BILL ANALYSIS Ó SB 332 Page 1 Date of Hearing: August 20, 2013 ASSEMBLY COMMITTEE ON HEALTH Richard Pan, Chair SB 332 (Emmerson and DeSaulnier) - As Amended: May 16, 2013 SENATE VOTE : 33-0 SUBJECT : California Health Benefit Exchange: records. SUMMARY : Eliminates an exemption from the California Public Records Act (PRA) for contracts entered into by the California Health Benefit Exchange (Exchange, also known as Covered California); and instead requires contracts between health plans or insurers (collectively carriers) and Covered California to be open to inspection one year after the effective date and payment rates to be open three years after a contract or amendment is open to inspection. Also deletes a provision which exempts impressions, opinions, strategy, training, and other Covered California business from the PRA. Specifically, this bill : 1)Deletes a provision in existing law which exempts impressions, opinions, recommendations, meeting minutes, research, work product, theories, or strategy of the Exchange board or its staff, or records that provide instructions, advice, or training to employees from the PRA. 2)Deletes a provision in existing law which makes Exchange contracts and amendments, except the rates of payment, open to inspection one year after their effective date. Instead, requires contracts between carriers and the Exchange, except rates of payment, to be open to inspection one year after their effective date. 3)Requires, three years after a contract with a participating carrier or amendment is open to inspection, the portion of the contract or amendment containing the rates of payment to be open to inspection. 4)Requires, notwithstanding any other law, entire Exchange contracts with participating carriers or amendments to contracts with participating carriers to be open to inspection by the Joint Legislative Audit Committee (JLAC). Requires JLAC to maintain the confidentiality of the contracts and amendments until the contracts or amendments to a contract are SB 332 Page 2 open to PRA inspection. 5)Contains an urgency clause to ensure that the provisions of this bill go into immediate effect upon enactment. EXISTING LAW : 1)Establishes the PRA, which makes public records open to inspection at all times during the office hours of the state or local agency and provides that every person has a right to inspect any public record, except as indicated, upon payment of fees covering direct costs of duplication or a statutory fee if applicable. Requires any reasonably segregable portion of a record to be available for inspection by any person requesting the record after deletion of the portions that are exempted by law. 2)Defines "public records," for purposes of the PRA, to include any writing containing information relating to the conduct of the public's business prepared, owned, used, or retained by any state or local agency regardless of physical form or characteristics. Exempts certain types of records from disclosure under the PRA. 3)Establishes the Exchange in state government as an independent public entity not affiliated with any state agency governed by a five member board. 4)Makes records of the Exchange that reveal any of the following exempt from disclosure under the PRA: a) The deliberative processes, discussions, communications, or any other portion of the negotiations with entities contracting or seeking to contract with the Exchange, entities with which the Exchange is considering a contract, or entities with which the Exchange is considering or enters into any other arrangement under which the Exchange provides, receives, or arranges services or reimbursement; or, b) The impressions, opinions, recommendations, meeting minutes, research, work product, theories, or strategy of the Exchange board or its staff, or records that provide instructions, advice, or training to employees. SB 332 Page 3 5)Makes contracts entered into by the Exchange open to inspection one year after their effective date except for the portion of a contract that contains the rates of payment. Requires amendments to contracts to be open to public inspection one year after the effective date of the amendment. 6)Establishes the Healthy Families Program (HFP) administered by the Managed Risk Medical Insurance Board (MRMIB) to make subsidized health, vision, and dental insurance available to children with family income up to 250% of the federal poverty level (FPL). Transfers HFP-eligible children to the Medi-Cal program beginning in 2013. 7)Protects from public disclosure pursuant to the PRA, records of MRMIB related to activities governed by HFP or the County Health Initiative Matching Fund program (CHIM) and that reveal any of the following: a) The deliberative processes, discussions, communications, or any other portion of the negotiations with entities contracting or seeking to contract with MRMIB, entities with which MRMIB is considering a contract, or entities with which MRMIB is considering or enters into any other arrangement under which MRMIB provides, receives, or arranges for services or reimbursement; or, b) The impressions, opinions, recommendations, meeting minutes, research, work product, theories, or strategy of MRMIB or its staff, or records that provide instructions, advice, or training to employees. 8)Requires, except for the portion of a contract that contains the rates of payment, contracts entered into pursuant to HFP or CHIM, on or after January 1, 1998, to be open to inspection one year after their effective dates, and amendments to contracts open to inspection one year after the effective date of the amendment. 9)Requires three years after a HFP or CHIM contract or amendment is open to inspection, the portion of the contract or amendment containing the rates of payment to be open to inspection. 10)Makes, notwithstanding any other law, the entire HFP or CHIM contract or amendments to a contract open to inspection by JLAC. Requires JLAC to maintain the confidentiality of the SB 332 Page 4 contract and amendments thereto until the contract or amendments to a contract are open to inspection. FISCAL EFFECT : This bill has not yet been analyzed by a fiscal committee. COMMENTS : 1)PURPOSE OF THIS BILL . According to the author, this bill seeks to ensure that Covered California is properly subject to the PRA, and brings the Exchange in line with other state agencies. The author states that although Covered California's current practice is consistent with the PRA, it's in the public's best interest to guarantee transparency in upcoming years. The author indicates a reporter discovered that the law establishing the Exchange permits Covered California to keep all contracts private for a year and the rates of pay to companies and individuals receiving contracts secret indefinitely. The author asserts that this lack of transparency is unique compared to other state agencies within California and among other states that have established their health insurance exchanges. This bill closely resembles, with few exceptions, MRMIB and its contracting of services and coverage under HFP. Further, this bill allows for health insurer and health plan contracts and amendments to those contracts to be held private for an additional three years before being available for public inspection. Finally, this bill restores authority for JLAC to audit the Exchange, which was not explicitly permitted under the Exchange's authorizing legislation. 2)BACKGROUND . On March 23, 2010, the federal government enacted the Patient Protection and Affordable Care Act (ACA). Beginning in 2014, the ACA gives states the option to expand Medicaid (Medi-Cal in California) eligibility and requires the restructuring of the individual and small group health insurance markets, sets minimum standards for health coverage, provides financial assistance to individuals with income below 400% of FPL through Advanceable Premium Tax Credits and provides tax credits for small employers, establishes Health Benefit Exchanges, and an essential health benefits package as required to be offered by Qualified Health Plans (QHP). Covered California was established as California's Exchange and it is an independent public agency governed by a five member board of directors. SB 332 Page 5 In May 2013, the Associated Press (AP) published a story entitled "California Exchange Granted Secrecy," stating the implementing legislation gave Covered California the authority to keep all contracts private for a year and the amounts paid secret indefinitely, potentially shielding the public from seeing how hundreds of millions of dollars are spent. The story stated the indefinite ban on releasing rates of pay to companies and individuals receiving contracts also goes beyond exemptions for other state health programs, such as HFP, which withholds rates of pay from disclosure for up to four years, but not permanently. According to the story, in response to an AP PRA request, the Exchange released information on a dozen competitively bid contracts issued since early 2011, which included $14 million for a 19-month contract with Ogilvy Public Relations for marketing and other services; $400,000 for PriceWaterhouseCoopers for a four-month deal developing a small business program; and, $327 million for a five-year deal with the consulting firm Accenture to develop a Web portal and enrollment system for those who will seek coverage. Those contracts are also accessible on the Exchange's Website, along with about two dozen requests for services the Exchange has published. But the AP story states it's not clear how many contracts the Exchange has executed, for how much, or with whom. 3)CALIFORNIA STATE AUDIT . In July 2013, the California State Auditor (Auditor) released a report on the creation of Covered California's establishment of a health insurance exchange. In the report, the Auditor indicates that Covered California has unique statutory authority to keep details of all of its contracts confidential. Despite this authority, Covered California has publicly released many of its contracts, including their associated dollar amounts. Recently, Covered California developed a written policy, which the board has yet to adopt, limiting its use of its authority to withhold contract details only to certain contracts and bids. According to state law, Covered California must release a contract for public inspection one year after the contract is signed; however, it may keep the rates of payment in a contract and the contract amounts confidential indefinitely. In addition, state law specifies that the deliberative processes-discussions and communications Covered California has related to the contracting process-are exempt from disclosure. The varied contracts that Covered California has SB 332 Page 6 selected to disclose include contracts for legal and consulting services and for information technology development services. In May 2013, Covered California drafted a policy concerning contract disclosure that would have Covered California essentially mirroring the requirements found in the PRA and only using the statutory exemption for QHP contracts and bids. According to its general counsel, the policy has not been formally adopted by the board. However, the general counsel explained that Covered California has, for the last few months, been releasing all contracts, including their rates, in response to PRA requests, with appropriate redactions based on exemptions available to all public entities under the PRA. The general counsel stated that Covered California may make use of its statutory exemption so it will not be at a negotiating disadvantage in future contracting efforts. This bill was introduced to change Covered California's statutory exemption from contract disclosure. The Auditor indicates that whether or not this legislation is enacted, Covered California will continue to face difficult decisions regarding the disclosure of its contracts. For this reason, and to provide as much public transparency as possible, the Auditor recommends Covered California's board should formally adopt a policy to retain confidentiality only for contracts, contract amendments, and payment rates that are necessary for limiting negotiating disadvantages with future contracts. 4)SUPPORT . According to California Common Cause, this bill promotes transparency and ensures that California, the first state to comply with the ACA, remains a leader as the scheduled October implementation date quickly approaches. California Common Cause believes the Exchange is a state agency and should be held to the same disclosure and transparency standards as similar agencies, such as for HFP. 5)RELATED LEGISLATION . a) AB 804 (Lowenthal) requires pharmacy invoice information that is submitted to the Department of Health Care Services or a designated vendor for the purpose of establishing average acquisition cost to be confidential and exempt from disclosure under the PRA. AB 804 is pending in the Senate Health Committee. b) SCA 3 (Leno and Steinberg) places a measure on the ballot to amend the California Constitution to require SB 332 Page 7 local agencies to comply with the PRA and the Ralph M. Brown Act, California's open meetings law, and any subsequent amendments that further the constitutional provisions on public access to public agency meetings and records. SCA 3 exempts compliance with PRA and the Brown Act from state mandate claims. SCA 3 is pending in the Assembly Local Government Committee. 6)PREVIOUS LEGISLATION . a) AB 1602 (John A. Pérez), Chapter 655, Statutes of 2010, and SB 900 (Alquist), Chapter 659, Statutes of 2010, establish the Exchange as an independent public entity to purchase health insurance on behalf of Californians with incomes of between 100% and 400% FPL and employees of small businesses. Clarifies the powers and duties of the board governing the Exchange relative to the administration of the Exchange, determining eligibility and enrollment in the Exchange, and arranging for coverage under qualified carriers. b) AB 1381 (Bagley), Chapter 1473, Statutes of 1968, creates the PRA which establishes standards for public agencies' open and public meetings and public access to the agencies' records. 7)DOUBLE REFERRAL . This bill has been double referred and passed the Assembly Committee on Judiciary on August 15, 2013 with a consent vote of 10-0. REGISTERED SUPPORT / OPPOSITION : Support California Common Cause Opposition None on file. Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097 SB 332 Page 8