BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 332
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          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  








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            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.  









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          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  








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            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.  








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            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  








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            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  








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               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  












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