BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 780
AUTHOR: Jackson
AMENDED: April 24, 2013
HEARING DATE: May 1, 2013
CONSULTANT: Bain
SUBJECT : Health care coverage.
SUMMARY : Establishes consumer notice requirements for health
insurance preferred provider organizations (PPOs) regulated by
the California Department of Insurance (CDI) and additional
consumer notice requirements for health plans regulated by the
Department of Managed Health Care (DMHC). Requires PPOs and
DMHC-regulated health care service plans (health plans) to allow
enrollees with authorized or scheduled services from a
terminated unassigned provider group or hospital to receive
those services at in network cost-sharing until completion of
the authorized or scheduled service for at least 60 days from
date of the termination notice. Requires a filing with CDI prior
to contract terminations between providers groups and hospitals
and insurers. Establishes additional disclosure requirements for
health insurers regulated by CDI.
Existing law:
1.Regulates health plans by the Department of Managed Health
Care (DMHC) under the Knox-Keene Act, and health insurers by
the California Department of Insurance (CDI).
2.Requires DMHC-regulated health plans, at least 75 days prior
to the termination date of its contract with a provider group
or a general acute care hospital (hospital), to submit an
enrollee block transfer filing to the DMHC that includes the
written notice the plan proposes to send to affected
enrollees. Defines, through DMHC regulation, a "block
transfer" as a transfer or redirection of 2,000 or more
enrollees by a health plan from a terminated provider group or
terminated hospital to one or more contracting providers that
takes place as a result of a termination or non-renewal of a
provider contract. PPOs regulated by CDI do not have this
requirement.
3.Requires DMHC-regulated health plans, at least 60 days prior
to the termination date of a contract between a health plan
Continued---
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and a provider group or a hospital, to send a written notice
by United States mail to enrollees who are assigned to the
terminated provider group or hospital. Requires a plan that is
unable to comply with the timeframe because of exigent
circumstances to apply to the DMHC for a waiver. PPOs
regulated by CDI do not have this requirement.
4.Requires the DMHC-regulated health plan to send the written
notice to each enrollee who is a member of the provider group
and who resides within a 15-mile radius of the terminated
hospital if the terminated provider is a hospital and the plan
assigns enrollees to a provider group with exclusive admitting
privileges to the hospital. Requires the health plan to send
the written notice to all enrollees who reside within a
15-mile radius of the terminated hospital, if the plan
operates as a PPO or assigns members to a provider group with
admitting privileges to hospitals in the same geographic area
as the terminated hospital. PPOs regulated by CDI do not have
these requirements.
5.Requires DMHC-regulated health plans and CDI-regulated health
insurers, at the request of an enrollee, to provide for the
completion of covered services by a terminated provider or by
a non-participating provider (for health plans) for the
following conditions:
a. An acute condition;
b. A serious chronic condition;
c. A pregnancy;
d. A terminal illness;
e. The care of a newborn child between birth and
36 months; and,
f. Performance of a surgery or other procedures
authorized by the plan as part of a documented course
of treatment that will occur within 180 days of the
contract termination date.
6.Requires, for CDI-regulated insurers for the services in 5)
above, unless otherwise agreed upon between the terminated
provider and the insurer or between the terminated provider
and the provider group, the agreement to be construed to
require a rate and method of payment to the terminated
provider, for the services rendered that are the same as the
rate and method of payment for the same services while under
contract with the insurer and at the time of termination.
Requires the provider to accept the reimbursement as payment
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in full and not bill the insured for any amount in excess of
the reimbursement rate, with the exception of copayments and
deductibles.
7.Requires, for DMHC-regulated health plans, unless otherwise
agreed by the terminated provider and the plan or by the
individual provider and the provider group, the continuity of
care services in 5) above to be compensated at rates and
methods of payment similar to those used by the plan or the
provider group for currently contracting providers providing
similar services who are not capitated and who are practicing
in the same or a similar geographic area as the terminated
provider. States that neither the plan nor the provider group
is required to continue the services of a terminated provider
if the provider does not accept the payment rates provided.
This bill:
1.Requires PPOs regulated by CDI, at least 75 days prior to the
termination date of a contract with a provider group or
hospital, to submit a filing to CDI that includes the written
notice the PPO proposes to send to its insureds. Prohibits the
PPO from sending this notice until CDI has reviewed and
approved the filing. Deems the filing approved if CDI does not
respond to the insured within seven days of the date of the
filing. (This requirement currently exists for DMHC-regulated
plans.)
2.Requires, for purposes of a termination with a provider group,
the CDI-regulated PPO and a DMHC-regulated health plan to
submit a filing if 1,700 or more insureds were treated by the
provider group within the 12 months preceding the filing date.
Permits CDI, in consultation with the DMHC, to adopt a
different filing threshold from the threshold established in
this bill through regulation.
3.Requires a CDI-regulated PPO and a DMHC-regulated plan (for
unassigned enrollees who are typically in a PPO), in the event
of a contract termination between a PPO/plan and a provider
group or hospital, to do all of the following:
a. Send the required written notice within one
business day of the contract termination with a
provider group, to all of the following persons:
i. Any covered individual who has
received health care services from the terminated
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provider group within the 12 months preceding the
date of termination; and,
ii. Any covered individual who has any
health care services scheduled with the
terminated provider group after the date of
termination.
b. Send the required written notice, within one
business day of the contract termination with a
hospital, to all of the following persons:
i. Any covered individual who has
received health care services from the terminated
hospital within the 12 months preceding the date
of termination;
ii. For health plans, any enrollee who
is assigned to a provider group with any
physicians who have exclusive admitting
privileges to the terminated unassigned hospital;
and,
iii. Any covered individual who has
authorized health care services scheduled at a
terminating hospital after the date of
termination.
4.Allows all health plan enrollees and insured individuals to
continue to access services that were authorized or scheduled
at the terminated provider group or hospital prior to the date
of termination. Requires those services to be provided until
completion of the authorized or scheduled services for at
least 60 days from the date of the notice unless a longer
period of time is required under the continuity of care
provisions in existing law. Requires the amount of, and the
requirement for payment of, copayments, deductibles,
coinsurance, and other cost-sharing components by an
individual during the period of completion of authorized or
scheduled services with a terminated provider group or
hospital to be the same that would be paid by the individual
when receiving care from a provider currently contracting with
the PPO/plan.
5.Requires the PPO/plan to provide reimbursement for services
either at a rate agreed upon by the PPO/plan and the
terminated provider group or hospital or the rate for those
services as provided in the terminating contract. Prohibits
the provider from billing the patient for the cost of services
beyond the copayment, deductible, or other cost-sharing
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components of what the individual would have been responsible
for if the provider group or hospital was currently contracted
with the PPO/plan.
6.Requires a PPO to send the required written notices even if a
filing is not required to be submitted, and allows a health
insurer to only send insured notices that have been filed and
approved by CDI. (This requirement currently exists for DMHC
plans.)
7.Permits a CDI-regulated PPO to require the provider group to
send the required notices if an individual provider terminates
his or her contract or employment with a provider group that
contracts with a health insurer. (This authority currently
exists for DMHC plans.)
8.Requires, if after sending the required notices, a
CDI-regulated PPO reaches an agreement with a terminated
provider group or hospital to renew or enter into a new
contract or to not terminate its contract, the PPO to send a
subsequent written notice to all insureds that were previously
notified that the provider group or hospital remains in their
provider network (this requirement currently exists for DMHC
plans).
9.Requires a CDI-regulated health insurer or a provider group to
include in all written, printed, or electronic communications
sent to an insured that concern the contract termination, the
a specified disclosure statement in not less than 8-point type
regarding their ability to continue to receive care for a
designated time period (this requirement currently exists for
DMHC plans).
10.Permits the CDI commissioner to adopt regulations in
accordance with the Administrative Procedure Act that are
necessary to implement the continuity of care-related
provisions of this bill (DMHC has existing authority to adopt
regulations under the Knox-Keene Act).
11.Repeals the requirement in 4) described in existing law
above.
12.Establishes additional disclosure requirements for health
insurers regulated by CDI.
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FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1.Author's statement. SB 780 would strengthen consumer
protections in California's regulation of health insurance by
requiring disclosure to consumers and CDI when contracts
between health insurers and medical provider groups or acute
care hospitals are set to terminate and that would result in a
material change to the insurer's provider network.
2.Background and CDI-sponsored legislation from last session.
Regulation and oversight of health insurance in California is
split between DMHC and CDI. DMHC regulates health plans under
the Knox-Keene Act in the Health and Safety Code, while CDI
regulates health insurers under the Insurance Code. DMHC
health plans include health maintenance organizations (HMOs),
exclusive provider organizations (EPOs) and some PPO plans,
which have historically been licensed by DMHC.
Existing law establishes continuity of care requirements for
health plans and health insurers for individuals with specific
conditions. However, existing law contains different notice
requirements to the regulator and the consumer depending upon
whether the plan is an HMO regulated by DMHC, a PPO regulated
by DMHC, or a PPO regulated by CDI. For example, HMO plans
regulated by DMHC are required to provide 60 days advance
notice prior to a contract termination to enrollees assigned
to a provider group and hospital, DMHC-regulated PPOs are
required to send an enrollee notice only if the terminated
provider is a hospital, while CDI-regulated PPOs are not
required to provide such a notice. In addition, HMOs and PPOs
regulated by DMHC are required under existing law to notify
DMHC at least 75 days prior to the termination date of a
contract with a provider group or a hospital, and to provide
DMHC with the notice the plan intends to provide to enrollees.
No similar requirement exists for CDI-regulated PPOs.
Last session, CDI sponsored AB 2152 (Eng), which would have
required CDI-regulated PPOs to provide notice to the regulator
and insureds of a contract termination exceeding specified
thresholds, and notice to DMHC enrollees of a PPO contract
terminations exceeding specified thresholds. AB 2152 was
vetoed by Governor Brown. In his veto message, the Governor
stated he agreed with the need to provide adequate notice to
consumers about relevant changes to their health coverage.
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However, the Governor stated AB 2152 was technically flawed in
that it provided for stronger notification procedures at CDI,
but weakened the notification procedures under existing law at
DMHC. The Governor directed DMHC to work with the Insurance
Commissioner, the Legislature and interested parties to
correct these defects and develop a workable solution the next
year.
3.Bill process and DMHC language. In response to the Governor's
veto message, DMHC provided bill language to CDI and
legislative staff on April 11, 2013, the language was modified
following that discussion, and this bill was amended on April
25, 2013, so many affected stakeholders are still reviewing
the language. These amendments contain provisions not included
in AB 2152 that require a notice immediately following a
contract termination involving a PPO enrollee and unassigned
enrollees of a DMHC-regulated plan (an assigned provider group
is one in which the plan directs its enrollees to receive
specialty care or assigns its members for primary care, while
an unassigned provider group is one where a covered individual
can select their choice of provider or hospital). In addition,
this bill would allow enrollees of a CDI-regulated PPO and
enrollees of a DMHC-regulated plan to continue to access
services that were authorized or scheduled at the terminated
provider group or hospital prior to the date of termination
until completion of the authorized or scheduled services for
at least 60 days from the date of the notice at in-network
cost-sharing.
DMHC indicates its changes are intended to protect consumers
from higher out-of-pocket costs, to ensure timely filings so
DMHC can monitor network adequacy, and to provide the
termination notice to unassigned enrollees at the right time.
CDI indicates its intent with this change is to ensure
patients, who are likely unaware of a pending contract
termination, have the same cost-sharing 60 days
post-termination that they would have when they made an
appointment with the then-in network health care provider or
hospital that accepted the appointment.
In addition, the DMHC amendments modify the health plan filing
and enrollee notification requirements for certain DMHC plans.
For enrollee notification, this bill repeals the existing
requirement that, if a PPO plan assigns members to a provider
group with admitting privileges to hospitals in the same
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geographic area as the terminated hospital, the PPO send the
written notice to all enrollees who reside within a 15-mile
radius of the terminated hospital. Instead, this bill targets
the notice at individuals who previously received services
from a provider group or hospital or who have scheduled
services. Notices to enrollees assigned to provider groups and
hospitals would continue to be provided 60 days in advance, as
under current law.
For health plan filings regarding an assigned provider group,
filing to DMHC is required if 2,000 or more enrollees will be
transferred or redirected by the plan from the contracted
provider. For a termination with an unassigned provider group
(such as in a DMHC-regulated PPO, which do not assign
members), the plan must submit a filing if 1,700 or more
enrollees were treated by the unassigned provider group within
12 months preceding the filing date.
DMHC indicates the policy rationale for the 1,700 threshold for
unassigned provider group terminations is based on anticipated
utilization derived from the current 2,000 threshold.
Specifically, DMHC states that the Centers for Disease Control
and Prevention states approximately 85 percent of individuals
under age 65 visit the doctor once per year, and using the
existing filing standard for "assigned enrollees" (2,000 or
more affected enrollees) as a baseline, 85 percent of 2,000
would mean that 1,700 enrollees would see a physician at least
once per year. In this respect, unassigned provider groups
that treat 1,700 or more enrollees affect a significant
portion of the consumers in the plan's network, making it an
accurate measure for triggering block transfer filings.
DMHC indicates the rationale for these changes are because
existing law does not ensure that all affected enrollees will
be notified of a termination, and the current standard is
being replaced with a better standard that will capture all
affected enrollees. For example, DMHC states existing law does
not notify all affected enrollees of an unassigned hospital
termination, such as individuals who frequently use the
terminated hospital or who have a surgery scheduled
post-termination, but who live outside of the 15-mile radius.
4.Additional disclosure provisions required by this bill. This
bill requires health insurance policies to include additional
disclosure provisions generally modeled on those in
Knox-Keene. These additional disclosure requirements include:
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(a) the basic method of reimbursement, including the scope and
general methods of payment, made to its contracting providers
of health care services; (b) whether financial bonuses or any
other incentives are used; (c) a general description of the
bonus and any other incentive arrangements used in its
compensation agreement; (d) a description regarding whether,
and in what manner, the bonuses and any other incentives are
related to a provider's use of referral services; (e) the
terms and conditions of coverage; (f) the right to view the
disclosure form and policy prior to beginning coverage; (g)
that the disclosure and the policy should be read completely
and carefully; (h) that it include the insurer's telephone
number; (i) where a health policy benefits and coverage matrix
is located; (j) when benefits cease in the event of
non-payment of premium; (k) the nature and extent of provider
choice permitted; (l) a summary of the terms and conditions
under which insureds may remain in the policy in the event the
group ceases to exist, the group policy is terminated, an
individual insured leaves the group, or the insureds'
eligibility status changes; (m) the insurer's use of
arbitration to settle disputes; (n) a description of any
limitations on the insured's choice of primary care and
specialty care physicians, non-physician health care
practitioners, based on service area and limitations on the
insured's choice of acute care hospital care, subacute or
transitional inpatient care, or skilled nursing facility; (o)
conditions and procedures for cancellation, rescission, or
non-renewal; (p) how to request continuity of care and a
second opinion; (r) the right to independent medical review;
(s) and a notice on information practices.
5.Prior legislation. AB 1286 (Frommer), Chapter 591, Statutes of
2003, and SB 2003 (Speier), Chapter 590, Statutes of 2003,
revised and expanded continuity of care laws under which a
health plan is required, under certain circumstances, to
allow an enrollee to continue to see a health care provider
who is no longer contracting with the plan, requires the
notice to be filed with the DMHC at least 75 days prior to the
contract termination and specifies language that must be
included in the notice regarding an enrollee's right to
continue seeing a health care provider.
6.Support. This bill is sponsored by CDI to strengthen consumer
protections in California's regulation of health insurance by
requiring disclosure to consumers and CDI when contracts
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between health insurers and medical provider groups or
hospitals are scheduled to terminate. Under current law,
DMHC-regulated plans health plans are required to notify
specified enrollees and DMHC prior to a contract termination.
However, the Insurance Code does not provide similar
protections for policyholders of PPO products regulated by
CDI. CDI states providing notice to PPO policyholders whose
medical provider group or hospital faces contract termination
with an insurer is an important consumer protection that will
help to prevent policyholders from unknowingly seeking care
from a provider whose contract with an insurer has just
terminated or will imminently terminate, and will help prevent
patients from unexpectedly being charged much higher
out-of-pocket costs.
CDI states several recent events highlight the needs for this
bill. At the end of 2011, a major
health insurer terminated contracts with UCLA Medical Center
effective January 1, 2012 in the midst of contract
negotiation. CDI states that, when it learned of the imminent
termination of the provider contract, CDI requested that the
insurer notify affected policyholders prior to the termination
in order to prevent them from seeking out-of-network care
without knowing the cost implications of doing so. CDI states
the insurer refused to send out notices to policyholders in
advance of the contract termination and refused to cover the
difference in the cost for those policyholders except those
already entitled by law to continuity of care. In March 8,
2012, another major health insurer notified insureds about the
March 3, 2012 termination of the Los Robles Regional Medical
Center and the West Hills Hospital service area. On March 5,
2012, an insured had a procedure performed at one of the,
terminated facilities, which had been previously approved. She
was not aware that she would be charged an out-of-network
price for services from this hospital that was in network when
she made her appointment. In August 2012, CDI learned through
media coverage that a health insurer had terminated a number
of provider contracts as of September 1, 2012. The insurer did
not notify CDI of the provider contract terminations or
provide information about the specific contracts terminated in
each region in which the insurer has policyholders. Without
information from the insurer about what contracts they
terminated recently, CDI could not determine whether the
terminations would result in the insurer failing to be in
compliance with the law requiring an adequate network of
medical providers.
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CDI concludes that providing notice to PPO policyholders whose
medical provider group or hospital faces contract termination
is an important consumer protection that will help to prevent
policyholders from unknowingly seeking services with higher
out-of-network costs, and requiring insurers to notify CDI at
least 75 days prior to terminating a contract with a provider
group or hospital will allow CDI to better monitor provider
network adequacy.
7.Opposition. The Association of California Life and Health
Insurance Companies (ACLHIC) writes in opposition to the
prior version of this bill, stating it will impose several
new reporting and disclosure requirements on health
insurers regulated under CDI. Many of these disclosure
requirements simply do not make sense within the PPO model
and could potentially be confusing to consumers. In
addition, ACLHIC states that it appreciates the author and
sponsor's desire to protect consumers, it fundamentally
questions the need for this bill given that the CDI
Commissioner currently has the authority to ensure that a
health insurer's provider network is adequate. ACLHIC
states that if termination of a provider group or facility
contract would impact the adequacy of the network, the
Commissioner has the authority to take regulatory action
through existing continuity-of-care protections that apply
to consumers when a provider contract is terminated. ACLHIC
concludes that it is critical, at this juncture, to put all
of its resources toward implementing the federal Affordable
Care Act in a meaningful way that creates a smooth and
seamless transition rather than implementing costly,
unnecessary and time-consuming new requirements on insurers
that ultimately do not provide any commensurate benefit to
consumers.
8.Oppose unless amended. The California Hospital Association
(CHA) writes that it is oppose unless amended to this bill,
arguing this bill establishes provisions that conflict with
the existing continuity of care provisions which establish
a process for reimbursement for continuity of care services
required under existing law.
9.Policy issues:
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a. Plan and PPO ability to meet requirement of bill.
The language affecting DMHC regulated plans makes no
changes in notice requirements for enrollees assigned to
a medical group or hospitals because when enrollees are
assigned, it is possible to identify and give prior
notice to all enrollees that will be affected by the
contract termination. For terminating provider groups and
hospitals where enrollees are not assigned (in a CDI or
DMHC-regulated PPO or EPO), the language for unassigned
provider groups and hospitals requires plans to notify
any enrollee who received treatment within 12 months
prior to the termination and any enrollee that, as of the
termination date, has a service scheduled after the
termination date. However, it is unclear how plans and
PPOs would be able to meet this requirement as they may
not know if an enrollee is scheduled to receive services
from an unassigned provider unless the service requires
prior authorization. Staff recommends the author clarify
how a plan/PPO would meet this requirement in the bill.
b. Time frame for notice. This bill requires a written
notice to be sent to PPO insured individuals and health
plan enrollees of an unassigned provider group or
unassigned hospital who have received services from those
providers within the 12 months preceding the date of
termination and those, as of the termination date, who
have scheduled services after the termination date. The
PPO/plan must provide the notice under this bill within
one business day of a contract termination. The rationale
for the change to the existing DMHC notification
provisions is to target the notice at individuals who had
previously received care from that provider, and to avoid
alarming enrollees about pending contract terminations
that will ultimately not occur. DMHC indicates
approximately 95 percent of block transfer cases end up
with the parties agreeing to contract. The goal of the
immediate notification requirement is to ensure
individuals with services scheduled immediately following
the contract termination are informed and provided
in-network cost-sharing. However, the author may consider
a longer time frame for the notice to be provided, or to
require the notice be provided earlier prior to a
contract termination as a one-day notice requirement will
be difficult to meet.
c. Payment to providers post-termination. This bill
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requires plans and PPOs to
provide reimbursement for services either at a rate agreed
upon by the plan/PPO and the terminated provider
group/hospital, or at the rate for those services
provided in the terminating contract. This requirement is
similar to the current continuity of care requirements
for CDI-regulated PPOs, which requires a rate and method
of payment for terminated providers for continuity of
care services that is the same as the rate and method of
payment for the same services while under contract with
the terminated provider, unless otherwise agreed upon
between the terminated provider and the PPO. In addition,
current law for CDI-regulated PPOs requires the provider
to accept the reimbursement as payment in full, which is
not a requirement in this bill.
By contrast, DMHC-regulated plans are required to reimburse
for continuity of care services at rates and methods of
payment similar to those used by the plan or the provider
group for currently contracting providers providing
similar services who are not capitated and who are
practicing in the same or a similar geographic area as
the terminated provider, unless otherwise agreed to by
the parties. However, neither the plan nor the provider
group is required to continue the services of a
terminated provider if the provider does not accept the
payment rates.
This bill contains within its reimbursement-related
provisions a cross reference to the current continuity of
care reimbursement requirements, which appear to conflict
with the existing law reimbursement provisions. Staff
recommends the author clarify whether the reimbursement
requirement for continuity of care services in this bill
is intended to replace the current reimbursement
requirements for continuity of care in existing law.
d. Duration of advance notice to CDI for hospital and
provider group terminations. This bill requires 75 day
advance notice to CDI for hospital and provider group
terminations, which parallels the 75 day advance notice
for health plans regulated by DHMC. The introduced
version of this bill and AB 2152 had a 30 day advance
notice requirement. What is the appropriate duration of
advance notice for these types of terminations?
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e. Delayed implementation. Last session, implementation
of AB 2152 was amended to provide a six month delay in
implementation in order to allow for information
technology system changes and the development of the
termination notices. In light of the many changes
required under federal health care reform effective
January 1, 2014, should implementation of the changes
made by this bill be delayed by six months consistent
with the Committee's actions last year?
f. Definition. This bill defines, for DMHC licensed
plans, the phrase
assigned provider group, assigned hospital and unassigned
provider group and unassigned hospital. This bill uses
the phrase "unassigned enrollee" which is not defined.
The author may wish to define this phrase as these
individuals are required to immediately receive a notice.
g. Technical amendment. On page 10, line 38 the word
"insured" should be instead "insurer" because CDI would
notify the insurer know when it approves the filing, not
the insured.
SUPPORT AND OPPOSITION :
Support: California Department of Insurance (sponsor)
Congress of California Seniors (prior version)
California Teachers Association (prior version)
California Federation of Teachers (prior version)
Health Access California
Laborers' Local 777 (prior version)
Laborers' Local 792 (prior version)
United Policyholders (prior version)
Oppose: Association of California Life and Health Insurance
Companies (prior version)
Blue Shield of California (prior version)
California Chamber of Commerce (prior version)
California Hospital Association (unless amended)
-- END -
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