California Legislature—2015–16 Regular Session

Assembly BillNo. 2400


Introduced by Assembly Member Nazarian

February 18, 2016


An act to amend Sections 1367.24, 1367.241, 1367.244, 1368, 1368.01, and 1374.30 of the Health and Safety Code, and to amend Sections 10123.191, 10123.197, and 10169 of, and to add Section 10123.190 to, the Insurance Code, relating to health care coverage.

LEGISLATIVE COUNSEL’S DIGEST

AB 2400, as introduced, Nazarian. Prescription drug coverage: prior authorization and external review.

Existing federal law requires a group health plan and a health insurance issuer offering group or individual health insurance coverage to provide for a coverage appeals process, which includes both an internal review and an external review process, that applies if an enrollee receives an adverse benefit determination for a drug that is included on the health plan’s formulary drug list.

For plan years commencing on or after January 1, 2016, existing federal law requires a health plan providing essential health benefits to have procedures in place that allow an enrollee, the enrollee’s designee, or the enrollee’s prescribing provider to request and gain access to clinically appropriate nonformulary drugs within certain timeframes, and have an external review if the initial request is denied by the plan.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes a willful violation of the act a crime. Existing law provides for the regulation of health insurers by the Department of Insurance. Existing law requires health care service plans to establish and maintain a grievance system approved by the department under which enrollees may submit grievances to the plan and requires plans to resolve those grievances within 30 days, except as specified. Existing law requires individual, small group, and large group health care service plans and health insurers that provide prescription drug coverage to comply with the external exception request process required by federal law for nonformulary drugs.

This bill would require those plans and insurers to also comply with that external exception request process for formulary drugs that require prior authorization by the plan or health insurer. The bill would specify that, for both nonformulary and formulary drugs, the external exception process is in lieu of the health care service plan’s grievance process and the health insurer’s internal review process following an adverse benefit determination.

The bill would make other conforming changes to implement these changes.

Because a willful violation of these requirements by a health care service plan would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 1367.24 of the Health and Safety Code
2 is amended to read:

3

1367.24.  

(a) begin insert(1)end insertbegin insertend insertEvery health care service plan that provides
4prescription drug benefits shall maintain an expeditious processbegin insert,
5as described in this subdivision,end insert
by whichbegin insert enrollees, enrollees’
6designees, orend insert
prescribing providers maybegin insert request andend insert obtain
7authorization forbegin delete aend delete medically necessary nonformulary prescription
8begin delete drug. On or before July 1, 1999, every health care service plan that
9provides prescription drug benefits shall file with the department
10a description of its process, including timelines, for responding to
P3    1authorization requests for nonformulary drugs. Any changes to
2this process shall be filed with the department pursuant to Section
31352. Eachend delete
begin insert drugs and medically necessary formulary prescription
4drugs that require prior authorization by the plan. The plan shall
5provide that the enrollee, the enrollee’s designee, or the enrollee’s
6prescribing provider may seek a prior authorization for a
7prescription drug under this subdivision.end insert

begin insert

8(2) Each plan shall respond to a prior authorization request
9within 72 hours following receipt of the prior authorization request.
10A plan that grants a prior authorization request under this
11paragraph shall provide coverage of the prescription drug for the
12duration of the prescription, including refills.

end insert
begin insert

13(3) Each plan shall provide that a prior authorization may be
14obtained within 24 hours if an enrollee is suffering from a health
15condition that may seriously jeopardize the enrollee’s life, health,
16or ability to regain maximum function or if an enrollee is
17undergoing a current course of treatment using a nonformulary
18drug. A plan that grants a prior authorization request under this
19paragraph based on exigent circumstances shall provide coverage
20of the prescription drug for the duration of the exigency.

end insert
begin insert

21(4) If a plan fails to respond within 72 hours for a prior
22authorization request, or within 24 hours if exigent circumstances
23exist, upon receipt of a completed prior authorization request, the
24prior authorization request shall be deemed to have been granted.

end insert

25begin insert(5)end insertbegin insertend insertbegin insertEachend insert plan shall provide a written description ofbegin delete its most
26current process, including timelines,end delete
begin insert the process described in
27paragraph (1)end insert
to its prescribing providers. For purposes of this
28section, a prescribing provider shall include a provider authorized
29to write a prescription, pursuant to subdivision (a) of Section 4040
30of the Business and Professions Code, to treat a medical condition
31of an enrollee.

begin insert

32(b) If a plan disapproves a prior authorization request made
33pursuant to subdivision (a), the plan shall maintain an expeditious
34process to authorize an enrollee to obtain an external review.

end insert
begin insert

35(1) A determination on an external review shall be made no
36later than 72 hours following receipt of the request, if the original
37request was an authorization request under paragraph (2) of
38subdivision (a), and no later than 24 hours following receipt of
39the request, if the original request was an authorization request
40under paragraph (3) of subdivision (a).

end insert
begin insert

P4    1(2) If an external review decision of a prior authorization
2request under paragraph (2) of subdivision (a) is granted, the plan
3shall provide coverage of the prescription drug for the duration
4of the prescription, including refills. If an external review decision
5of a prior authorization request under paragraph (3) of subdivision
6(a) is granted, the plan shall provide coverage of the prescription
7drug for the duration of the exigency.

end insert
begin delete

8(b)

end delete

9begin insert(c)end insert Any plan that disapproves a request made pursuant to
10subdivision (a)begin delete by a prescribing providerend delete to obtain authorization
11for a nonformularybegin insert or formularyend insert drug shall provide the reasons
12for the disapproval in a notice provided to the enrollee. The notice
13shall indicate that the enrollee maybegin delete file a grievance with the planend delete
14begin insert file, in lieu of filing a grievance with the plan, a request for an
15external review pursuant to subdivision (b)end insert
if the enrollee objects
16to the disapproval, including any alternative drug or treatment
17offered by the plan. The notice shall comply with subdivision (b)
18of Section 1368.02.begin delete Any health plan that is required to maintain
19an external exception request review process pursuant to
20subdivision (k) shall indicate in the notice required under this
21subdivision that the enrollee may file a grievance seeking an
22external exception request review.end delete
begin insert If a plan disapproves a request
23made pursuant to subdivision (a), an enrollee shall not be required
24to file a grievance with the plan or its contracting provider
25pursuant to Section 1368.end insert

begin delete

26(c)

end delete

27begin insert(d)end insert The process described inbegin delete subdivisionend deletebegin insert subdivisionsend insert (a)begin insert and
28(b)end insert
by whichbegin insert enrollee’s, enrollees’ designees, andend insert prescribing
29providers may obtain authorization for medically necessary
30nonformulary drugs shall not apply to a nonformulary drug that
31has been prescribed for an enrollee in conformance with the
32provisions of Section 1367.22.

begin delete

33(d)

end delete

34begin insert(e)end insert The process described inbegin delete subdivisionend deletebegin insert subdivisionsend insert (a)begin insert and
35(b)end insert
by which enrollees may obtain medically necessary
36nonformularybegin delete drugs, including specified timelines for responding
37to prescribing provider authorization requests,end delete
begin insert drugs and formulary
38drugsend insert
shall be described in evidence of coverage and disclosure
39forms, as required by subdivision (a) of Section 1363, issued on
40or afterbegin delete July 1, 1999.end deletebegin insert July 1, 2017.end insert

begin delete

P5    1(e)

end delete

2begin insert(f)end insert Every health care service plan that provides prescription drug
3benefits shall maintain, as part of its books and records under
4Section 1381, all of the following information, which shall be
5made available to the director upon request:

6(1) The complete drug formulary or formularies of the plan, if
7the plan maintains a formulary, including a list of the prescription
8drugs on the formulary of the plan by major therapeutic category
9with an indication of whether any drugs are preferred over other
10drugs.

11(2) Records developed by the pharmacy and therapeutic
12committee of the plan, or by others responsible for developing,
13modifying, and overseeing formularies, including medical groups,
14individual practice associations, and contracting pharmaceutical
15benefit management companies, used to guide the drugs prescribed
16for the enrollees of the plan, that fully describe the reasoning
17behind formulary decisions.

18(3) Any plan arrangements with prescribing providers, medical
19groups, individual practice associations, pharmacists, contracting
20pharmaceutical benefit management companies, or other entities
21that are associated with activities of the plan to encourage
22formulary compliance or otherwise manage prescription drug
23benefits.

begin delete

24(f)

end delete

25begin insert(g)end insert If a plan provides prescription drug benefits, the department
26shall, as part of its periodic onsite medical survey of each plan
27undertaken pursuant to Section 1380, review the performance of
28the plan in providing those benefits, including, but not limited to,
29a review of the procedures and information maintained pursuant
30to this section, and describe the performance of the plan as part of
31its report issued pursuant to Section 1380.

begin delete

32(g)

end delete

33begin insert(h)end insert The director shall not publicly disclose any information
34reviewed pursuant to this section that is determined by the director
35to be confidential pursuant to state law.

begin delete

36(h)

end delete

37begin insert(i)end insert For purposes of this section, “authorization” means approval
38by the health care service plan to provide payment for the
39prescription drug.

begin delete

40(i)

end delete

P6    1begin insert(j)end insert Nonformulary prescription drugs shall include any drug for
2which an enrollee’s copayment or out-of-pocket costs are different
3than the copayment for a formulary prescription drug, except as
4otherwise provided by law or regulation or in cases in which the
5drug has been excluded in the plan contract pursuant to Section
61342.7.

begin delete

7(j)

end delete

8begin insert(k)end insert Nothing in this section shall be construed to restrict or impair
9the application of any other provision of this chapter, including,
10but not limited to, Section 1367, which includes among its
11requirements that a health care service plan furnish services in a
12manner providing continuity of care and demonstrate that medical
13decisions are rendered by qualified medical providers unhindered
14by fiscal and administrative management.

begin delete

15(k) For any individual, small group, or large health plan
16contracts, a health care service plan’s process described in
17subdivision (a) shall comply with the request for exception and
18 external exception request review processes described in
19subdivision (c) of Section 156.122 of Title 45 of the Code of
20Federal Regulations. This subdivision shall not apply to Medi-Cal
21managed care health care service plan contracts as described in
22subdivision (l).

end delete
begin insert

23(l) A health care service plan contract in the individual, small
24group, and large group markets that provides coverage for
25outpatient prescription drugs shall comply with this section. This
26section shall not apply to Medi-Cal managed care health care
27service plan contracts.

end insert
begin delete

28(l)

end delete

29begin insert(m)end insert “Medi-Cal managed care health care service plan contract”
30means any entity that enters into a contract with the State
31Department of Health Care Services pursuant to Chapter 7
32(commencing with Section 14000), Chapter 8 (commencing with
33Section 14200), or Chapter 8.75 (commencing with Section 14591)
34of Part 3 of Division 9 of the Welfare and Institutions Code.

begin delete

35(m)

end delete

36begin insert(n)end insert Nothing in this section shall be construed to affect an
37enrollee’s or subscriber’s eligibility to submit a grievance to the
38department for review under Section 1368 or to apply to the
39department for an independent medical review under Section
P7    11370.4, or Article 5.55 (commencing with Section 1374.30) of
2this chapter.

3

SEC. 2.  

Section 1367.241 of the Health and Safety Code is
4amended to read:

5

1367.241.  

(a) Notwithstanding any other law, on and after
6January 1, 2013, a health care service plan that provides coverage
7for prescription drugs shall accept only the prior authorization
8form developed pursuant to subdivisionbegin delete (c),end deletebegin insert (b),end insert or an electronic
9prior authorization process described in subdivisionbegin delete (e),end deletebegin insert (d),end insert when
10requiring prior authorization for prescription drugs. This section
11does not apply in the event that a physician or physician group has
12been delegated the financial risk for prescription drugs by a health
13care service plan and does not use a prior authorization process.
14This section does not apply to a health care service plan, or to its
15affiliated providers, if the health care service plan owns and
16operates its pharmacies and does not use a prior authorization
17process for prescription drugs.

begin delete

18(b) If a health care service plan or a contracted physician group
19fails to respond within 72 hours for nonurgent requests, and within
2024 hours if exigent circumstances exist, upon receipt of a completed
21prior authorization request from a prescribing provider, the prior
22authorization request shall be deemed to have been granted. The
23requirements of this subdivision shall not apply to contracts entered
24into pursuant to Chapter 7 (commencing with Section 14000),
25Chapter 8 (commencing with Section 14200), or Chapter 8.75
26(commencing with Section 14591) of Part 3 of Division 9 of the
27Welfare and Institutions Code. Medi-Cal managed care health care
28service plans that contract under those chapters shall not be
29required to maintain an external exception request review as
30provided in Section 156.122 of Title 45 of the Code of Federal
31Regulations.

32(c)

end delete

33begin insert(b)end insert On or before January 1, 2017, the department and the
34Department of Insurance shall jointly develop a uniform prior
35authorization form. Notwithstanding any other law, on and after
36July 1, 2017, or six months after the form is completed pursuant
37to this section, whichever is later, every prescribing provider shall
38use that uniform prior authorization form, or an electronic prior
39authorization process described in subdivisionbegin delete (e),end deletebegin insert (d),end insert to request
40prior authorization for coverage of prescription drugs and every
P8    1health care service plan shall accept that form or electronic process
2as sufficient to request prior authorization for prescription drugs.

begin delete

3(d)

end delete

4begin insert(c)end insert The prior authorization form developed pursuant to
5subdivisionbegin delete (c)end deletebegin insert (b)end insert shall meet the following criteria:

6(1) The form shall not exceed two pages.

7(2) The form shall be made electronically available by the
8department and the health care service plan.

9(3) The completed form may also be electronically submitted
10from the prescribing provider to the health care service plan.

11(4) The department and the Department of Insurance shall
12develop the form with input from interested parties from at least
13one public meeting.

14(5) The department and the Department of Insurance, in
15development of the standardized form, shall take into consideration
16the following:

17(A) Existing prior authorization forms established by the federal
18Centers for Medicare and Medicaid Services and the State
19Department of Health Care Services.

20(B) National standards pertaining to electronic prior
21authorization.

begin delete

22(e)

end delete

23begin insert(d)end insert A prescribing provider may use an electronic prior
24authorization system utilizing the standardized form described in
25subdivisionbegin delete (c)end deletebegin insert (b)end insert or an electronic process developed specifically
26for transmitting prior authorization information that meets the
27National Council for Prescription Drug Programs’ SCRIPT
28standard for electronic prior authorization transactions.

begin delete

29(f)

end delete

30begin insert(e)end insert Subdivision (a) does not apply if any of the following occurs:

31(1) A contracted physician group is delegated the financial risk
32for prescription drugs by a health care service plan.

33(2) A contracted physician group uses its own internal prior
34authorization process rather than the health care service plan’s
35prior authorization process for plan enrollees.

36(3) A contracted physician group is delegated a utilization
37management function by the health care service plan concerning
38any prescription drug, regardless of the delegation of financial
39risk.

begin delete

40(g)

end delete

P9    1begin insert(f)end insert For prescription drugs, prior authorization requirements
2described in subdivisionsbegin delete (c)end deletebegin insert (b)end insert andbegin delete (e)end deletebegin insert (d)end insert apply regardless of
3how that benefit is classified under the terms of the health plan’s
4group or individual contract.

begin delete

5(h)

end delete

6begin insert(g)end insert For purposes of this section:

7(1) “Prescribing provider” shall include a provider authorized
8to write a prescription, pursuant to subdivision (a) of Section 4040
9of the Business and Professions Code, to treat a medical condition
10of an enrollee.

begin delete

11(2) “Exigent circumstances” exist when an enrollee is suffering
12from a health condition that may seriously jeopardize the enrollee’s
13life, health, or ability to regain maximum function or when an
14enrollee is undergoing a current course of treatment using a
15nonformulary drug.

end delete
begin delete

16(3)

end delete

17begin insert(2)end insert “Completed prior authorization request” means a completed
18uniform prior authorization form developed pursuant to subdivision
19begin delete (c),end deletebegin insert (b),end insert or a completed request submitted using an electronic prior
20authorization system described in subdivisionbegin delete (e),end deletebegin insert (d),end insert or, for
21contracted physician groups described in subdivisionbegin delete (f),end deletebegin insert (e),end insert the
22process used by the contracted physician group.

23

SEC. 3.  

Section 1367.244 of the Health and Safety Code is
24amended to read:

25

1367.244.  

(a) A request for an exception to a health care
26service plan’s step therapy process for prescription drugs may be
27submitted in the same manner as a request for prior authorization
28for prescription drugs pursuant to Sectionbegin delete 1367.241,end deletebegin insert 1367.24,end insert and
29shall be treated in the same manner, and shall be responded to by
30the health care service plan in the same manner, as a request for
31prior authorization for prescription drugs.

32(b) The department and the Department of Insurance shall
33include a provision for step therapy exception requests in the
34uniform prior authorization form developed pursuant to subdivision
35begin delete (c)end deletebegin insert (b)end insert of Section 1367.241.

36

SEC. 4.  

Section 1368 of the Health and Safety Code is amended
37to read:

38

1368.  

(a) Every plan shall do all of the following:

39(1) Establish and maintain a grievance system approved by the
40department under which enrollees may submit their grievances to
P10   1the plan. Each system shall provide reasonable procedures in
2accordance with department regulations that shall ensure adequate
3consideration of enrollee grievances and rectification when
4appropriate.

5(2) Inform its subscribers and enrollees upon enrollment in the
6plan and annually thereafter of the procedure for processing and
7resolving grievances. The information shall include the location
8and telephone number where grievances may be submitted.

9(3) Provide forms for grievances to be given to subscribers and
10enrollees who wish to register written grievances. The forms used
11by plans licensed pursuant to Section 1353 shall be approved by
12the director in advance as to format.

13(4) (A) Provide for a written acknowledgment within five
14calendar days of the receipt of a grievance, except as noted in
15subparagraph (B). The acknowledgment shall advise the
16complainant of the following:

17(i) That the grievance has been received.

18(ii) The date of receipt.

19(iii) The name of the plan representative and the telephone
20number and address of the plan representative who may be
21contacted about the grievance.

22(B) begin delete(i)end deletebegin deleteend deleteGrievances received by telephone, by facsimile, by
23email, or online through the plan’s Internet Web site pursuant to
24Section 1368.015, that are not coverage disputes, disputed health
25care services involving medical necessity, or experimental or
26investigational treatment and that are resolved by the next business
27day following receipt are exempt from the requirements of
28subparagraph (A) and paragraph (5). The plan shall maintain a log
29of all these grievances. The log shall be periodically reviewed by
30the plan and shall include the following information for each
31complaint:

begin delete

32(I)

end delete

33begin insert(i)end insert The date of the call.

begin delete

34(II)

end delete

35begin insert(ii)end insert The name of the complainant.

begin delete

36(III)

end delete

37begin insert(iii)end insert The complainant’s member identification number.

begin delete

38(IV)

end delete

39begin insert(iv)end insert The nature of the grievance.

begin delete

40(V)

end delete

P11   1begin insert(v)end insert The nature of the resolution.

begin delete

2(VI)

end delete

3begin insert(vi)end insert The name of the plan representative who took the call and
4resolved the grievance.

begin delete

5(ii) For health plan contracts in the individual, small group, or
6large group markets, a health care service plan’s response to
7grievances subject to Section 1367.24 shall also comply with
8subdivision (c) of Section 156.122 of Title 45 of the Code of
9Federal Regulations. This paragraph shall not apply to Medi-Cal
10managed care health care service plan contracts or any entity that
11enters into a contract with the State Department of Health Care
12Services pursuant to Chapter 7 (commencing with Section 14000),
13Chapter 8 (commencing with Section 14200), or Chapter 8.75
14(commencing with Section 14591) of Part 3 of Division 9 of the
15Welfare and Institutions Code.

end delete

16(5) Provide subscribers and enrollees with written responses to
17grievances, with a clear and concise explanation of the reasons for
18the plan’s response. For grievances involving the delay, denial, or
19modification of health care services, the plan response shall
20describe the criteria used and the clinical reasons for its decision,
21including all criteria and clinical reasons related to medical
22necessity. If a plan, or one of its contracting providers, issues a
23decision delaying, denying, or modifying health care services based
24in whole or in part on a finding that the proposed health care
25services are not a covered benefit under the contract that applies
26to the enrollee, the decision shall clearly specify the provisions in
27the contract that exclude that coverage.

28(6) For grievances involving the cancellation, rescission, or
29nonrenewal of a health care service plan contract, the health care
30service plan shall continue to provide coverage to the enrollee or
31subscriber under the terms of the health care service plan contract
32until a final determination of the enrollee’s or subscriber’s request
33for review has been made by the health care service plan or the
34director pursuant to Section 1365 and this section. This paragraph
35shall not apply if the health care service plan cancels or fails to
36renew the enrollee’s or subscriber’s health care service plan
37contract for nonpayment of premiums pursuant to paragraph (1)
38of subdivision (a) of Section 1365.

39(7) Keep in its files all copies of grievances, and the responses
40thereto, for a period of five years.

P12   1(b) (1) (A) After either completing the grievance process
2described in subdivisionbegin delete (a), orend deletebegin insert (a),end insert participating in the process for
3at least 30 days,begin insert or completing the external review process
4described in subdivision (b) of Section 1367.24,end insert
a subscriber or
5enrollee may submit the grievancebegin insert or external review decisionend insert to
6the department for review. In any casebegin insert under the grievance processend insert
7 determined by the department to be a case involving an imminent
8and serious threat to the health of the patient, including, but not
9limited to, severe pain, the potential loss of life, limb, or major
10bodily function, cancellations, rescissions, or the nonrenewal of a
11health care service plan contract, or in any other case where the
12department determines that an earlier review is warranted, a
13subscriber or enrollee shall not be required to complete the
14grievance process or to participate in the process for at least 30
15days before submitting a grievance to the department for review.

16(B) A grievancebegin insert or external review decisionend insert may be submitted
17to the department for review and resolution prior to any arbitration.

18(C) Notwithstanding subparagraphs (A) and (B), the department
19may refer any grievancebegin insert or external review decisionend insert that does not
20pertain to compliance with this chapter to the State Department of
21Public Health, the California Department of Aging, the federal
22begin delete Health Care Financing Administration,end deletebegin insert Centers for Medicare and
23Medicaid Services,end insert
or any other appropriate governmental entity
24for investigation and resolution.

25(2) If the subscriber or enrollee is a minor, or is incompetent or
26incapacitated, the parent, guardian, conservator, relative, or other
27designee of the subscriber or enrollee, as appropriate, may submit
28the grievancebegin insert or external review decisionend insert to the department as the
29agent of the subscriber or enrollee. Further, a provider may join
30with, or otherwise assist, a subscriber or enrollee, or the agent, to
31submit the grievancebegin insert or external review decisionend insert to the department.
32In addition, following submission of the grievancebegin insert or external
33review decisionend insert
to the department, the subscriber or enrollee, or
34the agent, may authorize the provider to assist, including
35advocating on behalf of the subscriber or enrollee. For purposes
36of this section, a “relative” includes the parent, stepparent, spouse,
37adult son or daughter, grandparent, brother, sister, uncle, or aunt
38of the subscriber or enrollee.

39(3) The department shall review the written documents submitted
40with the subscriber’s or the enrollee’s request for review, or
P13   1submitted by the agent on behalf of the subscriber or enrollee. The
2department may ask for additional information, and may hold an
3informal meeting with the involved parties, including providers
4who have joined in submitting the grievancebegin insert or external review
5decisionend insert
or who are otherwise assisting or advocating on behalf
6of the subscriber or enrollee. If after reviewing the record, the
7department concludes that thebegin delete grievance,end deletebegin insert grievance or external
8review decision,end insert
in whole or in part, is eligible for review under
9the independent medical review system established pursuant to
10Article 5.55 (commencing with Section 1374.30), the department
11shall immediately notify the subscriber or enrollee, or agent, of
12that option and shall, if requested orally or in writing, assist the
13subscriber or enrollee in participating in the independent medical
14review system.

15(4) If after reviewing the record of abegin delete grievance,end deletebegin insert grievance or
16external review decision,end insert
the department concludes that a health
17care service eligible for coverage and payment under a health care
18service plan contract has been delayed, denied, or modified by a
19plan, or by one of its contracting providers, in whole or in part due
20to a determination that the service is not medically necessary, and
21that determination was not communicated to the enrollee in writing
22along with a notice of the enrollee’s potential right to participate
23in the independent medical review system, as required by this
24chapter, the director shall, by order, assess administrative penalties.
25A proceeding for the issuance of an order assessing administrative
26penalties shall be subject to appropriate notice of, and the
27opportunity for, a hearing with regard to the person affected in
28accordance with Section 1397. The administrative penalties shall
29not be deemed an exclusive remedy available to the director. These
30penalties shall be paid to the Managed Care Administrative Fines
31and Penalties Fund and shall be used for the purposes specified in
32Section 1341.45.

33(5) The department shall send a written notice of the final
34disposition of thebegin delete grievance,end deletebegin insert grievance or external review decision,end insert
35 and the reasons therefor, to the subscriber or enrollee, the agent,
36to any provider that has joined with or is otherwise assisting the
37subscriber or enrollee, and to the plan, within 30 calendar days of
38receipt of the request for review unless the director, in his or her
39discretion, determines that additional time is reasonably necessary
40to fully and fairly evaluate the relevantbegin delete grievance.end deletebegin insert grievance or
P14   1external review decision.end insert
In any case not eligible for the
2independent medical review system established pursuant to Article
35.55 (commencing with Section 1374.30), the department’s written
4notice shall include, at a minimum, the following:

5(A) A summary of its findings and the reasons why the
6department found the plan to be, or not to be, in compliance with
7any applicable laws, regulations, or orders of the director.

8(B) A discussion of the department’s contact with any medical
9provider, or any other independent expert relied on by the
10department, along with a summary of the views and qualifications
11of that provider or expert.

12(C) If the enrollee’s grievancebegin insert or external review decisionend insert is
13sustained in whole or in part, information about any corrective
14action taken.

15(6) In any department review of a grievancebegin insert or external review
16decisionend insert
involving a disputed health care service, as defined in
17subdivision (b) of Section 1374.30, that is not eligible for the
18independent medical review system established pursuant to Article
195.55 (commencing with Section 1374.30), in which the department
20finds that the plan has delayed, denied, or modified health care
21services that are medically necessary, based on the specific medical
22circumstances of the enrollee, and those services are a covered
23benefit under the terms and conditions of the health care service
24plan contract, the department’s written notice shall do either of
25the following:

26(A) Order the plan to promptly offer and provide those health
27care services to the enrollee.

28(B) Order the plan to promptly reimburse the enrollee for any
29reasonable costs associated with urgent care or emergency services,
30or other extraordinary and compelling health care services, when
31the department finds that the enrollee’s decision to secure those
32services outside of the plan network was reasonable under the
33circumstances.

34The department’s order shall be binding on the plan.

35(7) Distribution of the written notice shall not be deemed a
36waiver of any exemption or privilege under existing law, including,
37but not limited to, Section 6254.5 of the Government Code, for
38any information in connection with and including the written
39notice, nor shall any person employed or in any way retained by
P15   1the department be required to testify as to that information or
2notice.

3(8) The director shall establish and maintain a system of aging
4of grievances that are pending and unresolved for 30 days or more
5that shall include a brief explanation of the reasons each grievance
6is pending and unresolved for 30 days or more.

7(9) A subscriber or enrollee, or the agent acting on behalf of a
8subscriber or enrollee, may also request voluntary mediation with
9the plan prior to exercising the right to submit a grievancebegin insert or
10external review decisionend insert
to the department. The use of mediation
11services shall not preclude the right to submit a grievancebegin insert or
12external review decisionend insert
to the department upon completion of
13mediation. In order to initiate mediation, the subscriber or enrollee,
14or the agent acting on behalf of the subscriber or enrollee, and the
15plan shall voluntarily agree to mediation. Expenses for mediation
16shall be borne equally by both sides. The department shall have
17no administrative or enforcement responsibilities in connection
18with the voluntary mediation process authorized by this paragraph.

19(c) The plan’s grievance system shall include a system of aging
20of grievances that are pending and unresolved for 30 days or more.
21The plan shall provide a quarterly report to the director of
22grievances pending and unresolved for 30 or more days with
23separate categories of grievances for Medicare enrollees and
24Medi-Cal enrollees. The plan shall include with the report a brief
25explanation of the reasons each grievance is pending and
26unresolved for 30 days or more. The plan may include the
27following statement in the quarterly report that is made available
28to the public by the director:


30“Under Medicare and Medi-Cal law, Medicare enrollees and
31Medi-Cal enrollees each have separate avenues of appeal that
32are not available to other enrollees. Therefore, grievances
33pending and unresolved may reflect enrollees pursuing their
34Medicare or Medi-Cal appeal rights.”


36If requested by a plan, the director shall include this statement in
37a written report made available to the public and prepared by the
38director that describes or compares grievances that are pending
39and unresolved with the plan for 30 days or more. Additionally,
40the director shall, if requested by a plan, append to that written
P16   1report a brief explanation, provided in writing by the plan, of the
2reasons why grievances described in that written report are pending
3and unresolved for 30 days or more. The director shall not be
4required to include a statement or append a brief explanation to a
5written report that the director is required to prepare under this
6chapter, including Sections 1380 and 1397.5.

7(d) Subject to subparagraph (C) of paragraph (1) of subdivision
8(b), the grievance or resolution procedures authorized by this
9section shall be in addition to any other procedures that may be
10available to any person, and failure to pursue, exhaust, or engage
11in the procedures described in this section shall not preclude the
12use of any other remedy provided by law.

13(e) Nothing in this section shall be construed to allow the
14submission to the department of any provider grievance under this
15section. However, as part of a provider’s duty to advocate for
16medically appropriate health care for his or her patients pursuant
17to Sections 510 and 2056 of the Business and Professions Code,
18nothing in this subdivision shall be construed to prohibit a provider
19from contacting and informing the department about any concerns
20he or she has regarding compliance with or enforcement of this
21chapter.

22(f) To the extent required by Section 2719 of the federal Public
23Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent
24rules or regulations, there shall be an independent external review
25pursuant to the standards required by the United States Secretary
26of Health and Human Services of a health care service plan’s
27cancellation, rescission, or nonrenewal of an enrollee’s or
28subscriber’s coverage.

29

SEC. 5.  

Section 1368.01 of the Health and Safety Code is
30amended to read:

31

1368.01.  

(a)  The grievance system shall require the plan to
32resolve grievances within 30begin delete days, except as provided in
33subdivision (c).end delete
begin insert days.end insert

34(b)  The grievance system shall include a requirement for
35expedited plan review of grievances for cases involving an
36imminent and serious threat to the health of the patient, including,
37but not limited to, severe pain, potential loss of life, limb, or major
38bodily function. When the plan has notice of a case requiring
39expedited review, the grievance system shall require the plan to
40immediately inform enrollees and subscribers in writing of their
P17   1 right to notify the department of the grievance. The grievance
2system shall also require the plan to provide enrollees, subscribers,
3and the department with a written statement on the disposition or
4pending status of the grievance no later than three days from receipt
5of thebegin delete grievance, except as provided in subdivision (c).end deletebegin insert grievance.end insert
6 Paragraph (4) of subdivision (a) of Section 1368 shall not apply
7to grievances handled pursuant to this section.

begin delete

8(c) A health care service plan contract in the individual, small
9group, or large group markets that provides coverage for outpatient
10prescription drugs shall comply with subdivision (c) of Section
11156.122 of Title 45 of the Code of Federal Regulations. This
12subdivision shall not apply to Medi-Cal managed care health care
13service plan contracts or any entity that enters into a contract with
14the State Department of Health Care Services pursuant to Chapter
157 (commencing with Section 14000), Chapter 8 (commencing with
16Section 14200), or Chapter 8.75 (commencing with Section 14591)
17of Part 3 of Division 9 of the Welfare and Institutions Code.

end delete
18

SEC. 6.  

Section 1374.30 of the Health and Safety Code is
19amended to read:

20

1374.30.  

(a) Commencing January 1, 2001, there is hereby
21established in the department the Independent Medical Review
22System.

23(b) For the purposes of this chapter, “disputed health care
24service” means any health care service eligible for coverage and
25payment under a health care service plan contract that has been
26denied, modified, or delayed by a decision of the plan, or by one
27of its contracting providers, in whole or in part due to a finding
28that the service is not medically necessary. A decision regarding
29a disputed health care service relates to the practice of medicine
30and is not a coverage decision. A disputed health care service does
31not include services provided by a specialized health care service
32plan, except to the extent that the service (1) involves the practice
33of medicine, or (2) is provided pursuant to a contract with a health
34care service plan that covers hospital, medical, or surgical benefits.
35If a plan, or one of its contracting providers, issues a decision
36denying, modifying, or delaying health care services, based in
37whole or in part on a finding that the proposed health care services
38are not a covered benefit under the contract that applies to the
39enrollee, the statement of decision shall clearly specify the
40provision in the contract that excludes that coverage.

P18   1(c) For the purposes of this chapter, “coverage decision” means
2the approval or denial of health care services by a plan, or by one
3of its contracting entities, substantially based on a finding that the
4provision of a particular service is included or excluded as a
5covered benefit under the terms and conditions of the health care
6service plan contract. A “coverage decision” does not encompass
7a plan or contracting provider decision regarding a disputed health
8care service.

9(d) (1) All enrollee grievances involving a disputed health care
10service are eligible for review under the Independent Medical
11Review System if the requirements of this article are met. If the
12department finds that an enrollee grievance involving a disputed
13health care service does not meet the requirements of this article
14for review under the Independent Medical Review System, the
15enrollee request for review shall be treated as a request for the
16department to review the grievance pursuant to subdivision (b) of
17Section 1368. All other enrollee grievances, including grievances
18involving coverage decisions, remain eligible for review by the
19department pursuant to subdivision (b) of Section 1368.

20(2) In any case in which an enrollee or provider asserts that a
21decision to deny, modify, or delay health care services was based,
22in whole or in part, on consideration of medical necessity, the
23department shall have the final authority to determine whether the
24grievance is more properly resolved pursuant to an independent
25medical review as provided under this article or pursuant to
26subdivision (b) of Section 1368.

27(3) The department shall be the final arbiter when there is a
28question as to whether an enrollee grievance is a disputed health
29care service or a coverage decision. The department shall establish
30a process to complete an initial screening of an enrollee grievance.
31If there appears to be any medical necessity issue, the grievance
32shall be resolved pursuant to an independent medical review as
33provided under this article or pursuant to subdivision (b) of Section
341368.

35(e) Every health care service plan contract that is issued,
36amended, renewed, or delivered in this state on or after January
371, 2000, shall provide an enrollee with the opportunity to seek an
38independent medical review whenever health care services have
39been denied, modified, or delayed by the plan, or by one of its
40contracting providers, if the decision was based in whole or in part
P19   1on a finding that the proposed health care services are not medically
2necessary. For purposes of this article, an enrollee may designate
3an agent to act on his or her behalf, as described in paragraph (2)
4of subdivision (b) of Section 1368. The provider may join with or
5otherwise assist the enrollee in seeking an independent medical
6review, and may advocate on behalf of the enrollee.

7(f) Medi-Cal beneficiaries enrolled in a health care service plan
8shall not be excluded from participation. Medicare beneficiaries
9enrolled in a health care service plan shall not be excluded unless
10expressly preempted by federal law. Reviews of cases for Medi-Cal
11enrollees shall be conducted in accordance with statutes and
12regulations for the Medi-Cal program.

13(g) The department may seek to integrate the quality of care
14and consumer protection provisions, including remedies, of the
15Independent Medical Review System with related dispute
16resolution procedures of other health care agency programs,
17including the Medicare and Medi-Cal programs, in a way that
18minimizes the potential for duplication, conflict, and added costs.
19Nothing in this subdivision shall be construed to limit any rights
20conferred upon enrollees under this chapter.

21(h) The independent medical review process authorized by this
22article is in addition to any other procedures or remedies that may
23be available.

24(i) Every health care service plan shall prominently display in
25every plan member handbook or relevant informational brochure,
26in every plan contract, on enrollee evidence of coverage forms, on
27copies of plan procedures for resolving grievances, on letters of
28denials issued by either the plan or its contracting organization,
29on the grievance forms required under Section 1368, and on all
30written responses to grievances, information concerning the right
31of an enrollee to request an independent medical review in cases
32where the enrollee believes that health care services have been
33improperly denied, modified, or delayed by the plan, or by one of
34its contracting providers.

35(j) An enrollee may apply to the department for an independent
36medical review when all of the following conditions are met:

37(1) (A) The enrollee’s provider has recommended a health care
38service as medically necessary, or

39(B) The enrollee has received urgent care or emergency services
40that a provider determined was medically necessary, or

P20   1(C) The enrollee, in the absence of a provider recommendation
2under subparagraph (A) or the receipt of urgent care or emergency
3services by a provider under subparagraph (B), has been seen by
4an in-plan provider for the diagnosis or treatment of the medical
5condition for which the enrollee seeks independent review. The
6plan shall expedite access to an in-plan provider upon request of
7an enrollee. The in-plan provider need not recommend the disputed
8health care service as a condition for the enrollee to be eligible for
9an independent review.

10For purposes of this article, the enrollee’s provider may be an
11out-of-plan provider. However, the plan shall have no liability for
12payment of services provided by an out-of-plan provider, except
13as provided pursuant to subdivision (c) of Section 1374.34.

14(2) The disputed health care service has been denied, modified,
15or delayed by the plan, or by one of its contracting providers, based
16in whole or in part on a decision that the health care service is not
17medically necessary.

18(3) begin insert(A)end insertbegin insertend insertThe enrollee has filed a grievance with the plan or its
19contracting provider pursuant to Section 1368, and the disputed
20decision is upheld or the grievance remains unresolved after 30
21days. The enrollee shall not be required to participate in the plan’s
22grievance process for more than 30 days. In the case of a grievance
23that requires expedited review pursuant to Section 1368.01, the
24enrollee shall not be required to participate in the plan’s grievance
25process for more than threebegin delete days.end deletebegin insert days, orend insert

begin insert

26(B) The enrollee has filed for an external review decision with
27the plan or its contracting provider pursuant to subdivision (b) of
28Section 1367.24, and the disputed decision is upheld or the external
29review remains unresolved after 72 hours, or 24 hours if exigent
30circumstances exist.

end insert

31(k) An enrollee may apply to the department for an independent
32medical review of a decision to deny, modify, or delay health care
33services, based in whole or in part on a finding that the disputed
34health care services are not medically necessary, within six months
35of any of the qualifying periods or events under subdivision (j).
36The director may extend the application deadline beyond six
37months if the circumstances of a case warrant the extension.

38(l) The enrollee shall pay no application or processing fees of
39any kind.

P21   1(m) As part of its notification to the enrollee regarding a
2disposition of the enrollee’s grievance that denies, modifies, or
3delays health care services, the plan shall provide the enrollee with
4a one- or two-page application form approved by the department,
5and an addressed envelope, which the enrollee may return to initiate
6an independent medical review. The plan shall include on the form
7any information required by the department to facilitate the
8completion of the independent medical review, such as the
9enrollee’s diagnosis or condition, the nature of the disputed health
10care service sought by the enrollee, a means to identify the
11enrollee’s case, and any other material information. The form shall
12also include the following:

13(1) Notice that a decision not to participate in the independent
14medical review process may cause the enrollee to forfeit any
15statutory right to pursue legal action against the plan regarding the
16disputed health care service.

17(2) A statement indicating the enrollee’s consent to obtain any
18necessary medical records from the plan, any of its contracting
19providers, and any out-of-plan provider the enrollee may have
20consulted on the matter, to be signed by the enrollee.

21(3) Notice of the enrollee’s right to provide information or
22documentation, either directly or through the enrollee’s provider,
23regarding any of the following:

24(A) A provider recommendation indicating that the disputed
25health care service is medically necessary for the enrollee’s medical
26condition.

27(B) Medical information or justification that a disputed health
28care service, on an urgent care or emergency basis, was medically
29necessary for the enrollee’s medical condition.

30(C) Reasonable information supporting the enrollee’s position
31that the disputed health care service is or was medically necessary
32for the enrollee’s medical condition, including all information
33provided to the enrollee by the plan or any of its contracting
34providers, still in the possession of the enrollee, concerning a plan
35or provider decision regarding disputed health care services, and
36a copy of any materials the enrollee submitted to the plan, still in
37the possession of the enrollee, in support of the grievance, as well
38as any additional material that the enrollee believes is relevant.

P22   1(4) A section designed to collect information on the enrollee’s
2ethnicity, race, and primary language spoken that includes both of
3the following:

4(A) A statement of intent indicating that the information is used
5for statistics only, in order to ensure that all enrollees get the best
6care possible.

7(B) A statement indicating that providing this information is
8optional and will not affect the independent medical review process
9in any way.

10(n) Upon notice from the department that the health care service
11plan’s enrollee has applied for an independent medical review, the
12plan or its contracting providers shall provide to the independent
13medical review organization designated by the department a copy
14of all of the following documents within three business days of
15the plan’s receipt of the department’s notice of a request by an
16enrollee for an independent review:

17(1) (A) A copy of all of the enrollee’s medical records in the
18possession of the plan or its contracting providers relevant to each
19of the following:

20(i) The enrollee’s medical condition.

21(ii) The health care services being provided by the plan and its
22contracting providers for the condition.

23(iii) The disputed health care services requested by the enrollee
24for the condition.

25(B) Any newly developed or discovered relevant medical records
26in the possession of the plan or its contracting providers after the
27initial documents are provided to the independent medical review
28organization shall be forwarded immediately to the independent
29medical review organization. The plan shall concurrently provide
30a copy of medical records required by this subparagraph to the
31enrollee or the enrollee’s provider, if authorized by the enrollee,
32unless the offer of medical records is declined or otherwise
33prohibited by law. The confidentiality of all medical record
34information shall be maintained pursuant to applicable state and
35federal laws.

36(2) A copy of all information provided to the enrollee by the
37plan and any of its contracting providers concerning plan and
38provider decisions regarding the enrollee’s condition and care, and
39a copy of any materials the enrollee or the enrollee’s provider
40submitted to the plan and to the plan’s contracting providers in
P23   1support of the enrollee’s request for disputed health care services.
2This documentation shall include the written response to the
3enrollee’s grievance, required by paragraph (4) of subdivision (a)
4of Section 1368. The confidentiality of any enrollee medical
5information shall be maintained pursuant to applicable state and
6federal laws.

7(3) A copy of any other relevant documents or information used
8by the plan or its contracting providers in determining whether
9disputed health care services should have been provided, and any
10statements by the plan and its contracting providers explaining the
11reasons for the decision to deny, modify, or delay disputed health
12care services on the basis of medical necessity. The plan shall
13concurrently provide a copy of documents required by this
14paragraph, except for any information found by the director to be
15legally privileged information, to the enrollee and the enrollee’s
16provider. The department and the independent medical review
17organization shall maintain the confidentiality of any information
18found by the director to be the proprietary information of the plan.

begin delete

19(o) This section shall become operative on July 1, 2015.

end delete
20

SEC. 7.  

Section 10123.190 is added to the Insurance Code, 21immediately following Section 10123.19, to read:

22

10123.190.  

(a) (1) Every health insurer that provides
23prescription drug benefits shall maintain an expeditious process,
24as described in this subdivision, by which insureds, insureds’
25designees, or prescribing providers may request and obtain
26authorization for medically necessary nonformulary prescription
27drugs and medically necessary formulary drugs that require prior
28authorization by the health insurer. The health insurer shall provide
29that the insured, the insured’s designee, or the insured’s prescribing
30provider may seek a prior authorization for a prescription drug
31under this subdivision.

32(2) Each health insurer shall respond to a prior authorization
33request within 72 hours following receipt of the prior authorization
34request. A health insurer that grants a prior authorization request
35under this paragraph shall provide coverage of the prescription
36drug for the duration of the prescription, including refills.

37(3) Each health insurer shall provide that a prior authorization
38may be obtained within 24 hours if an insured is suffering from a
39health condition that may seriously jeopardize the insured’s life,
40health, or ability to regain maximum function or if an insured is
P24   1undergoing a current course of treatment using a nonformulary
2drug. A health insurer that grants a prior authorization request
3under this paragraph based on exigent circumstances shall provide
4coverage of the prescription drug for the duration of the exigency.

5(4) If a health insurer fails to respond within 72 hours for a prior
6authorization request, or within 24 hours if exigent circumstances
7exist, upon receipt of a completed prior authorization request, the
8prior authorization request shall be deemed to have been granted.

9(5) Each health insurer shall provide a written description of
10the process described in paragraph (1) to its prescribing providers.
11For purposes of this section, a prescribing provider shall include
12a provider authorized to write a prescription, pursuant to
13subdivision (a) of Section 4040 of the Business and Professions
14Code, to treat a medical condition of an insured.

15(b) If a health insurer disapproves a prior authorization request
16made pursuant to subdivision (a), the health insurer shall maintain
17an expeditious process to authorize an insured to obtain an external
18review.

19(1) A determination on an external review shall be made no
20later than 72 hours following receipt of the request, if the original
21request was an authorization request under paragraph (2) of
22subdivision (a), and no later than 24 hours following receipt of the
23request, if the original request was an authorization request under
24paragraph (3) of subdivision (a).

25(2) If an external review decision of a prior authorization request
26under paragraph (2) of subdivision (a) is granted, the health insurer
27shall provide coverage of the prescription drug for the duration of
28the prescription, including refills. If an external review decision
29of a prior authorization request under paragraph (3) of subdivision
30(a) is granted, the health insurer shall provide coverage of the
31prescription drug for the duration of the exigency.

32(c) Any health insurer that disapproves a request made pursuant
33to subdivision (a) to obtain authorization for a nonformulary or
34formulary drug shall provide the reasons for the disapproval in a
35notice provided to the insured. The notice shall indicate that the
36insured may file, in lieu of filing a grievance with the health
37insurer, a request for an external review pursuant to subdivision
38(b) if the insured objects to the disapproval, including any
39alternative drug or treatment offered by the health insurer. If a
40health insurer disapproves a request made pursuant to subdivision
P25   1(a), an insured shall not be required to file a grievance with the
2health insurer or its contracting provider pursuant the grievance
3process established by the health insurer.

4(d) The process described in subdivisions (a) and (b) by which
5insureds may obtain medically necessary nonformulary and
6formulary drugs shall be described in the evidence of coverage or
7certificate of insurance issued by the health insurer on or after July
81, 2017.

9(e) A health insurance policy in the individual, small group, and
10large group markets that provides coverage for outpatient
11prescription drugs shall comply with this section.

12(f) Nothing in this section shall be construed to affect an
13insured’s or policyholder’s eligibility to submit a complaint to the
14department for review or to apply to the department for an
15independent medical review under Article 3.5 (commencing with
16Section 10169).

17

SEC. 8.  

Section 10123.191 of the Insurance Code is amended
18to read:

19

10123.191.  

(a) Notwithstanding any other law, on and after
20January 1, 2013, a health insurer that provides coverage for
21prescription drugs shall utilize and accept only the prior
22authorization form developed pursuant to subdivisionbegin delete (c),end deletebegin insert (b),end insert or
23an electronic prior authorization process described in subdivision
24begin delete (e),end deletebegin insert (d),end insert when requiring prior authorization for prescription drugs.

begin delete

25(b) If a health insurer or a contracted physician group fails to
26respond within 72 hours for nonurgent requests, and within 24
27hours if exigent circumstances exist, upon receipt of a completed
28prior authorization request from a prescribing provider, the prior
29authorization request shall be deemed to have been granted.

30(c)

end delete

31begin insert(b)end insert On or before January 1, 2017, the department and the
32Department of Managed Health Care shall jointly develop a
33uniform prior authorization form. Notwithstanding any other law,
34on and after July 1, 2017, or six months after the form is completed
35pursuant to this section, whichever is later, every prescribing
36provider shall use that uniform prior authorization form, or an
37electronic prior authorization process described in subdivisionbegin delete (e),end delete
38begin insert (d),end insert to request prior authorization for coverage of prescription
39drugs and every health insurer shall accept that form or electronic
P26   1process as sufficient to request prior authorization for prescription
2drugs.

begin delete

3(d)

end delete

4begin insert(c)end insert The prior authorization form developed pursuant to
5subdivisionbegin delete (c)end deletebegin insert (b)end insert shall meet the following criteria:

6(1) The form shall not exceed two pages.

7(2) The form shall be made electronically available by the
8department and the health insurer.

9(3) The completed form may also be electronically submitted
10from the prescribing provider to the health insurer.

11(4) The department and the Department of Managed Health
12Care shall develop the form with input from interested parties from
13at least one public meeting.

14(5) The department and the Department of Managed Health
15Care, in development of the standardized form, shall take into
16consideration the following:

17(A) Existing prior authorization forms established by the federal
18Centers for Medicare and Medicaid Services and the State
19Department of Health Care Services.

20(B) National standards pertaining to electronic prior
21authorization.

begin delete

22(e)

end delete

23begin insert(d)end insert A prescribing provider may use an electronic prior
24authorization system utilizing the standardized form described in
25subdivisionbegin delete (c)end deletebegin insert (b)end insert or an electronic process developed specifically
26for transmitting prior authorization information that meets the
27National Council for Prescription Drug Programs’ SCRIPT
28standard for electronic prior authorization transactions.

begin delete

29(f)

end delete

30begin insert(e)end insert Subdivision (a) does not apply if any of the following occurs:

31(1) A contracted physician group is delegated the financial risk
32for the pharmacy or medical drug benefit by a health insurer.

33(2) A contracted physician group uses its own internal prior
34authorization process rather than the health insurer’s prior
35authorization process for the health insurer’s insureds.

36(3) A contracted physician group is delegated a utilization
37management function by the health insurer concerning any
38prescription drug, regardless of the delegation of financial risk.

begin delete

39(g)

end delete

P27   1begin insert(f)end insert For prescription drugs, prior authorization requirements
2described in subdivisionsbegin delete (c)end deletebegin insert (b)end insert andbegin delete (e)end deletebegin insert (d)end insert apply regardless of
3how that benefit is classified under the terms of the health insurer’s
4group or individual policy.

begin delete

5(h) A health insurer shall maintain a process for an external
6exception request review that complies with subdivision (c) of
7Section 156.122 of Title 45 of the Code of Federal Regulations.

end delete
begin delete

8(i) For an individual, small group, or large group health
9insurance policy, a health insurer that provides coverage for
10outpatient prescription drugs shall comply with subdivision (c) of
11Section 156.122 of Title 45 of the Code of Federal Regulations.

end delete
begin delete

12(j)

end delete

13begin insert(g)end insert For purposes of this section:

14(1) “Prescribing provider” shall include a provider authorized
15to write a prescription, pursuant to subdivision (a) of Section 4040
16of the Business and Professions Code, to treat a medical condition
17of an insured.

begin delete

18(2) “Exigent circumstances” exist when an insured is suffering
19from a health condition that may seriously jeopardize the insured’s
20life, health, or ability to regain maximum function or when an
21insured is undergoing a current course of treatment using a
22nonformulary drug.

end delete
begin delete

23(3)

end delete

24begin insert(2)end insert “Completed prior authorization request” means a completed
25uniform prior authorization form developed pursuant to subdivision
26begin delete (c),end deletebegin insert (b),end insert or a completed request submitted using an electronic prior
27authorization system described in subdivisionbegin delete (e),end deletebegin insert (d),end insert or, for
28contracted physician groups described in subdivisionbegin delete (f),end deletebegin insert (e),end insert the
29process used by the contracted physician group.

30

SEC. 9.  

Section 10123.197 of the Insurance Code is amended
31to read:

32

10123.197.  

(a) A request for an exception to a health insurer’s
33step therapy process for prescription drugs may be submitted in
34the same manner as a request for prior authorization for prescription
35drugs pursuant to Sectionbegin delete 10123.191,end deletebegin insert 10123.190end insert and shall be
36treated in the same manner, and shall be responded to by the health
37insurer in the same manner, as a request for prior authorization for
38prescription drugs.

39(b) The department and the Department of Managed Health
40Care shall include a provision for step therapy exception requests
P28   1in the uniform prior authorization form developed pursuant to
2subdivisionbegin delete (c)end deletebegin insert (b)end insert of Section 10123.191.

3

SEC. 10.  

Section 10169 of the Insurance Code, as added by
4Section 19 of Chapter 348 of the Statutes of 2015, is amended to
5read:

6

10169.  

(a) Commencing January 1, 2001, there is hereby
7established in the department the Independent Medical Review
8System.

9(b) For the purposes of this chapter, “disputed health care
10service” means any health care service eligible for coverage and
11payment under a disability insurance contract that has been denied,
12modified, or delayed by a decision of the insurer, or by one of its
13contracting providers, in whole or in part due to a finding that the
14service is not medically necessary. A decision regarding a disputed
15health care service relates to the practice of medicine and is not a
16coverage decision. A disputed health care service does not include
17services provided by a group or individual policy of vision-only
18or dental-only coverage, except to the extent that (1) the service
19involves the practice of medicine, or (2) is provided pursuant to a
20contract with a disability insurer that covers hospital, medical, or
21surgical benefits. If an insurer, or one of its contracting providers,
22issues a decision denying, modifying, or delaying health care
23services, based in whole or in part on a finding that the proposed
24health care services are not a covered benefit under the contract
25that applies to the insured, the statement of decision shall clearly
26specify the provision in the contract that excludes that coverage.

27(c) For the purposes of this chapter, “coverage decision” means
28the approval or denial of health care services by a disability insurer,
29or by one of its contracting entities, substantially based on a finding
30that the provision of a particular service is included or excluded
31as a covered benefit under the terms and conditions of the disability
32insurance contract. A coverage decision does not encompass a
33 disability insurer or contracting provider decision regarding a
34disputed health care service.

35(d) (1) All insured grievances involving a disputed health care
36service are eligible for review under the Independent Medical
37Review System if the requirements of this article are met. If the
38department finds that an insured grievance involving a disputed
39health care service does not meet the requirements of this article
40for review under the Independent Medical Review System, the
P29   1insured request for review shall be treated as a request for the
2department to review the grievance. All other insured grievances,
3including grievances involving coverage decisions, remain eligible
4for review by the department.

5(2) In any case in which an insured or provider asserts that a
6decision to deny, modify, or delay health care services was based,
7in whole or in part, on consideration of medical necessity, the
8department shall have the final authority to determine whether the
9grievance is more properly resolved pursuant to an independent
10medical review as provided under this article.

11(3) The department shall be the final arbiter when there is a
12question as to whether an insured grievance is a disputed health
13care service or a coverage decision. The department shall establish
14a process to complete an initial screening of an insured grievance.
15If there appears to be any medical necessity issue, the grievance
16shall be resolved pursuant to an independent medical review as
17provided under this article.

18(e) Every disability insurance contract that is issued, amended,
19renewed, or delivered in this state on or after January 1, 2000, shall
20provide an insured with the opportunity to seek an independent
21medical review whenever health care services have been denied,
22modified, or delayed by the insurer, or by one of its contracting
23providers, if the decision was based in whole or in part on a finding
24that the proposed health care services are not medically necessary.
25For purposes of this article, an insured may designate an agent to
26act on his or her behalf. The provider may join with or otherwise
27assist the insured in seeking an independent medical review, and
28may advocate on behalf of the insured.

29(f) Medicare beneficiaries enrolled in Medicare + Choice
30products shall not be excluded unless expressly preempted by
31federal law.

32(g) The department may seek to integrate the quality of care
33and consumer protection provisions, including remedies, of the
34Independent Medical Review System with related dispute
35resolution procedures of other health care agency programs,
36including the Medicare program, in a way that minimizes the
37potential for duplication, conflict, and added costs. Nothing in this
38subdivision shall be construed to limit any rights conferred upon
39insureds under this chapter.

P30   1(h) The independent medical review process authorized by this
2article is in addition to any other procedures or remedies that may
3be available.

4(i) Every disability insurer shall prominently display in every
5insurer member handbook or relevant informational brochure, in
6every insurance contract, on insured evidence of coverage forms,
7on copies of insurer procedures for resolving grievances, on letters
8of denials issued by either the insurer or its contracting
9organization, and on all written responses to grievances,
10information concerning the right of an insured to request an
11independent medical review when the insured believes that health
12care services have been improperly denied, modified, or delayed
13by the insurer, or by one of its contracting providers. The
14department’s telephone number, 1-800-927-4357, and Internet
15Web site, www.insurance.ca.gov, shall also be displayed.

16(j) An insured may apply to the department for an independent
17medical review when all of the following conditions are met:

18(1) (A) The insured’s provider has recommended a health care
19service as medically necessary, or

20(B) The insured has received urgent care or emergency services
21that a provider determined was medically necessary, or

22(C) The insured, in the absence of a provider recommendation
23under subparagraph (A) or the receipt of urgent care or emergency
24services by a provider under subparagraph (B), has been seen by
25a contracting provider for the diagnosis or treatment of the medical
26condition for which the insured seeks independent review. The
27insurer shall expedite access to a contracting provider upon request
28of an insured. The contracting provider need not recommend the
29disputed health care service as a condition for the insured to be
30eligible for an independent review.

31For purposes of this article, the insured’s provider may be a
32noncontracting provider. However, the insurer shall have no
33liability for payment of services provided by a noncontracting
34provider, except as provided pursuant to Section 10169.3.

35(2) The disputed health care service has been denied, modified,
36or delayed by the insurer, or by one of its contracting providers,
37based in whole or in part on a decision that the health care service
38is not medically necessary.

39(3) begin insert(A)end insertbegin insertend insertThe insured has filed a grievance with the insurer or its
40contracting provider, and the disputed decision is upheld or the
P31   1grievance remains unresolved after 30 days. The insured shall not
2be required to participate in the insurer’s grievance process for
3more than 30 days. In the case of a grievance that requires
4expedited review, the insured shall not be required to participate
5in the insurer’s grievance process for more than threebegin delete days.end deletebegin insert days,
6orend insert

begin insert

7(B) The insured has filed for an external review decision with
8the insurer or its contracting provider pursuant to subdivision (b)
9of Section 10123.190, and the disputed decision is upheld or the
10external review remains unresolved after 72 hours, or 24 hours if
11exigent circumstances exist.

end insert

12(k) An insured may apply to the department for an independent
13medical review of a decision to deny, modify, or delay health care
14services, based in whole or in part on a finding that the disputed
15health care services are not medically necessary, within six months
16of any of the qualifying periods or events under subdivision (j).
17The commissioner may extend the application deadline beyond
18six months if the circumstances of a case warrant the extension.

19(l) The insured shall pay no application or processing fees of
20any kind.

21(m) As part of its notification to the insured regarding a
22disposition of the insured’s grievance that denies, modifies, or
23delays health care services, the insurer shall provide the insured
24with a one- or two-page application form approved by the
25department, and an addressed envelope, which the insured may
26return to initiate an independent medical review. The insurer shall
27include on the form any information required by the department
28to facilitate the completion of the independent medical review,
29such as the insured’s diagnosis or condition, the nature of the
30disputed health care service sought by the insured, a means to
31identify the insured’s case, and any other material information.
32The form shall also include the following:

33(1) Notice that a decision not to participate in the independent
34review process may cause the insured to forfeit any statutory right
35to pursue legal action against the insurer regarding the disputed
36health care service.

37(2) A statement indicating the insured’s consent to obtain any
38necessary medical records from the insurer, any of its contracting
39providers, and any noncontracting provider the insured may have
40consulted on the matter, to be signed by the insured.

P32   1(3) Notice of the insured’s right to provide information or
2documentation, either directly or through the insured’s provider,
3regarding any of the following:

4(A) A provider recommendation indicating that the disputed
5health care service is medically necessary for the insured’s medical
6condition.

7(B) Medical information or justification that a disputed health
8care service, on an urgent care or emergency basis, was medically
9necessary for the insured’s medical condition.

10(C) Reasonable information supporting the insured’s position
11that the disputed health care service is or was medically necessary
12for the insured’s medical condition, including all information
13provided to the insured by the insurer or any of its contracting
14providers, still in the possession of the insured, concerning an
15insurer or provider decision regarding disputed health care services,
16and a copy of any materials the insured submitted to the insurer,
17still in the possession of the insured, in support of the grievance,
18as well as any additional material that the insured believes is
19relevant.

20(4) A section designed to collect information on the insured’s
21ethnicity, race, and primary language spoken that includes both of
22the following:

23(A) A statement of intent indicating that the information is used
24for statistics only, in order to ensure that all insureds get the best
25care possible.

26(B) A statement indicating that providing this information is
27optional and will not affect the independent medical review process
28in any way.

29(n) Upon notice from the department that the insured has applied
30for an independent medical review, the insurer or its contracting
31providers, shall provide to the independent medical review
32organization designated by the department a copy of all of the
33following documents within three business days of the insurer’s
34receipt of the department’s notice of a request by an insured for
35an independent review:

36(1) (A) A copy of all of the insured’s medical records in the
37possession of the insurer or its contracting providers relevant to
38each of the following:

39(i) The insured’s medical condition.

P33   1(ii) The health care services being provided by the insurer and
2its contracting providers for the condition.

3(iii) The disputed health care services requested by the insured
4for the condition.

5(B) Any newly developed or discovered relevant medical records
6in the possession of the insurer or its contracting providers after
7the initial documents are provided to the independent medical
8review organization shall be forwarded immediately to the
9independent medical review organization. The insurer shall
10concurrently provide a copy of medical records required by this
11subparagraph to the insured or the insured’s provider, if authorized
12by the insured, unless the offer of medical records is declined or
13otherwise prohibited by law. The confidentiality of all medical
14record information shall be maintained pursuant to applicable state
15and federal laws.

16(2) A copy of all information provided to the insured by the
17insurer and any of its contracting providers concerning insurer and
18provider decisions regarding the insured’s condition and care, and
19a copy of any materials the insured or the insured’s provider
20submitted to the insurer and to the insurer’s contracting providers
21in support of the insured’s request for disputed health care services.
22This documentation shall include the written response to the
23insured’s grievance. The confidentiality of any insured medical
24information shall be maintained pursuant to applicable state and
25federal laws.

26(3) A copy of any other relevant documents or information used
27by the insurer or its contracting providers in determining whether
28disputed health care services should have been provided, and any
29statements by the insurer and its contracting providers explaining
30the reasons for the decision to deny, modify, or delay disputed
31health care services on the basis of medical necessity. The insurer
32shall concurrently provide a copy of documents required by this
33paragraph, except for any information found by the commissioner
34to be legally privileged information, to the insured and the insured’s
35provider. The department and the independent medical review
36organization shall maintain the confidentiality of any information
37found by the commissioner to be the proprietary information of
38the insurer.

begin delete

39(o) This section shall become operative on January 1, 2017.

end delete
P34   1

SEC. 11.  

No reimbursement is required by this act pursuant to
2Section 6 of Article XIII B of the California Constitution because
3the only costs that may be incurred by a local agency or school
4district will be incurred because this act creates a new crime or
5infraction, eliminates a crime or infraction, or changes the penalty
6for a crime or infraction, within the meaning of Section 17556 of
7the Government Code, or changes the definition of a crime within
8the meaning of Section 6 of Article XIII B of the California
9Constitution.



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