Amended in Assembly July 14, 2015

Amended in Assembly June 25, 2015

Amended in Assembly May 27, 2015

Senate Bill No. 260

Introduced by Senator Monning

February 18, 2015

An act to amend Section 10820 of the Corporations Code, to amend Sections 1343 and 101750.5 of the Health and Safety Code, and to amend Section 14499.5 of, and to repeal and add Section 14087.95 of, the Welfare and Institutions Code, relating to Medi-Cal.

LEGISLATIVE COUNSEL’S DIGEST

SB 260, as amended, Monning. Medi-Cal: county organized health systems: pilot programs.

Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services, under which qualified low-income individuals receive health care services. The Medi-Cal program is, in part, governed and funded by federal Medicaid Program provisions. One method by which these services are provided is pursuant to contracts with various types of managed care health plans, including through a county organized health system.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene), 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 the California Medical Assistance Commission with the authority to negotiate exclusive contracts with county organized health systems to provide health care services under the Medi-Cal program. Under existing law, the contracting counties are exempt from Knox-Keene for purposes of carrying out those contracts.

This bill would repeal that exemption and begin delete deleted end delete begin insert delete end insert related exemptions, deem a county contracting with the department under the provisions described above to be a health care service begin delete plan, end delete begin insert plan as of specified dates, end insert and subject contracting counties to the act for purposes of carrying out those contracts, unless the act expressly provides otherwise. The bill would make conforming changes.

Because a willful violation of Knox-Keene is a crime, this 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:

SECTION 1.  

Section 10820 of the Corporations Code is
amended to read:

10820.  

(a) “Health care service plan,” as used in this section
means a corporation that is a health care service plan defined in
the Knox-Keene Health Care Service Plan Act of 1975 (Chapter
2.2 (commencing with Section 1340) of Division 2 of the Health
and Safety Code), other than a corporation that is exempted from
that act by subdivision (c) of Section 1343 of the Health and Safety
Code.

(b) A health care service plan may be formed under or subject
to Part 2 (commencing with Section 5110) of this division or Part
3 (commencing with Section 7110) of this division.

SEC. 2.  

Section 1343 of the Health and Safety Code is amended
to read:

1343.  

(a) This chapter shall apply to health care service plans
and specialized health care service plan contracts as defined in
subdivisions (f) and (o) of Section 1345.

(b) The director may by the adoption of rules or the issuance of
orders deemed necessary and appropriate, either unconditionally
or upon specified terms and conditions or for specified periods,
exempt from this chapter any class of persons or plan contracts if
the director finds the action to be in the public interest and not
detrimental to the protection of subscribers, enrollees, or persons
regulated under this chapter, and that the regulation of the persons
or plan contracts is not essential to the purposes of this chapter.

(c) Upon the request of the Director of Health Care Services,
the director may exempt from this chapter any mental health plan
contractor or any capitated rate contract under Chapter 8.9
(commencing with Section 14700) of Part 3 of Division 9 of the
Welfare and Institutions Code. Those exemptions may be subject
to conditions the Director of Health Care Services deems
appropriate.

(d) This chapter shall not apply to:

(1) A person organized and operating pursuant to a certificate
issued by the Insurance Commissioner unless the entity is directly
providing the health care service through those entity-owned or
contracting health facilities and providers, in which case this
chapter shall apply to the insurer’s plan and to the insurer.

(2) A plan directly operated by a bona fide public or private
institution of higher learning which directly provides health care
services only to its students, faculty, staff, administration, and their
respective dependents.

(3) A person who does all of the following:

(A) Promises to provide care for life or for more than one year
in return for a transfer of consideration from, or on behalf of, a
person 60 years of age or older.

(B) Has obtained a written license pursuant to Chapter 2
(commencing with Section 1250) or Chapter 3.2 (commencing
with Section 1569).

(C) Has obtained a certificate of authority from the State
Department of Social Services.

(4) The Major Risk Medical Insurance Board when engaging
in activities under Chapter 8 (commencing with Section 10700)
of Part 2 of Division 2 of the Insurance Code, Part 6.3
(commencing with Section 12695) of Division 2 of the Insurance
Code, and Part 6.5 (commencing with Section 12700) of Division
2 of the Insurance Code.

(5) The California Small Group Reinsurance Fund.

SEC. 3.  

Section 101750.5 of the Health and Safety Code is
amended to read:

101750.5.  

For the purposes of Division 3.6 (commencing with
Section 810) of Title 1 of the Government Code, the authority shall
be considered a public entity separate from the county or counties
and shall file the statement required by Section 53051 of the
Government Code.

SEC. 4.  

Section 14087.95 of the Welfare and Institutions Code
is repealed.

SEC. 5.  

Section 14087.95 is added to the Welfare and
Institutions Code, to read:

14087.95.  

begin delete A end delete begin insert (a) end insert begin insert   end insert begin insert Subject to subdivision (b), a end insert county
contracting with the department pursuant to this article shall be
deemed to be a health care service plan, as defined in Section 1345
of the Health and Safety Code, and shall be subject to the
Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2
(commencing with Section 1340) of Division 2 of the Health and
Safety Code) for the purpose of carrying out those contracts, unless
the act expressly provides otherwise.

begin insert

(b) (1) A county organized health system under subdivision (a)
that holds a license under the Knox-Keene Health Care Service
Plan Act of 1975 on December 31, 2015, to provide the product
described in subdivision (a), shall be subject to this section on and
after January 1, 2016.

end insert begin insert

(2) A county organized health system under subdivision (a) that
holds a license under the Knox-Keene Health Care Service Plan
Act of 1975 on December 31, 2015, for any product not described
in subdivision (a) that is subject to the act, shall be subject to this
section on and after January 1, 2017.

end insert begin insert

(3) A county organized health system under subdivision (a) that
does not hold a license under the Knox-Keene Health Care Service
Plan Act of 1975 on December 31, 2015, to provide the product
described in subdivision (a) or any other product that is subject
to the act, shall be subject to this section on and after July 1, 2017.

end insert

SEC. 6.  

Section 14499.5 of the Welfare and Institutions Code
is amended to read:

14499.5.  

(a) (1) In carrying out the intent of this article, the
director shall contract for the operation of one local pilot program.
Special consideration shall be given to approving a program
contracted through county government in Santa Barbara County.

(2) Notwithstanding the limitations contained in Section 14490,
the director may enter into, or extend, contracts with the local pilot
program in Santa Barbara County pursuant to paragraph (1) for
periods that do not exceed three years.

(b) The establishment of a pilot program pursuant to this section
shall be contingent upon the availability of state and federal
funding. The program shall include the following components:

(1) Local authority for administration, fiscal management, and
delivery of services, but not including eligibility determination.

(2) Physician case management.

(3) Cost containment through provider incentives and other
means.

(c) The program for the pilot project shall include a plan and
budget for delivery of services, administration, and evaluation.
During the first year of the pilot program, the amount of the state
contract shall equal 95 percent of total projected Medi-Cal
expenditures for delivery of services and for administration based
on fee-for-service conditions in the program county. During the
remaining years of the pilot project Medi-Cal expenditures in the
program county shall be no more than 100 percent of total projected
expenditures for delivery of services and for administration based
on any combination of the following paragraphs:

(1) Relevant prior fee-for-service Medi-Cal experience in the
program county.

(2) The fee-for-service Medi-Cal experience in comparable
counties or groups of counties.

(3) Medi-Cal experience of the pilot project in the program
county if, as determined by the department, the scope, level, and
duration of, and expenditures for, any services used in setting the
rates under this paragraph would be comparable to fee-for-service
conditions were they to exist in the program county and would be
more actuarially reliable for use in ratesetting than data available
for use in applying paragraph (1) or (2).

The projected total expenditure shall be determined annually
according to an acceptable actuarial process. The data elements
used by the department shall be shared with the proposed
contractor.

(d) The director shall accept or reject the proposal within 30
days after the date of receipt. If a decision is made to reject the
proposal, the director shall set forth the reasons for this decision
in writing. Upon approval of the proposal, a contract shall be
written within 60 days. After signature by the local contractor, the
State Department of Health Care Services and the Department of
General Services shall execute the contract within 60 days.

(e) The director shall seek the necessary state and federal
waivers to enable operation of the program. If the federal waivers
for delivery of services under this plan are not granted, the
department is under no obligation to contract for implementation
of the program.

(f) Dental services may be included within the services provided
in this pilot program.

(g) Any federal demonstration funding for this pilot program
shall be made available to the county within 60 days upon
notification of the award without the state retaining any portion
not previously specified in the grant application as submitted.

(h) (1) (A) The department may negotiate exclusive contracts
and rates with the Santa Barbara Regional Health Authority in the
implementation of this section.

(B) Contracts entered into under this article may be on a
noncompetitive bid basis and shall be exempt from Chapter 2
(commencing with Section 10290) of Part 2 of Division 2 of the
Public Contract Code.

(C) The department shall enter into contracts pursuant to this
article, and shall be bound by the terms and conditions related to
the rates negotiated by the negotiator.

(2) The department shall implement this subdivision to the extent
that the following apply:

(A) Its implementation does not revise the status of the pilot
program as a federal demonstration project.

(B) Existing federal waivers apply to the pilot program as
revised by this subdivision, or the federal government extends the
applicability of the existing federal waivers or authorizes additional
federal waivers for the implementation of the program.

(3) The implementation of this subdivision shall not affect the
pilot program’s having met any of the requirements of Part 3.5
(commencing with Section 1175) of Division 1 of the Health and
Safety Code and this division applicable to the pilot program with
respect to the negotiations of contracts and rates by the department.

SEC. 7.  

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