BILL ANALYSIS Ó
SB 260
Page 1
Date of Hearing: July 7, 2015
ASSEMBLY COMMITTEE ON HEALTH
Rob Bonta, Chair
SB
260 (Monning) - As Amended June 25, 2015
SENATE VOTE: 37-0
SUBJECT: Medi-Cal: county organized health systems: pilot
programs.
SUMMARY: Deems a county organized health system (COHS) to be a
health care service plan (plan) subject to the Knox-Keene Health
Care Service Plan Act of 1975 (Knox-Keene Act). Specifically,
this bill:
1)Repeals an exemption for counties contracting with the
Department of Health Care Services (DHCS) for the purposes of
providing or arranging for the provision of health care
services to Medi-Cal beneficiaries (referred to as COHS) from
the Knox-Keene Act.
2)Deems a COHS subject to the Knox-Keene Act for the purposes of
carrying out those contracts with DHCS as a health care
service plan unless expressly provided otherwise by the
Knox-Keene Act.
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3)Makes conforming changes related to the repeal of the
exemption referenced in 1) above.
EXISTING LAW:
1)Establishes the Medi-Cal program, administered by DHCS, under
which qualified low-income individuals receive health care
services.
2)Establishes the Knox-Keene Act, the body of law governing
health care service plans which provides for the licensure and
regulation plans by the Department of Managed Health Care
(DMHC).
3)Authorizes DHCS to negotiate exclusive contracts with any
county which seeks to establish a COHS to provide, or arrange
for the provision of health care services, to Medi-Cal
beneficiaries, and to negotiate the rates, terms, and
conditions of COHS contracts and contract amendments.
4)Requires DHCS, through a method independent of any agency of
the county, to monitor the level and quality of services
provided in a COHS county, as well as the county's
expenditures pursuant to the contract, and to ensure
conformity with federal law.
5)Exempts COHS from the Knox-Keene Act for the purposes of
carrying out contracts to provide, or arrange for, services to
Medi-Cal beneficiaries.
6)Cross-references the COHS exemption in certain codes, and
provides for related exemptions specific to certain COHS.
7)Requires COHS to obtain a license under the Knox-Keene Act if
the COHS seeks a contract with the federal government to
provide Medicare services as a Medicare Advantage program.
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FISCAL EFFECT: This bill, as currently amended, has not yet
been analyzed by a fiscal committee.
COMMENTS:
1)PURPOSE OF THIS BILL. According to the author, this bill will
ensure greater equity across Medi-Cal managed care (MCMC)
plans by affording all consumer protections to COHS plan
enrollees. The author reports that most COHS plans already
have at least one other line of business licensed under the
Knox-Keene Act. As such, these plans are already familiar
with Knox-Keene Act licensure and DMHC regulation, and the
requirement of obtaining a Knox-Keene license will not be
overly burdensome. The author argues that requiring COHS to
obtain a Knox-Keene Act license will ensure uniform standards
and regulation for all MCMC plans, and will extend important
protections that accompany Knox-Keene Act licensure to
Medi-Cal beneficiaries in COHS plans that they cannot access
today, including Independent Medical Review (IMR), DMHC
External Review, and others. The author states that, while
COHS plans do a good job at providing quality managed health
care for Medi-Cal beneficiaries throughout the 22 COHS
counties, there have been cases where Medi-Cal beneficiaries
would have benefited from the additional consumer protections
provided under the Knox-Keene Act, and would have received a
better health outcome had they simply lived in a county that
was not served by a COHS plan. The author concludes that the
time has come for all Medi-Cal plans to have a standard form
of regulation.
2)BACKGROUND.
a) MCMC. There are two main systems for the delivery of
services to Medi-Cal beneficiaries: fee-for-service (FFS)
and MCMC. MCMC is an organized system for the delivery of
medical services in which DHCS contracts with public and
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private managed care plans to provide health care coverage
for Medi-Cal beneficiaries. Managed care plans receive
monthly capitated payments from the state, and are
responsible for organizing provider networks and ensuring
that care delivery meets statutory and contractual
standards, including standards related to access,
availability, and quality.
Enrollment in MCMC has dramatically grown in recent years
as a result of several initiatives to mandate beneficiary
enrollment in MCMC. As of April 2015, out of approximately
12 million total Medi-Cal beneficiaries, MCMC serves
approximately 9.4 million throughout the state's 58
counties. The state uses six MCMC models of managed care,
including:
i) Geographic managed care (GMC) which offers
beneficiaries multiple commercial plans to choose from;
ii) Two-Plan model which provides beneficiaries a choice
between one commercial and one public plan (referred to
as a Local Initiative (LI);
iii) COHS, where DHCS contracts with a COHS created by a
County Board of Supervisors to be the sole administrator
of Medi-Cal benefits for an entire county.
iv) Regional and Imperial models in which beneficiaries
may choose between two commercial MCMC plans; and,
v) San Benito model in which beneficiaries may choose
between a commercial MCMC plan and FFS.
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b) MCMC regulation. All MCMC plans, except for five of the
six COHS, are subject to dual oversight by DHCS and DMHC.
MCMC plans enter into contracts with DHCS in order to
provide or arrange services for Medi-Cal beneficiaries.
While, federal and state laws establish the rules that
govern MCMC plans, many significant requirements are
established and enforced by DHCS through these contracts,
including compliance with financial viability and
standards; quality improvement systems; utilization
management; and, access and provider networks. The
requirements set forth in the contracts largely mirror
those required by the Knox-Keene Act.
MCMC plans, with the exception of COHS, are required to obtain a
Knox-Keene Act license for their Medi-Cal lines of business.
DMHC licenses and regulates health maintenance organizations
(HMOs) and some preferred provider organizations. As an
organization designed for consumer protection, the mission of
DMHC is to regulate and provide quality of care and fiscal
oversight of plans. It achieves this mission, in part, by
administering and enforcing the Knox-Keene Act.
Both DMHC and DHCS perform periodic reviews and audits of
MCMC plans. Specifically, state law requires DHCS to
perform annual medical audits of each MCMC plan to
determine, among other things, the health plans' ability to
provide quality health care services and to assess the
overall plan performance in providing health care benefits
to Medi-Cal beneficiaries. DMHC performs medical surveys
of all of the MCMC plans with a Knox-Keene Act license
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every three years, also evaluating the plans' compliance
with Knox-Keene Act licensure requirements, including
quality of care, and overall performance in providing
health care benefits and meeting the health care needs of
enrollees. Recent legislation requires DMHC to review
compliance with timely access requirements on an annual
basis, rather than triennially.
Reviews by both DMHC and DHCS include many overlapping
areas. For example, they both review utilization
management, access and availability of services, quality
management, grievances and appeals, case management and
coordination of care, access to emergency services and
payment, and prescription drug benefits and authorization
process. In recent years, DMHC and DHCS have made efforts
to coordinate their oversight of MCMC plans so as to reduce
burden on the plans. For example, in years in which an
MCMC plan will be audited by both DMHC and DHCS, they
attempt to coordinate the audits so they can be performed
at the same time, rather than requiring plans to under
separate surveys.
Additionally, through interagency agreements required by
recent trailer bill legislation, DMHC is contracted by DHCS
to perform specified oversight responsibilities with regard
to specific Medi-Cal enrollee populations, including
beneficiary populations transition into MCMC plans from FFS
or other programs, including seniors and persons with
disabilities, former Health Family Program enrollees,
Medi-Cal beneficiaries in the rural managed care expansion,
and enrollees in the Coordinated Care Initiative. Some of
the contracted duties to be performed by DMHC are financial
audits, medical surveys, plan readiness review, and review
of the adequacy of managed care health plan provider
networks.
c) COHS. According to the National Health Law Program, in
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1981, Congress passed a federal law aimed at encouraging
the proliferation of Medicaid managed care programs by
allowing states to waive certain Medicaid requirements if
they contracted with government-run prepaid plans that did
not federally qualify as HMOs. Under federal law, only a
limited number of such plans may operate, and enrollment is
capped. In 1982, California legislation authorized the
first COHS to deliver managed care services to Medi-Cal
beneficiaries.
Today, there are six COHS operating in 22 counties, and serving
approximately 2.1 million Medi-Cal beneficiaries. Almost all
Medi-Cal-eligible beneficiaries in COHS counties, including
those enrolled in both Medi-Cal and Medicare (referred to as
"dual-eligibles") and individuals with a share of cost, are
mandatorily enrolled into the COHS plan. Below is a list of the
COHS, the counties they serve, and the number of enrollees:
----------------------------------------------------------------
| COHS | Counties | Number of |
| | | enrollees |
| | | as of May 2015 |
|-------------------+------------------------+-------------------|
| CalOptima | Orange | 746,767 |
|-------------------+------------------------+-------------------|
| CenCal Health | Santa Barbara | 163,264 |
| | San Luis Obispo | |
|-------------------+------------------------+-------------------|
|Central California | Santa Cruz, Monterey, | 331,148 |
| Alliance for | Merced | |
| Health | | |
|-------------------+------------------------+-------------------|
| Gold Coast Health | Ventura | 190,750 |
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| Plan | | |
|-------------------+------------------------+-------------------|
|Health Plan of San | San Mateo | 106,080 |
| Mateo | | |
|-------------------+------------------------+-------------------|
|Partnership Health | Del Norte, Humboldt, | 542,890 |
|Plan of California | Lake, Lassen, Marin, | |
| |Mendocino, Modoc, Napa, | |
| | Shasta, Siskiyou, | |
| | Solano, Sonoma, | |
| | Trinity, and Yolo | |
| | Counties | |
----------------------------------------------------------------
----------------------------------------------------------------
| Total COHS Enrollment| 2,080,899 |
----------------------------------------------------------------
d) COHS and Knox-Keene Act licensure. COHS are exempt from
requirements to obtain Knox-Keene Act licensure. According
to a 2004 report from the Pacific Health Consulting Group
entitled, "An S.O.S for the COHS: Preserving County
Organized Health Systems," COHS were granted a waiver from
compliance with the Knox-Keene Act because they were
initially limited to Medi-Cal, not engaged in competition,
and publicly-operated. In contrast, LIs, established in
response to the Two-Plan model, were required to comply
with the Knox-Keene Act for Medi-Cal and well as other
lines of business.
Despite the exemption, one COHS, the Health Plan of San Mateo,
voluntarily obtained a Knox-Keene Act license. Additionally,
all other COHS, except for Gold Coast Health Plan, have obtained
a Knox-Keene Act license for other, non-Medi-Cal lines of
business.
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Below is a table outlining the specific products for which each
COHS already has a Knox-Keene Act license:
---------------------------------------------------------------
| COHS | Knox-Keene Act licensed product |
|-----------------------+---------------------------------------|
| CalOptima | Medicare Advantage |
|-----------------------+---------------------------------------|
| CenCal Health | Medi-Cal Access Program (formerly |
| |known as Access for Infants & Mothers) |
|-----------------------+---------------------------------------|
| Central California | In-Home Supportive Services |
| Alliance for Health | Healthy Kids |
| | Medi-Cal Access Program |
|-----------------------+---------------------------------------|
| Health Plan of San | In-Home Supportive Services |
| Mateo | Health Kids |
| | Medicare Advantage |
| | Medi-Cal |
|-----------------------+---------------------------------------|
| Partnership Health | Healthy Kids |
| Plan of California | |
| | |
| | |
---------------------------------------------------------------
Under this bill, Gold Coast Health Plan would be required to
file for initial licensure with DMHC in order to obtain a
Knox-Keene Act license. However, according to DMHC, COHS which
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already have a Knox-Keene Act license for non-Medi-Cal products
would be required to file a "material modification" to their
existing licenses to add their MCMC plan as a new product.
According to DMHC, material modification filings and review are
similar to that of initial licensure filings, but take less time
in part because DMHC has already reviewed certain information
about the plan that is on file with the plan's other licensed
product. For example, DMHC will have already reviewed the
plan's governance and administration.
Additionally, when DMHC reviews a licensed plan's overall
financial viability, the department includes the plan's Medi-Cal
product in its review. This is an important function, as DMHC
has previously identified serious financial issues within MCMC
plans. For example, as a result of DMHC's financial oversight,
the department was able to identify serous financial solvency
issues with one public MCMC plan, Alameda Alliance for Health,
which resulted in the plan being placed in receivership by DMHC.
According to DMHC, it currently takes approximately one year to
review an application for initial licensure. Material
modifications currently take approximately six months to review.
e) Knox-Keene Act licensure fees. Plans licensed under the
Knox-Keene Act are required to pay fees to DMHC to support
the costs and expenses associated with their licensure and
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regulation, and also to support DMHC's Office of the
Patient Advocate (OPA) which assists and collects data from
state health care consumer assistance call centers in order
to enable consumer to access services for which they are
eligible. For the 2015-16 fiscal year, full-service plans
are required to pay $1.42 per covered life, plus $0.05 per
covered life to support OPA. Plans are also required to
pay $0.07 per covered life to support the California Health
Benefits Review Program (CHBRP), a program within the
University of California (UC) that, upon request by the
Legislature, assesses legislation proposing to mandate or
repeal a benefit or service. Plans pay the CHBRP fees to
DMHC, which passes through the funds to the UC.
f) Consumer assistance and protection. DHCS' MCMC
contracts mirror most of the requirements contained in the
Knox-Keene Act, but there are some differences. For
example, DHCS contracts contain stricter time and distance
standards, requiring primary care physicians to be
available within 10 miles or 30 minutes of an enrollee's
workplace or residence as compared to 15 miles or 30
minutes required by the Knox-Keene Act. The most notable
difference in consumer protections is with regard to IMR of
disputed health care services and external review of
disputed coverage decisions.
i) IMR. The Knox-Keene Act requires DMHC to establish
an IMR system through which all plan enrollees, including
MCMC enrollees in Knox-Keene Act licensed plans, may
request an objective review by independent clinical
professionals of a decision by a plan to deny, modify, or
delay a health care service or treatment based on the
plan's determination that the service or treatment is not
medically necessary, deny coverage of an experimental or
investigational treatment, or pay for emergency or urgent
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medical services already received.
DMHC contracts with an IMR organization, which, pursuant
to existing law, is independent of any plan doing
business in the State of California. The IMR
organization, and the medical professionals retained to
conduct reviews, are prohibited from having any material,
professional, financial, or other affiliation with the
plan or the enrollee.
In order to obtain an IMR, an enrollee must first file a
grievance with the plan which has 30 days to resolve the
grievance, or 72 hours in cases involving imminent and
serious threat to the health of the enrollee. If the
plan upholds its decision, or does not resolve the
grievance within the required timeframe, the enrollee may
request an IMR. IMR decisions are made within 30 days,
or within three to seven days, if the case is urgent.
If an IMR is decided in the enrollee's favor, the plan is
required to authorize the service. If the IMR is not
decided in the enrollee's favor, the enrollee may not
appeal the decision, but may still be able to take legal
action. According to DMHC's website, approximately 60%
of IMRs decisions are made favoring the enrollee.
According to a 2013 report by DMHC regarding IMR, during
the 2013 calendar year, DMHC resolved 1,547 IMRs;
enrollees received the requested services in more than
54% of the IMR cases. In nearly one quarter of the cases
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(23%), the health plan reversed its denial after DMHC
received the IMR application, but prior to IMR review.
ii) Medi-Cal fair hearings. MCMC beneficiaries have the
option to request a state fair hearing, in lieu of an
IMR, if a beneficiary receives notice that a medical
service has been denied, deferred, or modified. Medi-Cal
hearings are heard by Administrative Law Judges (ALJ)
from the State Hearings Division of the Department of
Social Services. During the hearing, the claimant must
be allowed to present witnesses, evidence, arguments, and
confront and cross-examine adverse witnesses. Medi-Cal
hearings include giving testimony under oath and
submitting evidence into the record. The process is
designed to be fair to unrepresented laypersons and is
therefore more relaxed than a formal court proceeding.
After a fair hearing, a decision will be sent to the
claimant and their representative. The hearing decision
must be in writing and completed within 90 days of the
fair hearing request. The decision issued by the ALJ in
a Medi-Cal hearing is a proposed decision, which within
75 days is filed with the Director of DHCS who reviews
the proposed decision. The proposed decision is adopted,
changed, or set for further hearing. If the Director
takes no action within 30 days of receiving the proposed
decision, it is deemed adopted.
MCMC beneficiaries may choose to request an IMR or file
for a state fair hearing. Since COHS are not required to
obtain a Knox-Keene Act license, COHS beneficiaries, with
exception of beneficiaries of the Health Plan of San
Mateo, do not have the option to request an IMR.
iii) MCMC ombudsman and DMHC Help Center. MCMC
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beneficiaries in Knox-Keene Act licensed MCMC plans may
choose to seek assistance from either DHCS's MCMC
ombudsman, which investigates and resolves complaints by
or on behalf of MCMC beneficiaries, or DMHC's Help
Center, which provides information to consumers about
their rights and protections under the Knox-Keene Act,
handles complaints, and accepts IMR requests. COHS
beneficiaries may obtain assistance from the MCMC
ombudsman, but the Help center is designed to assist
consumers in Knox-Keene Act-licensed plans.
A recent report by the California State Auditor found
that the MCMC ombudsman does not have a telephone system
to handle the volume of calls it receives from
beneficiaries or the adequate staff to answer all of the
calls that the telephone system rejects. Specifically,
the telephone system rejected 7,000 to 45,000 calls per
month between February 2015 and January 2015.
Additionally, due to staffing limitations, the ombudsman
is able to answer an average of 30% to50% of the calls
the telephone system has accepted.
3)SUPPORT. Supporters argue that over two million Medi-Cal
beneficiaries are served by COHS, and they should have access
to the same regulatory structure and Knox-Keene Act
protections as all other Medi-Cal beneficiaries. Supporters
state that the current exemption from the Knox-Keene Act
allows for a separate standard for consumer protection that
does not include certain protections such as IMR or external
review for disputes over covered benefits, and that bill
ensures uniform protections and creates equity across all MCMC
plans.
The Western Center on Law and Poverty (WCLP), the sponsor of
this bill, and other supporters cite stories of Californians
who have had care denied by their COHS, and could not use IMR
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or DMHC complaint review processes to resolve the conflicts.
While other Medi-Cal beneficiaries can choose between IMR and
a Medi-Cal state fair hearing, consumers in COHS can only opt
for a state fair hearing if they disagree with a decision made
by their plan. Supporters assert that Medi-Cal beneficiaries
in non-COHS counties can generally resolve medical necessity
denials within 30 days, or 72 hours for urgent cases, using
the IMR process, COHS beneficiaries may have to wait weeks or
months to resolve their disputes using the state fair hearings
process.
WCLP argues that COHS started as small pilot programs back in
the early 1980's, but now provide coverage to over two million
Californians on Medi-Cal. Given their size, range, and
complexity, it is important that COHS are subject to proper
regulatory oversight. WCLP also argues that, given that all
other Medi-Cal plans, including the public LI plans, must be
licensed by DMHC, it does not make sense to exempt COHS plans.
4)OPPOSITION. Four of the six COHS oppose this bill arguing
that it will result in unnecessary, duplicative regulatory and
financial burdens on the COHS, which are already providing
high-quality care to, and maintaining high quality ratings
among, Medi-Cal beneficiaries. The opponents state that they
are already overseen by both the federal government and DHCS,
and adding a third regulator will add costs to both COHS and
the state without providing tangible value received in return.
The opponents state that, through their contracts with DHCS,
COHS are already required to meet relevant Knox-Keene Act
standards, and requiring additional regulation to address
singular concerns such as establishing an IMR process is
unnecessary, inefficient, and expensive. The opponents state
that a Knox-Keene Act license is not necessary to establish an
IMR, and they are willing to establish an IMR process outside
of Knox-Keene Act regulation. The opponents further argue
that, by requiring COHS to pay fees for Knox-Keene Act
licensure, this bill will reduce the amount of funding they
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are able to spend on direct services to MCMC beneficiaries,
including transportation, podiatry, vision, and other
supplemental non-Medi-Cal benefits currently provided to
Medi-Cal beneficiaries.
Partnership Health Plan of California argues that its existing
complaint, grievance, and appeal process has multiple doctors
engaged at many different points in the process, and that the
introduction of a new type of review will interrupt its
ability to collaboratively work with the member's health home
to reach a common resolution. Further, Partnership Health
Plan of California argues that adding DMHC as a regulator will
result in COHS receiving conflicting medical decisions from
IMR and ALJs for the same member case types. CenCalHealth
argues that a Knox-Keene Act license is a commercial license
developed and intended for private health plans competing in a
commercial marketplace, and since COHS are public entities
administering a publicly-sponsored program and do not compete
or otherwise perform many functions of a commercial insurer,
COHS plans should not be subject to Knox-Keene Act licensure.
Gold Coast Health Plan opposes this bill unless amended to
eliminate requirements for COHS to obtain a Knox-Keene Act
license, and to only require COHS to establish an IMR process,
including using the same IMR contractor that DMHC contracts
with.
5)PREVIOUS LEGISLATION.
a) SB 964 (Ed Hernandez), Chapter 573, Statutes of 2014,
increases oversight of plans with respect to compliance
with timely access and provider network adequacy standards;
requires plans to annually report specified network
adequacy data, including separate MCMC and individual
market product line data to DMHC and requires DMHC to
review plan compliance with timely access standards on an
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annual basis. Requires DHCS to share with DMHC monthly
provider files submitted by MCMC plans, and its findings
from MCMC plan audits.
b) SB 94 (Committee on Budget and Fiscal Review), Chapter
37, Statutes of 2013, requires DHCS to enter into an
interagency agreement with DMHC to, on its behalf, have
DMHC conduct various oversight functions of MCMC plans
participating in the MCMC expansion into rural counties,
and to transitions of SPDs into MCMC.
c) AB 1494 (Committee on Budget), Chapter 28, Statutes of
2012, requires DHCS, with respect to the transition of HFP
enrollees to MCMC, to consult and collaborate with DMHC in
assessing MCMC plan network adequacy in accordance with
Knox-Keene.
6)SUGGESTED AMENDMENTS. As stated in the analysis, it currently
takes approximately one year for DMHC to complete its review
of an application for an initial Knox-Keene Act license, and
approximately six months to complete the review of an
application for a material modification. This bill would
require all COHS to have a Knox-Keene Act license by January
1, 2016. This implementation date would not allow enough time
for the submission, review, and approval of either an initial
license, or a material modification. The Committee may wish
to amend the bill to delay implementation for the five COHS
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plans that need to file for a Knox-Keene Act License with
implementation dates that reflect the general timeframe needed
to obtain licensure. Specifically, the Committee may wish to
consider a January 1, 2017 implementation date for the four
COHS that must file material modifications and a July 1, 2017
implementation date for Gold Coast Health Plan which must file
an initial licensure application. These timeframes will grant
COHS time to prepare to submit the licensure filings with DMHC
and for DMHC to complete its review in order to grant
licensure.
REGISTERED SUPPORT / OPPOSITION:
Support
California Medical Association
California Rural Legal Assistance Foundation
Health Access California
Justice in Aging
Legal Services of Northern California
National Health Law Program
Project Inform
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Western Center on Law and Poverty (sponsor)
Youth Law Center
Opposition
CenCal
CalOptima
Partnership Health Plan of California
Gold Coast Health Plan (unless amended)
Analysis Prepared by:Kelly Green / HEALTH / (916)
319-2097