BILL ANALYSIS Ó
SB 260
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Date of Hearing: August 19, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
SB 260
(Monning) - As Amended July 14, 2015
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| |Health | |12 - 5 |
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Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill removes an exemption from Knox-Keene licensure for
Medi-Cal plans operated by county-organized health systems
(COHS), thereby subjecting such plans to licensure by the
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Department of Managed Health Care.
Licensure is required by either January 1, 2017 or July 1, 2017,
depending on whether the plan currently holds a Knox-Keene
license for any other product.
FISCAL EFFECT:
1)Increased fee revenue to DMHC of approximately $3.2 million
annually (Managed Care Fund). Revenue will vary year over
year depending on DMHC's regulatory costs and the per covered
life annual rate health plans must pay to support those costs.
2)Ongoing costs to DMHC commensurate with regulation of
additional lives, likely in the range of $3.2 million annually
(Managed Care Fund). First-year costs may be slightly higher
as initial licenses are filed. Total cost will depend how
much additional workload will be incurred by the DMHC help
center, which is based on utilization and is difficult to
predict. Data suggests Medi-Cal enrollees use the Help Center
in disproportionately small numbers compared to their number
of covered lives, so costs could be slightly lower than
projected if this pattern continues for COHS members.
3)Estimated cost pressure of $4 million (GF/federal) to
reimburse COHS for administrative costs incurred for
compliance, including fees paid to DMHC, through higher
Medi-Cal rates. These costs would be reflected in reporting
to DHCS for purposes of Medi-Cal managed care rate
development, and will be reimbursed on an ongoing basis once
costs are incorporated into rates two years later, according
to the current rate development process. This $4 million
estimate includes the fees paid to DMHC plus administrative
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costs at the plan level (GF/federal). For example, $4 million
overall in administrative costs to COHS plans incurred in
2016-17 would incur a commensurate GF/federal funds budget
impact in 2018-19, in the form of higher managed care rates to
COHS. DHCS is currently exploring modifying the managed care
rates development process to better incentivize quality and
value, so future changes to the way managed care rates are
developed could change this fiscal impact.
COMMENTS:
1)Purpose. This bill aims to standardize licensure for Medi-Cal
managed care plans by requiring COHS, which are currently
exempt from licensure under the Knox-Keene Act, to obtain such
licensure. The author contends this change will benefit
Medi-Cal enrollees by providing a single standard of consumer
protection under DMHC regulation. Specifically, the author
points out the main protections lacking for COHS enrollees are
independent medical review of a denial of medical care,
external review of a denial of coverage, and access to DMHC's
well-regarded consumer help center. In addition, he notes,
consistent collection of data regarding complaints and
grievances is not possible unless all health plans are held to
the same standard.
2)Background. The Knox-Keene Act governs managed care plans and
is enforced by DMHC. The managed care delivery system in
Medi-Cal has grown significantly in recent years; about 70% of
Medi-Cal enrollees now receive health care services through
managed care plans. Most Medi-Cal managed care plans are
already subject to the Knox-Keene Act and licensed by DMHC.
COHS plans serve about 2.1 million (16%) of Medi-Cal
enrollees. In counties served by COHS, all enrollees are
served by the COHS. In other counties, beneficiaries have a
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choice of plans. COHS plans are the only plan types exempt
from licensure, and only one of six COHS plans choose to
maintain licenses for their Medi-Cal products. Four of six
COHS plans maintain Knox-Keene licenses for other product
lines. In practical terms, DHCS managed care contracts
already include most Knox-Keene requirements, so COHS plans
are indirectly subject to most Knox-Keene requirements through
contract. However, not all Knox-Keene requirements are
included in DHCS contracts. In addition, oversight of the
standards is by contract enforcement at DHCS and through
regulation of licenses at DMHC, which creates different
enforcement mechanisms for the same requirements.
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.
3)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
regulation, and also to support DMHC's Office of the Patient
Advocate (OPA) which collects data related to complaints and
greivances. 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.
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4)Support. The Western Center on Law and Poverty (WCLP), the
sponsor of this bill, and other supporters cite the
availability of IMR, coverage review, and DMHC's help center
as critical rights all Medi-Cal managed care enrollees
deserve. WCLP argues that COHS started as small pilot programs
back in the early 1980's, but now given their size, range, and
complexity, it is important that COHS are subject to proper
regulatory oversight.
5)Opposition. Four of six COHS plans oppose this bill as
currently drafted (CenCal, CalOptima, Partnership Health Plan
of California, and Gold Coast Health Plan), contending the
potential marginal benefit is not worth the multi-million
dollar ongoing costs, and indicating there are other, more
effective ways to address the issues raised. For example,
they suggest strengthening the medical review process for
disputed treatments, and bolstering the ability of the DHCS
ombudsman call center to handle calls, would directly address
the issues raised, and could improve the system without
additional burdensome regulation. COHS plans point out some
Knox-Keene requirements do not apply to COHS, such as
provision related to marketing (COHS do not compete with other
plans, but serve all Medi-Cal enrollees).
6)Comments. This bill has significant additional administrative
costs to DMHC. The significant cost should be weighed against
enhanced consistency and standardization in consumer
protection and health care coverage regulation. The majority
of projected increased cost is for the DMHC help center, and
if this unit experienced increased costs, it would imply that
individuals have questions or problems that may not have
otherwise been addressed.
It does not appear any policy alternatives to Knox-Keene
licensure were explored. Perhaps a more targeted approach,
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such as those suggested by opponents, could meet some of the
goals of this legislation for a lower cost. On the other hand,
any alternative means to achieve the same goals would
necessarily fall short of the author's stated desire for
statewide consistency.
In addition, from a policy perspective it does appear
reasonable that the regulator (DHMC) is separate from the
purchaser (DHCS). Theoretically, a purchaser may be less
willing to enforce contract provisions that may serve to
increase its own costs or disrupt other programmatic goals.
This proposal guards against such a conflict of interest.
The availability of DMHC's help center staff could potentially
take some pressure off the DHCS Medi-Cal Office of the
Ombudsman phone system. No cost savings are projected with
this workload reduction, as the ombudsman system appears
severely under-resourced to handle current volume. For
example, a recent state audit found an average of 12,500 calls
to the program's ombudsman went unanswered each month for
nearly a year.
Finally, DMHC and DHCS are currently involved in a multi-year
effort to eliminate redundancy and improve coordination of
Medi-Cal managed care plan oversight. The addition of COHS
plans to Knox-Keene regulation could actually assist in
streamlining the duties of each department, as DHCS could rely
on DMHC findings for all, not just some, of their contracted
Medi-Cal plans, or vice versa.
Analysis Prepared by:Lisa Murawski / APPR. / (916)
319-2081
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