BILL ANALYSIS Ó SB 260 Page 1 SENATE THIRD READING SB 260 (Monning) As Amended July 14, 2015 Majority vote SENATE VOTE: 37-0 ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Health |12-5 |Bonta, Bonilla, |Maienschein, | | | |Burke, Chiu, Gomez, |Chávez, Lackey, | | | |Gonzalez, |Patterson, | | | | |Steinorth | | | | | | | | |Roger Hernández, | | | | |Nazarian, Rodriguez, | | | | |Santiago, Thurmond, | | | | |Waldron | | | | | | | |----------------+-----+----------------------+--------------------| |Appropriations | |Gomez, Bloom, Bonta, |Bigelow, Chang, | | | |Calderon, Nazarian, |Gallagher, Jones, | | | |Eggman, Eduardo |Wagner | | | |Garcia, Holden, | | | | |Quirk, Rendon, Weber, | | | | |Wood | | SB 260 Page 2 | | | | | | | | | | ------------------------------------------------------------------ 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. 3)Prescribes timeframes by which COHS must obtain Knox-Keene Act licensure. FISCAL EFFECT: According to the Assembly Appropriations Committee, this bill will result in: 1)Increased fee revenue to Department of Managed Health Care (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. SB 260 Page 3 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 (General Fund (GF)/federal funds) 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 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: 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 SB 260 Page 4 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. COHS are one model of MCMC, where DHCS contracts with a COHS to be the sole administrator of Medi-Cal benefits for an entire county. 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 are mandatorily enrolled into the COHS plan. All MCMC plans, except the COHS, are required to obtain a Knox-Keene Act license for their Medi-Cal lines of business and are subject to dual oversight by DHCS and DMHC. Although COHS are exempt from requirements to obtain Knox-Keene Act licensure, one COHS, the Health Plan of San Mateo (HPSM) voluntarily obtained a Knox-Keene Act license. Additionally, four other COHS, have obtained a Knox-Keene Act license for other, non-Medi-Cal lines of business. Only one COHS has no Knox-Keene Act license for any line of business. While, federal and state laws establish the rules that govern MCMC plans, many significant requirements are established and enforced by DHCS through contracts, including compliance with SB 260 Page 5 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, which is enforced by DMHC. However, there are some differences. The most notable difference in consumer protections is with regard to IMR of disputed health care services and external review of disputed coverage decisions. 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. 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 HPSM, do not have the option to request an IMR, and may only request a state fair hearing to resolve disputes. The Western Center on Law and Poverty (WCLP), the sponsor of this bill, and other 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. 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. SB 260 Page 6 Four of the six COHS, as well as the County of Solano 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 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. Analysis Prepared by: Kelly Green / HEALTH / (916) 319-2097 FN: 0001655 SB 260 Page 7