BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 260


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          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                  |                    |








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          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. 










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          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  








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          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  








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          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.









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          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



















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