BILL NUMBER: AB 55	ENROLLED
	BILL TEXT

	PASSED THE ASSEMBLY   SEPTEMBER 10, 1999
	PASSED THE SENATE   SEPTEMBER 9, 1999
	AMENDED IN SENATE   SEPTEMBER 9, 1999
	AMENDED IN SENATE   SEPTEMBER 8, 1999
	AMENDED IN SENATE   AUGUST 24, 1999
	AMENDED IN ASSEMBLY   APRIL 27, 1999
	AMENDED IN ASSEMBLY   APRIL 15, 1999
	AMENDED IN ASSEMBLY   APRIL 12, 1999

INTRODUCED BY   Assembly Members Migden and Thomson and Senator
Schiff
   (Principal coauthors:  Assembly Member Strom-Martin and Senator
Speier)
   (Coauthors:  Assembly Members Soto and Wayne)

                        DECEMBER 7, 1998

   An act to add Article 5.55 (commencing with Section 1374.30) to
Chapter 2.2 of Division 2 of the Health and Safety Code, and to add
Article 3.5 (commencing with Section 10169) to Chapter 1 of Part 2 of
Division 2 of the Insurance Code, relating to health.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 55, Migden.  Health care coverage:  independent medical review.

   Under existing law, the Knox-Keene Health Care Service Plan Act of
1975, health care service plans are regulated by the Department of
Corporations.  Existing law provides for the regulation of insurance,
administered by the Commissioner of Insurance.
   Existing law requires every health care service plan to establish
and maintain a grievance system approved by the department under
which enrollees and subscribers may submit their grievances to the
plan.  Under existing law, after participating for at least 60 days
in, or completing, the plan's grievance process, an enrollee or
subscriber may submit the grievance or complaint to the department
for review.
   Existing law requires every health care service plan and
disability insurer to establish a reasonable external, independent
review process to examine coverage decisions regarding experimental
or investigational therapies for individual enrollees or insureds who
have a terminal condition and meet certain specified criteria.
   This bill would require every health care service plan contract
that is issued, amended, renewed, or delivered in this state on or
after January 1, 2000, to provide an enrollee, effective January 1,
2001, with the opportunity to seek an independent medical review
whenever health care services have been denied, modified, or delayed
by the plan or by one of its contracting providers if the decision
was based on a finding that the proposed services are not medically
necessary.  The bill would establish, commencing January 1, 2000, an
independent medical review system whereby requests for reviews shall
be conducted by an independent medical review organization, as
specified. Under this bill, an enrollee would not pay any application
or processing fee. The bill would require that the costs of the
independent medical review process be paid by an assessment on health
care service plans.  The bill would enact other related provisions.

   The bill would also provide for a similar independent medical
review system to be established in the Department of Insurance for
review of similar decisions by disability insurers.
   Under existing law, a willful violation of the provisions
governing health care service plans is a crime.  By changing the
definition of the crime applicable to these plans, 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.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Article 5.55 (commencing with Section 1374.30) is added
to Chapter 2.2 of Division 2 of the Health and Safety Code, to read:


      Article 5.55.  Appeals Seeking Independent Medical Reviews

   1374.30.  (a) Commencing January 1, 2001, there is hereby
established in the department the Independent Medical Review System.

   (b) For the purposes of this chapter, "disputed health care
service" means any health care service eligible for coverage and
payment under a health care service plan contract that has been
denied, modified, or delayed by a decision of the plan, or by one of
its contracting providers, in whole or in part due to a finding that
the service is not medically necessary.  A decision regarding a
disputed health care service relates to the practice of medicine and
is not a coverage decision.  A disputed health care service does not
include services provided by a specialized health care service plan,
except to the extent that the service (1) involves the practice of
medicine, or (2) is provided pursuant to a contract with a health
care service plan.  If a plan, or one of its contracting providers,
issues a decision denying, modifying, or delaying health care
services, based in whole or in part on a finding that the proposed
health care services are not a covered benefit under the contract
that applies to the enrollee, the statement of decision shall clearly
specify the provision in the contract that excludes that coverage.
   (c) For the purposes of this chapter, "coverage decision" means
the approval or denial of health care services by a plan, or by one
of its contracting entities, substantially based on a finding that
the provision of a particular service is included or excluded as a
covered benefit under the terms and conditions of the health care
service plan contract.  A "coverage decision" does not encompass a
plan or contracting provider decision regarding a disputed health
care service.
   (d) (1) All enrollee grievances involving a disputed health care
service are eligible for review under the Independent Medical Review
System if the requirements of this article are met.  If the
department finds that an enrollee grievance involving a disputed
health care service does not meet the requirements of this article
for review under the Independent Medical Review System, the enrollee
request for review shall be treated as a request for the department
to review the grievance pursuant to subdivision (b) of Section 1368.
All other enrollee grievances, including grievances involving
coverage decisions, remain eligible for review by the department
pursuant to subdivision (b) of Section 1368.
   (2) In any case in which an enrollee or provider asserts that a
decision to deny, modify, or delay health care services was based, in
whole or in part, on consideration of medical necessity, the
department shall have the final authority to determine whether the
grievance is more properly resolved pursuant to an independent
medical review as provided under this article or pursuant to
subdivision (a) of Section 1368.
   (3) The department shall be the final arbiter when there is a
question as to whether an enrollee grievance is a disputed health
care service or a coverage decision.  The department shall establish
a process to complete an initial screening of an enrollee grievance.
If there appears to be any medical necessity issue, the grievance
shall be resolved pursuant to an independent medical review as
provided under this article or pursuant to subdivision (a) of Section
1368.
   (e) Every health care service plan contract that is issued,
amended, renewed, or delivered in this state on or after January 1,
2000, shall, effective January 1, 2001, provide an enrollee with the
opportunity to seek an independent medical review whenever health
care services have been denied, modified, or delayed by the plan, or
by one of its contracting providers, if the decision was based in
whole or in part on a finding that the proposed health care services
are not medically necessary.  For purposes of this article, an
enrollee may designate an agent to act on his or her behalf, as
described in paragraph (2) of subdivision (b) of Section 1368.  The
provider may join with or otherwise assist the enrollee in seeking an
independent medical review, and may advocate on behalf of the
enrollee.
   (f) Medi-Cal beneficiaries enrolled in a health care service plan
shall not be excluded from participation.  Medicare beneficiaries
enrolled in a health care service plan shall not be excluded unless
expressly preempted by federal law.  Reviews of cases for Medi-Cal
enrollees shall be conducted in accordance with statutes and
regulations for the Medi-Cal program.
   (g) The department may seek to integrate the quality of care and
consumer protection provisions, including remedies, of the
Independent Medical Review System with related dispute resolution
procedures of other health care agency programs, including the
Medicare and Medi-Cal programs, in a way that minimizes the potential
for duplication, conflict, and added costs.  Nothing in this
subdivision shall be construed to limit any rights conferred upon
enrollees under this chapter.
   (h) The independent medical review process authorized by this
article is in addition to any other procedures or remedies that may
be available.
   (i) No later than January 1, 2001, every health care service plan
shall prominently display in every plan member handbook or relevant
informational brochure, in every plan contract, on enrollee evidence
of coverage forms, on copies of plan procedures for resolving
grievances, on letters of denials issued by either the plan or its
contracting organization, on the grievance forms required under
Section 1368, and on all written responses to grievances, information
concerning the right of an enrollee to request an independent
medical review in cases where the enrollee believes that health care
services have been improperly denied, modified, or delayed by the
plan, or by one of its contracting providers.
   (j) An enrollee may apply to the department for an independent
medical review when all of the following conditions are met:
   (1) (A) The enrollee's provider has recommended a health care
service as medically necessary, or
   (B) The enrollee has received urgent care or emergency services
that a provider determined was medically necessary, or
   (C) The enrollee, in the absence of a provider recommendation
under subparagraph (A) or the receipt of urgent care or emergency
services by a provider under subparagraph (B), has been seen by an
in-plan provider for the diagnosis or treatment of the medical
condition for which the enrollee seeks independent review.  The plan
shall expedite access to an in-plan provider upon request of an
enrollee.  The in-plan provider need not recommend the disputed
health care service as a condition for the enrollee to be eligible
for an independent review.
   For purposes of this article, the enrollee's provider may be an
out-of-plan provider.  However, the plan shall have no liability for
payment of services provided by an out-of-plan provider, except as
provided pursuant to subdivision (b) of Section 1374.34.
   (2) The disputed health care service has been denied, modified, or
delayed by the plan, or by one of its contracting providers, based
in whole or in part on a decision that the health care service is not
medically necessary.
   (3) The enrollee has filed a grievance with the plan or its
contracting provider pursuant to Section 1368, and the disputed
decision is upheld or the grievance remains unresolved after 30 days.
  The enrollee shall not be required to participate in the plan's
grievance process for more than 30 days.  In the case of a grievance
that requires expedited review pursuant to Section 1368.01, the
enrollee shall not be required to participate in the plan's grievance
process for more than three days.
   (k) An enrollee may apply to the department for an independent
medical review of a decision to deny, modify, or delay health care
services, based in whole or in part on a finding that the disputed
health care services are not medically necessary, within six months
of any of the qualifying periods or events under subdivision (j).
The director may extend the application deadline beyond six months if
the circumstances of a case warrant the extension.
   (l) The enrollee shall pay no application or processing fees of
any kind.
   (m) As part of its notification to the enrollee regarding a
disposition of the enrollee's grievance that denies, modifies, or
delays health care services, the plan shall provide the enrollee with
a one-page application form approved by the department, and an
addressed envelope, which the enrollee may return to initiate an
independent medical review.  The plan shall include on the form any
information required by the department to facilitate the completion
of the independent medical review, such as the enrollee's diagnosis
or condition, the nature of the disputed health care service sought
by the enrollee, a means to identify the enrollee's case, and any
other material information.  The form shall also include the
following:
   (1) Notice that a decision not to participate in the independent
medical review process may cause the enrollee to forfeit any
statutory right to pursue legal action against the plan regarding the
disputed health care service.
   (2) A statement indicating the enrollee's consent to obtain any
necessary medical records from the plan, any of its contracting
providers, and any out-of-plan provider the enrollee may have
consulted on the matter, to be signed by the enrollee.
   (3) Notice of the enrollee's right to provide information or
documentation, either directly or through the enrollee's provider,
regarding any of the following:
   (A) A provider recommendation indicating that the disputed health
care service is medically necessary for the enrollee's medical
condition.
   (B) Medical information or justification that a disputed health
care service, on an urgent care or emergency basis, was medically
necessary for the enrollee's medical condition.
   (C) Reasonable information supporting the enrollee's position that
the disputed health care service is or was medically necessary for
the enrollee's medical condition, including all information provided
to the enrollee by the plan or any of its contracting providers,
still in the possession of the enrollee, concerning a plan or
provider decision regarding disputed health care services, and a copy
of any materials the enrollee submitted to the plan, still in the
possession of the enrollee, in support of the grievance, as well as
any additional material that the enrollee believes is relevant.
   (n) Upon notice from the department that the health care service
plan's enrollee has applied for an independent medical review, the
plan or its contracting providers shall provide to the independent
medical review organization designated by the department a copy of
all of the following documents within three business days of the plan'
s receipt of the department's notice of a request by an enrollee for
an independent review:
   (1) (A) A copy of all of the enrollee's medical records in the
possession of the plan or its contracting providers relevant to each
of the following:
   (i) The enrollee's medical condition.
   (ii) The health care services being provided by the plan and its
contracting providers for the condition.
   (iii) The disputed health care services requested by the enrollee
for the condition.
   (B) Any newly developed or discovered relevant medical records in
the possession of the plan or its contracting providers after the
initial documents are provided to the independent medical review
organization shall be forwarded immediately to the independent
medical review organization.  The plan shall concurrently provide a
copy of medical records required by this subparagraph to the enrollee
or the enrollee's provider, if authorized by the enrollee, unless
the offer of medical records is declined or otherwise prohibited by
law.  The confidentiality of all medical record information shall be
maintained pursuant to applicable state and federal laws.
   (2) A copy of all information provided to the enrollee by the plan
and any of its contracting providers concerning plan and provider
decisions regarding the enrollee's condition and care, and a copy of
any materials the enrollee or the enrollee's provider submitted to
the plan and to the plan's contracting providers in support of the
enrollee's request for disputed health care services.  This
documentation shall include the written response to the enrollee's
grievance, required by paragraph (4) of subdivision (a) of Section
1368.  The confidentiality of any enrollee medical information shall
be maintained pursuant to applicable state and federal laws.
   (3) A copy of any other relevant documents or information used by
the plan or its contracting providers in determining whether disputed
health care services should have been provided, and any statements
by the plan and its contracting providers explaining the reasons for
the decision to deny, modify, or delay disputed health care services
on the basis of medical necessity.  The plan shall concurrently
provide a copy of documents required by this paragraph, except for
any information found by the director to be legally privileged
information, to the enrollee and the enrollee's provider.  The
department and the independent review organization shall maintain the
confidentiality of any information found by the director to be the
proprietary information of the plan.
   1374.31.  (a) If there is an imminent and serious threat to the
health of the enrollee, as specified in subdivision (c) of Section
1374.33, all necessary information and documents shall be delivered
to an independent medical review organization within 24 hours of
approval of the request for review.  In reviewing a request for
review, the department may waive the requirement that the enrollee
follow the plan's grievance process in extraordinary and compelling
cases, where the director finds that the enrollee has acted
reasonably.
   (b) The department shall expeditiously review requests and
immediately notify the enrollee in writing as to whether the request
for an independent medical review has been approved, in whole or in
part, and, if not approved, the reasons therefor.  The plan shall
promptly issue a notification to the enrollee, after submitting all
of the required material to the independent medical review
organization, that includes an annotated list of documents submitted
and offer the enrollee the opportunity to request copies of those
documents from the plan.  The department shall promptly approve
enrollee requests whenever the enrollee's plan has agreed that the
case is eligible for an independent medical review.  The department
shall not refer coverage decisions for independent review.  To the
extent an enrollee request for independent review is not approved by
the department, the enrollee request shall be treated as an immediate
request for the department to review the grievance pursuant to
subdivision (b) of Section 1368.
   (c) An independent medical review organization, specified in
Section 1374.32, shall conduct the review in accordance with Section
1374.33 and any regulations or orders of the director adopted
pursuant thereto.  The organization's review shall be limited to an
examination of the medical necessity of the disputed health care
services and shall not include any consideration of coverage
decisions or other contractual issues.
   1374.32.  (a) By January 1, 2001, the department shall contract
with one or more independent medical review organizations in the
state to conduct reviews for purposes of this article.  The
independent medical review organizations shall be independent of any
health care service plan doing business in this state.  The director
may establish additional requirements, including conflict-of-interest
standards, consistent with the purposes of this article, that an
organization shall be required to meet in order to qualify for
participation in the Independent Medical Review System and to assist
the department in carrying out its responsibilities.
   (b) The independent medical review organizations and the medical
professionals retained to conduct reviews shall be deemed to be
medical consultants for purposes of Section 43.98 of the Civil Code.

   (c) The independent medical review organization, any experts it
designates to conduct a review, or any officer, director, or employee
of the independent medical review organization shall not have any
material professional, familial, or financial affiliation, as
determined by the director, with any of the following:
   (1) The plan.
   (2) Any officer, director, or employee of the plan.
   (3) A physician, the physician's medical group, or the independent
practice association involved in the health care service in dispute.

   (4) The facility or institution at which either the proposed
health care service, or the alternative service, if any, recommended
by the plan, would be provided.
   (5) The development or manufacture of the principal drug, device,
procedure, or other therapy proposed by the enrollee whose treatment
is under review, or the alternative therapy, if any, recommended by
the plan.
   (6) The enrollee or the enrollee's immediate family.
   (d) In order to contract with the department for purposes of this
article, an independent medical review organization shall meet all of
the following requirements:
   (1) The organization shall not be an affiliate or a subsidiary of,
nor in any way be owned or controlled by, a health plan or a trade
association of health plans.  A board member, director, officer, or
employee of the independent medical review organization shall not
serve as a board member, director, or employee of a health care
service plan.  A board member, director, or officer of a health plan
or a trade association of health plans shall not serve as a board
member, director, officer, or employee of an independent medical
review organization.
   (2) The organization shall submit to the department the following
information upon initial application to contract for purposes of this
article and, except as otherwise provided, annually thereafter upon
any change to any of the following information:
   (A) The names of all stockholders and owners of more than 5
percent of any stock or options, if a publicly held organization.
   (B) The names of all holders of bonds or notes in excess of one
hundred thousand dollars ($100,000), if any.
   (C) The names of all corporations and organizations that the
independent medical review organization controls or is affiliated
with, and the nature and extent of any ownership or control,
including the affiliated organization's type of business.
   (D) The names and biographical sketches of all directors,
officers, and executives of the independent medical review
organization, as well as a statement regarding any past or present
relationships the directors, officers, and executives may have with
any health care service plan, disability insurer, managed care
organization, provider group, or board or committee of a plan,
managed care organization, or provider group.
   (E) (i) The percentage of revenue the independent medical review
organization receives from expert reviews, including, but not limited
to, external medical reviews, quality assurance reviews, and
utilization reviews.
   (ii) The names of any health care service plan or provider group
for which the independent medical review organization provides review
services, including, but not limited to, utilization review, quality
assurance review, and external medical review.  Any change in this
information shall be reported to the department within five business
days of the change.
   (F) A description of the review process including, but not limited
to, the method of selecting expert reviewers and matching the expert
reviewers to specific cases.
   (G) A description of the system the independent medical review
organization uses to identify and recruit medical professionals to
review treatment and treatment recommendation decisions, the number
of medical professionals credentialed, and the types of cases and
areas of expertise that the medical professionals are credentialed to
review.
   (H) A description of how the independent medical review
organization ensures compliance with the conflict-of-interest
provisions of this section.
   (3) The organization shall demonstrate that it has a quality
assurance mechanism in place that does the following:
   (A) Ensures that the medical professionals retained are
appropriately credentialed and privileged.
   (B) Ensures that the reviews provided by the medical professionals
are timely, clear, and credible, and that reviews are monitored for
quality on an ongoing basis.
   (C) Ensures that the method of selecting medical professionals for
individual cases achieves a fair and impartial panel of medical
professionals who are qualified to render recommendations regarding
the clinical conditions and the medical necessity of treatments or
therapies in question.
   (D) Ensures the confidentiality of medical records and the review
materials, consistent with the requirements of this section and
applicable state and federal law.
   (E) Ensures the independence of the medical professionals retained
to perform the reviews through conflict-of-interest policies and
prohibitions, and ensures adequate screening for
conflicts-of-interest, pursuant to paragraph (5).
   (4) Medical professionals selected by independent medical review
organizations to review medical treatment decisions shall be
physicians or other appropriate providers who meet the following
minimum requirements:
   (A) The medical professional shall be a clinician knowledgeable in
the treatment of the enrollee's medical condition, knowledgeable
about the proposed treatment, and familiar with guidelines and
protocols in the area of treatment under review.
   (B) Notwithstanding any other provision of law, the medical
professional shall hold a nonrestricted license in the any state of
the United States, and for physicians, a current certification by a
recognized American medical specialty board in the area or areas
appropriate to the condition or treatment under review.  The
independent medical review organization shall give preference to the
use of a physician licensed in California as the reviewer, except
when training and experience with the issue under review reasonably
requires the use of an out-of-state reviewer.
   (C) The medical professional shall have no history of disciplinary
action or sanctions, including, but not limited to, loss of staff
privileges or participation restrictions, taken or pending by any
hospital, government, or regulatory body.
   (5) Neither the expert reviewer, nor the independent medical
review organization, shall have any material professional, material
familial, or material financial affiliation with any of the
following:
   (A) The plan or a provider group of the plan, except that an
academic medical center under contract to the plan to provide
services to enrollees may qualify as an independent medical review
organization provided it will not provide the service and provided
the center is not the developer or manufacturer of the proposed
treatment.
   (B) Any officer, director, or management employee of the plan.
   (C) The physician, the physician's medical group, or the
independent practice association (IPA) proposing the treatment.
   (D) The institution at which the treatment would be provided.
   (E) The development or manufacture of the treatment proposed for
the enrollee whose condition is under review.
   (F) The enrollee or the enrollee's immediate family.
   (6) For purposes of this section, the following terms shall have
the following meanings:
   (A) "Material familial affiliation" means any relationship as a
spouse, child, parent, sibling, spouse's parent, or child's spouse.
   (B) "Material professional affiliation" means any
physician-patient relationship, any partnership or employment
relationship, a shareholder or similar ownership interest in a
professional corporation, or any independent contractor arrangement
that constitutes a material financial affiliation with any expert or
any officer or director of the independent medical review
organization.  "Material professional affiliation" does not include
affiliations that are limited to staff privileges at a health
facility.
   (C) "Material financial affiliation" means any financial interest
of more than 5 percent of total annual revenue or total annual income
of an independent medical review organization or individual to which
this subdivision applies.  "Material financial affiliation" does not
include payment by the plan to the independent medical review
organization for the services required by this section, nor does
"material financial affiliation" include an expert's participation as
a contracting plan provider where the expert is affiliated with an
academic medical center or a National Cancer Institute-designated
clinical cancer research center.
   (e) The department shall provide, upon the request of any
interested person, a copy of all nonproprietary information, as
determined by the director, filed with it by an independent medical
review organization seeking to contract under this article.  The
department may charge a nominal fee to the interested person for
photocopying the requested information.
   1374.33.  (a) Upon receipt of information and documents related to
a case, the medical professional reviewer or reviewers selected to
conduct the review by the independent medical review organization
shall promptly review all pertinent medical records of the enrollee,
provider reports, as well as any other information submitted to the
organization as authorized by the department or requested from any of
the parties to the dispute by the reviewers.  If reviewers request
information from any of the parties, a copy of the request and the
response shall be provided to all of the parties.  The reviewer or
reviewers shall also review relevant information related to the
criteria set forth in subdivision (b).
   (b) Following its review, the reviewer or reviewers shall
determine whether the disputed health care service was medically
necessary based on the specific medical needs of the enrollee and any
of the following:
   (1) Peer-reviewed scientific and medical evidence regarding the
effectiveness of the disputed service.
               (2) Nationally recognized professional standards.
   (3) Expert opinion.
   (4) Generally accepted standards of medical practice.
   (5) Treatments that are likely to provide a benefit to a patient
for conditions for which other treatments are not clinically
efficacious.
   (c) The organization shall complete its review and make its
determination in writing, and in layperson's terms to the maximum
extent practicable, within 30 days of the receipt of the application
for review and supporting documentation, or within less time as
prescribed by the director. If the disputed health care service has
not been provided and the enrollee's provider or the department
certifies in writing that an imminent and serious threat to the
health of the enrollee may exist, including, but not limited to,
serious pain, the potential loss of life, limb, or major bodily
function, or the immediate and serious deterioration of the health of
the enrollee, the analyses and determinations of the reviewers shall
be expedited and rendered within three days of the receipt of the
information.  Subject to the approval of the department, the
deadlines for analyses and determinations involving both regular and
expedited reviews may be extended by the director for up to three
days in extraordinary circumstances or for good cause.
   (d) The medical professionals' analyses and determinations shall
state whether the disputed health care service is medically
necessary.  Each analysis shall cite the enrollee's medical
condition, the relevant documents in the record, and the relevant
findings associated with the provisions of subdivision (b) to support
the determination.  If more than one medical professional reviews
the case, the recommendation of the majority shall prevail.  If the
medical professionals reviewing the case are evenly split as to
whether the disputed health care service should be provided, the
decision shall be in favor of providing the service.
   (e) The independent medical review organization shall provide the
director, the plan, the enrollee, and the enrollee's provider with
the analyses and determinations of the medical professionals
reviewing the case, and a description of the qualifications of the
medical professionals.  The independent medical review organization
shall keep the names of the reviewers confidential in all
communications with entities or individuals outside the independent
medical review organization, except in cases where the reviewer is
called to testify and in response to court orders.  If more than one
medical professional reviewed the case and the result was differing
determinations, the independent medical review organization shall
provide each of the separate reviewer's analyses and determinations.

   (f) The director shall immediately adopt the determination of the
independent medical review organization, and shall promptly issue a
written decision to the parties that shall be binding on the plan.
   (g) After removing the names of the parties, including, but not
limited to, the enrollee, all medical providers, the plan, and any of
the insurer's employees or contractors, director decisions adopting
a determination of an independent medical review organization shall
be made available by the department to the public upon request, at
the department's cost and after considering applicable laws governing
disclosure of public records, confidentiality, and personal privacy.

   1374.35.  (a) After considering the results of a competitive
bidding process and any other relevant information on program costs,
the director shall establish a reasonable, per-case reimbursement
schedule to pay the costs of independent medical review organization
reviews, which may vary depending on the type of medical condition
under review and on other relevant factors.
   (b) The costs of the independent medical review system for
enrollees shall be borne by health care service plans pursuant to an
assessment fee system established by the director.  In determining
the amount to be assessed, the director shall consider all
appropriations available for the support of this chapter, and
existing fees paid to the department.  The director may adjust fees
upward or downward, on a schedule set by the department, to address
shortages or overpayments, and to reflect utilization of the
independent review process.
  SEC. 2.  Article 3.5 (commencing with Section 10169) is added to
Chapter 1 of Part 2 of Division 2 of the Insurance Code, to read:

      Article 3.5.  Appeals Seeking Independent Medical Review

   10169.  (a) Commencing January 1, 2001, there is hereby
established in the department the Independent Medical Review System.

   (b) For the purposes of this chapter, "disputed health care
service" means any health care service eligible for coverage and
payment under a disability insurance contract that has been denied,
modified, or delayed by a decision of the insurer, or by one of its
contracting providers, in whole or in part due to a finding that the
service is not medically necessary.  A decision regarding a disputed
health care service relates to the practice of medicine and is not a
coverage decision.  A disputed health care service does not include
services provided by a group policy of vision-only or dental-only
coverage, except to the extent that (1) the service involves the
practice of medicine, or (2) is provided pursuant to a contract with
a disability insurer.  If an insurer, or one of its contracting
providers, issues a decision denying, modifying, or delaying health
care services, based in whole or in part on a finding that the
proposed health care services are not a covered benefit under the
contract that applies to the insured, the statement of decision shall
clearly specify the provision in the contract that excludes that
coverage.
   (c) For the purposes of this chapter, "coverage decision" means
the approval or denial of health care services by an insurer, or by
one of its contracting entities, substantially based on a finding
that the provision of a particular service is included or excluded as
a covered benefit under the terms and conditions of the disability
insurance contract.  A coverage decision does not encompass a plan or
contracting provider decision regarding a disputed health care
service.
   (d) (1) All insured grievances involving a disputed health care
service are eligible for review under the Independent Medical Review
System if the requirements of this article are met.  If the
department finds that an insured grievance involving a disputed
health care service does not meet the requirements of this article
for review under the Independent Medical Review System, the insured
request for review shall be treated as a request for the department
to review the grievance.  All other insured grievances, including
grievances involving coverage decisions, remain eligible for review
by the department.
   (2) In any case in which an insured or provider asserts that a
decision to deny, modify, or delay health care services was based, in
whole or in part, on consideration of medical necessity, the
department shall have the final authority to determine whether the
grievance is more properly resolved pursuant to an independent
medical review as provided under this article.
   (3) The department shall be the final arbiter when there is a
question as to whether an insured grievance is a disputed health care
service or a coverage decision.  The department shall establish a
process to complete an initial screening of an insured grievance.  If
there appears to be any medical necessity issue, the grievance shall
be resolved pursuant to an independent medical review as provided
under this article.
   (e) Every disability insurance contract that is issued, amended,
renewed, or delivered in this state on or after January 1, 2000,
shall, effective, January 1, 2001, provide an insured with the
opportunity to seek an independent medical review whenever health
care services have been denied, modified, or delayed by the insurer,
or by one of its contracting providers, if the decision was based in
whole or in part on a finding that the proposed health care services
are not medically necessary.  For purposes of this article, an
insured may designate an agent to act on his or her behalf.  The
provider may join with or otherwise assist the insured in seeking an
independent medical review, and may advocate on behalf of the
insured.
   (f) Medicare beneficiaries enrolled in Medicare + Choice products
shall not be excluded unless expressly preempted by federal law.
   (g) The department may seek to integrate the quality of care and
consumer protection provisions, including remedies, of the
Independent Medical Review System with related dispute resolution
procedures of other health care agency programs, including the
Medicare program, in a way that minimizes the potential for
duplication, conflict, and added costs.  Nothing in this subdivision
shall be construed to limit any rights conferred upon insureds under
this chapter.
   (h) The independent medical review process authorized by this
article is in addition to any other procedures or remedies that may
be available.
   (i) No later than January 1, 2001, every insurer shall prominently
display in every insurer member handbook or relevant informational
brochure, in every insurance contract, on insured evidence of
coverage forms, on copies of insurer procedures for resolving
grievances, on letters of denials issued by either the insurer or its
contracting organization, and on all written responses to
grievances, information concerning the right of an insured to request
an independent medical review in cases where the insured believes
that health care services have been improperly denied, modified, or
delayed by the plan, or by one of its contracting providers.
   (j) An insurer may apply to the department for an independent
medical review when all of the following conditions are met:
   (1) (A) The insured's provider has recommended a health care
service as medically necessary, or
   (B) The insured has received urgent care or emergency services
that a provider determined was medically necessary, or
   (C) The insured, in the absence of a provider recommendation under
subparagraph (A) or the receipt of urgent care or emergency services
by a provider under subparagraph (B), has been seen by an in-plan
provider for the diagnosis or treatment of the medical condition for
which the insured seeks independent review.  The insurer shall
expedite access to an in-plan provider upon request of an insured.
The in-plan provider need not recommend the disputed health care
service as a condition for the insured to be eligible for an
independent review.
   For purposes of this article, the insured's provider may be an
out-of-plan provider.  However, the insurer shall have no liability
for payment of services provided by an out-of-plan provider, except
as provided pursuant to subdivision (b) of Section 10169.4.
   (2) The disputed health care service has been denied, modified, or
delayed by the insurer, or by one of its contracting providers,
based in whole or in part on a decision that the health care service
is not medically necessary.
   (3) The insured has filed a grievance with the insurer or its
contracting provider, and the disputed decision is upheld or the
grievance remains unresolved after 30 days.  The insured shall not be
required to participate in the insurer's grievance process for more
than 30 days.  In the case of a grievance that requires expedited
review, the insured shall not be required to participate in the
insurer's grievance process for more than three days.
   (k) An insured may apply to the department for an independent
medical review of a decision to deny, modify, or delay health care
services, based in whole or in part on a finding that the disputed
health care services are not medically necessary, within six months
of any of the qualifying periods or events under subdivision (j).
The commissioner may extend the application deadline beyond six
months if the circumstances of a case warrant the extension.
   (l) The insured shall pay no application or processing fees of any
kind.
   (m) As part of its notification to the insured regarding a
disposition of the insured's grievance that denies, modifies, or
delays health care services, the insurer shall provide the insured
with a one-page application form approved by the department, and an
addressed envelope, which the insured may return to initiate an
independent medical review.  The insurer shall include on the form
any information required by the department to facilitate the
completion of the independent medical review, such as the insured's
diagnosis or condition, the nature of the disputed health care
service sought by the insured, a means to identify the insured's
case, and any other material information.  The form shall also
include the following:
   (1) Notice that a decision not to participate in the independent
review process may cause the insured to forfeit any statutory right
to pursue legal action against the insurer regarding the disputed
health care service.
   (2) A statement indicating the insured's consent to obtain any
necessary medical records from the insurer, any of its contracting
providers, and any out-of-plan provider the insured may have
consulted on the matter, to be signed by the insured.
   (3) Notice of the insured's right to provide information or
documentation, either directly or through the insured's provider,
regarding any of the following:
   (A) A provider recommendation indicating that the disputed health
care service is medically necessary for the insured's medical
condition.
   (B) Medical information or justification that a disputed health
care service, on an urgent care or emergency basis, was medically
necessary for the insured's medical condition.
   (C) Reasonable information supporting the insured's position that
the disputed health care service is or was medically necessary for
the insured's medical condition, including all information provided
to the insured by the insurer or any of its contracting providers,
still in the possession of the insured, concerning an insurer or
provider decision regarding disputed health care services, and a copy
of any materials the insured submitted to the insurer, still in the
possession of the insured, in support of the grievance, as well as
any additional material that the insured believes is relevant.
   (n) Upon notice from the department that the insured has applied
for an independent medical review, the insurer or its contracting
providers, shall provide to the independent medical review
organization designated by the department a copy of all of the
following documents within three business days of the insurer's
receipt of the department's notice of a request by an insured for an
independent review:
   (1) (A) A copy of all of the insured's medical records in the
possession of the insurer or its contracting providers relevant to
each of the following:
   (i) The insured's medical condition.
   (ii) The health care services being provided by the insurer and
its contracting providers for the condition.
   (iii) The disputed health care services requested by the insured
for the condition.
   (B) Any newly developed or discovered relevant medical records in
the possession of the insurer or its contracting providers after the
initial documents are provided to the independent medical review
organization shall be forwarded immediately to the independent
medical review organization.  The insurer shall concurrently provide
a copy of medical records required by this subparagraph to the
insured or the insured's provider, if authorized by the insured,
unless the offer of medical records is declined or otherwise
prohibited by law.  The confidentiality of all medical record
information shall be maintained pursuant to applicable state and
federal laws.
   (2) A copy of all information provided to the insured by the
insurer and any of its contracting providers concerning insurer and
provider decisions regarding the insured's condition and care, and a
copy of any materials the insured or the insured's provider submitted
to the insurer and to the insurer's contracting providers in support
of the insured's request for disputed health care services.  This
documentation shall include the written response to the insured's
grievance.  The confidentiality of any insured medical information
shall be maintained pursuant to applicable state and federal laws.
   (3) A copy of any other relevant documents or information used by
the insurer or its contracting providers in determining whether
disputed health care services should have been provided, and any
statements by the insurer and its contracting providers explaining
the reasons for the decision to deny, modify, or delay disputed
health care services on the basis of medical necessity.  The insurer
shall concurrently provide a copy of documents required by this
paragraph, except for any information found by the commissioner to be
legally privileged information, to the insured and the insured's
provider.  The department and the independent review organization
shall maintain the confidentiality of any information found by the
commissioner to be the proprietary information of the insurer.
   10169.1.  (a) If there is an imminent and serious threat to the
health of the insured, as specified in subdivision (c) of Section
10169.3, all necessary information and documents shall be delivered
to an independent medical review organization within 24 hours of
approval of the request for review.  In reviewing a request for
review, the department may waive the requirement that the insured
follow the insurer's grievance process in extraordinary and
compelling cases, where the commissioner finds that the insured has
acted reasonably.
   (b) The department shall expeditiously review requests and
immediately notify the insured in writing as to whether the request
for an independent medical review has been approved, in whole or in
part, and, if not approved, the reasons therefor.  The insurer shall
promptly issue a notification to the insured, after submitting all of
the required material to the independent medical review
organization, that includes an annotated list of documents submitted
and offer the insured the opportunity to request copies of those
documents from the insurer.  The department shall promptly approve
insured requests whenever the insurer has agreed that the case is
eligible for an independent medical review.  The department shall not
refer coverage decisions for independent review.  To the extent an
insured request for independent review is not approved by the
department, the insured request shall be treated as an immediate
request for the department to review the grievance.
   (c) An independent medical review organization, specified in
Section 10169.2, shall conduct the review in accordance with Section
10169.3 and any regulations or orders of the commissioner adopted
pursuant thereto.  The organization's review shall be limited to an
examination of the medical necessity of the disputed health care
services and shall not include any consideration of coverage
decisions or other contractual issues.
   10169.2.  (a) By January 1, 2001, the department shall contract
with one or more independent medical review organizations in the
state to conduct reviews for purposes of this article.  The
independent medical review organizations shall be independent of any
insurer doing business in this state.  The commissioner may establish
additional requirements, including conflict-of-interest standards,
consistent with the purposes of this article, that an organization
shall be required to meet in order to qualify for participation in
the Independent Medical Review System and to assist the department in
carrying out its responsibilities.
   (b) The independent medical review organizations and the medical
professionals retained to conduct reviews shall be deemed to be
medical consultants for purposes of Section 43.98 of the Civil Code.

   (c) The independent medical review organization, any experts it
designates to conduct a review, or any officer, director, or employee
of the independent medical review organization shall not have any
material professional, familial, or financial affiliation, as
determined by the commissioner, with any of the following:
   (1) The insurer.
   (2) Any officer, director, or employee of the insurer.
   (3) A physician, the physician's medical group, or the independent
practice association involved in the health care service in dispute.

   (4) The facility or institution at which either the proposed
health care service, or the alternative service, if any, recommended
by the insurer, would be provided.
   (5) The development or manufacture of the principal drug, device,
procedure, or other therapy proposed by the insured whose treatment
is under review, or the alternative therapy, if any, recommended by
the insurer.
   (6) The insured or the insured's immediate family.
   (d) In order to contract with the department for purposes of this
article, an independent medical review organization shall meet all of
the following requirements:
   (1) The organization shall not be an affiliate or a subsidiary of,
nor in any way be owned or controlled by, an insurer or a trade
association of insurers.  A board member, director, officer, or
employee of the independent medical review organization shall not
serve as a board member, director, or employee of an insurer.  A
board member, director, or officer of an insurer or a trade
association of insurers shall not serve as a board member, director,
officer, or employee of an independent medical review organization.
   (2) The organization shall submit to the department the following
information upon initial application to contract for purposes of this
article and, except as otherwise provided, annually thereafter upon
any change to any of the following information:
   (A) The names of all stockholders and owners of more than 5
percent of any stock or options, if a publicly held organization.
   (B) The names of all holders of bonds or notes in excess of one
hundred thousand dollars ($100,000), if any.
   (C) The names of all corporations and organizations that the
independent medical review organization controls or is affiliated
with, and the nature and extent of any ownership or control,
including the affiliated organization's type of business.
   (D) The names and biographical sketches of all directors,
officers, and executives of the independent medical review
organization, as well as a statement regarding any past or present
relationships the directors, officers, and executives may have with
any health care service plan, disability insurer, managed care
organization, provider group, or board or committee of a plan,
managed care organization, or provider group.
   (E) (i) The percentage of revenue the independent medical review
organization receives from expert reviews, including, but not limited
to, external medical reviews, quality assurance reviews, and
utilization reviews.
   (ii) The names of any insurer or provider group for which the
independent medical review organization provides review services,
including, but not limited to, utilization review, quality assurance
review, and external medical review.  Any change in this information
shall be reported to the department within five business days of the
change.
   (F) A description of the review process including, but not limited
to, the method of selecting expert reviewers and matching the expert
reviewers to specific cases.
   (G) A description of the system the independent medical review
organization uses to identify and recruit medical professionals to
review treatment and treatment recommendation decisions, the number
of medical professionals credentialed, and the types of cases and
areas of expertise that the medical professionals are credentialed to
review.
   (H) A description of how the independent medical review
organization ensures compliance with the conflict-of-interest
provisions of this section.
   (3) The organization shall demonstrate that it has a quality
assurance mechanism in place that does the following:
   (A) Ensures that the medical professionals retained are
appropriately credentialed and privileged.
   (B) Ensures that the reviews provided by the medical professionals
are timely, clear, and credible, and that reviews are monitored for
quality on an ongoing basis.
   (C) Ensures that the method of selecting medical professionals for
individual cases achieves a fair and impartial panel of medical
professionals who are qualified to render recommendations regarding
the clinical conditions and the medical necessity of treatments or
therapies in question.
   (D) Ensures the confidentiality of medical records and the review
materials, consistent with the requirements of this section and
applicable state and federal law.
   (E) Ensures the independence of the medical professionals retained
to perform the reviews through conflict-of-interest policies and
prohibitions, and ensures adequate screening for
conflicts-of-interest, pursuant to paragraph (5).
   (4) Medical professionals selected by independent medical review
organizations to review medical treatment decisions shall be
physicians or other appropriate providers who meet the following
minimum requirements:
   (A) The medical professional shall be a clinician knowledgeable in
the treatment of the insured's medical condition, knowledgeable
about the proposed treatment, and familiar with guidelines and
protocols in the area of treatment under review.
   (B) Notwithstanding any other provision of law, the medical
professional shall hold a nonrestricted license in the any state of
the United States, and for physicians, a current certification by a
recognized American medical specialty board in the area or areas
appropriate to the condition or treatment under review.  The
independent medical review organization shall give preference to the
use of a physician licensed in California as the reviewer, except
when training and experience with the issue under review reasonably
requires the use of an out-of-state reviewer.
   (C) The medical professional shall have no history of disciplinary
action or sanctions, including, but not limited to, loss of staff
privileges or participation restrictions, taken or pending by any
hospital, government, or regulatory body.
   (5) Neither the expert reviewer, nor the independent medical
review organization, shall have any material professional, material
familial, or material financial affiliation with any of the
following:
                                              (A) The insurer or a
provider group of the insurer, except that an academic medical center
under contract to the insurer to provide services to insureds may
qualify as an independent medical review organization provided it
will not provide the service and provided the center is not the
developer or manufacturer of the proposed treatment.
   (B) Any officer, director, or management employee of the insurer.

   (C) The physician, the physician's medical group, or the
independent practice association (IPA) proposing the treatment.
   (D) The institution at which the treatment would be provided.
   (E) The development or manufacture of the treatment proposed for
the insured whose condition is under review.
   (F) The insured or the insured's immediate family.
   (6) For purposes of this section, the following terms shall have
the following meanings:
   (A) "Material familial affiliation" means any relationship as a
spouse, child, parent, sibling, spouse's parent, or child's spouse.
   (B) "Material professional affiliation" means any
physician-patient relationship, any partnership or employment
relationship, a shareholder or similar ownership interest in a
professional corporation, or any independent contractor arrangement
that constitutes a material financial affiliation with any expert or
any officer or director of the independent medical review
organization.  "Material professional affiliation" does not include
affiliations that are limited to staff privileges at a health
facility.
   (C) "Material financial affiliation" means any financial interest
of more than 5 percent of total annual revenue or total annual income
of an independent medical review organization or individual to which
this subdivision applies.  "Material financial affiliation" does not
include payment by the insurer to the independent medical review
organization for the services required by this section, nor does
"material financial affiliation" include an expert's participation as
a contracting provider where the expert is affiliated with an
academic medical center or a National Cancer Institute-designated
clinical cancer research center.
   (e) The department shall provide, upon the request of any
interested person, a copy of all nonproprietary information, as
determined by the commissioner, filed with it by an independent
medical review organization seeking to contract under this article.
The department may charge a nominal fee to the interested person for
photocopying the requested information.
   10169.3.  (a) Upon receipt of information and documents related to
a case, the medical professional reviewer or reviewers selected to
conduct the review by the independent medical review organization
shall promptly review all pertinent medical records of the insured,
provider reports, as well as any other information submitted to the
organization as authorized by the department or requested from any of
the parties to the dispute by the reviewers.  If reviewers request
information from any of the parties, a copy of the request and the
response shall be provided to all of the parties.  The reviewer or
reviewers shall also review relevant information related to the
criteria set forth in subdivision (b).
   (b) Following its review, the reviewer or reviewers shall
determine whether the disputed health care service was medically
necessary based on the specific medical needs of the insured and any
of the following:
   (A) Peer-reviewed scientific and medical evidence regarding the
effectiveness of the disputed service.
   (B) Nationally recognized professional standards.
   (C) Expert opinion.
   (D) Generally accepted standards of medical practice.
   (E) Treatments that are likely to provide a benefit to a patient
for conditions for which other treatments are not clinically
efficacious.
   (c) The organization shall complete its review and make its
determination in writing, and in layperson's terms to the maximum
extent practicable, within 30 days of the receipt of the application
for review and supporting documentation, or within less time as
prescribed by the commissioner.  If the disputed health care service
has not been provided and the insured's provider or the department
certifies in writing that an imminent and serious threat to the
health of the insured may exist, including, but not limited to,
serious pain, the potential loss of life, limb, or major bodily
function, or the immediate and serious deterioration of the health of
the insured, the analyses and determinations of the reviewers shall
be expedited and rendered within three days of the receipt of the
information.  Subject to the approval of the department, the
deadlines for analyses and determinations involving both regular and
expedited reviews may be extended by the commissioner for up to three
days in extraordinary circumstances or for good cause.
   (d) The medical professionals' analyses and determinations shall
state whether the disputed health care service is medically
necessary.  Each analysis shall cite the insured's medical condition,
the relevant documents in the record, and the relevant findings
associated with the provisions of subdivision (b) to support the
determination.  If more than one medical professional reviews the
case, the recommendation of the majority shall prevail.  If the
medical professionals reviewing the case are evenly split as to
whether the disputed health care service should be provided, the
decision shall be in favor of providing the service.
   (e) The independent medical review organization shall provide the
director, the insurer, the insured, and the insured's provider with
the analyses and determinations of the medical professionals
reviewing the case, and a description of the qualifications of the
medical professionals.  The independent medical review organization
shall keep the names of the reviewers confidential in all
communications with entities or individuals outside the independent
medical review organization, except in cases where the reviewer is
called to testify and in response to court orders.  If more than one
medical professional reviewed the case and the result was differing
determinations, the independent medical review organization shall
provide each of the separate reviewer's analyses and determinations.

   (f) The commissioner shall immediately adopt the determination of
the independent medical review organization, and shall promptly issue
a written decision to the parties that shall be binding on the
insurer.
   (g) After removing the names of the parties, including, but not
limited to, the insured, all medical providers, the insurer, and any
of the plan's employees or contractors, commissioner decisions
adopting a determination of an independent medical review
organization shall be made available by the department to the public
upon request, at the department's cost and after considering
applicable laws governing disclosure of public records,
confidentiality, and personal privacy.
   10169.5.  (a) After considering the results of a competitive
bidding process and any other relevant information on program costs,
the commissioner shall establish a reasonable, per-case reimbursement
schedule to pay the costs of independent medical review organization
reviews, which may vary depending on the type of medical condition
under review and on other relevant factors.
   (b) The costs of the independent medical review system for
insureds shall be borne by insurers pursuant to an assessment fee
system established by the commissioner.  In determining the amount to
be assessed, the commissioner shall consider all appropriations
available for the support of this article, and existing fees paid to
the department.  The commissioner may adjust fees upward or downward,
on a schedule set by the department, to address shortages or
overpayments, and to reflect utilization of the independent review
process.
  SEC. 3.  No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB 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 XIIIB of the California Constitution.