BILL NUMBER: SB 21	CHAPTERED
	BILL TEXT

	CHAPTER   536
	FILED WITH SECRETARY OF STATE   SEPTEMBER 28, 1999
	APPROVED BY GOVERNOR   SEPTEMBER 27, 1999
	PASSED THE SENATE   SEPTEMBER 9, 1999
	PASSED THE ASSEMBLY   SEPTEMBER 8, 1999
	AMENDED IN ASSEMBLY   SEPTEMBER 8, 1999
	AMENDED IN ASSEMBLY   JULY 6, 1999
	AMENDED IN SENATE   APRIL 29, 1999
	AMENDED IN SENATE   APRIL 20, 1999
	AMENDED IN SENATE   MARCH 15, 1999

INTRODUCED BY   Senator Figueroa and Assembly Member Kuehl
   (Coauthor:  Senator Escutia)

                        DECEMBER 7, 1998

   An act to add Title 7 (commencing with Section 3428) to Part 1 of
Division 4 of the Civil Code, relating to health care service plans.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 21, Figueroa.  Health care service plans:  duty of care.
   Existing law, the Knox-Keene Health Care Service Plan Act of 1975,
provides for the licensure and regulation of health care service
plans by the Commissioner of Corporations.  Willful violation of
those provisions is a crime.
   This bill would require that a health care service plan or managed
care entity, for services rendered on or after January 1,  2001,
have a duty of ordinary care to provide medically appropriate health
care service to its subscribers and enrollees where the health care
service is a benefit provided under the plan.
   The bill would make a health care service plan or managed care
entity liable for any and all harm legally caused by the failure to
exercise ordinary care in the arranging for the provision of, or
denial of, health care services in specified circumstances.
   The bill would set forth prohibitions regarding health care
service plans or managed care entities seeking indemnity from the
requirements of this provision and would make any provisions to the
contrary in a contract with providers void and unenforceable.  The
bill would make any waiver of certain provisions in the bill contrary
to public policy, unenforceable, and void.
   This bill would also require that a person may not maintain a
cause of action against a health care service plan unless he or she
has exhausted the procedures provided by any applicable independent
medical review system or independent review system, with certain
exceptions.  This provision would only become operative if SB 189 and
AB 55 are enacted on or before January 1, 2000.
  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.  This act shall be known and may be cited as the Managed
Health Care Insurance Accountability Act of 1999.
  SEC. 2.  (a) The Legislature finds and declares as follows:
   (1) Based on the fundamental nature of the relationships involved,
a health care service plan and all other managed care entities
regulated under the Health and Safety Code are engaged in the
business of insurance in this state as that term is defined for
purposes of the McCarran-Ferguson Act (15 U.S.C. Sec. 1011 and
following).  Nothing in this act shall be construed to impose the
regulatory requirements of the Insurance Code on health care service
plans regulated by the Health and Safety Code.
   (2) The state's interest in regulating the business of insurance
as provided in this act is to protect insurance purchasers and their
beneficiaries, including employees, their dependents and families,
and any other patients covered by private employer-sponsored health
and disability insurance, from the harm that may occur when insurance
entities, including managed health care insurance entities, act
improperly.  To this end, health care providers rather than health
care service plans and managed care entities are in charge of patient
care.
   (b) It is the intent of the Legislature in enacting this act to
ensure that adequate state law remedies exist for all persons who are
subject to the wrongful acts of those entities that contract to
provide insurance for the life, health, and disability of California
citizens.  The existence of these remedies and the deterrent effects
of these remedies are necessary to protect the health and safety of
the residents of this state.
  SEC. 3.  Title 7 (commencing with Section 3428) is added to Part 1
of Division 4 of the Civil Code, to read:

      TITLE 7.  DUTY OF HEALTH CARE SERVICE PLANS AND MANAGED CARE
ENTITIES

   3428.  (a) For services rendered on or after January 1, 2001, a
health care service plan or managed care entity, as described in
subdivision (f) of Section 1345 of the Health and Safety Code, shall
have a duty of ordinary care to arrange for the provision of
medically necessary health care service to its subscribers and
enrollees, where the health care service is a benefit provided under
the plan, and shall be liable for any and all harm legally caused by
its failure to exercise that ordinary care when both of the following
apply:
   (1) The failure to exercise ordinary care resulted in the denial,
delay, or modification of the health care service recommended for, or
furnished to, a subscriber or enrollee.
   (2) The subscriber or enrollee suffered substantial harm.
   (b) For purposes of this section:  (1) substantial harm means loss
of life, loss or significant impairment of limb or bodily function,
significant disfigurement, severe and chronic physical pain, or
significant financial loss; (2) health care services need not be
recommended or furnished by an in-plan provider, but may be
recommended or furnished by any health care provider practicing
within the scope of his or her practice; and (3) health care services
shall be recommended or furnished at any time prior to the inception
of the action, and the recommendation need not be made prior to the
occurrence of substantial harm.
   (c) Health care service plans and managed care entities are not
health care providers under any provision of law, including, but not
limited to, Section 6146 of the Business and Professions Code,
Sections 3333.1 or 3333.2 of this code, or Sections 340.5, 364,
425.13, 667.7, or 1295 of the Code of Civil Procedure.
   (d) A health care service plan or managed care entity shall not
seek indemnity, whether contractual or equitable, from a provider for
liability imposed under subdivision (a).  Any provision to the
contrary in a contract with providers is void and unenforceable.
   (e) This section shall not create any liability on the part of an
employer or an employer group purchasing organization that purchases
coverage or assumes risk on behalf of its employees or on behalf of
self-funded employee benefit plans.
   (f) Any waiver by a subscriber or enrollee of the provisions of
this section is contrary to public policy and shall be unenforceable
and void.
   (g) This section does not create any new or additional liability
on the part of a health care service plan or managed care entity for
harm caused that is attributable to the medical negligence of a
treating physician or other treating health care provider.
   (h) This section does not abrogate or limit any other theory of
liability otherwise available at law.
   (i) This section shall not apply in instances where subscribers or
enrollees receive treatment by prayer, consistent with the
provisions of subdivision (a) of Section 1270 of the Health and
Safety Code, in lieu of medical treatment.
   (j) Damages recoverable for a violation of this section include,
but are not limited to, those set forth in Section 3333.
   (k) (1) A person may not maintain a cause of action pursuant to
this section against any entity required to comply with any
independent medical review system or independent review system
required by law unless the person or his or her representative has
exhausted the procedures provided by the applicable independent
review system.
   (2) Compliance with paragraph (1) is not required in a case where
either of the following applies:
   (A) Substantial harm, as defined in subdivision (b), has occurred
prior to the completion of the applicable review.
   (B) Substantial harm, as defined, in subdivision (b), will
imminently occur prior to the completion of the applicable review.
   (3) This subdivision shall become operative only if Senate Bill
189 and Assembly Bill 55 of the 1999-2000 Regular Session are also
enacted and enforceable.
   (l) If any provision of this section or the application thereof to
any person or circumstance is held to be unconstitutional or
otherwise invalid or unenforceable, the remainder of the section and
the application of those provisions to other persons or circumstances
shall not be affected thereby.
  SEC. 4.  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.