BILL NUMBER: SB 189	ENROLLED
	BILL TEXT

	PASSED THE SENATE   SEPTEMBER 10, 1999
	PASSED THE ASSEMBLY   SEPTEMBER 9, 1999
	AMENDED IN ASSEMBLY   SEPTEMBER 8, 1999
	AMENDED IN ASSEMBLY   SEPTEMBER 7, 1999
	AMENDED IN ASSEMBLY   AUGUST 16, 1999
	AMENDED IN ASSEMBLY   JULY 7, 1999
	AMENDED IN SENATE   MAY 28, 1999
	AMENDED IN SENATE   MAY 18, 1999

INTRODUCED BY   Senator Schiff and Assembly Member Migden
   (Coauthors:  Senators Chesbro, Karnette, Perata, and Rainey)
   (Coauthors:  Assembly Members Alquist, Havice, Longville, Romero,
and Washington)

                        JANUARY 15, 1999

   An act to amend Section 1368.01 of, to amend, repeal, and add
Sections 1368, 1368.03, 1368.04, and 1370.4 of, and to add Sections
1374.34 and 1374.36 to, the Health and Safety Code, and to amend,
repeal, and add Section 10145.3 of the Insurance Code, relating to
health care coverage.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 189, Schiff.  Health care coverage:  grievances:  independent
medical review.
   (1) 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 separately provides for the
regulation of insurance, including disability insurance,
administered by the Commissioner of Insurance.
   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 revise this criteria to instead require that the
enrollee or insured have a life-threatening or seriously debilitating
condition.
   (2) Existing law requires that the external, independent review of
a health care service plan or disability insurer under these
provisions meet certain criteria, including that the health care
service plan or disability insurer contract with one or more
impartial, independent, accredited entities which in turn are
required to select an independent panel.
   Existing law provides that the enrollee shall not be required to
pay for the external, independent review and requires that the costs
of the review be borne by the health care service plan or disability
insurer.
   This bill would require the Department of Corporations to contract
with one or more impartial, independent, accredited entities for
purposes of the external, independent review process, rather than the
plan or insurer.  The bill would require the plan or insurer to
reimburse the department for costs associated with the contract.
   (3) 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.
   This bill would require health care service plans to provide
subscribers and enrollees with written responses to grievances, and
would provide that a grievance may be submitted to the department by
an enrollee or subscriber after participating in the plan's grievance
process for 30 days.  The bill would require the department to
respond to each grievance in writing within 30 days.
   (4) This bill would also include provisions which shall only
become operative if AB 55 of the 1999-2000 Regular Session is enacted
on or before December 31, 2000, and establishes a specified
independent medical review system.
   (5) 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.  Section 1368 of the Health and Safety Code is amended
to read:
   1368.  (a) Every plan shall do all of the following:
   (1) Establish and maintain a grievance system approved by the
department under which enrollees may submit their grievances to the
plan.  Each system shall provide reasonable procedures in accordance
with department regulations that shall ensure adequate consideration
of enrollee grievances and rectification when appropriate.
   (2) Inform its subscribers and enrollees upon enrollment in the
plan and annually thereafter of the procedure for processing and
resolving grievances.  The information shall include the location and
telephone number where grievances may be submitted.
   (3) Provide forms for grievances to be given to subscribers and
enrollees who wish to register written grievances.  The forms used by
plans licensed pursuant to Section 1353 shall be approved by the
commissioner in advance as to format.
   (4) Provide subscribers and enrollees with written responses to
grievances, with a clear and concise explanation of the reasons for
the plan's response.  For grievances involving the delay, denial, or
modification of health care services, the plan response shall
describe the criteria used and the clinical reasons for its decision,
including all criteria and clinical reasons related to medical
necessity.  If a plan, or one of its contracting providers, issues a
determination delaying, denying, or modifying 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 decision shall clearly specify the provisions in
the contract that exclude that coverage.
   (5) Keep in its files all copies of grievances, and the responses
thereto, for a period of five years.
   (b) (1) (A) After either completing the grievance process
described in subdivision (a), or participating in the process for at
least 30 days, a subscriber or enrollee may submit the grievance to
the department for review.  In any case determined by the department
to be a case involving an imminent and serious threat to the health
of the patient, including, but not limited to, severe pain, the
potential loss of life, limb, or major bodily function, or in any
other case where the department determines that an earlier review is
warranted, a subscriber or enrollee shall not be required to complete
the grievance process or participate in the process for at least 30
days before submitting a grievance to the department for review.
   (B) A grievance may be submitted to the department for review and
resolution prior to any arbitration.
   (C) Notwithstanding subparagraphs (A) and (B), the department may
refer any grievance that does not pertain to compliance with this
chapter to the State Department of Health Services, the California
Department of Aging, the federal Health Care Financing
Administration, or any other appropriate governmental entity for
investigation and resolution.
   (2) If the subscriber or enrollee is a minor, or is incompetent or
incapacitated, the parent, guardian, conservator, relative, or other
designee of the subscriber or enrollee, as appropriate, may submit
the grievance to the department as the agent of the subscriber or
enrollee.  Further, a provider may join with, or otherwise assist, a
subscriber or enrollee, or the agent, to submit the grievance to the
department.  In addition, following submission of the grievance to
the department, the subscriber or enrollee, or the agent, may
authorize the provider to assist, including advocating on behalf of
the subscriber or enrollee.  For purposes of this section, a
"relative" includes the parent, stepparent, spouse, adult son or
daughter, grandparent, brother, sister, uncle, or aunt of the
subscriber or enrollee.
   (3) The department shall review the written documents submitted
with the subscriber's or the enrollee's request for review, or
submitted by the agent on behalf of the subscriber or enrollee.  The
department may ask for additional information, and may hold an
informal meeting with the involved parties, including providers who
have joined in submitting the grievance, or who are otherwise
assisting or advocating on behalf of the subscriber or enrollee.
   (4) The department shall send a written notice of the final
disposition of the grievance, and the reasons therefor, to the
subscriber or enrollee, the agent, to any provider that has joined
with or is otherwise assisting the subscriber or enrollee, and to the
plan, within 30 calendar days of receipt of the request for review
unless the commissioner, in his or her discretion, determines that
additional time is reasonably necessary to fully and fairly evaluate
the relevant grievance.
   (5) Distribution of the written notice shall not be deemed a
waiver of any exemption or privilege under existing law, including,
but not limited to, Section 6254.5 of the Government Code, for any
information in connection with and including the written notice, nor
shall any person employed or in any way retained by the department be
required to testify as to that information or notice.
   (6) The commissioner shall establish and maintain a system of
aging of grievances that are pending and unresolved for 30 days or
more, that shall include a brief explanation of the reasons each
grievance is pending and unresolved for 30 days or more.
   (7) A subscriber or enrollee, or the agent acting on behalf of a
subscriber or enrollee, may also request voluntary mediation with the
plan prior to exercising the right to submit a grievance to the
department.  The use of mediation services shall not preclude the
right to submit a grievance to the department upon completion of
mediation.  In order to initiate mediation, the subscriber or
enrollee, or the agent acting on behalf of the subscriber or
enrollee, and the plan shall voluntarily agree to mediation.
Expenses for mediation shall be borne equally by both sides.  The
department shall have no administrative or enforcement
responsibilities in connection with the voluntary mediation process
authorized by this paragraph.
   (c) The plan's grievance system shall include a system of aging of
grievances that are pending and unresolved for 30 days or more.  The
plan shall provide a quarterly report to the commissioner of
grievances pending and unresolved for 30 or more days with separate
categories of grievances for Medicare enrollees and Medi-Cal
enrollees.  The plan shall include with the report a brief
explanation of the reasons each grievance is pending and unresolved
for 30 days or more.  The plan may include the following statement in
the quarterly report that is made available to the public by the
commissioner:
"Under Medicare and Medi-Cal law, Medicare enrollees and Medi-Cal
enrollees each have separate avenues of appeal that are not available
to other enrollees.  Therefore, grievances pending and unresolved
may reflect enrollees pursuing their Medicare or Medi-Cal appeal
rights."
If requested by a plan, the commissioner shall include this
statement in a written report made available to the public and
prepared by the commissioner that describes or compares grievances
that are pending and unresolved with the plan for 30 days or more.
Additionally, the commissioner shall, if requested by a plan, append
to that written report a brief explanation, provided in writing by
the plan, of the reasons why grievances described in that written
report are pending and unresolved for 30 days or more.  The
commissioner shall not be required to include a statement or append a
brief explanation to a written report that the commissioner is
required to prepare under this chapter, including Sections 1380 and
1397.5.
   (d) Subject to subparagraph (C) of paragraph (1) of subdivision
(b), the grievance or resolution procedures authorized by this
section shall be in addition to any other procedures that may be
available to any person, and failure to pursue, exhaust, or engage in
the procedures described in this section shall not preclude the use
of any other remedy provided by law.
   (e) Nothing in this section shall be construed to allow the
submission to the department of any provider complaint under this
section.  However, as part of a provider's duty to advocate for
medically appropriate health care for his or her patients pursuant to
Sections 510 and 2056 of the Business and Professions Code, nothing
in this subdivision shall be construed to prohibit a provider from
contacting and informing the department about any concerns he or she
has regarding compliance with or enforcement of this chapter.
   (f) Upon the operation of the Department of Managed Care and the
appointment of its director, the responsibilities of the Department
of Corporations and its commissioner shall be transferred to the
Department of Managed Care and its director.
   (g) If Assembly Bill 55 of the 1999-2000 Regular Session is
enacted, this section shall remain in effect only until January 1,
2001, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2001, deletes or extends
that date.
  SEC. 2.  Section 1368 is added to the Health and Safety Code, to
read:
   1368.  (a) Every plan shall do all of the following:
   (1) Establish and maintain a grievance system approved by the
department under which enrollees may submit their grievances to the
plan.  Each system shall provide reasonable procedures in accordance
with department regulations that shall ensure adequate consideration
of enrollee grievances and rectification when appropriate.
   (2) Inform its subscribers and enrollees upon enrollment in the
plan and annually thereafter of the procedure for processing and
resolving grievances.  The information shall include the location and
telephone number where grievances may be submitted.
   (3) Provide forms for grievances to be given to subscribers and
enrollees who wish to register written grievances.  The forms used by
plans licensed pursuant to Section 1353 shall be approved by the
director in advance as to format.
   (4) Provide subscribers and enrollees with written responses to
grievances, with a clear and concise explanation of the reasons for
the plan's response.  For grievances involving the delay, denial, or
modification of health care services, the plan response shall
describe the criteria used and the clinical reasons for its decision,
including all criteria and clinical reasons related to medical
necessity.  If a plan, or one of its contracting providers, issues a
decision delaying, denying, or modifying 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 decision shall clearly specify the provisions in
the contract that exclude that coverage.
   (5) Keep in its files all copies of grievances, and the responses
thereto, for a period of five years.
   (b) (1) (A) After either completing the grievance process
described in subdivision (a), or participating in the process for at
least 30 days, a subscriber or enrollee may submit the grievance to
the department for review.  In any case determined by the department
to be a case involving an imminent and serious threat to the health
of the patient, including, but not limited to, severe pain, the
potential loss of life, limb, or major bodily function, or in any
other case where the department determines that an earlier review is
warranted, a subscriber or enrollee shall not be required to complete
the grievance process or participate in the process for at least 30
days before submitting a grievance to the department for review.
   (B) A grievance may be submitted to the department for review and
resolution prior to any arbitration.
   (C) Notwithstanding subparagraphs (A) and (B), the department may
refer any grievance that does not pertain to compliance with this
chapter to the State Department of Health Services, the California
Department of Aging, the federal Health Care Financing
Administration, or any other appropriate governmental entity for
investigation and resolution.
   (2) If the subscriber or enrollee is a minor, or is incompetent or
incapacitated, the parent, guardian, conservator, relative, or other
designee of the subscriber or enrollee, as appropriate, may submit
the grievance to the department as the agent of the subscriber or
enrollee.  Further, a provider may join with, or otherwise assist, a
subscriber or enrollee, or the agent, to submit the grievance to the
department. In addition, following submission of the grievance to the
department, the subscriber or enrollee, or the agent, may authorize
the provider to assist, including advocating on behalf of the
subscriber or enrollee.  For purposes of this section, a "relative"
includes the parent, stepparent, spouse, adult son or daughter,
grandparent, brother, sister, uncle, or aunt of the subscriber or
enrollee.
   (3) The department shall review the written documents submitted
with the subscriber's or the enrollee's request for review, or
submitted by the agent on behalf of the subscriber or enrollee. The
department may ask for additional information, and may hold an
informal meeting with the involved parties, including providers who
have joined in submitting the grievance or who are otherwise
assisting or advocating on behalf of the subscriber or enrollee. If
after reviewing the record, the department concludes that the
grievance, in whole or in part, is eligible for review under the
independent medical review system established pursuant to Article 12
(commencing with Section 1374.30), the department shall immediately
notify the subscriber or enrollee, or agent, of that option and
shall, if requested orally or in writing, shall assist the subscriber
or enrollee in participating in the independent medical review
system.
   (4) If after reviewing the record of a grievance, the department
concludes that a health care service eligible for coverage and
payment under a health care service plan contract has been delayed,
denied, or modified by a plan, or by one of its contracting
providers, in whole or in part due to a determination that the
service is not medically necessary, and that determination was not
communicated to the enrollee in writing along with a notice of the
enrollee's potential right to participate in the independent medical
review system, as required by this chapter, the director shall, by
order, assess administrative penalties.  A proceeding for the
issuance of an order assessing administrative penalties shall be
subject to appropriate notice of, and the opportunity for, a hearing
with regard to the person affected in accordance with Section 1397.
The administrative penalties shall not be deemed an exclusive remedy
available to the director.  These penalties shall be paid to the
State Managed Care Fund.
   (5) The department shall send a written notice of the final
disposition of the grievance, and the reasons therefor, to the
subscriber or enrollee, the agent, to any provider that has joined
with or is otherwise assisting the subscriber or enrollee, and to the
plan, within 30 calendar days of receipt of the request for review
unless the director, in his or her discretion, determines that
additional time is reasonably necessary to fully and fairly evaluate
the relevant grievance. In any case not eligible for the independent
medical review system established pursuant to Article 12 (commencing
with Section 1374.30), the department's written notice shall include,
at a minimum, the following:
   (A) A summary of its findings and the reasons why the department
found the plan to be, or not to be, in compliance with any applicable
laws, regulations, or orders of the director.
   (B) A discussion of the department's contact with any medical
provider, or any other independent expert relied on by the
department, along with a summary of the views and qualifications of
that provider or expert.
   (C) If the enrollee's grievance is sustained in whole or part,
information about any corrective action taken.
   (6) In any department review of a grievance involving a disputed
health care service, as defined in subdivision (b) of Section
1374.30, that is not eligible for the independent medical review
system established pursuant to Article 12 (commencing with Section
1374.30), in which the department finds that the plan has delayed,
denied, or modified health care services that are medically
necessary, based on the specific medical circumstances of the
enrollee, and those services are a covered benefit under the terms
and conditions of the health care service plan contract, the
department's written notice shall either: (A) Order the plan to
promptly offer and provide those health care services to the
enrollee, or (B) Order the plan to promptly reimburse the enrollee
for any reasonable costs associated with urgent care or emergency
services, or other extraordinary and compelling health care services,
when the department finds that the enrollee's decision to secure
those services outside of the plan network was reasonable under the
circumstances. The department's order shall be binding on the plan.
   (7) Distribution of the written notice shall not be deemed a
waiver of any exemption or privilege under existing law, including,
but not limited to, Section 6254.5 of the Government Code, for any
information in connection with and including the written notice, nor
shall any person employed or in any way retained by the department be
required to testify as to that information or notice.
   (8) The director shall establish and maintain a system of aging of
grievances that are pending and unresolved for 30 days or more, that
shall include a brief explanation of the reasons each grievance is
pending and unresolved for 30 days or more.
   (9) A subscriber or enrollee, or the agent acting on behalf of a
subscriber or enrollee, may also request voluntary mediation with the
plan prior to exercising the right to submit a grievance to the
department. The use of mediation services shall not preclude the
right to submit a grievance to the department upon completion of
mediation.  In order to initiate mediation, the subscriber or
enrollee, or the agent acting on behalf of the subscriber or
enrollee, and the plan shall voluntarily agree to mediation.
Expenses for mediation shall be borne equally by both sides.  The
department shall have no administrative or enforcement
responsibilities in connection with the voluntary mediation process
authorized by this paragraph.
   (c) The plan's grievance system shall include a system of aging of
grievances that are pending and unresolved for 30 days or more.  The
plan shall provide a quarterly report to the director of grievances
pending and unresolved for 30 or more days with separate categories
of grievances for Medicare enrollees and Medi-Cal enrollees.  The
plan shall include with the report a brief explanation of the reasons
each grievance is pending and unresolved for 30 days or more.  The
plan may include the following statement in the quarterly report that
is made available to the public by the director:
"Under Medicare and Medi-Cal law, Medicare enrollees and Medi-Cal
enrollees each have separate avenues of appeal that are not available
to other enrollees.  Therefore, grievances pending and unresolved
may reflect enrollees pursuing their Medicare or Medi-Cal appeal
rights."
If requested by a plan, the director shall include this statement in
a written report made available to the public and prepared by the
director that describes or compares grievances that are pending and
unresolved with the plan for 30 days or more.  Additionally, the
director shall, if requested by a plan, append to that written report
a brief explanation, provided in writing by the plan, of the reasons
why grievances described in that written report are pending and
unresolved for 30 days or more. The director shall not be required to
include a statement or append a brief explanation to a written
report that the director is required to prepare under this chapter,
including Sections 1380 and 1397.5.
   (d) Subject to subparagraph (C) of paragraph (1) of subdivision
(b), the grievance or resolution procedures authorized by this
section shall be in addition to any other procedures that may be
available to any person, and failure to pursue, exhaust, or engage in
the procedures described in this section shall not preclude the use
of any other remedy provided by law.
   (e) Nothing in this section shall be construed to allow the
submission to the department of any provider grievance under this
section.  However, as part of a provider's duty to advocate for
medically appropriate health care for his or her patients pursuant to
Sections 510 and 2056 of the Business and Professions Code, nothing
in this subdivision shall be construed to prohibit a provider from
contacting and informing the department about any concerns he or she
has regarding compliance with or enforcement of this chapter.
   (f) This section shall become operative on January 1, 2001, and
then only if Assembly Bill 55 of the 1999-2000 Regular Session is
enacted.
  SEC. 3.  Section 1368.01 of the Health and Safety Code is amended
to read:
   1368.01.  (a) The grievance system shall require the plan to
resolve grievances within 30 days.
   (b) The grievance system shall include a requirement for expedited
plan review of grievances for cases involving an imminent and
serious threat to the health of the patient, including, but not
limited to, severe pain, potential loss of life, limb, or major
bodily function.  When the plan has notice of a case requiring
expedited review, the grievance system shall require the plan to
immediately inform enrollees and subscribers in writing of their
right to notify the department of the grievance.  The grievance
system shall also require the plan to provide enrollees, subscribers,
and the department with a written statement on the disposition or
pending status of the grievance no later than three days from receipt
of the grievance.
  SEC. 4.  Section 1368.03 of the Health and Safety Code is amended
to read:
   1368.03.  (a) The department may require enrollees and subscribers
to participate in a plan's grievance process for up to 30 days
before pursuing a grievance through the department.  However, the
department may not impose this waiting period for expedited review
cases covered by subdivision (b) of Section 1368.01 or in any other
case where the department determines that an earlier review is
warranted.
   (b) Notwithstanding subdivision (a), the department may refer any
grievance issue that does not pertain to compliance with this chapter
to the State Department of Health Services, the California
Department of Aging, the federal Health Care Financing
Administration, or any other appropriate governmental entity for
investigation and resolution.
   (c) Upon the operation of the Department of Managed Care, the
responsibilities of the Department of Corporations pursuant to this
section shall be transferred to the Department of Managed Care.
   (d) If Assembly Bill 55 of the 1999-2000 Regular Session is
enacted, this section shall remain in effect only until January 1,
2001, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2001, deletes or extends
that date.
  SEC. 5.  Section 1368.03 is added to the Health and Safety Code, to
read:
   1368.03.  (a) The department may require enrollees and subscribers
to participate in a plan's grievance process for up to 30 days
before pursuing a grievance through the department or the independent
medical review system.  However, the department may not impose this
waiting period for expedited review cases covered by subdivision (b)
of Section 1368.01 or in any other case where the department
determines that an earlier review is warranted.
   (b) Notwithstanding subdivision (a), the department may refer any
grievance issue that does not pertain to compliance with this chapter
to the State Department of Health Services, the California
Department of Aging, the federal Health Care Financing
Administration, or any other appropriate governmental entity for
investigation and resolution.
   (c) This section shall become operative on January 1, 2001, and
then only if Assembly Bill 55 of the 1999-2000 Regular Session is
enacted.
  SEC. 6.  Section 1368.04 of the Health and Safety Code is amended
to read:
   1368.04.  (a) The commissioner shall investigate and take
enforcement action against plans regarding grievances reviewed and
found by the department to involve plan noncompliance with the
requirements of this chapter.  The commissioner shall periodically
evaluate grievances to determine if any audit, investigative, or
enforcement actions should be undertaken by the department.
   (b) The commissioner may, after appropriate notice and opportunity
for hearing in accordance with Section 1397, by order, assess
administrative penalties, if the commissioner determines that a
health care service plan has knowingly committed, or has performed
with a frequency that indicates a general business practice, any of
the following:
   (1) Repeated failure to act promptly and reasonably to investigate
and resolve grievances in accordance with Section 1368.01.
   (2) Repeated failure to act promptly and reasonably to resolve
grievances when the obligation of the plan to the enrollee or
subscriber is reasonably clear.
   (c) The administrative penalties available to the commissioner
pursuant to this section are not exclusive, and may be sought and
employed in any combination with civil, criminal, and other
administrative remedies deemed warranted by the commissioner to
enforce this chapter.
   (d) The administrative penalties authorized pursuant to this
section shall be paid to the State Corporations Fund.
   (e) Upon the operation of the Department of Managed Care and the
appointment of its director, the responsibilities of the Department
of Corporations and its commissioner shall be transferred to the
Department of Managed Care and its director.
   (f) If Assembly Bill 55 of the 1999-2000 Regular Session is
enacted, this section shall remain in effect only until January 1,
2001, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2001, deletes or extends
that date.
  SEC. 7.  Section 1368.04 is added to the Health and Safety Code, to
read:
   1368.04.  (a) The director shall investigate and take enforcement
action against plans regarding grievances reviewed and found by the
department to involve noncompliance with the requirements of this
                                       chapter, including grievances
that have been reviewed pursuant to the independent medical review
system established pursuant to Article 12 (commencing with Section
1374.30).  Where substantial harm to an enrollee has occurred as a
result of plan noncompliance, the director shall, by order, assess
administrative penalties subject to appropriate notice of, and the
opportunity for, a hearing with regard to the person affected in
accordance with Section 1397.  The administrative penalties shall not
be deemed an exclusive remedy available to the director. These
penalties shall be paid to the State Managed Care Fund.  The director
shall periodically evaluate grievances to determine if any audit,
investigative, or enforcement actions should be undertaken by the
department.
   (b) The director may, after appropriate notice and opportunity for
hearing in accordance with Section 1397, by order, assess
administrative penalties if the director determines that a health
care service plan has knowingly committed, or has performed with a
frequency that indicates a general business practice, either of the
following:
   (1) Repeated failure to act promptly and reasonably to investigate
and resolve grievances in accordance with Section 1368.01.
   (2) Repeated failure to act promptly and reasonably to resolve
grievances when the obligation of the plan to the enrollee or
subscriber is reasonably clear.
   (c) The administrative penalties available to the director
pursuant to this section are not exclusive, and may be sought and
employed in any combination with civil, criminal, and other
administrative remedies deemed warranted by the director to enforce
this chapter.
   (d) The administrative penalties authorized pursuant to this
section shall be paid to the State Managed Care Fund.
   (e) This section shall become operative on January 1, 2001, and
then only if Assembly Bill 55 of the 1999-2000 Regular Session is
enacted.
  SEC. 8.  Section 1370.4 of the Health and Safety Code is amended to
read:
   1370.4.  (a) Every health care service plan shall provide an
external, independent review process to examine the plan's coverage
decisions regarding experimental or investigational therapies for
individual enrollees who meet all of the following criteria:
   (1) (A) The enrollee has a life-threatening or seriously
debilitating condition.
   (B) For purposes of this section, "life-threatening" means either
or both of the following:
   (i) Diseases or conditions where the likelihood of death is high
unless the course of the disease is interrupted.
   (ii) Diseases or conditions with potentially fatal outcomes, where
the end point of clinical intervention is survival.
   (C) For purposes of this section, "seriously debilitating" means
diseases or conditions that cause major irreversible morbidity.
   (2) The enrollee's physician certifies that the enrollee has a
condition, as defined in paragraph (1), for which standard therapies
have not been effective in improving the condition of the enrollee,
for which standard therapies would not be medically appropriate for
the enrollee, or for which there is no more beneficial standard
therapy covered by the plan than the therapy proposed pursuant to
paragraph (3).
   (3) Either (A) the enrollee's physician, who is under contract
with or employed by the plan, has recommended a drug, device,
procedure or other therapy that the physician certifies in writing is
likely to be more beneficial to the enrollee than any available
standard therapies, or (B) the enrollee, or the enrollee's physician
who is a licensed, board-certified or board-eligible physician
qualified to practice in the area of practice appropriate to treat
the enrollee's condition, has requested a therapy that, based on two
documents from the medical and scientific evidence, as defined in
subdivision (d), is likely to be more beneficial for the enrollee
than any available standard therapy. The physician certification
pursuant to this subdivision shall include a statement of the
evidence relied upon by the physician in certifying his or her
recommendation.  Nothing in this subdivision shall be construed to
require the plan to pay for the services of a nonparticipating
physician provided pursuant to this subdivision, that are not
otherwise covered pursuant to the plan contract.
   (4) The enrollee has been denied coverage by the plan for a drug,
device, procedure or other therapy recommended or requested pursuant
to paragraph (3).
   (5) The specific drug, device, procedure or other therapy
recommended pursuant to paragraph (3) would be a covered service,
except for the plan's determination that the therapy is experimental
or investigational.
   (6) This section shall not apply to any Medi-Cal beneficiary
enrolled in a health care service plan under the plan's contract with
the Medi-Cal program.
   (b) The plan's external, independent review shall meet the
following criteria:
   (1) The plan shall offer all enrollees who meet the criteria in
subdivision (a) the opportunity to have the requested therapy
reviewed under the external, independent review process.  The plan
shall notify eligible enrollees in writing of the opportunity to
request the external independent review within five business days of
the decision to deny coverage.
   (2) The department shall contract with one or more impartial,
independent entities that are accredited pursuant to subdivision (c).
  The entity shall arrange for review of the coverage decision of the
plan by selecting an independent panel of at least three physicians
or other providers who are experts in the treatment of the enrollee's
medical condition and knowledgeable about the recommended therapy.
If the entity is an academic medical center accredited in accordance
with subdivision (e), the independent panel may include experts
affiliated with or employed by the entity.  A panel of two experts
may be arranged at the plan's request, provided the enrollee consents
in writing.  The independent entity may arrange for a panel of one
expert only if the independent entity certifies in writing that there
is only one expert qualified and able to review the recommended
therapy.  Neither the plan nor the enrollee shall choose or control
the choice of the physician or other provider experts.
   (3) Neither the expert, nor the independent entity, nor any
officer, director, or management employee of the independent entity
may have any material professional, familial, or financial
affiliation, as defined in paragraph (4), with any of the following:

   (A) The plan.
   (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 therapy.
   (D) The institution at which the therapy would be provided.
   (E) The development or manufacture of the principal drug, device,
procedure, or other therapy proposed for the enrollee whose treatment
is under review.
   (4) For purposes of this section, the following terms 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 entity.  The term
"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 entity or individual to which this subdivision applies.
"Material financial affiliation" does not include payment by the plan
to the independent entity 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.
   (5) The enrollee shall not be required to pay for the external,
independent review.  The costs of the review shall be borne by the
plan.  The plan shall reimburse the department for any costs
associated with contracting with any independent entity pursuant to
paragraph (2).
   (6) The plan shall provide to the independent entity arranging for
the panel of experts a copy of the following documents within five
business days of the plan's receipt of a request by an enrollee or
enrollee's physician for an external, independent review:
   (A) The medical records relevant to the patient's condition for
which the proposed therapy has been recommended, provided the
documents are within the plan's possession.  Any medical records
provided to the plan after the initial documents are provided to the
independent entity shall be forwarded by the plan to the independent
entity within five business days.  The confidentiality of the medical
records shall be maintained pursuant to Section 56.10 of the Civil
Code.
   (B) A copy of any relevant documents used by the plan in
determining whether the proposed therapy should be covered, and any
statement by the plan explaining the reasons for the plan's decision
not to provide coverage for the proposed therapy.  The plan shall
provide, upon request, a copy of the documents required by this
paragraph, except for the documents described in subparagraphs (A)
and (C), to the enrollee and the enrollee's physician.
   (C) Any information submitted by the enrollee or the enrollee's
physician to the plan in support of the enrollee's request for
coverage of the proposed drug, device, procedure, or other therapy.
   (7) The experts on the panel shall render their analyses and
recommendations within 30 days of the receipt of the enrollee's
request for review.  If the enrollee's physician determines that the
proposed therapy would be significantly less effective if not
promptly initiated, the analyses and recommendations of the experts
on the panel shall be rendered within seven days of the request for
expedited review.  At the request of the expert, the deadline shall
be extended by up to three days for a delay in providing the
documents required by paragraph (6) of subdivision (b).
   (8) Each expert's analysis and recommendation shall be in written
form and state the reasons the requested therapy is or is not likely
to be more beneficial for the enrollee than any available standard
therapy, and the reasons that the expert recommends that the therapy
should or should not be provided by the plan, citing the enrollee's
specific medical condition, the relevant documents provided pursuant
to paragraph (6), and the relevant medical and scientific evidence,
including, but not limited to, the medical and scientific evidence as
defined in subdivision (d), to support the expert's recommendation.

   (9) The independent entity shall provide the plan and the enrollee'
s physician with the experts' analyses and recommendations, a
description of the qualifications of each expert, and any other
information that it chooses to provide to the plan and the enrollee's
physician, including, but not limited to, the names of the expert
reviewers.  The independent entity shall not be required to disclose
the names of the expert reviewers to the plan or the enrollee's
physician, except pursuant to a properly made request for discovery.
If the independent entity chooses to disclose the names of the
experts on the panel to the plan, the independent entity must also
disclose the names of the experts to the enrollee's physician.  The
enrollee's physician may provide these documents and information to
the enrollee.
   (10) If the majority of experts on the panel recommend providing
the proposed therapy, pursuant to paragraph (8), the recommendation
shall be binding on the plan.  If the recommendations of the experts
on the panel are evenly divided as to whether the therapy should be
provided, then the panel's decision shall be deemed to be in favor of
coverage.  If less than a majority of the experts on the panel
recommend providing the therapy, the plan is not required to provide
the therapy.  Coverage for the services required under this section
shall be provided subject to the terms and conditions generally
applicable to other benefits under the plan contract.
   (11) The plan shall have written policies describing the external,
independent review process.  The plan shall disclose the
availability of the external, independent review process and how
enrollees may access the review process in the plan's evidence of
coverage and disclosure forms.
   (c) The Commissioner of Corporations, in consultation with the
Insurance Commissioner, shall, by January 1, 1998, contract with a
private, nonprofit accrediting organization to accredit the
independent review entities specified in subdivision (b).  The
accrediting organization shall have the power to grant and revoke
accreditation, and shall develop, apply, and enforce accreditation
standards, including those required in subdivision (e), that ensure
the independence of the independent review entity, the
confidentiality of the medical records, and the qualifications and
independence of the health care professionals providing the analyses
and recommendations requested of them.  The accrediting organization
shall demonstrate the ability to objectively evaluate the performance
of independent entities and shall demonstrate that it has no
conflict of interest, including any material professional, familial,
or financial affiliation as defined in paragraph (4) of subdivision
(b) with any independent entity or plan, in accrediting entities for
the purpose of reviewing medical treatments, treatment
recommendations, and coverage decisions by health care service plans.

   (d) For the purposes of paragraph (3) of subdivision (a), "medical
and scientific evidence" means the following sources:
   (1) Peer-reviewed scientific studies published in or accepted for
publication by medical journals that meet nationally recognized
requirements for scientific manuscripts and that submit most of their
published articles for review by experts who are not part of the
editorial staff.
   (2) Peer-reviewed literature, biomedical compendia, and other
medical literature that meet the criteria of the National Institutes
of Health's National Library of Medicine for indexing in Index
Medicus, Excerpta Medicus (EMBASE), Medline, and MEDLARS data base
Health Services Technology Assessment Research (HSTAR).
   (3) Medical journals recognized by the Secretary of Health and
Human Services, under Section 1861(t)(2) of the Social Security Act.

   (4) The following standard reference compendia:  The American
Hospital Formulary Service-Drug Information, the American Medical
Association Drug Evaluation, the American Dental Association Accepted
Dental Therapeutics, and the United States Pharmacopoeia-Drug
Information.
   (5) Findings, studies, or research conducted by or under the
auspices of federal government agencies and nationally recognized
federal research institutes including the Federal Agency for Health
Care Policy and Research, National Institutes of Health, National
Cancer Institute, National Academy of Sciences, Health Care Financing
Administration, Congressional Office of Technology Assessment, and
any national board recognized by the National Institutes of Health
for the purpose of evaluating the medical value of health services.
   (6) Peer-reviewed abstracts accepted for presentation at major
medical association meetings.
   (e) In order to receive accreditation for the purposes of this
section, an independent entity shall meet all of the following
requirements:
   (1) The independent entity shall be an organization that has as
its primary function the provision of expert reviews and related
services and receives a majority of its revenues from these services,
except that an academic medical center may qualify as an independent
entity for purposes of this act without meeting either of these
criteria.  An independent entity may not be a subsidiary of, nor in
any way owned or controlled by, a health plan, a trade association of
health plans, or a professional association of health care
providers.
   (2) The independent entity shall submit to the accrediting
organization and to the Department of Corporations the following
information upon initial application for accreditation and 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 entity 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 entity, as well as a
statement regarding any 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.
   (E) The percentage of revenue the independent entity receives from
expert reviews.
   (F) A description of the review process, including, but limited
not to, the method of selecting expert reviewers and matching the
expert reviewers to specific cases.
   (G) A description of the system the independent entity uses to
identify and recruit expert reviewers, the number of expert reviewers
credentialed, and the types of cases the experts are credentialed to
review.
   (H) Documentation regarding the medical institutions from which
the independent entity has selected the experts during the previous
12 months, and the percentage of opinions obtained from each
institution.
   (I) A description of the areas of expertise available from expert
reviewers retained by the independent entity.
   (J) A description of how the independent entity ensures compliance
with the conflict-of-interest provisions of this section.
   (3) The independent entity shall demonstrate that it has a quality
assurance mechanism in place that does the following:
   (A) Ensures that the experts retained are appropriately
credentialed and privileged.
   (B) Ensures that the reviews provided by the experts are timely,
clear and credible, and that reviews are monitored for quality on an
ongoing basis.
   (C) Ensures that the method of selecting expert reviewers for
individual cases achieves a fair and impartial panel of experts who
are qualified to render recommendations regarding the clinical
conditions and therapies in question.
   (D) Ensures the confidentiality of medical records and the review
materials, consistent with the requirements of this section.
   (E) Ensures the independence of the experts retained to perform
the reviews through conflict-of-interest policies and prohibitions
and adequate screening for conflicts of interest, pursuant to
paragraph (3) of subdivision (b).
   (f) (1) The Department of Corporations shall receive the
information filed by independent entities pursuant to paragraph (2)
of subdivision (e) for the purpose of creating a file of public
records.  The Department of Corporations shall not be responsible for
accrediting independent entities.
   (2) The accrediting organization shall provide, upon the request
of any interested person, a copy of all nonproprietary information
filed with it by the independent entity under paragraph (2) of
subdivision (e).  The accrediting organization may charge a
reasonable fee to the interested person for photocopying the
requested information.
   (g) The independent review process established by this section
shall be required on and after January 1, 2000.
   (h) Upon the operation of the Department of Managed Care and the
appointment of its director, the responsibilities of the Department
of Corporations and its commissioner shall be transferred to the
Department of Managed Care and its director.
   (i) If Assembly Bill 55 of the 1999-2000 Regular Session is
enacted, this section shall remain in effect only until January 1,
2001, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2001, deletes or extends
that date.
  SEC. 9.  Section 1370.4 is added to the Health and Safety Code, to
read:
   1370.4.  (a) Every health care service plan shall provide an
external, independent review process to examine the plan's coverage
decisions regarding experimental or investigational therapies for
individual enrollees who meet all of the following criteria:
   (1) (A) The enrollee has a life-threatening or seriously
debilitating condition.
   (B) For purposes of this section, "life-threatening" means either
or both of the following:
   (i) Diseases or conditions where the likelihood of death is high
unless the course of the disease is interrupted.
   (ii) Diseases or conditions with potentially fatal outcomes, where
the end point of clinical intervention is survival.
   (C) For purposes of this section, "seriously debilitating" means
diseases or conditions that cause major irreversible morbidity.
   (2) The enrollee's physician certifies that the enrollee has a
condition, as defined in paragraph (1), for which standard therapies
have not been effective in improving the condition of the enrollee,
for which standard therapies would not be medically appropriate for
the enrollee, or for which there is no more beneficial standard
therapy covered by the plan than the therapy proposed pursuant to
paragraph (3).
   (3) Either (A) the enrollee's physician, who is under contract
with or employed by the plan, has recommended a drug, device,
procedure or other therapy that the physician certifies in writing is
likely to be more beneficial to the enrollee than any available
standard therapies, or (B) the enrollee, or the enrollee's physician
who is a licensed, board-certified or board-eligible physician
qualified to practice in the area of practice appropriate to treat
the enrollee's condition, has requested a therapy that, based on two
documents from the medical and scientific evidence, as defined in
subdivision (d), is likely to be more beneficial for the enrollee
than any available standard therapy.  The physician certification
pursuant to this subdivision shall include a statement of the
evidence relied upon by the physician in certifying his or her
recommendation.  Nothing in this subdivision shall be construed to
require the plan to pay for the services of a nonparticipating
physician provided pursuant to this subdivision, that are not
otherwise covered pursuant to the plan contact.
   (4) The enrollee has been denied coverage by the plan for a drug,
device, procedure, or other therapy recommended or requested pursuant
to paragraph (3).
   (5) The specific drug, device, procedure, or other therapy
recommended pursuant to paragraph (3) would be a covered service,
except for the plan's determination that the therapy is experimental
or investigational.
   (b) The plan's decision to delay, deny, or modify experimental or
investigational therapies shall be subject to the independent medical
review process under Article 12 (commencing with Section 1374.30) of
this chapter except that, in lieu of the information specified in
subdivision (i) of Section 1374.30, an independent medical reviewer
shall base his or her determination on relevant medical and
scientific evidence, including, but not limited to, the medical and
scientific evidence defined in subdivision (d).
   (c) The independent medical review process shall also meet the
following criteria:
   (1) The plan shall notify eligible enrollees in writing of the
opportunity to request the external independent review within five
business days of the decision to deny coverage.
   (2) If the enrollee's physician determines that the proposed
therapy would be significantly less effective if not promptly
initiated, the analyses and recommendations of the experts on the
panel shall be rendered within seven days of the request for
expedited review.  At the request of the expert, the deadline shall
be extended by up to three days for a delay in providing the
documents required.  The timeframes specified in this paragraph shall
be in addition to any otherwise applicable timeframes contained in
subdivision (c) of Section 1374.33.
   (3) Each expert's analysis and recommendation shall be in written
form and state the reasons the requested therapy is or is not likely
to be more beneficial for the enrollee than any available standard
therapy, and the reasons that the expert recommends that the therapy
should or should not be provided by the plan, citing the enrollee's
specific medical condition, the relevant documents provided, and the
relevant medical and scientific evidence, including, but not limited
to, the medical and scientific evidence as defined in subdivision
(d), to support the expert's recommendation.
   (4) Coverage for the services required under this section shall be
provided subject to the terms and conditions generally applicable to
other benefits under the plan contract.
   (d) For the purposes of subdivision (b), "medical and scientific
evidence" means the following sources:
   (1) Peer-reviewed scientific studies published in or accepted for
publication by medical journals that meet nationally recognized
requirements for scientific manuscripts and that submit most of their
published articles for review by experts who are not part of the
editorial staff.
   (2) Peer-reviewed literature, biomedical compendia, and other
medical literature that meet the criteria of the National Institutes
of Health's National Library of Medicine for indexing in Index
Medicus, Excerpta Medicus (EMBASE), Medline, and MEDLARS data base
Health Services Technology Assessment Research (HSTAR).
   (3) Medical journals recognized by the Secretary of Health and
Human Services, under Section 1861(t)(2) of the Social Security Act.

   (4) The following standard reference compendia:  The American
Hospital Formulary Service-Drug Information, the American Medical
Association Drug Evaluation, the American Dental Association Accepted
Dental Therapeutics, and the United States Pharmacopoeia-Drug
Information.

            (5) Findings, studies, or research conducted by or under
the auspices of federal government agencies and nationally recognized
federal research institutes, including the Federal Agency for Health
Care Policy and Research, National Institutes of Health, National
Cancer Institute, National Academy of Sciences, Health Care Financing
Administration, Congressional Office of Technology Assessment, and
any national board recognized by the National Institutes of Health
for the purpose of evaluating the medical value of health services.
   (6) Peer-reviewed abstracts accepted for presentation at major
medical association meetings.
   (e) The independent review process established by this section
shall be required on and after January 1, 2001.
   (f) This section shall become operative on January 1, 2001, and
then only if Assembly Bill 55 of the 1999-2000 Regular Session is
enacted.
  SEC. 10.  Section 1374.34 is added to the Health and Safety Code,
to read:
   13933.  (a) Upon receiving the decision adopted by the director
pursuant to Section 1374.33 that a disputed health care service is
medically necessary, the plan shall immediately contact the enrollee
and offer to promptly implement the decision.
   (b) A plan shall not engage in any conduct that has the effect of
prolonging the independent review process.  The engaging in that
conduct or the failure of the plan to promptly implement the decision
is a violation of this chapter and, in addition to any other fines,
penalties, and other remedies available to the director under this
chapter, the plan shall be subject to an administrative penalty of
not less than five thousand dollars ($5,000) for each day that the
decision is not implemented.  Administrative penalties shall be
deposited in the State Managed Care Fund.
   (c) In any case where an enrollee secured urgent care or emergency
services outside of the plan provider network, which services are
later found by the independent medical review organization to have
been medically necessary pursuant to Section 1374.33, the director
shall require the plan to promptly reimburse the enrollee for any
reasonable costs associated with those services when the director
finds that the enrollee's decision to secure the services outside of
the plan provider network prior to completing the plan grievance
process or seeking an independent medical review was reasonable under
the circumstances and the disputed health care services were a
covered benefit under the terms and conditions of the health care
service plan contract.
   (d) In addition to requiring plan compliance regarding
subdivisions (a), (b), and (c) the director shall review individual
cases submitted for independent medical review to determine whether
any enforcement actions, including penalties, may be appropriate.  In
particular, where substantial harm to an enrollee has already
occurred because of the decision of a plan, or one of its contracting
providers, to delay, deny, or modify covered health care services
that an independent medical review determines to be medically
necessary pursuant to Section 1374.33, the director shall impose
penalties.
   (e) Pursuant to Section 1368.04, the director shall perform an
annual audit of independent medical review cases for the dual
purposes of education and the opportunity to determine if any
investigative or enforcement actions should be undertaken by the
department, particularly if a plan repeatedly fails to act promptly
and reasonably to resolve grievances associated with a delay, denial,
or modification of medically necessary health care services when the
obligation of the plan to provide those health care services to
enrollees or subscribers is reasonably clear.
   (f) This section shall become operative on January 1, 2001, and
then only if Assembly Bill 55 of the 1999-2000 Regular Session is
enacted.
  SEC. 11.  Section 1374.36 is added to the Health and Safety Code,
to read:
   1374.36.  (a) The director shall submit to the Legislature by
March 1, 2002, a report on the initial implementation of this
article.  The report shall include a description of assessments
imposed on plans to implement this article, increased staffing and
other resources attributable to these new responsibilities, and any
redirection of existing staff and resources to carry out these
responsibilities.  A single copy of the report shall be made
available at no cost to members of the public upon request.  The
department may recover the cost of additional copies that are
requested.
   (b) This section shall become operative on January 1, 2001, and
then only if Assembly Bill 55 of the 1999-2000 Regular Session is
enacted.
  SEC. 12.  Section 10145.3 of the Insurance Code is amended to read:

   10145.3.  (a) Every disability insurer that covers hospital,
medical, or surgical benefits shall provide an external, independent
review process to examine the insurer's coverage decisions regarding
experimental or investigational therapies for individual insureds who
meet all of the following criteria:
   (1) (A) The insured has a life-threatening or seriously
debilitating condition.
   (B) For purposes of this section, "life-threatening" means either
or both of the following:
   (i) Diseases or conditions where the likelihood of death is high
unless the course of the disease is interrupted.
   (ii) Diseases or conditions with potentially fatal outcomes, where
the end point of clinical intervention is survival.
   (C) For purposes of this section, "seriously debilitating" means
diseases or conditions that cause major irreversible morbidity.
   (2) The insured's physician certifies that the insured has a
condition, as defined in paragraph (1), for which standard therapies
have not been effective in improving the condition of the insured,
for which standard therapies would not be medically appropriate for
the insured, or for which there is no more beneficial standard
therapy covered by the insurer than the therapy proposed pursuant to
paragraph (3).
   (3) Either (A) the insured's contracting physician has recommended
a drug, device, procedure, or other therapy that the physician
certifies in writing is likely to be more beneficial to the insured
than any available standard therapies, or (B) the insured, or the
insured's physician who is a licensed, board-certified or
board-eligible physician qualified to practice in the area of
practice appropriate to treat the insured's condition, has requested
a therapy that, based on two documents from the medical and
scientific evidence, as defined in subdivision (d), is likely to be
more beneficial for the insured than any available standard therapy.
The physician certification pursuant to this subdivision shall
include a statement of the evidence relied upon by the physician in
certifying his or her recommendation.  Nothing in this subdivision
shall be construed to require the insurer to pay for the services of
a noncontracting physician, provided pursuant to this subdivision,
that are not otherwise covered pursuant to the contract.
   (4) The insured has been denied coverage by the insurer for a
drug, device, procedure, or other therapy recommended or requested
pursuant to paragraph (3), unless coverage for the specific therapy
has been excluded by the insurer's contract.
   (5) This section does not apply to any Medi-Cal beneficiary
enrolled with an insurer under the insurer's contract with the
Medi-Cal program.
   (6) The specific drug, device, procedure, or other therapy
recommended pursuant to paragraph (3) would be a covered service
except for the insurer's determination that the therapy is
experimental or under investigation.
   (b) The insurer's external, independent review shall meet the
following criteria:
   (1) The insurer shall offer all insureds who meet the criteria in
subdivision (a) the opportunity to have the requested therapy
reviewed under the external, independent review process.  The insurer
shall notify eligible insureds in writing of the opportunity to
request the external independent review within five business days of
the decision to deny coverage.
   (2) The Department of Corporations shall contract with one or more
impartial, independent entities that are accredited pursuant to
subdivision (c).  The entity shall arrange for review of the coverage
decision of the insurer by selecting an independent panel of at
least three physicians or other providers who are experts in the
treatment of the insured's medical condition and knowledgeable about
the recommended therapy.  If the entity is an academic medical center
accredited in accordance with subdivision (e), the independent panel
may include experts affiliated with or employed by the entity.  A
panel of two experts may be arranged at the insurer's request,
provided the insured consents in writing.  The independent entity may
arrange for a panel of one expert only if the independent entity
certifies in writing that there is only one expert qualified and able
to review the recommended therapy.  Neither the insurer nor the
insured shall choose or control the choice of the physician or other
provider experts.
   (3) Neither the expert, nor the independent entity, nor any
officer, director, or management employee of the independent entity
may have any material professional, familial, or financial
affiliation, as defined in paragraph (4), with any of the following:

   (A) The insurer.
   (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 therapy.
   (D) The institution at which the therapy would be provided.
   (E) The development or manufacture of the principal drug, device,
procedure, or other therapy proposed for the insured whose treatment
is under review.
   (4) For purposes of this section, the following terms 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 entity.  The term
"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 entity or individual to which this subdivision applies.
"Material financial affiliation" does not include payment by the
insurer to the independent entity for the services required by this
section, nor does "material financial affiliation" include an expert'
s participation as a contracting provider for the insurer where the
expert is affiliated with an academic medical center or a National
Cancer Institute-designated clinical cancer research center.
   (5) The insured shall not be required to pay for the external
independent review.  The costs of the review shall be borne by the
insurer.  The insurer shall reimburse the Department of Corporations
for any costs associated with contracting with any independent entity
pursuant to paragraph (2).
   (6) The insurer shall provide to the independent entity arranging
for the panel of experts a copy of the following documents within
five business days of the insurer's receipt of a request by an
insured or insured's physician for an external independent review.
   (A) The medical records relevant to the patient's condition for
which the proposed therapy has been recommended, provided the
documents are within the insurer's possession.  Any medical records
provided to the insurer after the initial documents are provided to
the independent entity shall be forwarded by the insurer to the
independent entity within five business days.  The confidentiality of
the medical records shall be maintained pursuant to Section 56.10 of
the Civil Code.
   (B) A copy of any relevant documents used by the insurer in
determining whether the proposed therapy should be covered, and any
statement by the insurer explaining the reasons for the insurer's
decision not to provide coverage for the proposed therapy.  The
insurer shall provide, upon request, a copy of the documents required
by this paragraph, except for the documents described in
subparagraphs (A) and (C), to the insured and the insured's
physician.
   (C) Any information submitted by the insured or the insured's
physician to the insurer in support of the insured's request for
coverage of the proposed drug, device, procedure, or other therapy.
   (7) The experts on the panel shall render their analyses and
recommendations within 30 days of the receipt of the insured's
request for review.  If the insured's physician determines that the
proposed therapy would be significantly less effective if not
promptly initiated, the analyses and recommendations of the experts
on the panel shall be rendered within seven days of the request for
expedited review.  At the request of the expert, the deadline shall
be extended by up to three days for a delay in providing the
documents required by paragraph (6) of subdivision (b).
   (8) Each expert's analysis and recommendation shall be in written
form and state the reasons the requested therapy is or is not likely
to be more beneficial for the insured than any available standard
therapy, and the reasons that the expert recommends that the therapy
should or should not be covered by the insurer, citing the insured's
specific medical condition, the relevant documents provided pursuant
to paragraph (6), and the relevant medical and scientific evidence,
including, but not limited to, the medical and scientific evidence as
defined in subdivision (d), to support the expert's recommendation.

   (9) The independent entity shall provide the insurer and the
insured's physician with the expert's analyses and recommendations, a
description of the qualifications of each expert, and any other
information that it chooses to provide to the insurer and the insured'
s physician, including, but not limited to, the names of the expert
reviewers.  The independent entity shall not be required to disclose
the names of the expert reviewers to the insurer or to the insured's
physician, except pursuant to a properly made request for discovery.
If the independent entity chooses to disclose the names of the
experts on the panel to the insurer, the independent entity must also
disclose the names of the experts to the insured's physician.  The
insured's physician may provide these documents and information to
the enrollee.
   (10) If the majority of experts on the panel recommend providing
the proposed therapy, pursuant to paragraph (8), the recommendation
shall be binding on the insurer.  If the recommendations of the
experts on the panel are evenly divided as to whether the therapy
should be provided, then the panel's decision shall be deemed to be
in favor of coverage.  If less than a majority of the experts on the
panel recommend providing the therapy, the insurer is not required to
provide the therapy.  Coverage for the services required under this
section shall be provided subject to the terms and conditions
generally applicable to other benefits under the contract.
   (11) The insurer shall have written policies describing the
external, independent review process.  The insurer shall disclose the
availability of the external, independent review process and how
insureds may access the review process in the insurer's evidence of
coverage and disclosure forms.
   (c) The Commissioner of Corporations, in consultation with the
Insurance Commissioner, shall, by January 1, 1998, contract with a
private, nonprofit accrediting organization to accredit the
independent review entities specified in subdivision (b).  The
accrediting organization shall have the power to grant and revoke
accreditation, and shall develop, apply, and enforce accreditation
standards, including those required in subdivision (e), that ensure
the independence of the independent review entity, the
confidentiality of the medical records, and the qualifications and
independence of the health care professionals providing the analyses
and recommendations requested of them.  The accrediting organization
shall demonstrate the ability to objectively evaluate the performance
of independent entities and shall demonstrate that it has no
conflict of interest, including any material professional, familial,
or financial affiliation as defined in paragraph (4) of subdivision
(b) with any independent entity or disability insurer, in accrediting
entities for the purpose of reviewing medical treatments, treatment
recommendations, and coverage decisions by disability insurers.
   (d) For the purposes of paragraph (3) of subdivision (a), "medical
and scientific evidence" means the following sources:
   (1) Peer-reviewed scientific studies published in or accepted for
publication by medical journals that meet nationally recognized
requirements for scientific manuscripts and that submit most of their
published articles for review by experts who are not part of the
editorial staff.
   (2) Peer-reviewed literature, biomedical compendia and other
medical literature that meet the criteria of the National Institutes
of Health's National Library of Medicine for indexing in Index
Medicus, Excerpta Medicus (EMBASE), Medline and MEDLARS data base
Health Services Technology Assessment Research (HSTAR).
   (3) Medical journals recognized by the Secretary of Health and
Human Services, under Section 1861(t)(2) of the Social Security Act.

   (4) The following standard reference compendia:  The American
Hospital Formulary Service-Drug Information, the American Medical
Association Drug Evaluation, the American Dental Association Accepted
Dental Therapeutics and The United States Pharmacopoeia-Drug
Information.
   (5) Findings, studies, or research conducted by or under the
auspices of federal government agencies and nationally recognized
federal research institutes, including the Federal Agency for Health
Care Policy and Research, National Institutes of Health, National
Cancer Institute, National Academy of Sciences, Health Care Financing
Administration, Congressional Office of Technology Assessment, and
any national board recognized by the National Institutes of Health
for the purpose of evaluating the medical value of health services.
   (6) Peer-reviewed abstracts accepted for presentation at major
medical association meetings.
   (e) In order to receive accreditation for the purposes of this
section, an independent entity shall meet all of the following
requirements:
   (1) The independent entity shall be an organization that has as
its primary function the provision of expert reviews and related
services and receives a majority of its revenues from these services,
except that an academic medical center may qualify as an independent
entity for purposes of this act without meeting either of these
criteria.  An independent entity may not be a subsidiary of, nor in
any way owned or controlled by, a health plan, a trade association of
health plans, or a professional association of health care
providers.
   (2) The independent entity shall submit to the accrediting
organization and to the Department of Corporations the following
information upon initial application for accreditation and 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 entity 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 entity, as well as a
statement regarding any 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.
   (E) The percentage of revenue the independent entity receives from
expert reviews.
   (F) A description of the review process, including, but limited
not to, the method of selecting expert reviewers and matching the
expert reviewers to specific cases.
   (G) A description of the system the independent entity uses to
identify and recruit expert reviewers, the number of expert reviewers
credentialed, and the types of cases the experts are credentialed to
review.
   (H) Documentation regarding the medical institutions from which
the independent entity has selected the experts during the previous
12 months, and the percentage of opinions obtained from each
institution.
   (I) A description of the areas of expertise available from expert
reviewers retained by the independent entity.
   (J) A description of how the independent entity ensures compliance
with the conflict-of-interest provisions of this section.
   (3) The independent entity must demonstrate that it has a quality
assurance mechanism in place that does the following:
   (A) Ensures that the experts retained are appropriately
credentialed and privileged.
   (B) Ensures that the reviews provided by the experts are timely,
clear and credible, and that reviews are monitored for quality on an
ongoing basis.
   (C) Ensures that the method of selecting expert reviewers for
individual cases achieves a fair and impartial panel of experts who
are qualified to render recommendations regarding the clinical
conditions and therapies in question.
   (D) Ensures the confidentiality of medical records and the review
materials, consistent with the requirements of this section.
   (E) Ensures the independence of the experts retained to perform
the reviews through conflict-of-interest policies and prohibitions
and adequate screening for conflicts of interest, pursuant to
paragraph (3) of subdivision (b).
   (f) (1) The Department of Corporations shall receive the
information filed by independent entities pursuant to paragraph (2)
of subdivision (e) for the purpose of creating a file of public
records.  The Department of Corporations shall not be responsible for
accrediting independent entities.
   (2) The accrediting organization shall provide, upon the request
of any interested person, a copy of all nonproprietary information
filed with it by the independent entity under paragraph (2) of
subdivision (e).  The accrediting organization may charge a
reasonable fee to the interested person for photocopying the
requested information.
   (g) The independent review process established by this section
shall be required on and after January 1, 2000.
   (h) Upon the operation of the Department of Managed Care and the
appointment of its director, the responsibilities of the Department
of Insurance and its commissioner shall be transferred to the
Department of Managed Care and its director.
   (i) This section shall remain in effect only until the operative
date of the independent review process established by Assembly Bill
55 of the 1999-2000 Regular Session, and as of that date is repealed.

  SEC. 13.  Section 10145.3 is added to the Insurance Code, to read:

   10145.3.  (a) Every disability insurer that covers hospital,
medical, or surgical benefits shall provide an external, independent
review process to examine the insurer's coverage decisions regarding
experimental or investigational therapies for individual insureds who
meet all of the following criteria:
   (1) (A) The insured has a life-threatening or seriously
debilitating condition.
   (B) For purposes of this section, "life-threatening" means either
or both of the following:
   (i) Diseases or conditions where the likelihood of death is high
unless the course of the disease is interrupted.
   (ii) Diseases or conditions with potentially fatal outcomes, where
the end point of clinical intervention is survival.
   (C) For purposes of this section, "seriously debilitating" means
diseases or conditions that cause major irreversible morbidity.
   (2) The insured's physician certifies that the insured has a
condition, as defined in paragraph (1), for which standard therapies
have not been effective in improving the condition of the insured,
for which standard therapies would not be medically appropriate for
the insured, or for which there is no more beneficial standard
therapy covered by the insurer than the therapy proposed pursuant to
paragraph (3).
   (3) Either (A) the insured's contracting physician has recommended
a drug, device, procedure, or other therapy that the physician
certifies in writing is likely to be more beneficial to the insured
than any available standard therapies, or (B) the insured, or the
insured's physician who is a licensed, board-certified or
board-eligible physician qualified to practice in the area of
practice appropriate to treat the insured's condition, has requested
a therapy that, based on two documents from the medical and
scientific evidence, as defined in subdivision (d), is likely to be
more beneficial for the insured than any available standard therapy.
The physician certification pursuant to this subdivision shall
include a statement of the evidence relied upon by the physician in
certifying his or her recommendation.  Nothing in this subdivision
shall be construed to require the insurer to pay for the services of
a noncontracting physician, provided pursuant to this subdivision,
that are not otherwise covered pursuant to the contract.
   (4) The insured has been denied coverage by the insurer for a
drug, device, procedure, or other therapy recommended or requested
pursuant to paragraph (3), unless coverage for the specific therapy
has been excluded by the insurer's contract.
   (5) The specific drug, device, procedure, or other therapy
recommended pursuant to paragraph (3) would be a covered service
except for the insurer's determination that the therapy is
experimental or under investigation.
   (b) The insurer's decision to deny, delay, or modify experimental
or investigational therapies shall be subject to the independent
medical review process established under Article 12 (commencing with
Section 1374.30) of Chapter 2 of Division 2 of the Health and Safety
Code, except that in lieu of the information specified
                                in subdivision (i) of Section
1374.30, an independent medical reviewer shall base his or her
determination on relevant medical and scientific evidence, including,
but not limited to, the medical and scientific evidence defined in
subdivision (d).
   (c) The independent medical review process shall also meet the
following criteria:
   (1) The insurer shall notify eligible insureds in writing of the
opportunity to request the external independent review within five
business days of the decision to deny coverage.
   (2) If the insured's physician determines that the proposed
therapy would be significantly less effective if not promptly
initiated, the analyses and recommendations of the experts on the
panel shall be rendered within seven days of the request for
expedited review.  At the request of the expert, the deadline shall
be extended by up to three days for a delay in providing the
documents required.  The timeframes specified in this paragraph shall
be in addition to any otherwise applicable timeframes contained in
subdivision (c) of Section 1374.33 of the Health and Safety Code.
   (3) Each expert's analysis and recommendation shall be in written
form and state the reasons the requested therapy is or is not likely
to be more beneficial for the insured than any available standard
therapy, and the reasons that the expert recommends that the therapy
should or should not be covered by the insurer, citing the insured's
specific medical condition, the relevant documents, and the relevant
medical and scientific evidence, including, but not limited to, the
medical and scientific evidence as defined in subdivision (d), to
support the expert's recommendation.
   (4) Coverage for the services required under this section shall be
provided subject to the terms and conditions generally applicable to
other benefits under the contract.
   (d) For the purposes of subdivision (b), "medical and scientific
evidence" means the following sources:
   (1) Peer-reviewed scientific studies published in or accepted for
publication by medical journals that meet nationally recognized
requirements for scientific manuscripts and that submit most of their
published articles for review by experts who are not part of the
editorial staff.
   (2) Peer-reviewed literature, biomedical compendia and other
medical literature that meet the criteria of the National Institutes
of Health's National Library of Medicine for indexing in Index
Medicus, Excerpta Medicus (EMBASE), Medline and MEDLARS data base
Health Services Technology Assessment Research (HSTAR).
   (3) Medical journals recognized by the Secretary of Health and
Human Services, under Section 1861(t)(2) of the Social Security Act.

   (4) The following standard reference compendia: The American
Hospital Formulary Service-Drug Information, the American Medical
Association Drug Evaluation, the American Dental Association Accepted
Dental Therapeutics and The United States Pharmacopoeia-Drug
Information.
   (5) Findings, studies, or research conducted by or under the
auspices of federal government agencies and nationally recognized
federal research institutes, including the Federal Agency for Health
Care Policy and Research, National Institutes of Health, National
Cancer Institute, National Academy of Sciences, Health Care Financing
Administration, Congressional Office of Technology Assessment, and
any national board recognized by the National Institutes of Health
for the purpose of evaluating the medical value of health services.
   (6) Peer-reviewed abstracts accepted for presentation at major
medical association meetings.
   (e) The independent review process established by this section
shall be required on and after January 1, 2001.
   (f) This section shall become operative on January 1, 2001, and
then only if Assembly Bill 55 of the 1999-2000 Regular Session is
enacted.
  SEC. 14.  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.