BILL ANALYSIS
AB 1600
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 1600 (Keeley)
As Amended September 7, 2001
Majority vote
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|ASSEMBLY: | |(June 6, 2001) |SENATE: |23-12|(September 12, |
| | | | | |2001) |
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(vote not relevant)
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|COMMITTEE VOTE: |7-3 |(September 13, |RECOMMENDATION: |concur |
| | |2001) | | |
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Original Committee Reference: HEALTH
SUMMARY : Allows for enforcement of existing statutory obligations
respecting health care service plans (licensees). Specifically,
this bill :
1)Expressly authorizes a private right of action for equitable
relief from violations of the Knox-Keene Act, except as to an
enrollee or subscriber's individual grievance under specified
sections, provided that administrative remedies of the Department
of Managed Health Care (DMHC) have first been exhausted.
2)Provides for the continuation of health service contracts that
expire during the pendency of an action respecting the contract
in order to ensure continuing care to enrollees or subscribers.
3)Prohibits retaliation by licensees against persons who exercise
their rights under the bill.
4)Prohibits licensees from seeking or obtaining waiver of the
rights provided under the bill or indemnification for liability
for violation.
Senate amendments delete the Assembly-approved version of this bill
and insert the above-described provisions.
AS PASSED BY THE ASSEMBLY , this bill provided an exemption from
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federal antitrust laws to allow health care providers, as a class,
to renegotiate contracts with health care service plans.
EXISTING LAW:
1)Regulates health care providers and health care service plans
under the Knox-Keene Act. (Health and Safety Code section 1340
et seq. All further statutory references are to this code unless
otherwise noted.
2)Sets forth the intent of the Legislature to ensure that
California residents receive high-quality health care coverage in
the most efficient and cost-effective manner possible. (Section
1342.6; Business and Professions Code section 16770.)
3)Provides that all contracts between a health care service plan
and health care providers shall be fair and reasonable, and shall
contain provisions requiring a fast, fair, and cost-effective
dispute resolution mechanism under which providers may submit
disputes to the plan. (Section 1367.)
4)Requires each health care service plan to ensure that its dispute
resolution mechanism is accessible to non-contracting providers
for the purpose of resolving billing and claims disputes.
(Section 1367.)
5)Requires DMHC, on or before July 1, 2001, to adopt regulations to
ensure that plans have adopted a dispute resolution mechanism
that is fair, fast, and cost-effective for contracting and
non-contracting providers. DMHC shall report to the Legislature
on or before December 31, 2001 on recommendations for any
additional statutory provisions which are necessary relating to
plan and provider dispute resolution mechanisms. (Section
1371.38.)
6)Otherwise governs the relationship between providers, enrollees
and subscribers, and between them and the plan and authorizes a
private right of action for damages and equitable relief for
breach of a plan's duty of care to arrange for the provision of
medical care under specified conditions. (Civil Code section
3428.)
FISCAL EFFECT : According to the Senate Appropriations Committee
analysis, although DMHC does not have any specific estimates for
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the costs of this bill, it believes that there could be significant
costs associated with the costs of litigation in those instances
where DMHC is compelled to intervene as the enforcer of the Act.
DMHC support costs are entirely offset by license fee revenue from
the health care service plans. There could also be some increased
costs for health care plan capitated rates under the California
Public Employees Retirement System (CalPERS), Medi-Cal and Healthy
Families programs, if there is a significant increase in the costs
of litigation to the plans. On the other hand, there may be a
significant deterrent effect resulting in less litigation.
COMMENTS : According to the author, health care providers are being
economically squeezed by health plans and need better ability to
enforce the obligation of Knox-Keene to obtain fair contracts.
According to the California Medical Association (CMA), health plans
have the ability to offer provider contracts on a "take-it or
leave-it" basis. CMA asserts that four or five health plans
control over 80 percent of the market not served by Kaiser, giving
them the market power to insist that providers accept contract
terms that are unfair, unreasonable and harmful to patient care.
The Knox-Keene Act recognizes the potential disparity in bargaining
power by requiring that plan-provider contracts be fair and
reasonable. However, the Act provides no explicit mechanism for
enforcing this obligation. Moreover, DMHC has declined to get
involved in this issue. Lacking a means for enforcement, these
violations of the Knox-Keene Act are effectively a wrong without a
remedy. Provision of an express right to enforce the law removes
any ambiguity. This bill would allow providers as well as
enrollees to seek equitable relief in order to protect their rights
under current law. Anyone attempting to bring an action would
first be required to exhaust all available administrative remedies
of the DMHC. Only equitable actions would be permissible under the
bill. No suit of any kind would be permissible regarding a patient
or subscriber's complaint that is subject to the existing internal
grievance or independent external review process under the
specified sections of the Knox-Keene Act.
Analysis Prepared by : Kevin G. Baker / (916) 319-2334
FN: 0003599