BILL NUMBER: SB 1040	AMENDED
	BILL TEXT

	AMENDED IN SENATE  APRIL 18, 2001

INTRODUCED BY   Senator Machado
   (Principal coauthor: Senator Polanco)
   (Principal coauthor: Assembly Member Thomson)
   (Coauthor: Assembly Member Correa)

                        FEBRUARY 23, 2001

   An act to add Section 1373.22 to the Health and Safety Code,
relating to health care service plans.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1040, as amended, Machado.  Health care service plans:
arbitration.
   Existing law, the Knox-Keene Health Care Service Plan Act of 1975,
provides for the licensure and regulation of health care service
plans by the Department of Managed Health Care.  The act, among other
matters, regulates a plan's use of arbitration to settle disputes
with subscribers and enrollees.  Existing law makes a willful
violation of the act's provisions a crime.
   This bill would prohibit a health care service plan contract that
contains terms concerning mandatory or voluntary arbitration with
subscribers or enrollees from imposing limits on the damages that may
be awarded in an arbitration that differ from the damages that could
otherwise be awarded in a similar dispute decided by a court or jury
trial and from precluding a subscriber or enrollee from
representation by counsel, filing a written brief, or making a
closing argument before the arbitrator.  The bill would also provide
that the same statute of limitations that governs the timeliness of
civil actions shall also govern the timeliness of a demand for
arbitration and would require the contract to incorporate provisions
of existing law concerning discovery in arbitration actions.
   The bill would, if a health care service plan contract includes a
term requiring the use of mandatory binding arbitration, prohibit the
subscriber or enrollee from paying specified costs and require that
the health care service plan  to  use mandatory
binding arbitration to settle disputes with a subscriber or enrollee.

   The bill would make any arbitration agreement in a plan contract
having terms inconsistent with these provisions void and
unenforceable and would authorize a court to vacate an arbitration
award under specified circumstances.
   Because this bill would specify prohibited conduct by a health
care service plan, the violation of which would constitute a criminal
offense,  this   the  bill would expand
the scope of an existing crime, thereby imposing 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.
   Vote:  majority.  Appropriation:  no.  Fiscal committee:  yes.
State-mandated local program:  yes.


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


  SECTION 1.  It is the intent of the Legislature that the enactment
of Section 2 shall not be construed as legislative intent either to
limit a court's power to find a term limiting damages in any other
arbitration agreement to be unconscionable and void and unenforceable
or to restrict a court's power to find an arbitration agreement with
that unconscionable term to be void and unenforceable in its
entirety.  The enactment of Section 2 shall not be construed as
legislative intent to affect in any manner any pending matter before
the California Supreme Court.
  SEC. 2.  Section 1373.22 is added to the Health and Safety Code, to
read:
   1373.22.  (a) Any health care service plan contract that contains
terms concerning mandatory or voluntary binding arbitration to settle
disputes with subscribers or enrollees shall comply with all of the
following:
   (1) The plan contract shall not impose limits on damages that may
be awarded in an arbitration that differ from the damages that could
be otherwise awarded in a similar dispute decided by a court or jury
trial.
   (2) The plan contract shall not prohibit an enrollee or subscriber
from retaining and being represented by counsel.
   (3) The plan contract shall not prohibit a subscriber or enrollee
from filing a written brief or making a closing argument before the
arbitrator.
   (4) The plan contract shall provide that the same statute of
limitations that governs the timeliness of civil actions shall also
govern the timeliness of a demand for arbitration.
   (5) The plan contract shall expressly incorporate the provisions
of Section 1283.05 of the Code of Civil Procedure.
   (b) Any health care service plan contract that includes a term
requiring the use of mandatory binding arbitration to settle disputes
with subscribers or enrollees shall comply with the following:
   (1) A subscriber or an enrollee shall not be required to pay any
portion of the neutral arbitrator's fees.
   (2) A subscriber or an enrollee shall not be required to pay
administrative fees, except for a filing fee, which shall not exceed
the amount of the first appearance filing fee in the superior court.

   (3) A subscriber or an enrollee shall not be required to pay
attorneys' fees, expert witness fees, deposition fees, or any other
costs that are recoverable by the subscriber or enrollee under
Section 998 of the Code of Civil Procedure or under a fee or
cost-shifting provision of a remedial statute on which the claim of
the enrollee or subscriber is based.
   (4)  
   (3)  The health care service plan shall be required to use
mandatory binding arbitration to settle disputes that may arise with
a subscriber or enrollee.
   (c) Any arbitration agreement in a health care service plan
contract that includes terms that are inconsistent with this section
shall be void and unenforceable.
   (d) Notwithstanding any other provision of law, a court may vacate
an award of an arbitrator in an arbitration to which this section
applies if the award, on its face, evidences a manifest disregard of
the law and thereby results in a substantial injustice.
  SEC. 3.  No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.