BILL ANALYSIS
SB 1092
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Date of Hearing: June 11, 2002
ASSEMBLY COMMITTEE ON HEALTH
Helen Thomson, Chair
SB 1092 (Sher) - As Amended: May 30, 2002
POLICY QUESTIONS :
1)Should the director of the Department of Managed Health Care
(DMHC) be required to adopt regulations to establish the
Consumer Participation Program (CPP)?
2)Should the regulations be required to allow the director of
DMHC to award reasonable advocacy and witness fees to any
person who demonstrates that the person represents the
interests of consumers and who has made a substantial
contribution on behalf of consumers to the adoption of any
order, regulation, or decision made by the director?
SENATE VOTE : Not relevant.
SUBJECT : Health care service plans: Consumer Participation
Program.
SUMMARY : Requires the director of the Department of Managed
Health Care (DMHC) to adopt regulations to establish the
Consumer Participation Program (CPP). Requires the regulations
to allow the director of DMHC to award reasonable advocacy and
witness fees to any person who demonstrates that the person
represents the interests of consumers and who has made a
substantial contribution on behalf of consumers to the adoption
of any order, regulation, or decision made by the director.
Specifically, this bill :
1)Requires the director of the DMHC, on or before July 1, 2003,
to adopt regulations to establish the CPP.
2)Requires the regulations to allow for the director of DMHC to
award reasonable advocacy and witness fees to any person who
demonstrates that the person represents the interests of
consumers and who has made a substantial contribution on
behalf of consumers to the adoption of any order, regulation,
or decision made by the director.
3)Requires the regulations adopted by the director to include
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specifications for eligibility of participation, rates of
compensation, and procedures for seeking compensation.
4)Requires this bill to apply to all proceedings of DMHC, but
prohibits it from applying to the resolution of individual
grievances, complaints, or cases.
5)Requires fees awarded under this bill to be considered costs
and expenses pursuant to a specified provision of existing law
requiring licensing fees and assessments of health plans.
6)Makes various legislative finding and declarations, including
that:
a) Consumer participation programs at the Public Utilities
Commission (PUC) and the Department of Insurance (DOI) have
been a cost-effective and successful means of encouraging
consumer protection, expertise, and participation in rate
setting and adjudicatory and quasi-legislative proceedings;
and
b) Ensuring that the proceedings in a) above have the
benefit of consumer expertise and evidence, consumer
participation programs have saved California taxpayers
billions of dollars and have significantly improved the
decisions made by the affected agencies.
7)States legislative intent:
a) To establish a consumer participation program
administered by DMHC that will promote the interests and
effective representation of consumers and assist DMHC in
ensuring affordable and effective delivery of health care
to the people of this state who are eligible to enroll in
or subscribe to a health care service plan or a specialized
health care service plan; and
b) That this bill be administered in a manner that
encourages the effective and efficient participation of all
organizations representing the interests of consumers that
have a stake in the regulation of health care service plans
or specialized health care service plans.
EXISTING LAW :
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1)Licenses and regulates health care service plans under the
Knox-Keene Act through DMHC.
2)Establishes in DMHC the Advisory Committee on Managed Health
Care, the Financial Solvency Standards Board and the Clinical
Advisory Panel. Establishes within DMHC an Office of Patient
Advocate to represent the interests of enrollees served by
health care service plans regulated by DMHC, and requires the
goal of the office to be to help enrollees secure health care
services to which they are entitled under the laws
administered by DMHC.
3)Requires each health plan applying for licensure to reimburse
the director for the actual cost of processing the
application, including overhead, up to an amount not to exceed
$25,000.
4)Requires each licensed plan to pay to the director an amount
as estimated by the director for the ensuing fiscal year, as a
reimbursement of its share of all costs and expenses,
including, but not limited to, costs and expenses associated
with routine financial examinations, grievances and complaints
including maintaining a toll-free number for consumer
grievances and complaints, investigation and enforcement,
medical surveys and reports, and overhead, reasonably incurred
in the administration of the Knox-Keene Act and not otherwise
recovered.
5)Requires health plans and specialized health plans (e.g.,
vision, dental-only plans) to pay an assessment of a specified
amount, plus additional amounts based on enrollment.
6)Permits the director, on or before September 15, 2000, to
require health care service plans to pay an additional
assessment to provide DMHC with sufficient revenues to support
costs and expenses, as specified, for the 2000-01, 2001-02,
and 2002-03 fiscal years.
FISCAL EFFECT : Unknown.
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COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, the passage of
the HMO reform legislation in 1999 shifted the focus of
consumer advocates to the regulatory area. The newly created
DMHC, its three advisory boards, and DMHC's proposed
regulations on a variety of managed care topics requires an
on-going consumer presence in the regulatory process. Six
organizations have obtained three years of funding from two
foundations, but this funding is due to expire in June 2003.
This bill would establish a Consumer Participation Program
similar to what is presently in place at the PUC and DOI.
Consumer participants would receive compensation if they
demonstrate that the person represents the interests of
consumers and the individual has made a "substantial
contribution" on behalf of consumers to the adoption of any
order, regulation or decision by the director of DMHC. The
author states a consumer voice in the regulatory process has
made a difference in the outcome of regulations and in the HMO
Report Card, and this bill will ensure an on-going consumer
presence in the regulatory process to prevent the regulated
entities from taking over the regulator.
2)PROPOSITION 103 INTERVENOR PROGRAM . Proposition 103, a 1988
ballot initiative dealing with auto insurance rates, required
the commissioner or a court to award reasonable advocacy and
witness fees and expenses to any person who demonstrates that
the person represents the interests of consumers, and that he
or she has made a substantial contribution to the adoption of
any order, regulation or decision by the commissioner or a
court. If the advocacy occurs in response to a rate
application, the award is required to be paid by the
applicant. The fees awarded under this provision of
Proposition 103 are referred to as "intervenor fees."
According to the DOI's web site, as of July 1997, intervenors
had been paid $4.3 million in reimbursements for their
participation in various DOI proceedings. Since 1997, DOI
staff indicate $2.7 million has been awarded in intervenor
fees. DOI indicates the amount it can spend on intervenor
fees is currently $600,000 a year, which is appropriated by
the Legislature in the Budget Act, and that funds cannot be
"rolled over" to the next fiscal year if they are unspent.
3)PUBLIC UTILITIES ACT INTERVENOR'S FEES AND EXPENSES . The
Public Utilities Act authorizes intervenor's fees and expenses
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for formal proceedings of the PUC involving electric, gas,
water and telephone utilities. The purpose of this provision
is to provide compensation for reasonable advocate's fees,
reasonable expert witness fees, and other reasonable costs to
public utility customers of participation or intervention in
any PUC proceeding. The PUC is required to award reasonable
advocate's fees, reasonable expert witness fees, and other
reasonable costs of preparation for and participation in a
hearing or proceeding to any customer who complies with
provisions relating to notice and filing of intent to claim
compensation, and satisfies both of the following
requirements:
a) The customer's presentation makes a substantial
contribution to the adoption, in whole or in part, of the
PUC's order or decision; and
b) Participation or intervention without an award of fees
or costs imposes a significant financial hardship.
PUC staff write that the awards paid to intervenors are paid
by the utility, and those costs are later recovered in utility
rates paid by customers. According to PUC staff, the
following amounts were spent on intervenor's fees and expenses
from 1997 to 2001:
Year Dollar Amount
$ 911,843
$3,560,336
$1,485,024
2000 $2,752,383
2001 $1,278,763
4)SUPPORT . This bill is supported by consumer groups, including
Western Center on Law and Poverty, Consumers Union and Health
Access California, which argue that administrative agencies
often hear only from the industries they regulate and the
public interest is not represented, primarily because of a
lack of funding for this type of advocacy. Proponents write
that this bill is modeled on similar programs at DOI and the
PUC, and that the rationale for such programs is that
administrative agencies make better decisions when they hear
from the full-range of affected interests. Supporters argue
that administrative proceedings, such as rulemaking, are often
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lengthy and complex, can involve expert witnesses, and that
preparation and travel expenses for these proceedings can be
prohibitive for nonprofit consumer and public interest
organizations. Supporters argue that their work before the
DMHC has involved drafting extensive comments on proposed
regulations to implement the independent medical review
system, representing consumer interests in the fiscal solvency
crisis affecting medical groups, and successfully advocating
for inclusion of cultural and linguistic data on the first HMO
report card. Proponents argue that sufficient funding exists
in DMHC to fund a consumer participation program, and that
this bill will provide a stable source of funding to ensure a
strong consumer voice at the DMHC that will benefit enrollees
of managed care plans.
5)OPPOSITION . This bill is opposed by Health Net, Kaiser
Permanente Medical Care Program, and the California
Association of Health Plans (CAHP). CAHP argues that basing
this bill on the practice of DOI and the PUC is dubious
because, unlike DMHC, these entities award witness fees and
reimbursement for advocacy in the context of their overriding
public policy responsibility, which CAHP states is rate
regulation. Additionally, CAHP argues that this bill would
require health plans to underwrite the advocacy of others who
are potentially opponents, and that consumer advocacy is
already assured in DMHC. CAHP concludes that those who appear
before DMHC in regulatory proceedings are advocates for a
specific point of view, but that no side in a democracy should
be forced to pay for the advocacy costs of others who want to
join the discussion in support or opposition. The Kaiser
Permanente Medical Care Program (KPMCP) writes in opposition
that the bill does not establish sufficient standards to
govern who would be eligible for advocacy fees, that the
Office of the Patient Advocate was created to represent health
care consumers, and that during a time of rapidly rising
health care costs, KPMCP believes it is neither fiscally
responsible or good public policy to create a program without
legislatively established guidelines as to who would be
eligible and that it is a duplication of the role played by
the Office of Patient Advocate.
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DMHC BUDGET . The following Fund Condition Summary shows DMHC's
funding and expenditures:
--------------------------------------------------------
| | | | | | 2002-03 Printed Governor's |
| | | | | | Budget |
| | | | | | (dollar in thousands) |
|----------+-+--------+-+-+--------+----------+----------|
| | | | | |2000-01 | 2001-02 | 2002-03 |
|----------+-+--------+-+-+--------+----------+----------|
| | | | | | Actual |Projected |Estimated |
| | | | | | $ | $ | $ |
|----------+-+--------+-+-+--------+----------+----------|
|Funding: | | | | | | | |
|-----------------------+-+--------+----------+----------|
|Beginning Fund Balance | | 6,200 | 2,117 | 2,335 |
|(Reserve) | | | | |
|---------------------+-+-+--------+----------+----------|
|Assessment of Health | | | 27,755 | 30,621 | 31,221 |
|Plans | | | | | |
|---------------------+-+-+--------+----------+----------|
|Miscellaneous | | | 862 | 651 | 651 |
|Revenues 1 | | | | | |
|-----------------------+-+--------+----------+----------|
|Reimbursement for IMR | | 196 | 860 | 860 |
|Costs | | | | |
|-----------------------+-+--------+----------+----------|
|Interest - Surplus | | 523 | 493 | 493 |
|Money Invest. | | | | |
|---------------------+-+-+--------+----------+----------|
|Total Available | | | 35,536 | 34,742 | 35,560 |
|Funding | | | | | |
|----------+-+--------+-+-+--------+----------+----------|
| | | | | | | | |
|---------------------+-+-+--------+----------+----------|
|Expenditures: | | | | | |
|---------------------+-+-+--------+----------+----------|
|DMHC State | | | 26,862 | 29,504 | 31,591 |
|Operations (Ongoing) | | | | | |
|---------------------+-+-+--------+----------+----------|
|One-time exp., | | | 4,283 | 0 | 0 |
|Limited Term 6/30/01 | | | | | |
|---------------------+-+-+--------+----------+----------|
|One-time/Limited | | | 2,042 | 2,043 | 0 |
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|Term | | | | | |
|---------------------+-+-+--------+----------+----------|
|IMR/EIR | | | 232 | 860 | 860 |
|(reimbursable)* | | | | | |
|---------------------+-+-+--------+----------+----------|
|Total, Expenditures | | | 33,419 | 32,407 | 32,451 |
|----------+-+--------+-+-+--------+----------+----------|
| | | | | | | | |
|-----------------------+-+--------+----------+----------|
|Ending Fund Balance | | 2,117 | 2,335 | 3,109 |
|(Reserve) | | | | |
|----------+-+--------+-+-+--------+----------+----------|
| | | | | | | | |
|--------------------------------------------------------|
|1 Includes material modifications, license |
|fees/application, non-routine financial exams, cost |
|recoveries (litigation), penalties/fines, etc. |
| |
|* Independent Medical Review/Experimental Treatment |
|Independent Review |
--------------------------------------------------------
6)RELATED LEGISLATION . AB 1996 (Thomson), currently pending in
the Senate, proposes to create the Consumer Health Care
Benefits Commission (CHCBC), and requires it to assess the
social, medical, and financial impacts of proposed mandated
benefit legislation. For the 2002-03 through 2005-06 fiscal
years, the CHCBC would be funded through fees assessed to
health care service plans and health insurers in an amount, as
determined by CHCBC through regulation, not to exceed $0.10
per covered individual, to be limited to the amount necessary
to fund the actual and necessary expenses of CHCBC and its
work.
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7)QUESTIONS AND COMMENTS .
a) The Consumer Participation Program and the regulations
required under this bill allow the director of DMHC to
award reasonable advocacy and witness fees to any person
who demonstrates that the person represents the interests
of consumers and who has made a substantial contribution on
behalf of consumers to the adoption of any order,
regulation, or decision made by the director. Due to the
state's budget deficit, AB 1996 (Thomson), which proposes
to establish a Consumer Health Care Benefits Commission to
review benefit mandate legislation, is proposed to be
funded through a fee assessed on health plans and insurers
through regulation, not to exceed 10 cents per covered
individual. Because DMHC is primarily funded through fees
assessed to health plans, the cost of the advocacy and
witness fees in this bill and AB 1996 will ultimately be
passed on by health plans to consumers and purchasers.
This bill is modeled on the intervenor fees required under
the PUC and DOI. Are advocacy and witness fees for
individuals who make a substantial contribution in the
adoption of orders, regulations or decisions made by the
director of DMHC necessary to ensure the interests of
consumers are represented? If the Legislature determines
these fees are necessary, how should the CPP be funded?
Should it be through a General Fund appropriation, or
through the DMHC (which is funded primarily by the
licensing fees paid by health care service plans), as this
bill proposes?
b) This bill requires the regulations adopted by the
director for the CPP's advocacy and witness fees to include
specifications for eligibility of participation, rates of
compensation, and procedures for seeking compensation.
Should there be a statutory cap on the amount of advocacy
and witness fees, or should this issue be left to
regulation?
c) The previous contents of this bill as it passed the
Senate dealt with the definition of a grievance in the
Knox-Keene Act. Those provisions were deleted by the May
30, 2002 amendments.
REGISTERED SUPPORT / OPPOSITION :
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Support
California Pan-Ethnic Health Network
Center for Health Care Rights
Consumers Union
Health Access California
Western Center on Law and Poverty
Opposition
California Association of Health Plans
Health Net
Kaiser Permanente Medical Care Program
Analysis Prepared by : Scott Bain / HEALTH / (916) 319-2097