BILL ANALYSIS
SENATE COMMITTEE ON INSURANCE
Senator Jackie Speier, Chair
SB 1092 (Sher) Hearing Date: August
31,
As Amended:August 23, 2002
Fiscal: Yes
Urgency: No
SUMMARY
Would require that the director of the Department of
Managed Health Care (DMHC) adopt regulations to establish
the Consumer Participation Program (CPP).
DIGEST
Existing law
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.
3.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.
4.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.
5.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,
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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.
6.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.
This bill
1.Would require the director of DMHC, on or before July 1,
2003, to adopt regulations to establish the CPP.
2.Would specify that the regulations allow for the director
to award reasonable advocacy and witness fees to any
person or organization that demonstrates the following:
a. They represent the interests of consumers, and
b. They have made a substantial contribution on behalf
of consumers towards the adoption of any regulation or
to an order or decision made by the director if the
order or decision had the potential to impact a
significant amount of enrollees.
1.Would require that the regulations adopted by the
director shall include specifications for eligibility of
participation, rates of compensation, and procedures for
seeking compensation.
2.Would require that the regulations specify that the
person or organization demonstrate a record of advocacy
on behalf of health care consumes in administrative or
legislative proceedings in order to determine whether the
person or organization represents the interests of
consumers.
3.Would state that the provisions of the bill do not apply
to resolution of individual grievances, complaints, or
cases.
4.Would specify that fees awarded may not exceed three
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hundred fifty thousand dollars ($350,000) each fiscal
year.
5.Would require that the fees awarded under this act shall
be paid from the current assessment on plans.
6.Would require that DMHC report to the Legislature before
March 1, 2004, and annually thereafter, the following
information:
a. The amount of reasonable advocacy and witness fees
awarded each fiscal year.
b. The individuals or organization to whom advocacy and
witness fees awarded were awarded pursuant to this
bill.
c. The orders, decisions, and regulations pursuant to
which the advocacy and witness fees were awarded.
1.Would sunset on January 1, 2007.
BACKGROUND
1.Proposition 103 Intervenor Program . Proposition 103, a
1988 ballot initiative dealing with auto insurance rates,
required the Insurance Commissioner (IC) 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. If
the advocacy occurs during rulemaking proceedings, the
award is required to be paid by the Department of
Insurance (DOI).
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
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Budget Act, and that funds cannot be "rolled over" to the
next fiscal year if they are unspent.
2.California Public Utilities Commission Intervenor's Fees
and Expenses . The
Public Utilities Act authorizes intervenor's fees and
expenses for formal
proceedings of the California Public Utilities
Commission (CPUC) 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 CPUC proceeding.
The CPUC 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 CPUC's order or decision; and
b) Participation or intervention without an award of
fees or costs imposes a significant financial
hardship.
CPUC staff reports that the awards paid to intervenors
are paid by the utility, and that those costs are later
recovered in utility rates paid by customers. According
to CPUC staff, $9,988,349 was spent on intervenor's fees
and expenses from 1997 to 2001.
1.Office of Patient Advocate . Section 1368.02 of the
Health and Safety Code declares that the Office of
Patient Advocate (OPA) shall be appointed by, and serve
at the pleasure of, the Governor. Subdivision (c) (1)
states, in part, that "the goal of the office shall be to
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help enrollees secure health care services to which they
are entitled." In addition, subdivision (c) (3) states
that the duties of the office shall be determined by the
Secretary of Business Transportation and Housing.
According to OPA staff, the secretary has never expanded
the duties of the OPA to include participation and
advocacy in the DMHC regulatory or decision making
process. The OPA budget is approximately $3.5 million
per year.
COMMENTS
1.Purpose of the bill .
a. Consumer presence is needed. According to the
author, the purpose of the bill is to preserve
consumer input in DMHC proceedings. The author notes
that in the months following the establishment of the
DMHC, the department established three advisory
committees that started meeting on a monthly basis.
In addition, DMHC began implementation of the new
Independent Medical Review (IMR) process, fiscal
solvency standards for risk-bearing provider groups,
and an HMO hotline. In addition, regulations were
required to implement many of the new patient's rights
such as expedited grievance procedures and the
arbitration/settlement requirements.
The author states that without consumer presence, only
the plans and the providers will be active in the
regulatory arena. In addition, the author fears that
HMO reform efforts will be less effective and
meaningful and that the regulated industries will take
over the regulator (i.e. DMHC).
b. Consumer groups are outnumbered by industry
representatives. The author asserts that consumer
groups are currently outnumbered. According to the
author, six organizations, California Pan-Ethnic
Health Network (CPEHN), Center for Health Care Rights,
Consumers Union (CU) Health Access, The Latino Issues
Forum (LIF), and the Western Center on Law and
Poverty, have formed a coalition that broadly
represents the interests of California consumers on
health-related issues.
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The author states that at every meeting or hearing
there are lawyers and staff from every major plan,
medical group and provider organization. According to
the author, the consumer groups have struggled to find
the resources to pay for representation. In addition,
according to the author, the plans and medical groups
have established the Industry Collaborative Effort
(ICE) in order to assert a continuing presence in DMHC
proceedings.
c. Funding source is drying up. The author notes that
the consumer organizations have received funding for
the past three years from the California Wellness
Foundation and the California Consumer Protection
Foundation. The funding was designed to provide
consumer input and to monitor the implementation of
the 1999 managed care reform legislation. According
to the author, this source of funding will end June 1,
2003.
d. CPP will be cost effective. The author cites
several examples where consumer input has resulted in
savings. According to the author, consumer advocates
are responsible for the fact that DMHC and the
Clinical Advisory Committee are monitoring the
patterns of cases that go to IMR. Reviewing the IMR
decisions allows the DMHC to identify types of health
care services and procedures that plans routinely deny
as well as procedures that are typically upheld. For
those cases where the consumer appeal is approved,
plans are being educated to change behavior at the
first review. According to the author, over time,
this saves money. On the other hand, the author notes
that if there is a pattern of cases where the plans
are routinely upheld, providers and enrollees can be
educated to understand why the care is not medically
necessary.
Other examples of cost savings attributed to consumer
participation include; ensuring that plans provide
linguistic services for limited English speaking
enrollees so as to reduce the number of consumer
complaints; establishing timely access standards to
ensure that patients receive early preventative care
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in order to reduce dependence on emergency room care,
and; fighting for the establishment of standards to
help prevent medical groups from going bankrupt.
1.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 that the public interest is
not represented. Proponents write that this bill is
modeled on similar programs at the Department of
Insurance (DOI) and the California Public Utilities
Commission (CPUC). The proponents assert that
administrative agencies make better decisions when they
hear from the full range of affected parties.
The proponents state that administrative proceedings,
such as rulemaking, are often 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.
They assert 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 maintain 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.
2.Opposition . The California Association of Health Plans
(CAHP) asserts that basing this bill on the practice of
DOI and the CPUC 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 asserts 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
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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)
contends 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.
COMMITTEE QUESTIONS
1.The bill states that the provisions of this act shall
remain in effect until January 1, 2007, and as of that
date is repealed, unless a later enacted statute deletes
or extends that date. The bill is silent on what becomes
of the regulations that must be created pursuant to this
act. If the Legislature does not delete or extend the
sunset, the regulations would arguably still be in effect
beyond the date that the statute expires. In addition,
funding for this program would presumably be awarded for
the fiscal year. Thus, should the statute expire on
January 1, 2007, the disposition of any remaining funds
would arguably be in limbo. Should the author send a
letter to the Journal clarifying legislative intent
regarding the disposition of the regulations and funding?
2.As an alternative to the provisions of this bill, should
the duties of OPA be expanded to allow for the OPA to
have input into the DMHC's regulatory and decision-making
process?
3.OPA staff indicated that their role does not include
advocating for consumers during DMHC regulatory or
decision-making procedures. Should the Legislature call
for an audit to determine if the OPA budget is being used
effectively?
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POSITIONS
Support
California Pan-Ethnic Health Network
Congress of California Seniors
Consumers Union
Older Women's League of California
Health Access California
Western Center on Law and Poverty
Oppose
American Medical Group Association
California Association of Physician Organizations
California Chamber of Commerce
California Medical Group Association
Health Net
Kaiser Permanente
Consultant:Michael A. Paiva