BILL ANALYSIS �
AB 778
Page 1
Date of Hearing: April 26, 2011
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 778 (Atkins) - As Amended: April 12, 2011
SUBJECT : Health care service plans: vision care.
SUMMARY : Permits a dispensing optician, an optical company, a
manufacturer or distributor of optical goods, or a nonoptometric
corporation to own a health care service plan (health plan) that
provides vision care services and share its profits, contract
for business services with, lease office space or equipment to
or from, or share office space with, a health plan that provides
vision care services, and jointly advertise vision care services
with a health plan that provides vision care services.
Specifically, this bill :
1)Permits a dispensing optician, an optical company, a
manufacturer or distributor of optical goods, or a
nonoptometric corporation to:
a) Own a health plan that provides vision care services and
share its profits;
b) Contract for business services with, lease office space
or equipment to or from, or share office space with, a
health plan that provides vision care services; and,
c) Jointly advertise vision care services with a health
plan that provides vision care services.
2)Prohibits a registered dispensing optician, an optical
company, a manufacturer or distributor of optical goods, or a
nonoptometric corporation from engaging in conduct designed to
influence or interfere with the medical decisions of an
optometrist employed by, or who has contracted with, a
specialized vision care service plan for fiscal or
administrative reasons.
3)Requires the medical decisions of an optometrist who is
employed by, or who has contracted with, a specialized vision
care service plan to be unhindered by fiscal and
administrative management, as specified.
EXISTING LAW :
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1)Provides the regulation of health plans by the Department of
Managed Health Care (DMHC) under the Knox-Keene Health Care
Service Plan Act of 1975 (Knox-Keene Act).
2)Prohibits health plans from being deemed to be engaged in the
practice of a profession, and may employ, or contract with,
any licensed health care professional to deliver professional
services, and may directly own, and may directly operate
through its professional employees or contracted licensed
professionals, offices, and subsidiary corporations.
3)Prohibits licensed health care professionals from owning or
controlling offices or branch offices unless otherwise
expressly authorized.
4)Provides for the licensure and regulation of dispensing
opticians by the Medical Board of California (MBC). Provides
for the licensure and regulation of optometrists by the
California Board of Optometry (CBO).
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, EYEXAM of
California was licensed in 1986 as a specialized health plan,
regulated by DMHC, to provide vision services to its members
throughout the state. Most EYEXAM locations are within a
LensCrafters store and have a partnership with the store.
Patients can purchase frames at this location, or at any other
eyewear location, should they need prescription eyewear. The
author states that there are over 100 EYEXAM locations
throughout the state where close to 400 optometrists are
employed, serving their community. The author states that
current California law does not prohibit a Knox-Keene plan
from having a business relationship with an optical dispenser,
but there is no statutory language that specifically
authorizes this relationship either. However, current
California law prohibits an optometrist from being directly
employed by an optical company. The author states that this
bill is intended to specifically allow a specialty health care
plan (like EYEXAM) to conduct business with an optical
dispenser (like Lenscrafters). The author states that due to
an ambiguity in the law, there is a question about whether the
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co-location model can continue to remain in California and
that this bill seeks to provide clarity on the issue by
defining the business model.
2)BACKGROUND . In California, there are two eye care service
models: an optometrist's private office and a "co-location"
office, where an optical retail store and DMHC-regulated
specialized health plan that runs an optometry office are at
the same location. At co-location sites, patients receive an
eye exam and typically fill their prescription for eyeglasses
during the same visit though an optical retail store. At
private optometrist offices, patients receive an eye exam and
either take a prescription for glasses or contact lenses to a
different provider or the optometrist sends the order out to
be filled and delivered to the patient at a later date. In
both settings, optometrists are licensed by the Board of
Optometry. In a co-location site, the opticians working at
the optical retail store are regulated by MBC and the
optometry office is regulated by DMHC (regulation of the
specialized health plan) and the CBO (regulation of the
optometrist employed by the plan). According to the CBO,
there are approximately 8,000 active optometrist licensees in
California. According to information provided by the sponsor
of this bill, Californians for Healthy Vision (a coalition of
co-located eye care businesses and optometrists), in
California there are four companies that own both a plan and
an optical company:
----------------------------------------------------------------
|Company |Number of |Number of optometrists |
| |locations |(approx) |
|----------------------+----------------+------------------------|
|EYEXAM/LensCrafters | 110 | 400 |
|----------------------+----------------+------------------------|
|NVI/First Site | 140 | 500 |
|----------------------+----------------+------------------------|
|Sterling Vision/Site | 40 | 40 |
|4 Sore Eyes | | |
|----------------------+----------------+------------------------|
|For Eyes Vision | 7 |10 |
|Plan/For Eyes | | |
----------------------------------------------------------------
3)CALIFORNIA AND FEDERAL LAWSUITS . In February 2002, Attorney
General (AG) Bill Lockyer sued Pearle Vision, ( People of the
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State of California v. Cole National Corporation , Case No.
GIC783135 (2004) 122 Cal.App.4th 1060 , -- Cal.Rptr.3d),
stating that the company had been violating the Optometry
Practice Act. The AG in part challenged the business
relationship between the Knox-Keene plan (Pearle VisionCare)
and the optical sister company (Pearle Vision), as well as the
ownership of the Knox-Keene plan by an optical company,
claiming that such relationships violated the restrictions in
current law (specifically, Business and Professions Code
Sections 655 and 2556). In March 2002, LensCrafters was sued
by a private plaintiff ( Snow v. LensCrafters , Superior Court,
County of San Francisco, Case No. CGC-02-405544), who raised
some of the same business relationship issues as those raised
in the Pearle case. Subsequently, a separate case was brought
in the federal district court by LensCrafters and others,
challenging the constitutionality of the underlying laws in
the Snow case (e.g., Business & Professions (B&P) Code � 655
and 2556). Both state cases were ultimately settled, with no
determinations regarding to the underlying LensCrafters/EYEXAM
or Pearle Vision/Pearle VisionCare business relationships.
According to information provided to the Committee by the
sponsors of this bill, in December 2006, the federal court
struck down B&P Code � 655 and 2556 as unconstitutional. The
federal court interpreted the California Supreme Court's
ruling in the Pearle case as a bar to LensCrafters' Knox-Keene
plan arrangement. The court therefore found that LensCrafters
and others had no lawful means in California to effectively
compete by offering eyewear where eye exams are provided. As
a result, the court determined that "the challenged laws
substantially effect and discriminate against interstate
commerce."
4)SUPPORT . Californians for Healthy Vision write that this bill
will preserve the way millions of Californians receive eye
care services. The sponsor states that this bill is focused
on maintaining the co-location model that has been operating
in the state for decades, and provides a one-stop experience
where patients receive quality eye care and fill their
prescription during the same visit. According to the sponsor,
current ambiguities in state law resulted in ongoing
litigation and this bill is the best way to clarify the law
rather than wait for years of litigation where there is no
certainty that the law will be clarified. Finally, the
sponsor states that this bill is the most cost-effective and
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clear way to validate the aims of the original Knox-Keene law
by allowing co-location services to operate under the close
regulation of the DMHC. EYEXAM of California and LensCrafters
state that due to the vagueness in the law, millions of
Californians may find that their optometrists at a co-located
office are no longer there and that California could become
one of only three states to not allow patients to have the
option of receiving vision service at a co-location office.
The California Retailers Association states that if
deficiencies in the statute related to these eye care
providers are not clarified, vision care companies could leave
the state resulting in enormous losses in economic activity
and limited vision care choices for California consumers.
5)CONCERNS . VSP Vision Care writes that this bill would create
a conflict in law, specifically between what it purports to
permit in the health plan regulatory arena and what currently
are the fundamental practice restrictions of the parties
covered by the bill are currently (under the Business and
Professions Code). VSP states that those practice restrictions
are expressly oriented to patient protection in California as
recognized in litigation, which has unsuccessfully challenged
the restrictions.
6)DOUBLE REFERRAL . This bill is double referred. Should it
pass out of this committee, it will be referred to the
Assembly Committee on Business, Professions & Consumer
Protection.
7)AUTHOR'S AMENDMENT . The author requests that the Committee
approve technical amendments to, on page 3, line 37 and page
4, line 2, delete "medical" and insert "clinical"
REGISTERED SUPPORT / OPPOSITION :
Support
Californians for Healthy Vision (sponsor)
Anthem Blue Cross
California Retailers Association
EYEXAM of California
FirstSight Vision Services, Inc.
LensCrafters
Over 100 individuals and optometrists
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Opposition
None on file.
Analysis Prepared by : Melanie Moreno / HEALTH / (916)
319-2097