BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  AB 778
                                                                  Page  1

          Date of Hearing:   May 11, 2011

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                    AB 778 (Atkins) - As Amended:  April 27, 2011 

          Policy Committee:                             Business and 
          Professions  Vote:                            6-1
                       Health                           Vote: 14-1

          Urgency:     No                   State Mandated Local Program: 
          Yes    Reimbursable:              No

           SUMMARY  

          This bill specifies the business relationships that are 
          permissible between a health care service plan (health plan) 
          that provides vision care, and an optician, an optical company, 
          optical manufacturers or distributors, or a non-optometric 
          corporation.   Specifically, this bill:  

          1)Permits a registered dispensing optician (RDO), an optical 
            company, a manufacturer or distributor of optical goods, or a 
            non-optometric corporation to do all of the following:

             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. 

             c)   Jointly advertise vision care services with a health 
               plan that provides vision care services.

          1)Prohibits the entities that have such business relationships 
            with an optometrist from influencing or interfering with the 
            optometrist's clinical decisions.

           FISCAL EFFECT  

          Minor and absorbable costs to the Department of Managed Health 
          Care to continue oversight of licensed health plans, as well as 
          to the Board of Optometry and the Medical Board within the 








                                                                  AB 778
                                                                  Page  2

          Department of Consumer Affairs to regulate the optometrists' and 
          opticians' and activities, respectively.

           COMMENTS  

           1)Rationale  . According to the author, current law is ambiguous 
            with respect to whether co-location models such as 
            LensCrafters, where an independent optical retail store and 
            optometry office exist in the same location, are allowable in 
            the state.  This bill intends to provide clarity and clearly 
            define the business model, so that current businesses in 
            California can continue to operate.

           2)Ongoing Litigation  .  The co-location model that this bill 
            codifies has been the subject of past litigation as well as 
            ongoing litigation.  Cases brought by the Attorney General 
            (AG) of California and private defendants challenging these 
            relationships as unlawful have been settled over the last 
            decade, leaving the underlying legal issues unresolved.  Most 
            recently, a federal judge struck down the law upon which the 
            AG's case was based as unconstitutional. This case has been 
            appealed. According to the sponsor of this bill, EYEXAM of 
            California, a licensed specialty vision care service plan, 
            this litigation could take years to resolve.   


           Analysis Prepared by  :    Lisa Murawski / APPR. / (916) 319-2081