BILL ANALYSIS
AB 55
Page 1
Date of Hearing: April 13, 1999
ASSEMBLY COMMITTEE ON HEALTH
Martin Gallegos, Chair
AB 55 (Migden) - As Amended: April 12, 1999
SUBJECT : Resolution of complaints against HMOs.
SUMMARY : Expedites health plan and Department of Corporations
(DOC) review of consumer complaints, establishes an independent
medical review system for specified, unresolved consumer
complaints against health plans, and holds health plans liable
for patient harm resulting from the failure to exercise ordinary
care. Specifically, this bill :
1)Requires health plans, in their response to grievances
involving the denial or termination of health care services,
to describe the criteria used and the clinical reasons for the
decision, including all criteria and clinical reasons related
to medical necessity or appropriateness.
2)Allows enrollees to seek DOC review of unresolved grievances
after 30 days (instead of the current 60 days), requires plans
to provide enrollees with a written status report on
grievances within 15 days (instead of the current 30 days) and
requires plans to act on emergency grievances, including those
involving severe pain, within three days from receipt of the
grievance (instead of the current five days).
3)Requires DOC, in any enrollee appeal decision not subject to
the Independent Medical Review System set forth in this bill,
to provide a written decision within 30 days (instead of the
current 60 days) which shall include:
a) A summary of its findings and the reasons why DOC found
the plan to be, or not to be, in compliance with any
applicable laws, regulations, or orders of the
Commissioner;
b) A discussion of DOC's contact with any medical provider,
or any other independent expert relied on by DOC, along
with a summary of the views of that provider or expert; and
c) If the enrollee's grievance is sustained in whole or
part, information about any corrective action taken.
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4)Specifies situations, not covered by the Independent Medical
Review System, where DOC is directed to order a health plan to
offer and provide services that were improperly denied, or to
order the plan to reimburse the enrollee for the reasonable
costs of urgent or emergency care.
5)Requires DOC to maintain a system of aging of complaints that
are pending and unresolved for 30 days or more (instead of the
current 60 days).
6)Directs DOC to take enforcement actions against health plans
that fail to comply with the requirements of the Independent
Medical Review System.
7)Commencing January 1, 2001, establishes an Independent Medical
Review System that requires health plans to provide enrollees
the opportunity to seek an independent medical review whenever
health care services have been denied or terminated or
otherwise limited by a plan or one of its contracting
providers based in whole or in part on a finding that the
proposed health care services are not medically necessary or
medically appropriate.
8)Specifies that Medi-Cal beneficiaries enrolled in a health
plan shall not be excluded from participation in the
Independent Medical Review System.
9)Specifies that Medicare beneficiaries shall not be excluded
unless the federal Health Care Financing Administration issues
a finding that federal law preempts their participation.
10)Authorizes an enrollee to apply for Independent Review if one
of the following conditions is met:
a) The enrollee has received a provider recommendation
(this does not have to be an in-plan provider) indicating
that the disputed service is medically necessary or
medically appropriate;
b) The enrollee has received the disputed service on an
urgent care or emergency basis from a provider who
determined it was medically necessary or medically
appropriate; or
c) In the absence of a) or b), the enrollee has been seen
by an in-plan provider for the medical condition for which
the enrollee seeks independent review.
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11)Requires an enrollee to go through the 30-day health plan
grievance process, or the 3-day health plan review for
emergency grievances, before seeking independent review.
12)Provides that the enrollee shall pay an application fee of
$25, which shall be refunded if the enrollee prevails.
Medi-Cal beneficiaries shall be exempt from the fee, and DOC
shall establish a reduced fee schedule for low-income persons,
subject to self-certification documentation.
13)With the exception of the $25 fee, provides that other costs
of the Independent Medical Review System shall be borne by
health plans pursuant to an assessment fee system established
by DOC.
14)Provides that independent reviews be conducted by expert
medical organizations independent of health plans and
certified by a nonprofit accrediting organization, pursuant to
specified conflict of interest provisions.
15)Requires independent review decisions to determine whether
the disputed service is or was medically necessary or
appropriate based on specified practice guidelines, relevant
medical or scientific evidence, and generally accepted
standards of medical practice.
16)Requires the independent medical review entity to provide
DOC, the plan, the enrollee, and the enrollee's physician with
the decision of the medical professionals reviewing the case,
a description of the qualifications of the medical
professionals, and the names of the reviewers. Directs the
commissioner to adopt the determination of the independent
review entity, which shall be binding on the plan. In cases
where the enrollee's position prevails, the plan must either
offer the enrollee the disputed health care service or
reimburse the enrollee for care received if so directed by
DOC.
17)Requires DOC to submit a report to the Legislature by March
1, 2002, on the initial implementation of the Independent
Medical Review System.
18)Requires a similar but unspecified independent medical review
system to be established in the Department of Insurance for
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review of similar decisions by disability insurers.
19)***Provides for the partial admissibility of independent
review decisions in judicial cases.
20)***Provides that a health plan shall have a duty of ordinary
care to provide medically appropriate health care services and
shall be liable for any and all harm resulting from the
failure to exercise ordinary care.
***(Issue # 19, whether the decision of an independent medical
review panel should be admissible in a lawsuit against a health
plan, and issues associated with #20, a patient's right to sue a
health plan, will be considered in the Assembly Judiciary
Committee should this bill be approved by the Health Committee).
EXISTING LAW :
1)Provides for the regulation of health care service plans
(health plans) by the Department of Corporations (DOC) and the
regulation of disability insurers (health insurers) by the
Department of Insurance (DOI).
2)Requires every health plan to maintain a grievance system
under which enrollees may submit their grievances to the plan.
An enrollee may submit an unresolved grievance to DOC after
completing the health plan grievance process or after
participating in the process for 60 days. Health plans must
address emergency grievances within five days.
3)Requires health plans and health insurers to establish
external, independent review systems to examine coverage
decisions regarding experimental or investigational therapies
for patients who have a terminal condition and meet other
specified criteria.
FISCAL EFFECT : Unknown
COMMENTS :
1)PURPOSE OF THIS BILL . The author maintains that this bill
goes to the heart of restoring consumer confidence in our
health care system by requiring a fully independent, outside
review when HMOs deny care, and by giving consumers access to
courts in the same manner as public employees who are injured
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by HMOs. This bill rectifies the current situation where
patients and their doctors who believe needed care has been
denied can be left hanging while the dispute resolution
process drags on indefinitely. While there may be occasions
when the treatment a patient wants may not be appropriate or
necessary, the author believes when HMOs deny a patient care,
those patients should have the right to an independent look
from someone concerned with that patient's health, not
preoccupied with the company's bottom line.
2)BACKGROUND . Last year the Governor's Managed Health Care
Improvement Task Force recommended the creation of an
independent, third-party review process by January 2000, that
would provide consumers with an unbiased, expert-based review
of patient grievances pertaining to delays, denials or
curtailment of care based on medical necessity or
appropriateness. This bill seeks to implement that
recommendation.
3)SUPPORT . The California School Employees Association,
California Psychiatric Association, California Teachers
Association, and the Union of American Physicians & Dentists
support this bill because it allows enrollees to appeal
unresolved grievances after 30 days instead of 60, provides
for an independent review system when health services are
denied, and imposes accountability and liability on health
plans. Supporters argue that experience in other states that
have independent review systems has shown that the mere
existence of such a process seems to act as a policing
mechanism that increases the reasonableness of health plans in
reviewing the medical necessity of decisions. They also
believe that this bill will help ensure that health care
treatment decisions are driven by physicians and not health
plans.
4)SUPPORT WITH AMENDMENTS . The Consumer Attorneys of California
(CAOC) supports this bill if amended. CAOC supports giving
enrollees the right to sue HMOs. With regard to independent
review, CAOC wants to ensure that consumers need not exhaust
the review process before having standing to sue. CAOC also
argues for amendments to ensure a broad definition of medical
necessity that focuses on the needs of the particular patient.
CAOC favors allowing both Medi-Cal and Medicare beneficiaries
access to the independent review system. CAOC also opposes
application fees, arguing that such fees may discourage
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legitimate appeals. CAOC also argues against withholding
privileged HMO information from patients requesting documents
on appeal. Finally, CAOC argues for the inadmissibility of
independent review decisions in any subsequent trials.
The Western Center on Law and Poverty (WCLP) is willing to
support an independent review bill that meets certain
principles. WCLP seeks an independent review bill that:
a) Ensures the inclusion of Medi-Cal and Medicare
beneficiaries enrolled in managed care plans;
b) Has no medical care dollar threshold to trigger reviews;
c) Has no enrollee application fees;
d) Allows patients to access the independent review system
without a physician's recommendation;
e) Has a broad definition of "medical necessity" to be used
by independent reviewers;
f) Has appropriate review timelines and expedited reviews
in urgent cases;
g) Provides enrollees with adequate and timely notice of
their rights and gives clear instructions on how to access
the system;
h) Has standards and criteria to ensure independent
reviewers are free of conflicts of interest;
i) Requires that the selection of reviewers should be by
DOC, not the health plan, and reviewers should have
expertise relevant to the enrollee's medical condition;
j) Requires the review process to cover all levels of
adverse decisions, including those made by medical groups
and independent practice associations that contract with
health plans; and
aa) Requires that independent review decisions are binding
on the plan, DOC have authority to impose sanctions for
plan noncompliance, and DOC issue summaries of independent
review cases and outcomes so the public can benefit from
the decisions.
1)REQUEST FOR AMENDMENTS . Health Access California supports
independent review and HMO liability as part of a continuum of
reforms designed to make managed care organizations responsive
to consumer needs. Health Access California seeks an
independent review bill that:
a) Includes medical groups as managed care organizations
subject to the bill;
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b) Mirrors Medicare which provides for automatic referral
of grievances to independent review;
c) Clarifies that the enrollee's in-plan physician need not
recommend the disputed treatment as a condition for the
enrollee to access independent review;
d) Recognizes the overlap between "health care" decisions
and "coverage" decisions and allow all disputed health plan
decisions, including coverage decisions, to go to
independent review;
e) Ensures that significantly "delayed" decisions, as well
as denial decisions are eligible for review based "in whole
or in part" on medical necessity and appropriateness; and
f) Ensures that Medi-Cal and Medicare patients in HMOs have
access to the review system.
6)OPPOSITION. The Association for California Tort Reform
opposes provisions in this bill which increase health plan
liability. Blue Cross opposes the extension of tort liability
to health plans. With regard to independent review, Blue
Cross recommends that enrollees must first exhaust the plan's
internal grievance process, there be a $50 application fee for
independent review, that Medi-Cal and Medicare beneficiaries
be excluded and that the results of external review should be
admissible in any subsequent legal proceeding. Health Net
points out that the liability provisions withhold MICRA
protection. Kaisers favors independent review over liability
lawsuits. In addition to concerns about the liability
provisions, the California Association of Health Plans seeks
amendments regarding independent review to ensure that
decisions are admissible, that reviewers meet specified
qualifications, that a government entity selects the
independent reviewers and that the review process is conducted
in a timely manner. The California Physician Groups Council
seeks amendments to remove the liability provisions and to
fine tune the independent review sections. The California
Chamber of Commerce argues that this bill will result in
defensive medical practices that will lead to increased costs
and unnecessary treatment, and as costs go up the number of
uninsured will go up as well.
7)PRIOR LEGISLATION . Last session, several bills, including AB
1667 (Migden), SB 1504 (Rosenthal) and SB 1653 (Johnston),
attempted to establish independent medical review systems.
All the bills failed passage due to controversies surrounding
the linkage of independent review to the right to sue HMOs.
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An additional controversy involved the degree to which
independent review bills allowed fair and easy access to the
system by consumers. SB 1653, sponsored by the HMO industry,
contained significant roadblocks; SB 1504, supported by most
consumer groups, facilitated consumer access to the
independent review system. Both of these bills, before they
died, were substantially amended in the Assembly to
incorporate not only a linkage to the right to sue HMOs, but
also independent review amendments recommended by senior and
consumer groups to further promote consumer access (see
comment #10).
8)RELATED LEGISLATION . Several bills have also been introduced
this session to require, through varying means, health plans
to establish an independent medical review system. These
bills include AB 1621 (Thomson) approved by this Committee
last week (see comment #10), SB 189 (Schiff) and SB 254
(Speier).
2)TECHNICAL AMENDMENTS . The author's staff has indicated that a
number of technical errors exist in this bill. For example,
the author intends to clarify that Independent Review disputes
pertain to disputed health care services that have been
"denied, significantly delayed, terminated or otherwise
limited" by a health plan or one of its contracting providers
"based in whole or in part" on a decision that the health care
service is not medically necessary or medically appropriate.
6)SUGGESTED POLICY AMENDMENTS TO AVOID CONFLICTS WITH AB 1621 .
Last week this Committee approved AB 1621 (Thompson) which
also includes provisions involving independent review that are
substantially similar to AB 55. However, there are some
significant differences. The Committee may wish to reconcile
these differences:
a) MEDICARE PATIENTS : At the request of Health Access,
WCLP, the Congress of California Seniors and other groups,
AB 1621 specifies that Medicare patients may not be
excluded from the independent review system except to the
extent their participation is judicially determined to be
preempted. This bill specifies that Medicare beneficiaries
shall not be excluded unless the federal Health Care
Financing Administration issues a finding that federal law
preempts their participation, thus allowing a federal
agency to decide this states rights issue instead of a
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federal court. The Medicare provision adopted in AB 1621
was also adopted last year in the final version of
independent review legislation that passed the Assembly
Judiciary Committee and was held in this Committee (due to
the unresolved controversy over HMO liability).
b) APPLICATION FEE : At the request of WCLP and other
consumer groups, AB 1621 contains no fee to participate in
the independent review system. This bill provides that the
enrollee shall pay an application fee of $25, with reduced
or waived fees for low-income patients and Medi-Cal
beneficiaries, respectively. The no fee provision adopted
in AB 1621 was also adopted last year in the final version
of independent review legislation that passed the Assembly
Judiciary Committee and was held in this Committee (due to
the unresolved controversy over HMO liability).
c) MEDICAL NECESSITY : At the request of WCLP, and other
consumer groups, AB 1621 requires independent review
decisions to determine whether the disputed service is or
was medically necessary or appropriate based on (a)
specified practice guidelines, (b) relevant medical or
scientific evidence, (c) generally accepted standards of
medical practice or (d) treatments that are likely to
provide a benefit to a patient for conditions for which
other treatments are not clinically efficacious . This bill
excludes (d) from the definition of medically necessity or
appropriate, thereby limiting the likelihood of an
independent review decision in favor of the patient. The
medical necessity or appropriate provision adopted in AB
1621 was also adopted last year in the final version of
independent review legislation that passed the Assembly
Judiciary Committee and was held in this Committee (due to
the unresolved controversy over HMO liability).
In addition to the three major issues above, this bill does
not include the following provisions found in AB 1621:
d) Adding the Attorney General (AG) to the list of agencies
that DOC may refer a complaint for investigation and
authorizing the AG, upon notifying DOC, to enforce any and
all provisions of laws regulating health plans, with any
civil, criminal or administrative remedies available to the
AG employed in any combination deemed advisable by the AG.
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e) Removing the $250,000 cap on administrative fines that
may be imposed by DOC on health plans that knowingly and
repeatedly fail to act promptly and reasonably to resolve
grievances, with a frequency that indicates a general
business practice to violate the law.
f) Clarifying that a patient's in-plan provider need not
recommend the disputed treatment as a condition for being
eligible for independent review.
g) Requiring that, after removing the names of all parties,
DOC decisions adopting a determination and recommendation
of an independent medical review organization shall be made
available to the public upon request, at DOC cost.
It should also be noted that AB 1621 does not include certain
provisions found in this bill. For example,
AB 1621 has modest conflict of interest requirements, subject to
expansion by DOC regulation, whereas this bill provides that
independent reviews be conducted by expert medical organizations
certified by a nonprofit accrediting organization pursuant to
comprehensive conflict of interest provisions.
3)DOUBLE REFERRAL . Should this bill pass out of this committee,
it will be referred to the Assembly Judiciary Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
California School Employees Association
California Psychiatric Association
California Teachers Association
Consumer Attorneys of California (if amended)
Union of American Physicians and Dentists
Western Center on Law and Poverty (with amendments)
Opposition
Association for California Tort Reform
Blue Cross of California (unless amended)
California Association of Health Plans (unless amended)
California Association of Health Underwriters
California Chamber of Commerce (unless amended)
California Physician Groups Council (unless amended)
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Health Insurance Association of America
Health Net (unless amended)
New York Life
Analysis Prepared by : Michael Shapiro / HEALTH / (916) 319-2097