BILL ANALYSIS
SENATE COMMITTEE ON INSURANCE
Senator Jackie Speier, Chair
Bill No: AB 55 (Migden) Hearing Date: August 18,
As Amended: April 27, 1999
Fiscal: Yes
Urgency: No
Assembly Health: 4/13/99 (9-5)
Assembly Judiciary: 4/20/99 (10-4)
Assembly Floor: 6/2/99 (45-27)
SUMMARY
Would expedite health plan (plan) and Department of
Corporations (DOC) review of consumer complaints, establish
an independent medical review system (IMRS) for unresolved
consumer complaints against plans, and hold plans liable in
court for patient harm resulting from the failure to
exercise ordinary care.
DIGEST
Existing law
1. Provides that DOC regulates plans and the Department of
Insurance (DOI) regulates disability insurers (insurers).
Requires plans to maintain a grievance system.
2. Requires plans and insurers to have an external IMRS to
examine coverage decisions regarding experimental or
investigational therapies for enrollees with a terminal
illness.
This bill
1. Would provide that a plan shall be legally responsible
to ensure that providers and not plans are in charge of
patient care, shall have a duty of ordinary care to
provide medically appropriate health services, shall be
liable for any and all harm resulting from the failure to
exercise ordinary care, and prohibit a plan from seeking
indemnity from these requirements, but would declare that
there shall be no liability on the part of an employer
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that purchases health coverage or assumes risk on behalf
of its employees.
2. Would allow enrollees to seek DOC review of unresolved
grievances after 30 days (instead of the current 60
days), require plans to provide enrollees with a written
status report on grievances within 15 days (instead of
the current 30 days) and require plans to act on
expedited grievances, including those involving severe
pain, within three days from receipt of the grievance
(instead of the current five days).
3. Would establish, commencing January 1, 2001, an IMRS
for enrollees to seek an independent review whenever
health care services have been denied, significantly
delayed, terminated or otherwise limited by a plan or one
of its contracting providers based on a finding that the
service is not medically necessary or appropriate, and
would not exclude Medi-Cal or Medicare beneficiaries from
participation.
4. Would not require a doctor's note or fee to apply to
DOC for the IMRS, but would require a $25 application fee
if the case were submitted to the IMRS.
5. Would provide that independent reviews be conducted by
expert medical organizations independent of plans and
certified by an accrediting organization, pursuant to
conflict of interest provisions.
6. Would direct DOC 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.
7. Would require a similar but unspecified IMRS be
established in DOI for review of similar decisions by
insurers.
8. Would provide the IMRS shall not be admissible in
subsequent proceedings.
COMMENTS
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1. Purpose of the bill . The author states that the right
to sue helps people only after they have been harmed,
whereas a IMRS will help people before their condition
worsens; and the right to sue is the "hammer" that will
keep the system honest. Currently only government
employees are allowed to file lawsuits against plans.
2. Background . Last year, the Governor's Managed Health
Care Improvement Task Force issued a series of
recommendations to reform managed health care including
the recommendation that "the State entity for regulation
of managed care should be directed to establish and
implement by January 1, 2000, an independent third-party
review process that would provide consumers and health
plans with an unbiased, expert-based review of grievances
pertaining to delays, denials, or curtailment of care
based on medical necessity, appropriateness, and all
experimental-investigational therapies."
3. Support . Consumers Union (CU) supports the bill but is
concerned about the artificial bright line distinction
between denials based on medical necessity and "coverage
decisions," as there are often disputes about whether a
decision is based on medical necessity or coverage. CU
requests that if denial is based on coverage, the plan
should state specifically the provision of the contract
that states the treatment is not covered - this would
hold plans accountable for all denials and will also give
consumers information they need to understand a plan
decision. CU also requests that the fee referenced in
1399.81(a)(2) and 1399.85(b) be deleted. The Western
Center on Law and Poverty is in support of an IMRS bill
which it believes should contain a) inclusion of Medi-Cal
and Medicare beneficiaries; b) broad definition of
"medical necessity'; c) no dollar threshold to access
IMRS; d) no application fee; e) no physician note to
access IMRS; f) appropriate timelines and expedited
review; g) adequate and timely notices; h) independent
and comprehensive review; and I) enforcement and
sanctions.
4. Opposition . The California Association of Health Plans
(CAHP) states that the results of IMRS should be
admissible in any subsequent legal proceeding as the
result of a State mandate as a judge or jury should be
aware of all the steps the plan took in reaching its
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final decision, especially in bad faith proceedings, and
why the plan took steps or made decisions.
CAHP believes "generally accepted practice
guidelines" should only be relied upon in the absence of
clinical evidence, that DOC should ensure that IMRS
decisions do not conflict with contractual terms, that
reviewers not be limited to California-licensed
physicians, and that reviews apply to denials based on
medical necessity.
CAHP also believes that the liability provision in
the bill will make plans liable for physician malpractice
as it contains language that would create tort liability
for plans for their own actions as well as the
malpractice of contracting physicians. CAHP believes
liability is an arbitrary compensation method, not an
effective deterrent, costly, slow, and inefficient. CAHP
further states that the liability for provider negligence
would lead to micromanagement, increase the number of
uninsured, and not even address the chief concern of
meeting patient needs. CAHP adds that the liability
proposal threatens the MICRA protections.
The Association of California Life and Health
Insurance Companies is also concerned about the liability
language as it would allow doctors to use the malpractice
defense that their action was based on financial
considerations which would then allow the plaintiff to
sue the plan, and that the redefinition of plan coverage
as "the business of insurance" to avoid the ERISA
preemption ropes in other lines of insurance and plans
unrelated to managed care.
The Christian Science Committee on Publication for
Southern California is also concerned about this
provision as it believes it would have a chilling effect
on insurance programs that provide coverage for patients
who choose to rely solely on a religious method of
healing and for whom medical treatment is inconsistent
with their beliefs, and as such requests an amendment to
protect them.
Blue Shield and others contend the bill contains
language that is a clear attempt to circumvent MICRA and
make plans the "deep pocket" outside the caps established
by the Legislature, and that vicarious liability would
lead to increased oversight by plans of physicians and
more restricted physician panels and higher costs due to
"defensive medicine."
California Physician Groups Council (CPGC) requests
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that the committee eliminate the liability provisions of
the bill. CPGC believes the bill could be strengthened
by adding a second opinion from a qualified doctor within
the group, and if the consultant agrees with the treating
physician then the plan should automatically authorize
the treatment, and an enrollee who is still dissatisfied
could then request IMRS which would become a "third
opinion."
The Civil Justice Association of California believes
the fundamental issue for policy makers should be how to
get access to health care and that those who are
uninsured will not benefit from the ability to sue their
plan as they don't even have a plan to sue, and that the
increase in premiums that will result from lawsuits will
drive health care coverage further from the reach of both
the insured and the uninsured.
5 Related legislation . Current bills to require plans to
establish an IMRS include AB 1621 (Thomson), SB 189
(Schiff); SB 254 (Speier) was held in the Senate. SB 21
(Figueroa) would also establish liability for plans. AB
136 (Migden) also deals with IMRS but in the context of
experimental treatments.
6. Committee comments based on the Senate Insurance hearing
on Independent Medical Review (IMR) on 8/12/99:
a. Should grievances referred for IMR be limited to those
denied based on medical necessity or should denials based
on coverage be included? The witnesses at the IMR hearing
on 8/12/99 agreed that it is very difficult to separate
these issues and suggested that all grievances be forwarded
to the DOC for review. The hearing revealed that only 12
of 31 states with IMR legislation limit IMR to issues of
medical necessity. The language in AB 55, AB 1621 and SB
189 are identical on this topic and state that a decision
eligible for IMR would include any "decision based in whole
or in part on a finding that the proposed health care
services are not medically necessary or appropriate." THE
AUTHORS BELIEVE THAT THIS LANGUAGE IS WRITTEN SO THAT BOTH
MEDICAL NECESSITY AND COVERAGE ISSUES ARE INCLUDED.
b. Should an application fee be required? The witnesses
were clear that there should be no impediments to patients
wishing IMR. Only 9 of 31 states require a fee. THE BILL
REQUIRES A FEE.
c. Should there be a minimum dollar amount of the claim as
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a threshold before allowing IMR? The witnesses were clear
that there should be no impediments to patients wishing
IMR. Only 5 of 31 states require a threshold. THE BILL
REQUIRES NO THRESHOLD.
d. Should there be a doctor's note required in order to
access IMR? This is a problem since the doctor may refuse
to give a note in order to save his or her medical group
money to protect the group from insolvency. The witnesses
were clear that there should be no impediments to patients
wishing IMR. No states require a doctor's note. THE BILL
REQUIRES NO NOTE.
e. Should there be two similar statutes that deal with
IMR? Currently there exists IMR for experimental therapy
under the Friedman-Knowles statute. The witnesses
indicated that it would be reasonable to blend the statutes
to be less confusing for patients. THE BILL DOES NOT BLEND
THE STATUTES.
f. How are patients going to learn about IMR? The
witnesses stressed the need for patient education and the
need to include how to access IMR in promotional
information and in denial letters from both the plan and
the physician group. THIS BILL DOES NOT ADDRESS INFORMING
PATIENTS ABOUT THEIR RIGHTS WHEN DENIALS ARE MADE BY
PHYSICIAN GROUPS.
g. Should Medicare patients be allowed access to IMR? The
witnesses agreed that federal law precludes the use of
state IMR for Medicare patients since all Medicare denials
are automatically referred to the Center for Health Dispute
Resolution that provides IMR. The witnesses agreed that
Medi-Cal should be included in IMR; one state includes and
one state excludes Medicaid from IMR. THIS BILL ALLOWS BOTH
MEDICARE AND MEDI-CAL PATIENTS TO ACCESS IMR.
h. Should patients be allowed to supplement their medical
record when being sent for IMR? The witnesses felt this
was reasonable. THIS BILL ALLOWS THE PATIENT TO SUPPLEMENT.
i. Should the IMR reviewer be a California licensed
physician ? The review of other states shows that 5 states
require their own physicians and 6 states allow any
licensed physician. The issue here is whether doing IMR is
the practice of medicine or not. However, the witnesses
stated that the problem is that it is difficult to obtain a
group of experts to do IMR well and that not all physicians
are good at doing IMR. Furthermore, the quality of the
review is directly related to the frequency of doing the
reviews. As such there should be a dedicated group of
experts doing the reviews rather than having many
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physicians doing only a few reviews. Also, if a State
physician is required, then the conflict of interest
provisions are probably too strict to allow a good pool of
physicians from which to choose. THIS BILL REQUIRES THE
REVIEWER TO BE A CALIFORNIA PHYSICIAN.
j. Should the DOC monitor the plans like the Health Care
Financing Administration (HCFA) does for Medicare IMR with
an annual audit ? The witnesses felt that this would be
valuable. THIS BILL DOES NOT REQUIRE AN AUDIT, BUT ONLY
ALLOWS THE DOC TO CONSIDER AN AUDIT.
k. Should the reviewer be anonymous and the chart
identifiers stripped from the records being reviewed? The
witness agreed that this is important for confidentiality.
THE BILL DOES NOT ADDRESS THIS.
l. What are the appropriate timelines for submission of a
grievance. The witnesses agreed that it would be
reasonable to make this 6 months to be in accord with
national quality guidelines. However, there should be an
exception for good cause. THE BILL ALLOWS ONLY 60 DAYS.
m. Should a disputed denial for a hospital stay be deemed
covered while the patient is still an inpatient until the
expedited IMR is completed? The witnesses felt this is an
important issue. THE BILL DOES NOT ADDRESS THIS ISSUE.
n. Should there be an entity to accredit the IMR
organization? The witnesses agreed that this is important.
THE BILL DOES ADDRESS THIS ISSUE.
o. Should the IMR organization, its reviewers and the
State be immune from subsequent legal proceedings? There
are 3 states that provide for this and the other states are
silent. The witnesses agreed that the review process
should be immune. THE BILL DOES NOT ADDRESS THIS ISSUE.
p. Should the plan be provided a safe harbor from
liability when they comply with the IMR decision? Should
liability be limited to severe harm? THE BILL DOES NOT
ADDRESS THIS ISSUE.
q. Should the IMR decision be admissible in subsequent
legal proceedings? There are 2 states that allow
admissibility and the others are silent. Most of the
witnesses agreed that the IMR decision should be
admissible. THE BILL REQUIRES THE IMR TO BE INADMISSIBLE.
r. Should the IMR physician be allowed to testify as an
expert witness? During the hearing, it was pointed out
that it would be a conflict of interest to have an IMR
physician be allowed to perform IMR and also be paid as an
expert witness for either side, but that it would be
reasonable to allow that physician to testify as a witness
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of the court simply to clarify questions about the IMR
record. THE BILL DOES NOT ADDRESS THIS ISSUE.
s. What should the effective date be? THIS BILL IS
EFFECTIVE 1/1/01.
POSITIONS
Support
American Federation of State, County and Municipal
Employees
California School Employees Association
California Teachers Association
Consumers Union
Union of American Physicians & Dentists
Western Center on Law and Poverty
Oppose
Association of California Life and Health Insurance
Companies
Blue Shield of California
California Association of Health Plans
California Chamber of Commerce
California Physicians Groups Council
Californians for Affordable Health Reform
Christian Science Committee on Publication for Southern
California
Civil Justice Association of California
Health Insurance Association of America
Health Net
PacifiCare of California
Pacific Life Insurance Company
Consultant: Michael Ashcraft