BILL ANALYSIS
AB 78
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Date of Hearing: April 20, 1999
ASSEMBLY COMMITTEE ON HEALTH
Martin Gallegos, Chair
AB 78 (Gallegos) - As Amended: April 15, 1999
SUBJECT : Regulation of health plans and health insurers.
SUMMARY : Establishes a new, unspecified regulator and transfers
the regulation of health care service plans (health plans) from
the Department of Corporations (DOC) to the new regulator, and
later transfers the regulation of disability insurers (health
insurers) from the Department of Insurance (DOI) to the new
regulator. Specifically, this bill :
1)Effective March 1, 2000, establishes a new, unspecified
managed care regulator and effective July 1, 2000, transfers
the responsibility for regulating health plans from DOC to the
new regulator.
2)Calls for the transfer of DOC personnel and funds dedicated to
health plan regulation to the new regulator.
3)Specifies the various functions of the new regulator,
including a patient advocate division to represent the
interests of patients.
4)Establishes an Advisory Committee on Managed Care consisting
of 29 members and specifies the composition of the committee.
5)Effective July 1, 2002, transfers the regulation of health
insurers from DOI to the new regulator including insurers that
provide coverage through preferred provider organizations and
other managed care systems.
6)Calls for the transfer of DOI personnel and funds dedicated to
health insurer regulation to the new regulator.
7)Requires the new regulator on or before May 1, 2000, to report
to the Governor and Legislature regarding the need to expand
jurisdiction over medical groups and independent practice
associations that provide or arrange for medical care and bear
significant financial risk.
EXISTING LAW :
AB 78
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1)Charges DOC, within the Business, Transportation and Housing
Agency, with regulating health plans.
2)Charges DOI with the responsibility for regulating health
insurers.
FISCAL EFFECT : This bill appropriates $3,000,000 from the State
Corporations Fund to pay for reorganization start-up costs.
COMMENTS :
1)PURPOSE OF THIS BILL . In response to continued criticisms of
the regulation of health plans in this state, the author
believes it is time to transfer health plan regulation out of
DOC to a new regulator dedicated to consumer protection and
quality of care. The author also believes it is inefficient
and confusing for consumers to have two different departments,
DOC and DOI, regulate heath care plans and health insurance,
and therefore also calls for the later transfer of health
insurance to the new regulator. In light of recent medical
practice group bankruptcies, the author is also concerned
about enhancing state authority over medical groups and
independent practice associations that arrange for care and
assume significant financial risk. This bill calls on the new
regulator to report to the Governor and Legislature on this
issue by next May. The Governor has indicated that he will
soon announce his proposal for reorganizing the regulation of
managed care. In order to keep options open pending receipt
of the Governor's proposal, this bill was recently amended by
the author to leave blank the agency, department or board that
would assume jurisdiction over managed care.
2)BACKGROUND . The Managed Health Care Improvement Task Force
issued a report last year recommending that a new state entity
for regulation of managed health care be created. The Task
Force called for an initial transfer of health plan regulation
from DOC to the new regulator, to be followed by the phased-in
transfer of regulation of other health care entities including
health insurers. Last week the State Auditor issued a report
concluding that, despite receiving a $6.5 million budget
increase in 1997 to enhance its regulation of health plans,
DOC has shown only limited improvement in its efforts to
AB 78
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protect health plan enrollees from inadequate medical care.
3)PRIOR LEGISLATION . This bill is similar to SB 406 (Rosenthal)
calling for a new Board of Managed Care that was vetoed last
year. In his veto message, Governor Wilson opposed
transferring health plan regulation to a regulatory board.
4)SUPPORT . Supporters agree that we need a new state system of
governance of managed health care. They endorsed the prior
version of this bill that called for a 5-member Board of
Managed Health Care.
5)CONCERNS . DOI is concerned about and objects to the provision
of this bill that would transfer the regulation of health
insurers from DOI to the new regulator effective July 1, 2002.
6)OPPOSITION . The California Association of Health Plans (CAHP)
opposed the earlier version of this bill that established a
board to regulate managed care. CAHP also maintains that the
new regulator should be housed in an agency familiar with
health coverage.
REGISTERED SUPPORT / OPPOSITION :
Support
American Association of Retired Persons
Congress of California Seniors
California Coalition of Nurse Practitioners
California Psychiatric Association
California Teachers Association
Medical Board of California
Resources for Independent Living
Opposition
California Association of Health Plans (unless amended)
Analysis Prepared by : Michael Shapiro / HEALTH / (916) 319-2097