BILL ANALYSIS
AB 78
Page 1
ASSEMBLY THIRD READING
AB 78 (Gallegos)
As Amended June 2, 1999
Majority vote
HEALTH 9-4 APPROPRIATIONS 14-7
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|Ayes:|Gallegos, Corbett, |Ayes:|Migden, Cedillo, Davis, |
| |Firebaugh, Kuehl, | |Hertzberg, Kuehl, Papan, |
| |Steinberg, Thomson, | |Romero, Shelley, |
| |Vincent, Wayne, Wildman | |Steinberg, Thomson, |
| | | |Wesson, Wiggins, Wright, |
| | | |Aroner |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Granlund, Bates, |Nays:|Brewer, Ashburn, Battin, |
| |Strickland, Zettel | |Pescetti, Maldonado, |
| | | |Runner, Zettel |
| | | | |
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SUMMARY : Establishes a new Department of Managed Health Care
and transfers the regulation of health care service plans
(health plans) from the Department of Corporations (DOC) to the
new department, and later transfers the regulation of disability
insurers (health insurers) from the Department of Insurance
(DOI) to the new department. Specifically, this bill :
1)Effective March 1, 2000, establishes a Department of Managed
Health Care in a new agency, the California Managed Health
Care Services Agency, and effective July 1, 2000, transfers
the responsibility for regulating health plans from DOC to the
new department. Calls for the transfer of DOC personnel and
funds dedicated to health plan regulation to the new
department.
2)Specifies the various functions of the new department,
including a patient advocate division to represent the
interests of patients.
3)Establishes an Advisory Committee on Managed Care consisting
of 29 members and specifies the composition of the committee.
4)Effective July 1, 2002, transfers the regulation of health
insurers from DOI to the new department including insurers
AB 78
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that provide coverage through preferred provider organizations
and other managed care systems.
5)Calls for the transfer of DOI personnel and funds dedicated to
health insurer regulation to the new department.
6)Requires the new department 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 :
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: According to the Assembly Appropriations
Committee analysis, appropriates $3 million from the State
Corporations Fund to cover one-time costs and, presumably, some
amount of first-year operating costs. Annual costs would depend
on the scope of additional regulatory and consumer assistance
activities assumed by the new department.
COMMENTS : 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.
Governor Davis has indicated that he will announce a proposal
for reorganizing state regulation of managed care. While this
bill calls for a Department of Managed Health Care in a new
AB 78
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California Managed Health Care Services Agency, the author may
amend the bill at a later time to reflect the agency, department
or board that the Governor recommends should assume jurisdiction
over managed care.
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. Recently, 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 protect
health plan enrollees from inadequate medical care.
Supporters agree that we need a new state system of governance
of managed health care. Some endorsed a prior version of this
bill that called for a five-member Board of Managed Health Care,
and others have endorsed moving HMO regulation to the Health and
Human Services Agency.
DOI and the health insurance industry object to the provision of
this bill that would transfer the regulation of health insurers
from DOI to the new department effective July 1, 2002.
The California Association of Health Plans (CAHP) opposed an
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.
This bill is similar to SB 406 (Rosenthal), which called for a
new Board of Managed Care and was vetoed last year. In his veto
message, Governor Wilson opposed transferring health plan
regulation to a new regulatory board.
Analysis Prepared by : Michael Shapiro / HEALTH / (916) 319-2097
FN: 0001680