BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 78|
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THIRD READING
Bill No: AB 78
Author: Gallegos (D)
Amended: 8/16/99 in Senate
Vote: 21
SENATE INSURANCE COMMITTEE : 8-2, 7/7/99
AYES: Speier, Escutia, Figueroa, Hughes, Johnston, Leslie,
Schiff, Sher
NOES: Johnson, Lewis
SENATE APPROPRIATIONS COMMITTEE : 8-4, 9/3/99
AYES: Johnston, Alpert, Bowen, Burton, Escutia, Karnette,
Perata, Vasconcellos
NOES: Johnson, Kelley, Leslie, McPherson
NOT VOTING: Mountjoy
ASSEMBLY FLOOR : 52-28, 6/4/99 - See last page for vote
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SUBJECT : Health care coverage: Department of Managed
Health Care
SOURCE : Author
DIGEST : This bill establishes a new State Department of
Managed Health Care and transfers the regulation of health
care service plans from the State Department of
Corporations (DOC) to the new department and later
transfers the regulation of disability insurers from the
DOC.
ANALYSIS : Existing law:
CONTINUED
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1.Charges DOC, within the State Business, Transportation
and Housing Agency, with regulating health plans.
2.Charges State Department of Insurance (DOI) with the
responsibility for regulating health insurers.
AB 78:
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.
8.Declares that it is the intent of the Legislature to
conduct a study to evaluate the feasibility of
transferring all personnel and funds dedicated to the
insurers that cover hospital, medical, or surgical
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expenses to the department on or before July 1, 2002.
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 protect health plan
enrollees from inadequate medical care.
This bill is similar to SB 406 (Rosenthal), which called
for a new Board of Managed Care and was vetoed last year.
According to the Governor's veto message:
"I am returning Senate Bill No. 406 without my signature.
"This bill would transfer the responsibility for regulating
health care service plans from the Department of
Corporations to a board with five members. Three members
would e appointed by the Governor and two members b the
Legislature. The Chairperson would hold a full time
position, while the other four members would hold part time
positions. The Chairperson would appoint two advisors and
each board member would appoint an additional advisor. The
bill would also establish a 29 member advisory board.
"This bill fails to deliver the reform it promises. It
would establish a weak and unaccountable regulatory
bureaucracy with dispersed enforcement authority. The
Little Hoover commission, an independent non-partisan
advisory organization, has rejected the key feature of this
bill, establishing a board to regulate health plans,
because the burden of collective decision making will not
provide consistent and responsive leadership.
"The Commission instead concluded that health plans should
be regulated by a focused department or agency lead by a
single gubernatorial appointee.
The Commission found that a single appointee would be more
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accountable and would be in the best position to provide
strong and decisive leadership, particularly on different
issues lacking broad political consensus.
"The regulation of health care service plans must be
improved. That is why I sponsored legislation to create
the Department of Managed Health Care lead by a single,
focused regulator. I am disappointed that the Legislature
rejected this health care reform."
SENATE FLOOR : 22-13, 8/20/98
AYES: Alpert, Ayala, Burton, Calderon, Costa, Dills,
Greene, Hayden, Hughes, Johnston, Karnette, Kopp,
Lockyer, O'Connell, Peace, Rosenthal, Schiff, Sher,
Solis, Thompson, Vasconcellos, Watson
NOES: Brulte, Haynes, Hurtt, Johannessen, Johnson, Kelley,
Knight, Lewis, McPherson, Monteith, Mountjoy, Rainey
NOT VOTING: Craven, Leslie, Maddy, Polanco
Assemblymember votes who are now Senators:
AYES: Baca, Bowen, Escutia, Figueroa, Murray, Ortiz,
Perata
NOES: Morrow, Poochigian
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: Yes
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.
SUPPORT : (Per Senate Insurance Committee analysis, but
unable to verify at time of writing)
AARP
American Federation of State, County and Municipal
Employees
California Coalition of Nurse Practitioners
California Psychiatric Association
California Seniors Coalition
California Teachers Association
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Congress of California Seniors
Health Access California
Medical Board of California
Resources for Independent Living
Tri-Pac Patient Provider Partnership Organization
Western Center on Law and Poverty
OPPOSITION : (Per Senate Insurance Committee analysis,
but unable to verify at time of writing)
American Nurses Association/California
Association of California Life and Health Insurance
Companies
California Association of Health Plans
California Association of Health Underwriters
Health Insurance Association of America
Los Angeles Employers Health Care Association
Pacific Life Insurance
ARGUMENTS IN SUPPORT : The author states that it is time
to transfer 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 plans and insurers, 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.
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
regulation to the State Health and Human Services Agency.
ARGUMENTS IN OPPOSITION : The California Association of
Health Plans is concerned that the creation of an appointed
board, instead of a single appointed executive, would
weaken regulation; and that the inclusion of the DOI would
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erode the focus on plans and their unique regulatory
requirements. The Association of California Life and
Health Insurance Companies opposes the bill as it would
require regulation of insurers as though they were plans,
which would subject them to increased regulatory costs, and
prefers only a study be done. The California Association
of Health Underwriters believes the board structure would
reduce accountability, slow the decision-making process,
defuse the ability to create clear direction and lead to
inconsistent regulation as appointed boards are vulnerable
to extreme and often inappropriate political influences,
fragmentation and paralysis. Pacific Life Insurance
Company states that there are several complex issues which
must be addressed: a) insurers pay a premium tax which is
significantly greater than the bank and corporations tax
paid by plans; b) insurers are required to set aside cash
reserves and a guarantee fund while plans are not; c)
claims are subject to different standards; d) insurers are
not designed to regulate quality as plans are; and e) fee
structures and assessments are very different for plans and
insurers.
ASSEMBLY FLOOR :
AYES: Alquist, Aroner, Bock, Calderon, Cardenas, Cardoza,
Cedillo, Corbett, Correa, Cunneen, Davis, Ducheny, Dutra,
Firebaugh, Florez, Floyd, Gallegos, Granlund, Havice,
Hertzberg, Honda, Jackson, Keeley, Knox, Kuehl, Lempert,
Longville, Lowenthal, Machado, Maldonado, Mazzoni,
Migden, Nakano, Papan, Pescetti, Reyes, Romero, Scott,
Shelley, Soto, Steinberg, Strom-Martin, Thomson,
Torlakson, Vincent, Washington, Wayne, Wesson, Wiggins,
Wildman, Wright, Villaraigosa
NOES: Aanestad, Ackerman, Ashburn, Baldwin, Bates, Battin,
Baugh, Brewer, Briggs, Campbell, Cox, Dickerson,
Frusetta, House, Kaloogian, Leach, Leonard, Maddox,
Margett, McClintock, Olberg, Oller, Robert Pacheco, Rod
Pacheco, Runner, Strickland, Thompson, Zettel
DLW:kb 9/7/99 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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