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AB-1572 Health care service plans: conversion.(2007-2008)

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AB1572:v98#DOCUMENT

Amended  IN  Assembly  March 29, 2007

CALIFORNIA LEGISLATURE— 2007–2008 REGULAR SESSION

Assembly Bill
No. 1572

Introduced  by  Assembly Member DeVore
 (Coauthor(s): Assembly Member Benoit, Silva)

February 23, 2007

An act to amend Section 1363.01 1399.72 of the Health and Safety Code, relating to health care coverage service plans.


LEGISLATIVE COUNSEL'S DIGEST


AB 1572, as amended, DeVore. Health care coverage: disclosures. service plans: conversion.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care. The act requires that a plan intending to convert from nonprofit to for-profit status, submit a conversion proposal to the director and, before approving the conversion, the director is required to find that the proposal sets aside the fair market value of the nonprofit plan and dedicates and transfers it to a tax-exempt charitable organization with a charitable mission and grantmaking function of serving the health care needs of the people of California.
This bill would instead require, that at least 90% of the money expended annually to fulfill the charitable mission and grantmaking function of the tax-exempt charitable organization receiving the set-aside be spent on health care services for Californians, as specified, who are not receiving health care services through a government program.

Existing law provides for the regulation of health care service plans by the Department of Managed Health Care. Existing law requires a plan that covers prescription drug benefits to provide specified information to enrollees, including information regarding whether the plan uses a formulary. Under existing law, a plan that covers prescription drug benefits must also provide, upon request, information to members of the public regarding whether a specific drug is on the plan’s formulary.

This bill would make a technical, nonsubstantive change to those provisions.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 1399.72 of the Health and Safety Code is amended to read:

1399.72.
 (a) Any A health care service plan that intends to convert from nonprofit to for-profit status, as defined in subdivision (b), shall, prior to the conversion, submit a conversion proposal to the director and secure approval from the director.
(b)  For the purposes of this section, a “conversion” or “convert” by a nonprofit health care service plan means the transformation of the plan from nonprofit to for-profit status, as determined by the director.
(c)  Prior to approving a conversion, the director shall find that the conversion proposal meets all of the following charitable trust requirements:
(1)  The fair market value of the nonprofit plan is set aside for appropriate charitable purposes. In determining fair market value, the director shall consider, but not be bound by, any market-based information available concerning the plan.
(2)  The set-aside shall be dedicated and transferred to one or more existing or new tax-exempt charitable organizations operating pursuant to Section 501(c)(3) (26 U.S.C.A. U.S.C. Sec. 501(c)(3)) of the federal Internal Revenue Code. The director shall consider requiring that a portion of the set-aside include equity ownership in the plan. Further, the director may authorize the use of a federal Internal Revenue Code Section 501(c)(4) organization (26 U.S.C.A. Sec. 501(c)(4)) an organization operating pursuant to Section 501(c)(4) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(4)) if, in the director’s view, it is necessary to ensure effective management and monetization of equity ownership in the plan and if the plan agrees that the Section 501(c)(4) organization will be limited exclusively to these functions, that funds generated by the monetization shall be transferred to the Section 501(c)(3) organization except to the extent necessary to fund the level of activity of the Section 501(c)(4) organization as may be necessary to preserve the organization’s tax status, that no funds or other resources controlled by the Section 501(c)(4) organization shall be expended for campaign contributions, lobbying, or other political activities, and that the Section 501(c)(4) organization shall comply with reporting requirements that are applicable to Section 501(c)(3) organizations, and that the Section 501(c)(4) organization shall be subject to any other requirements imposed upon Section 501(c)(3) organizations that the director determines to be appropriate.
(3)  Each Section 501(c)(3) or 501(c)(4) organization receiving a set-aside, its directors and officers, and its assets including any plan stock, shall be independent of any influence or control by the health care service plan and its directors, officers, subsidiaries, or affiliates.
(4)  The At least 90 percent of the money expended annually to fulfill the charitable mission and grant-making grantmaking functions of the charitable organization receiving any set-aside shall be dedicated to serving the health care needs of the people of California spent on health care services for citizens who reside in California and who are not receiving health care services through a local, state, or federal program.
(5)  Every Section 501(c)(3) or 501(c)(4) organization that receives a set-aside under this section shall have in place procedures and policies to prohibit conflicts of interest, including those associated with grant-making grantmaking activities that may benefit the plan, including the directors, officers, subsidiaries, or affiliates of the plan.
(6)  Every Section 501(c)(3) or 501(c)(4) organization that receives a set-aside under this section shall demonstrate that its directors and officers have sufficient experience and judgment to administer grant-making grantmaking and other charitable activities to serve the state’s health care needs.
(7)  Every Section 501(c)(3) or 501(c)(4) organization that receives a set-aside under this section shall provide the director and the Attorney General with an annual report that includes a detailed description of its grant-making grantmaking and other charitable activities related to its use of the set-aside received from the health care service plan. The annual report shall be made available by the director and the Attorney General for public inspection, notwithstanding the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code). Each organization shall submit the annual report for its immediately preceding fiscal year within 120 days after the close of that fiscal year. When requested by the director or the Attorney General, the organization shall promptly supplement the report to include any additional information that the director or the Attorney General deems necessary to ascertain compliance with this article.
(8)  The plan has satisfied the requirements of this chapter, and a disciplinary action pursuant to Section 1386 is not warranted against the plan.
(d)  The plan shall not file any forms or documents required by the Secretary of State in connection with any conversion or restructuring until the plan has received an order of the director approving the conversion or restructuring, or unless authorized to do so by the director.

SECTION 1.Section 1363.01 of the Health and Safety Code is amended to read:
1363.01.

(a) Every plan that covers prescription drug benefits shall provide notice in the evidence of coverage and disclosure form to enrollees regarding whether the plan uses a formulary. The notice shall be in language that is easily understood and in a format that is easy to understand. The notice shall include an explanation of what a formulary is, how the plan determines which prescription drugs are included or excluded, and how often the plan reviews the contents of the formulary.

(b) Every plan that covers prescription drug benefits shall provide to members of the public, upon request, information regarding whether a specific drug or drugs are on the plan’s formulary. Notice of the opportunity to secure this information from the plan, including the plan’s telephone number for making a request of this nature, shall be included in the evidence of coverage and disclosure form to enrollees.

(c) Every plan shall notify enrollees, and members of the public who request formulary information, that the presence of a drug on the plan’s formulary does not guarantee that an enrollee will be prescribed that drug by his or her prescribing provider for a particular medical condition.