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SB-714 Health care service plans: exemptions from licensure.(2019-2020)

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Date Published: 04/29/2019 02:00 PM
SB714:v97#DOCUMENT

Amended  IN  Senate  April 29, 2019
Amended  IN  Senate  March 28, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 714


Introduced by Senator Umberg

February 22, 2019


An act to add Section 1343.2 to the Health and Safety Code, relating to health care coverage.


LEGISLATIVE COUNSEL'S DIGEST


SB 714, as amended, Umberg. Health care service plans: exemptions from licensure.
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. Existing law generally governs contracts between health care service plans and risk-bearing organizations, as defined, and requires the department to adopt regulations that, among other things, establish a process for reviewing or grading risk-bearing organizations based on specified criteria and require risk-bearing organizations to disclose to the health care service plan and the department certain financial and other information concerning the type and amount of risk assumed by the risk-bearing organization. Existing law authorizes the director to exempt from the requirements of the act specified classes of persons or plan contracts if the director finds, among other things, the exemption to be in the public interest.
This bill would require the director, if the director determines it is in the public interest and not detrimental to the protection of subscribers, enrollees, or persons regulated under the act, to establish guidelines that identify payment arrangements that may be exempt from the requirements of the act a person who meets specified criteria relating to risk-based payment arrangements, including that the person’s annual revenue, tangible net equity, or cash on hand from payments for health care services is no more than 25% at risk, as defined. act, including, among others, payments not subject to downside risk. Under the bill, a person requesting an exemption pursuant to these provisions guidelines would be exempt from the act while the request is pending and during any administrative or judicial review of the director’s denial of a request for exemption. The bill would allow an exemption granted under these provisions guidelines to continue indefinitely, if there is no material change in the nature of payment arrangements. The bill would also exempt from the act any of the above-described payment arrangements if the arrangement was established on or before January 1, 2020, except as specified.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Section 1343.2 is added to the Health and Safety Code, to read:

1343.2.
 (a) Notwithstanding Section 1343, upon finding that the action is in the public interest and not detrimental to the protection of subscribers, enrollees, or persons regulated under this chapter, the director shall exempt from this chapter a person who meets any of the following criteria: establish guidelines that identify payment arrangements that may be exempt from this chapter, which may include any of the following payment arrangements:

(1)No more than 25 percent of the person’s maximum annual revenue from health care services from all payors is at risk.

(2)No more than 25 percent of the person’s sponsoring affiliate’s maximum annual revenue from health care services from all payors is at risk.

(3)No more than 25 percent of the person’s tangible net equity is at risk across all payors with whom the person has entered into payment arrangements.

(4)No more than 25 percent of the person’s sponsoring affiliate’s tangible net equity is at risk across all payors with whom the sponsoring affiliate has entered into payment arrangements.

(5)No more than 25 percent of the person’s cash on hand is at risk across all payors with whom the person has entered into payment arrangements.

(6)No more than 25 percent of the person’s sponsoring affiliate’s cash on hand is at risk across all payors with whom the sponsoring affiliate has entered into payment arrangements.

(b)A payment is not “at risk” for the purposes of this section if the payment is any of the following:

(1) Received Payment received under an alternative payment model, as defined in Section 1395l(z)(3)(C) of Title 42 of the United States Code.

(2)Received from an entity that contracts directly with the United States government or the Department of Health Care Services to provide services under the Medicare or Medi-Cal programs, respectively.

(3)

(2) A bundled payment for a specified set of services that are provided within a period of ninety 90 days or less and relate to a single episode of care.

(4)Received in

(3) Payment received in connection with participation in an institutional risk pool.

(5)Received in

(4) Payment received in connection with participation in an accountable care organization. organization approved by the department.

(6)Received pursuant

(5) Payment received pursuant to a payment arrangement that has not been materially modified for three or more years, if the provider has not sustained a loss of more than 10 percent of the provider’s maximum potential revenue under the arrangement over the last three years.

(7)Not subject

(6) Payment not subject to downside risk.

(8)Received under

(7) Payment received under an arrangement in which the provider is paid a fixed amount for each member per month by a licensed health care service plan solely for services the provider is authorized by law to provide.

(c)In calculating the amounts specified in subdivisions (a) and (b), the director shall consider any applicable insurance held by the person or sponsoring affiliate, including reinsurance or stop-loss coverage, or both.

(d)

(b) (1) The director shall approve or deny a request for exemption under the guidelines established pursuant to this section within 30 days of receiving the request.
(2) A person requesting an exemption under the guidelines established pursuant to this section is exempt from this chapter while the director’s approval or denial of the request is pending.
(3) If the director fails to approve or deny a request for exemption within the period specified in paragraph (1), the request is deemed approved.

(e)

(c) (1) The denial of a request for exemption under the guidelines established pursuant to this section is subject to review pursuant to Section 1397.
(2) A person appealing the director’s denial of a request for exemption under the guidelines established pursuant to this section is exempt from this chapter while administrative or judicial review of the denial is pending.

(f)

(d) (1) A person whose request for exemption under the guidelines established pursuant to this section is denied is not subject to this chapter until January 1 of the calendar year following the date the denial becomes final, or nine months from the date the denial becomes final, whichever comes later.
(2) For purposes of this subdivision, a denial of a request for exemption is not final until all appeals under subdivision (e) have been exhausted, as applicable.

(g)

(e) A person granted an exemption under the guidelines established pursuant to this section shall remain exempt from this chapter unless there is a material change in the nature of payment arrangements in which the person is engaged, as determined by the director.

(h)This chapter does not apply to a payment arrangement described in subdivision (a) that was established on or before January 1, 2020, unless the payment arrangement is significantly modified, as determined by the director.

(i)

(f) For purposes of this section, the following definitions apply:
(1) “Accountable care organization” means an arrangement in which one or more providers, paid pursuant to a fee schedule, are held accountable for a patient population’s care over a predetermined period of time by way of incentive payments that are tied to the provider or providers’ performance on quality metrics or their ability to control costs for that patient population, or both, by, among other things, comparing the actual cost of care to a target budget.

(2)“Deficit” means an amount payable by a person to a payor for downside risk.

(3)

(2) “Downside risk” means an arrangement in which one or more providers are paid using a fee schedule, but may be required to repay an amount to a payor at the end of a predetermined period if total payments for health care services under the arrangement exceed a target budget applicable to that arrangement. An arrangement does not subject a provider to downside risk if a deficit from spending exceeding a target budget accrues only against future surpluses under the arrangement, but does not require repayment to the payor. The department shall establish an acceptable amount of a deficit and the length of time for which it may accrue against future surpluses.

(4)“Institutional risk pool” means a payment arrangement in which fee-for-service payments for hospital services for a particular set of patients are compared to a target and any surplus is disbursed to the physicians and surgeons caring for those patients after a predetermined period of time, but only to the extent the patients’ costs for institutional services fall below the predetermined target, and any shortfall is accrued against future surpluses and does not create a payment obligation by the physicians and surgeons.

(5)

(3) “Payor” has the same meaning as provided in Section 1395.6.

(6)

(4) “Provider” has the same meaning as provided in Section 1345.

(7)“Sponsoring affiliate” means an affiliate of a person that provides the person with a qualified guarantee of any deficit that meets all of the following requirements:

(A)It is approved by a board resolution of the sponsoring affiliate.

(B)The sponsoring affiliate agrees to submit audited financial statements to the department within 120 days of the end of the sponsoring affiliate’s fiscal year.

(C)The guarantee is unconditional, except that the guarantee can be limited to the amount of the person’s deficits.

(D)The guarantee provides for six months’ advance notice to the person prior to its cancellation.