Bill Text

Bill Information

PDF |Add To My Favorites |Track Bill | print page

AB-595 Health care service plans: mergers and acquisitions.(2017-2018)

SHARE THIS:share this bill in Facebookshare this bill in Twitter
Date Published: 09/07/2018 09:00 PM
AB595:v93#DOCUMENT

Assembly Bill No. 595
CHAPTER 292

An act to add Article 10.2 (commencing with Section 1399.65) to Chapter 2.2 of Division 2 of the Health and Safety Code, relating to health care service plans.

[ Approved by Governor  September 07, 2018. Filed with Secretary of State  September 07, 2018. ]

LEGISLATIVE COUNSEL'S DIGEST


AB 595, Wood. Health care service plans: mergers and acquisitions.
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 and makes a willful violation of the act a crime. Existing law requires every nonprofit health care service plan applying to restructure, as defined, or convert its activities to secure the approval of the Director of the Department of Managed Health Care. Under existing law, a health care service plan is required to notify the director of any material modifications of its plan or operations, as specified.
This bill would require a health care service plan that intends to merge or consolidate with, or enter into an agreement resulting in its purchase, acquisition, or control by, any entity, as defined, including another health care service plan or a licensed health insurer, to give notice to, and secure prior approval from, the Director of the Department of Managed Health Care. The bill would require the health care service plan to meet specified requirements and to provide information necessary for the director to make the determination to approve, conditionally approve, or disapprove the transaction or agreement, as specified. The bill also would require the department, prior to approval, conditional approval, or denial of the proposed agreement or transaction, to hold a public meeting on the proposal and make specified findings. The bill would require the director to prepare a statement if the director determines that a material amount of the health care service plan’s assets are subject to merger, consolidation, acquisition, purchase, or control, as specified, and would require the department to make the statement available prior to the public meeting. The bill would authorize the director to give conditional approval for a transaction or agreement as described in the bill, under specified circumstances. The bill would deem any material modification filed by a health care service plan that is a transaction or agreement as described in the bill to be subject to specified fees and costs related to the approval, conditional approval, or disapproval process. Because a willful violation of the bill’s provisions applicable to a health care service plan would be a crime, it would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

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


SECTION 1.

 Article 10.2 (commencing with Section 1399.65) is added to Chapter 2.2 of Division 2 of the Health and Safety Code, to read:
Article  10.2. Mergers and Acquisitions of Health Care Service Plans

1399.65.
 (a) (1) A health care service plan that intends to merge or consolidate with, or enter into an agreement resulting in its purchase, acquisition, or control by, any entity, including another health care service plan or a health insurer licensed under the Insurance Code, shall give notice to, and secure prior approval from, the director.
(2) The transactions or agreements described in paragraph (1) may not be completed until the director approves the transaction or agreement.
(3) A health care service plan described in paragraph (1) shall meet all of the requirements of this chapter. The health care service plan shall file all the information necessary for the director to make the determination to approve, conditionally approve, or disapprove the transaction or agreement described in paragraph (1), including, but not limited to, a complete description of the proposed transaction or agreement, any modified exhibits for plan licensure pursuant to Section 1351, any approvals by federal or other state agencies required for the transaction or agreement, and any supporting documentation required by the director.
(4) The director may conditionally approve the transaction or agreement, contingent upon the health care service plan’s agreement to fulfill one or more conditions to benefit subscribers and enrollees of the health care service plan, provide for a stable health care delivery system, and impose other conditions specific to the transaction or agreement in furtherance of this chapter. The director shall engage stakeholders in determining the measures for improvement. For a major transaction or agreement, the director shall obtain an independent analysis of the impact of the transaction or agreement on subscribers and enrollees, the stability of the health care delivery system, and other relevant provisions of this chapter. For any other transaction or agreement, the director may obtain an independent analysis consistent with this paragraph.
(5) If an entity involved in the transaction or agreement is a nonprofit corporation described in Section 5046 of the Corporations Code, the health care service plan shall file all the information required by Article 11 (commencing with Section 1399.70).
(b) In addition to any grounds for disapproval as a result of information provided by a health care service plan pursuant to paragraph (3) of subdivision (a), the director may disapprove the transaction or agreement if the director finds the transaction or agreement would substantially lessen competition in health care service plan products or create a monopoly in this state, including, but not limited to, health coverage products for a specific line of business. In making this finding, the director may obtain an opinion from a consultant or consultants with the expertise to assess the competitive impact of the transaction or agreement.
(c) Prior to approving, conditionally approving, or disapproving a major transaction or agreement, the department shall hold a public meeting on the proposed transaction or agreement. For any other transaction or agreement, the department may hold a public meeting on the proposed transaction or agreement. The public meeting shall be conducted pursuant to the Bagley-Keene Open Meeting Act (Article 9 (commencing with Section 11120) of Chapter 1 of Part 1 of Division 3 of Title 2 of the Government Code). The meeting shall permit the parties to the proposed transaction and members of the public to provide written and verbal comments regarding the proposed transaction. If a substantive change in the proposed transaction or agreement is submitted to the director after the initial public meeting, the director may conduct an additional public meeting to hear comments from interested parties with respect to that change. The director shall consider the testimony and comments received at the public meeting in making the determination to approve, conditionally approve, or disapprove the transaction or agreement.
(d) If the director determines a material amount of assets of a health care service plan is subject to purchase, acquisition, or control, the director shall prepare a statement describing the proposed transaction or agreement subject to subdivision (a) and make it available to the public. The statement shall be made available before the public meeting.
(e) This section does not limit the authority of the director to enforce any other provision of this chapter.
(f) For purposes of this section, “entity” means a health care service plan, an individual, a corporation, a limited liability company, a partnership, an association, a joint stock company, a business trust, an unincorporated organization, any similar entity, or any combination thereof acting in concert.
(g) (1) For purposes of this section, “major transaction or agreement” means a transaction or agreement that meets any of the following criteria:
(A) Affects a significant number of enrollees.
(B) Involves a material amount of assets.
(C) Adversely affects either the subscribers or enrollees or the stability of the health care delivery system because of the entity’s market position, including, but not limited to, the entity’s market exit from a market segment or the entity’s dominance of a market segment.
(2) The director shall, upon request, make available to the public his or her determination of whether a transaction or agreement meets the criteria set forth in this subdivision.

1399.66.
 (a)  Notwithstanding subdivision (d) of Section 1352, a health care service plan that files a material modification that is a transaction or agreement described in subdivision (a) of Section 1399.65 shall be subject to the same fees required by subdivision (a) of Section 1356.
(b) (1) In addition to paying the fees described in subdivision (a), the health care service plan shall reimburse the director for the reasonable costs of all of the following:
(A) The independent analysis described in paragraph (4) of subdivision (a) of Section 1399.65.
(B) The opinion described in subdivision (b) of Section 1399.65.
(C) The public meeting described in subdivision (c)
(D) The statement described in subdivision (d) of Section 1399.65.
(2) The reimbursement required by this subdivision shall be irrespective of the director’s approval, conditional approval, or disapproval of the transaction or agreement described in subdivision (a) of Section 1399.65.
(3) If a transaction described in subdivision (a) of Section 1399.65 involves two health care service plans, the director shall determine whether the reimbursement requirements of this subdivision apply to one or both of the plans.

SEC. 2.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.