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AB-1132 Medi-Cal.(2021-2022)

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Date Published: 04/12/2021 09:00 PM
AB1132:v97#DOCUMENT

Amended  IN  Assembly  April 12, 2021
Amended  IN  Assembly  March 25, 2021

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 1132


Introduced by Assembly Member Wood

February 18, 2021


An act to add Section 685 to the Business and Professions Code, to add Sections 5931, 5932, and 5933 to the Corporations Code, to amend Section 1399.65 of, to amend the heading of Article 10.2 (commencing with Section 1399.65) of Chapter 2.2 of Division 2 of, and to add Sections 1255.4 and 1371.26 to, the Health and Safety Code, and to add Section 10123.146 to the Insurance Code, relating to health care. amend and repeal Section 14182.16 of the Welfare and Institutions Code, relating to Medi-Cal.


LEGISLATIVE COUNSEL'S DIGEST


AB 1132, as amended, Wood. Health Care Consolidation and Contracting Fairness Act of 2021. Medi-Cal.
Existing law establishes the Medi-Cal program, which is administered by the State Department of Health Care Services, under which qualified low-income individuals receive health care services, either through a fee-for-service or managed care delivery system. The Medi-Cal program is, in part, governed and funded by federal Medicaid program provisions. Existing federal law provides for the federal Medicare program, which is a public health insurance program for persons who are 65 years of age or older and specified persons with disabilities who are under 65 years of age. Under existing law, a demonstration project known as the Coordinated Care Initiative (CCI) enables beneficiaries who are dually eligible for the Medi-Cal program and the Medicare Program to receive a continuum of services that maximizes access to, and coordination of, benefits between these programs.
This bill would make specified portions of the CCI operative only through December 31, 2022, as specified, and would repeal its provisions on January 1, 2025.

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 provides for the regulation of health insurers by the Department of Insurance. Existing law regulates contracts between health care service plans or health insurers and health care providers or health facilities, including requirements for reimbursement and the cost-sharing amount collected from an enrollee or insured.

This bill, the Health Care Consolidation and Contracting Fairness Act of 2021, would prohibit a contract issued, amended, or renewed on or after January 1, 2022, between a health care service plan or health insurer and a health care provider or health facility from containing terms that, among other things, restrict the plan or insurer from steering an enrollee or insured to another provider or facility or require the plan or insurer to contract with other affiliated providers or facilities. The bill would authorize the appropriate regulating department to refer a plan’s or insurer’s contract to the Attorney General, and would authorize the Attorney General or state entity charged with reviewing health care market competition to review a health care practitioner’s entrance into a contract that contains specified terms. Because a willful violation of these provisions by a health care service plan would be a crime, the bill would impose a state-mandated local program.

Existing law requires a health care service plan that intends to merge with, consolidate with, or enter into an agreement resulting in its purchase, acquisition, or control by, an entity to give notice to, and secure prior approval from, the Director of the Department of Managed Health Care. Existing law authorizes the director to disapprove the transaction or agreement if the director finds it would substantially lessen competition in health care service plan products or create a monopoly in this state.

This bill would additionally require a health care service plan that intends to acquire or obtain control of an entity, as specified, to give notice to, and secure prior approval from, the director. Because a willful violation of this provision would be a crime, the bill would impose a state-mandated local program. The bill would also authorize the director to disapprove a transaction or agreement if it would substantially lessen competition in the health system or among a particular category of health care providers, and would require the director to provide information related to competition to the Attorney General.

Existing law requires a nonprofit corporation that operates or controls a health facility to obtain the written permission of the Attorney General before entering an agreement to dispose of its assets or transfer control of a material amount of its assets. Existing law requires the Attorney General to notify the corporation within 90 days of receiving notice the request of the Attorney General’s decision to consent to, give conditional consent to, or not consent to the agreement, and authorizes that period to be extended by 45 days if specified conditions are met.

This bill would require a medical group, hospital or hospital system, health care service plan, health insurer, or pharmacy benefit manager to provide written notice to the Attorney General at least 90 days before entering an agreement to make a specified material change with a value of $5,000,000 or more. The bill would authorize the Attorney General to consent to, give conditional consent to, or not consent to that agreement, and would require the Attorney General to notify the entity of the decision within 90 days, which may be extended by one 45-day period if specified conditions are met. The bill would require the Attorney General to conduct one or more public meetings before issuing a written decision on a major transaction, and would authorize the Attorney General to contract for assistance in reviewing a proposed material change and for monitoring ongoing compliance with the terms of a material change. The bill would prohibit an entity from entering into an agreement without the Attorney General’s written consent.

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: YESNO  

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


SECTION 1.

 Section 14182.16 of the Welfare and Institutions Code is amended to read:

14182.16.
 (a) The department shall require Medi-Cal beneficiaries who have dual eligibility in Medi-Cal and the Medicare Program to be assigned as mandatory enrollees into new or existing Medi-Cal managed care health plans for their Medi-Cal benefits in Coordinated Care Initiative counties.
(b) For the purposes of this section and Section 14182.17, the following definitions shall apply:
(1) “Coordinated Care Initiative counties” means the Counties of Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, and Santa Clara.
(2) “Dual eligible beneficiary” means an individual 21 years of age or older who is enrolled for benefits under Medicare Part A (42 U.S.C. Sec. 1395c et seq.) or Medicare Part B (42 U.S.C. Sec. 1395j et seq.), or both, and is eligible for medical assistance under the Medi-Cal State Plan.
(3) “Full-benefit dual eligible beneficiary” means an individual 21 years of age or older who is eligible for benefits under Medicare Part A (42 U.S.C. Sec. 1395c et seq.), Medicare Part B (42 U.S.C. Sec. 1395j et seq.), and Medicare Part D (42 U.S.C. Sec. 1395w-101), and is eligible for medical assistance under the Medi-Cal State Plan.
(4) “Managed care health plan” means an individual, organization, or entity that enters into a contract with the department pursuant to Article 2.7 (commencing with Section 14087.3), Article 2.81 (commencing with Section 14087.96), or Article 2.91 (commencing with Section 14089), of this chapter, or Chapter 8 (commencing with Section 14200).
(5) “Other health coverage” means health coverage providing the same full or partial benefits as the Medi-Cal program, health coverage under another state or federal medical care program except for the Medicare Program (Title XVIII of the federal Social Security Act (42 U.S.C. Sec. 1395 et seq.)), or health coverage under a contractual or legal entitlement, including, but not limited to, a private group or indemnification insurance program.
(6) “Out-of-network Medi-Cal provider” means a health care provider that does not have an existing contract with the beneficiary’s managed care health plan or its subcontractors.
(7) “Partial-benefit dual eligible beneficiary” means an individual 21 years of age or older who is enrolled for benefits under Medicare Part A (42 U.S.C. Sec. 1395c et seq.), but not Medicare Part B (42 U.S.C. Sec. 1395j et seq.), or who is eligible for Medicare Part B (42 U.S.C. Sec. 1395j et seq.), but not Medicare Part A (42 U.S.C. Sec. 1395c et seq.), and is eligible for medical assistance under the Medi-Cal State Plan.
(c) (1) Notwithstanding subdivision (a), a dual eligible beneficiary is exempt from mandatory enrollment in a managed care health plan if the dual eligible beneficiary meets any of the following:
(A) Except in counties with county organized health systems operating pursuant to Article 2.8 (commencing with Section 14087.5), the beneficiary has other health coverage.
(B) The beneficiary receives services through a foster care program, including the program described in Article 5 (commencing with Section 11400) of Chapter 2.
(C) The beneficiary is under 21 years of age.
(D) The beneficiary is not eligible for enrollment in managed care health plans for medically necessary reasons determined by the department.
(E) The beneficiary resides in one of the Veterans Homes of California, as described in Chapter 1 (commencing with Section 1010) of Division 5 of the Military and Veterans Code.
(F) The beneficiary is enrolled in any entity with a contract with the department pursuant to Chapter 8.75 (commencing with Section 14591).
(G) The beneficiary is enrolled in a managed care organization licensed under the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code) that has previously contracted with the department as a primary care case management plan pursuant to Article 2.9 (commencing with Section 14088) of Chapter 7.
(2) A beneficiary who has been diagnosed with HIV/AIDS is not exempt from mandatory enrollment, but may opt out of managed care enrollment at the beginning of any month.
(d) Implementation of this section shall incorporate the provisions of Section 14182.17 that are applicable to beneficiaries eligible for benefits under Medi-Cal and the Medicare Program.
(e) At the director’s sole discretion, in consultation with stakeholders, the department may determine and implement a phased-in enrollment approach that may include Medi-Cal beneficiary enrollment into managed care health plans immediately upon implementation of this section in a specific county, over a 12-month period, or other phased approach. The phased-in enrollment shall commence no sooner than March 1, 2013, and not until all necessary federal approvals have been obtained.
(f) To the extent that mandatory enrollment is required by the department, an enrollee’s access to fee-for-service Medi-Cal shall not be terminated until the enrollee has selected or been assigned to a managed care health plan.
(g) Except in a county where Medi-Cal services are provided by a county organized health system, and notwithstanding any other law, in any county in which fewer than two existing managed health care plans contract with the department to provide Medi-Cal services under this chapter that are available to dual eligible beneficiaries, including long-term services and supports, the department may contract with additional managed care health plans to provide Medi-Cal services.
(h) For partial-benefit dual eligible beneficiaries, the department shall inform these beneficiaries of their rights to continuity of care from out-of-network Medi-Cal providers pursuant to subparagraph (G) of paragraph (5) of subdivision (d) of Section 14182.17, and that the need for medical exemption criteria applied to counties operating under Chapter 4.1 (commencing with Section 53800) of Subdivision 1 of Division 3 of Title 22 of the California Code of Regulations may not be necessary to continue receiving Medi-Cal services from an out-of-network provider.
(i) The department may contract with existing managed care health plans to provide or arrange for services under this section. Notwithstanding any other law, the department may enter into the contract without the need for a competitive bid process or other contract proposal process, provided that the managed care health plan provides written documentation that it meets all of the qualifications and requirements of this section and Section 14182.17.
(j) The development of capitation rates for managed care health plan contracts shall include the analysis of data specific to the dual eligible population. For the purposes of developing capitation rates for payments to managed care health plans, the department shall require all managed care health plans, including existing managed care health plans, to submit financial, encounter, and utilization data in a form, at a time, and including substance as deemed necessary by the department. Failure to submit the required data shall result in the imposition of penalties pursuant to Section 14182.1.
(k) Persons meeting participation requirements for the Program of All-Inclusive Care for the Elderly (PACE) pursuant to Chapter 8.75 (commencing with Section 14591) may select a PACE plan if one is available in that county. Except in counties with county organized health systems operating pursuant to Article 2.8 (commencing with Section 14087.5), the department or its enrollment contractor shall notify a dual eligible beneficiary who is subject to mandatory enrollment in a managed care plan and who is potentially eligible for PACE that he or she they may alternatively request to be assessed for eligibility for PACE, and, if eligible, may enroll in a PACE plan. The department or its enrollment contractor shall not enroll a dual eligible beneficiary who requests to be assessed for PACE in a managed care plan until the earlier of 60 days or the time that he or she is they are assessed and determined to be ineligible for a PACE plan, unless the beneficiary subsequently chooses to enroll in a managed care plan.
(l) Except for dual eligible beneficiaries participating in the demonstration project pursuant to Section 14132.275, persons meeting the participation requirements in effect on January 1, 2010, for a Medi-Cal primary case management plan in operation on that date, may select that primary care case management plan or a successor health care plan that is licensed pursuant to the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code) to provide services within the same geographic area that the primary care case management plan served on January 1, 2010.
(m) The department may implement an intergovernmental transfer arrangement with a public entity that elects to transfer public funds to the state to be used solely as the nonfederal share of Medi-Cal payments to managed care health plans for the provision of services to dual eligible beneficiaries pursuant to Section 14182.15.
(n) To implement this section, the department may contract with public or private entities. Contracts or amendments entered into under this section may be on an exclusive or nonexclusive basis and on a noncompetitive bid basis and shall be exempt from all of the following:
(1) Part 2 (commencing with Section 10100) of Division 2 of the Public Contract Code and any policies, procedures, or regulations authorized by that part.
(2) Article 4 (commencing with Section 19130) of Chapter 5 of Part 2 of Division 5 of Title 2 of the Government Code.
(3) Review or approval of contracts by the Department of General Services.
(o) Any otherwise applicable provisions of this chapter, Chapter 8 (commencing with Section 14200), or Chapter 8.75 (commencing with Section 14591) not in conflict with this section or with the Special Terms and Conditions of the waiver shall apply to this section.
(p) The department shall, in coordination with and consistent with an interagency agreement with the Department of Managed Health Care, at a minimum, monitor on a quarterly basis the adequacy of provider networks of the managed care health plans. Notwithstanding any other law, this subdivision shall remain operative only through June 30, 2017.
(q) The department shall suspend new enrollment of dual eligible beneficiaries into a managed care health plan if it determines that the managed care health plan does not have sufficient primary or specialty care providers and long-term service and supports to meet the needs of its enrollees.
(r) Managed care health plans shall pay providers in accordance with Medicare and Medi-Cal coordination of benefits.
(s) This section shall be implemented only to the extent that all federal approvals and waivers are obtained and only if and to the extent that federal financial participation is available.
(t) Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department may implement, interpret, or make specific this section and any applicable federal waivers and state plan amendments by means of all-county letters, plan letters, plan or provider bulletins, or similar instructions, without taking regulatory action. Prior to issuing any letter or similar instrument authorized pursuant to this section, the department shall notify and consult with stakeholders, including advocates, providers, and beneficiaries. The department shall notify the appropriate policy and fiscal committees of the Legislature of its intent to issue instructions under this section at least five days in advance of the issuance.
(u) A managed care health plan that contracts with the department for the provision of services under this section shall ensure that beneficiaries have access to the same categories of licensed providers that are available under fee-for-service Medicare. Nothing in this section shall prevent a managed care health plan from contracting with selected providers within a category of licensure.
(v) The department shall, commencing August 1, 2013, convene stakeholders, at least quarterly, to review progress on the Coordinated Care Initiative and make recommendations to the department and the Legislature for the duration of the Coordinated Care Initiative. The stakeholders shall include beneficiaries, counties, and health plans, and representatives from primary care providers, specialists, hospitals, nursing facilities, MSSP programs, CBAS programs, other social service providers, the IHSS program, behavioral health providers, and substance use disorders stakeholders.
(w) Notwithstanding subdivisions (c) and (d) of Section 34 of Chapter 37 of the Statutes of 2013, this section shall not be made inoperative as a result of any determination made by the Director of Finance pursuant to Section 34 of Chapter 37 of the Statutes of 2013.
(x) (1) Notwithstanding any other law, this section shall remain operative only through December 31, 2022.
(2) This section shall remain in effect only until January 1, 2025, and as of that date is repealed.

SECTION 1.

This act shall be known and may be cited as the Health Care Consolidation and Contracting Fairness Act of 2021.

SEC. 2.Section 685 is added to the Business and Professions Code, to read:
685.

(a)Notwithstanding any other law, a health care practitioner licensed under this division shall not enter into, amend, enforce, or renew a contractual provision on or after January 1, 2022, with a health care service plan or health insurer that directly or indirectly does or implements any of the following:

(1)Restricts the health care service plan or health insurer from doing or implementing either of the following:

(A)Directing or steering enrollees or insureds to other health care practitioners.

(B)Offering incentives to encourage enrollees or insureds to utilize or avoid health care practitioners.

(2)Requires the health care service plan or health insurer to enter into an additional contract with any or all affiliates or individual facilities of the health care practitioner as a condition of entering into a contract with the practitioner.

(3)Requires the health care service plan or health insurer to agree to payment rates or terms for an individual facility or affiliate of the health care practitioner as a condition of entering into a contract with the practitioner, other individual facility, or affiliate.

(4)Requires the health care service plan or health insurer to agree to payment rates or other terms for an affiliate or individual facility that is not party to the contract.

(5)Restricts other health care service plans or health insurers that are not party to the contract from paying a lower rate for items or services than the rate the contracting plan pays for those items or services.

(6)Prevents a health care service plan or health insurer, directly or indirectly, from providing provider-specific cost or quality of care information, through a consumer engagement tool or any other means, to referring providers, the plan or insurer sponsor, enrollees, insureds, or eligible enrollees or insureds of the plan or insurer.

(b)A health care practitioner’s entrance into a contract that does or implements any of the conduct described in subdivision (a) may be reviewed by the Attorney General and any other state entity charged with reviewing health care market competition for compliance with this section.

(c)Notwithstanding any other law, the Attorney General and any other state entity charged with reviewing health care market competition shall be entitled to specific performance, injunctive relief, and other equitable remedies a court deems appropriate for enforcement of this section and shall be entitled to recover attorney’s fees and costs incurred in remedying each violation.

(d)The Attorney General and any other state agency charged with reviewing health care market competition may adopt regulations to implement this section.

(e)The authority of the Attorney General to maintain competitive markets and prosecute state and federal antitrust and unfair competition violations shall not be narrowed, abrogated, or otherwise altered by this section.

SEC. 3.Section 5931 is added to the Corporations Code, to read:
5931.

(a)(1)A medical group, hospital or hospital system, health care service plan, health insurer, or pharmacy benefit manager, except for a nonprofit corporation subject to Sections 5914 and 5920, shall provide written notice to, and obtain the written consent of, the Attorney General before entering into an agreement or transaction to do either of the following:

(A)Sell, transfer, lease, exchange, option, encumber, convey, or otherwise dispose of a material amount of its assets.

(B)Transfer control, responsibility, or governance of a material amount of its assets or operations.

(2)The substitution of a new corporate member or members that transfers the control of, responsibility for, or governance of the nonprofit corporation shall be deemed a transfer for purposes of this article. The substitution of one or more members of the governing body, or an arrangement, written or oral, that would transfer voting control of the members of the governing body, shall also be deemed a transfer for purposes of this article.

(3)This section applies to a material change with a value of five million dollars ($5,000,000) or more.

(b)(1)Subdivision (a) does not apply to a nonphysician provider. For purposes of this section, “nonphysician provider” means an individual or group of individuals licensed under Division 2 (commencing with Section 500) of the Business and Professions Code who does not provide health-related physician, surgery, or laboratory services to consumers.

(2)Subdivision (a) does not apply to an ambulatory surgical center that is not affiliated with or owned by a general acute care facility, as defined in subdivision (a) of Section 1250 of the Health and Safety Code, and is any of the following:

(A)A surgical clinic licensed by the State Department of Public Health.

(B)An ambulatory surgical center certified by the federal Centers for Medicare and Medicaid Services to participate in the Medicare program.

(C)An outpatient setting that is accredited by an accreditation agency approved by the Medical Board of California.

(c)The notice to the Attorney General pursuant to subdivision (a) shall be provided at least 90 days before the changes and shall include and contain the information the Attorney General deems is required. The notice, including any other information that is provided to the Attorney General pursuant to this section and that is in the public file, shall be made available by the Attorney General to the public in written form, as soon as is practicable after it is received by the Attorney General. The notice shall include a list of the threshold languages for Medi-Cal beneficiaries, as determined by the State Department of Health Care Services. The Attorney General may require the nonprofit corporation to provide certain components of the notice in any of these languages.

(d)The Attorney General shall have discretion to consent to, give conditional consent to, or not consent to an agreement or transaction described in subdivision (a). In making the determination, the Attorney General may consider any factors that the Attorney General deems relevant, including all of the following:

(1)Whether or not the proposed material change may have a significant impact on market competition or costs for payers, purchasers, or consumers.

(2)Whether or not the proposed material change may improve the quality of care, such as the ability to offer culturally competent and appropriate care.

(3)Whether or not the proposed material change may have a significant impact on the access to or availability of health care for payers, purchasers, or consumers.

(4)Whether or not the proposed material change is in the public interest.

(5)Whether or not the proposed material change is likely to maintain access to care in a rural community. If the Attorney General finds that access to care in a rural community will become more limited with the proposed material change, the Attorney General may approve the proposed material change, and may place conditions on the proposed material change.

(e)Within 90 days of the receipt of the written notice required by subdivision (a), the Attorney General shall notify the medical group, hospital or hospital system, health care service plan, or health insurer of the decision to consent to, give conditional consent to, or not consent to the agreement or transaction. The Attorney General may extend this period for one additional 45-day period if any of the following conditions apply:

(1)The extension is necessary to obtain additional information.

(2)The proposed agreement or transaction is substantially modified after the original notice was provided to the Attorney General.

(3)The proposed agreement or transaction involves a multifacility health system serving multiple communities, rather than a single facility or entity.

(f)This section applies to a foreign corporation that operates or controls a medical group, hospital or hospital system, health care service plan, health insurer, or pharmacy benefit manager, if that entity provides similar health care or coverage, regardless of whether it is currently operating or has a suspended license.

(g)The Attorney General may adopt regulations to implement this section.

(h)The authority of the Attorney General to maintain competitive markets and prosecute state and federal antitrust and unfair competition violations shall not be narrowed, abrogated, or otherwise altered by this section.

SEC. 4.Section 5932 is added to the Corporations Code, to read:
5932.

(a)Before issuing a written decision pursuant to Section 5931, the Attorney General shall conduct one or more public meetings on a major transaction. The Attorney General may also conduct one or more public meetings on other transactions.

(b)If the transaction involves a medical group or a hospital or hospital system, one of the public meetings shall be in the county in which the medical group or hospital is located, to hear comments from interested parties.

(c)At least 14 days before conducting the public meeting, the Attorney General shall provide written notice of the time and place of the meeting through publication in one or more newspapers of general circulation in the affected community and to the boards of supervisors of the county or counties in which the medical group or the hospital or hospital system is located. This notice shall be provided in English and in the primary languages spoken at the facility, if any, and the threshold languages for Medi-Cal beneficiaries, as determined by the State Department of Health Care Services.

(d)If a substantive change in the proposed agreement or transaction is submitted to the Attorney General after the initial public meeting, the Attorney General may conduct an additional public meeting to hear comments from interested parties with respect to that change.

(e)(1)With respect to a health care service plan, health insurer, or pharmacy benefit manager, “major transaction” has the same meaning as in Section 1399.65 of the Health and Safety Code.

(2)With respect to a hospital or hospital system, “major transaction” means a transaction that would have been subject to Section 5914 if it involved a nonprofit corporation.

(3)With respect to a medical group, the Attorney General shall define “major transaction” by regulation.

(f)The Attorney General may adopt regulations to implement this section.

SEC. 5.Section 5933 is added to the Corporations Code, to read:
5933.

(a)(1)Within the time periods designated in Section 5931 and relating to the factors specified in Section 5931, the Attorney General may do both of the following:

(A)Contract with, consult, and receive advice from a state agency on the terms and conditions that the Attorney General deems appropriate.

(B)In the Attorney General’s sole discretion, contract with experts or consultants to assist in reviewing the proposed material change in control.

(2)Contract costs shall not exceed an amount that is reasonable and necessary to conduct the review and evaluation. A contract entered into under this section shall be on a noncompetitive bid basis and shall be exempt from Chapter 2 (commencing with Section 10290) of Part 2 of Division 2 of the Public Contract Code. Upon request, the Attorney General shall be paid promptly by the entities seeking consent for all contract costs.

(3)The Attorney General shall be entitled to reimbursement from the entities seeking consent for all actual, reasonable, direct costs incurred in reviewing, evaluating, and making the determination referred to in this section, including administrative costs. The entity seeking consent shall promptly pay the Attorney General, upon request, for all of those costs.

(b)(1)To monitor effectively ongoing compliance with the terms and conditions of a material change of control subject to Section 5931, the Attorney General may, in their sole discretion, contract with experts and consultants to assist in this regard.

(2)Contract costs shall not exceed an amount that is reasonable and necessary to conduct the review and evaluation. A contract entered into under this section shall be on a noncompetitive bid basis and shall be exempt from Chapter 2 (commencing with Section 10290) of Part 2 of Division 2 of the Public Contract Code. The entities seeking consent shall pay the Attorney General promptly for all contract costs.

(3)The Attorney General shall be entitled to reimbursement from either the selling or the acquiring entity, depending upon which one the burden of compliance falls, for all actual, reasonable, and direct costs incurred in monitoring ongoing compliance with the terms and conditions of the sale or transfer of assets, including contract and administrative costs. The Attorney General may bill either the selling or the acquiring entity and the entity billed by the Attorney General shall promptly pay for all of those costs.

(c)The Attorney General may adopt regulations to implement this section.

SEC. 6.Section 1255.4 is added to the Health and Safety Code, to read:
1255.4.

(a)Notwithstanding any other law, a health facility shall not enter into, amend, enforce, or renew a contractual provision on or after January 1, 2022, with a health care service plan or health insurer that directly or indirectly does or implements any of the following:

(1)Restricts the health care service plan or health insurer from doing or implementing either of the following:

(A)Directing or steering enrollees or insureds to other health facilities.

(B)Offering incentives to encourage enrollees or insureds to utilize or avoid health facilities.

(2)Requires the health care service plan or health insurer to enter into an additional contract with any of all affiliates or individual facilities of the health facility as a condition of entering into a contract with the health facility.

(3)Requires the health care service plan or health insurer to agree to payment rates or terms for an individual facility or affiliate of the health facility as a condition of entering into a contract with the health facility, other individual facility, or affiliate.

(4)Requires the health care service plan or health insurer to agree to payment rates or other terms for an affiliate or individual facility that is not party to the contract.

(5)Restricts other health care service plans or health insurers that are not party to the contract from paying a lower rate for items or services than the rate the contracting plan or insurer pays for those items or services.

(6)Prevents a health care service plan or health insurer, directly or indirectly, from providing provider-specific cost or quality of care information, through a consumer engagement tool or any other means, to referring providers, the plan or insurer sponsor, enrollees, insureds, or eligible enrollees or insureds of the plan or insurer.

(b)The department may refer contracts subject to this section to the Attorney General or any other state entity charged with reviewing health care market competition to review the contract for compliance with this section. The authority of the Attorney General to maintain competitive markets and prosecute antitrust violations shall not be narrowed, abrogated, or otherwise altered by this section.

SEC. 7.Section 1371.26 is added to the Health and Safety Code, to read:
1371.26.

(a)A contract issued, amended, or renewed on or after January 1, 2022, between a health care service plan offering coverage in the group market or individual market and a health care provider, network or association of health care providers, or other service provider offering access to a network of service providers shall not contain a contract term that directly or indirectly does or implements any of the following:

(1)Restricts the health care service plan from doing or implementing either of the following:

(A)Directing or steering enrollees to other health care providers.

(B)Offering incentives to encourage enrollees to utilize or avoid specific health care providers.

(2)Requires the health care service plan to enter into an additional contract with any or all affiliates or individual facilities of the provider as a condition of entering into a contract with the provider.

(3)Requires the health care service plan to agree to payment rates or terms for an individual facility or affiliate of the provider as a condition of entering into a contract with the provider, other individual facility, or affiliate.

(4)Requires the health care service plan to agree to payment rates or other terms for an affiliate or individual facility that is not party to the contract.

(5)Restricts other health care service plans or health insurers that are not party to the contract from paying a lower rate for items or services than the rate the contracting plan pays for those items or services.

(6)Prevents a health care service plan, directly or indirectly, from providing provider-specific cost or quality of care information, through a consumer engagement tool or any other means, to referring providers, the plan sponsor, enrollees, or eligible enrollees of the plan.

(b)The director may refer contracts subject to this section to the Attorney General or any other state entity charged with reviewing health care market competition to review the contract for compliance with this section. The authority of the Attorney General to maintain competitive markets and prosecute antitrust violations shall not be narrowed, abrogated, or otherwise altered by this section.

SEC. 8.The heading of Article 10.2 (commencing with Section 1399.65) of Chapter 2.2 of Division 2 of the Health and Safety Code is amended to read:
10.2.Mergers and Acquisitions of and by Health Care Service Plans
SEC. 9.Section 1399.65 of the Health and Safety Code is amended to read:
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. A health care service plan that intends to acquire or obtain control of an entity through a change of governance or control of a material amount of assets of that entity 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, control costs to subscribers and enrollees, 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)(1)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.

(2)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) or paragraph (1) of this subdivision, the director may disapprove the transaction or agreement if the director finds the transaction or agreement would substantially lessen competition in the health system or among a particular category of health care providers. In so doing, the director shall provide to the Attorney General information related to competition. The authority of the Attorney General to maintain competitive markets and prosecute antitrust violations shall not be narrowed, abrogated, or otherwise altered by this section.

(3)In making a finding pursuant to paragraph (1) or (2), 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:

(1)“Acquiring” an entity includes the sale, transfer, lease, exchange, option, conveyance, or other disposition of an entity’s assets by a health care service plan if a material amount of the assets of the entity are involved in the agreement or transaction.

(2)“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.

(3)(A)“Major transaction or agreement” means a transaction or agreement that meets any of the following criteria:

(i)Affects a significant number of enrollees.

(ii)Involves a material amount of assets.

(iii)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.

(B)The director shall, upon request, make available to the public the director’s determination of whether a transaction or agreement meets the criteria set forth in this subdivision.

(4)“Obtaining control” of an entity occurs if the entity transfers control, responsibility, or governance of a material amount of its assets or operations to a health care service plan.

(5)“Transfer” includes the substitution of one or more new corporate members that would transfer the control of, responsibility for, or governance of the entity. “Transfer” also includes the substitution of one or more members of the entity’s governing body, or an arrangement, written or oral, that would transfer voting control of the members of the governing body.

SEC. 10.Section 10123.146 is added to the Insurance Code, to read:
10123.146.

(a)A contract issued, amended, or renewed on or after January 1, 2022, between a health insurer offering coverage in the group market or individual market and a health care provider, network or association of health care providers, or other service provider offering access to a network of service providers shall not contain a contract term that directly or indirectly does or implements any of the following:

(1)Restricts the health insurer from doing or implementing either of the following:

(A)Directing or steering insureds to other health care providers.

(B)Offering incentives to encourage insureds to utilize or avoid health care providers.

(2)Requires the health insurer to enter into an additional contract with any or all affiliates or individual facilities of the provider as a condition of entering into a contract with the provider.

(3)Requires the health insurer to agree to payment rates or terms for an individual facility or affiliate of the provider as a condition of entering into a contract with the provider, other individual facility, or affiliate.

(4)Requires the health insurer to agree to payment rates or other terms for an affiliate or individual facility that is not party to the contract.

(5)Restricts other health insurers or health care service plans that are not party to the contract from paying a lower rate for items or services than the rate the contracting plan pays for those items or services.

(6)Prevents a health insurer, directly or indirectly, from providing provider-specific cost or quality of care information, through a consumer engagement tool or any other means, to referring providers, the insurer sponsor, insureds, or eligible insureds of the insurer.

(b)The commissioner may refer contracts subject to this section to the Attorney General or any other state entity charged with reviewing health care market competition to review the contract for compliance with this section. The authority of the Attorney General to maintain competitive markets and prosecute antitrust violations shall not be narrowed, abrogated, or otherwise altered by this section.

SEC. 11.

The provisions of this act are severable. If any provision of this act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

SEC. 12.

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.