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

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Date Published: 01/22/2018 09:00 PM
AB595:v97#DOCUMENT

Amended  IN  Assembly  January 22, 2018
Amended  IN  Assembly  April 03, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 595


Introduced by Assembly Member Wood

February 14, 2017


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.


LEGISLATIVE COUNSEL'S DIGEST


AB 595, as amended, 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 specified entities that intend to merge with, consolidate, acquire, purchase, or control, directly or indirectly, a health care service plan doing business in this state 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 that entity to apply for licensure as a health care service plan. 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 authorize the department, prior to approval, conditional approval, or denial of the proposed agreement or transaction, to hold a public hearing on the proposal and make specified findings. The bill would require the department director to prepare an independent health care impact 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. 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:
10.2.Mergers and Acquisitions of Health Care Service Plans
1399.65.

(a)An entity that intends to merge with, consolidate, acquire, purchase, or control, directly or indirectly, any health care service plan doing business in this state shall give notice to, and secure prior approval from, the director.

(b)An entity that intends to merge with, consolidate, acquire, purchase, or control, directly or indirectly, any health care service plan shall apply for licensure as a health care service plan pursuant to Article 3 (commencing with Section 1349).

(c)This article shall apply only to an entity that holds a license as a health care service plan under this act.

(d)The director may approve, conditionally approve, or deny an application for licensure under this article.

1399.66.

(a)Prior to approving, conditionally approving, or denying a transaction or agreement described in Section 1399.65, the department shall do all of the following:

(1)Hold a public hearing on the proposal.

(2)Make a finding that the proposal meets all of the following criteria:

(A)Provides short-term and long-term benefits to purchasers, subscribers, enrollees, and patients in the form of lower prices, better quality, improved access to care, and reduced health disparities.

(B)Does not adversely affect competition. In making this finding, the director shall request an advisory opinion from the Attorney General regarding whether competition would be adversely affected and what mitigation measures could be adopted to avoid that result.

(C)Does not jeopardize the financial stability of the parties or prejudice the interests of their purchasers, subscribers, enrollees, and patients.

(D)Does not result in a significant effect on the availability or accessibility of existing health care services.

(3)Determine whether the applicant is of reputable and responsible character. The department shall consider any available information that the applicant has demonstrated a pattern and practice of violations of state or federal laws and regulations.

(4)Determine whether the applicant has the ability to comply with this chapter and the rules and regulations adopted under this chapter. The department shall consider all of the following:

(A)A history of noncompliance with applicable state or federal laws, regulations, or requirements related to providing, or arranging to provide for, health care services or benefits in this state or another state.

(B)A history of noncompliance with applicable state or federal laws, regulations, or requirements related to providing, or arranging to provide for, health care services or benefits authorized for reimbursement under the Medicare Program or the Medicaid program.

(C)A history of noncompliance with applicable state or federal laws, regulations, or requirements related to providing, or arranging to provide for, health care services as a licensed health professional or an individual or entity contracting with a health care service plan or health insurer in this state or another state.

(b)If the director determines that a material amount of the assets of a health care service plan is subject to merger, consolidation, acquisition, purchase, or control, either directly or indirectly, the director shall prepare an independent health care impact statement.

(1)The independent health care impact statement shall contain the following information about the short-term and long-term effects of the proposed transaction:

(A)An assessment of the effect of the transaction on health care costs to purchasers and consumers.

(B)An assessment of the effect of the transaction on quality of care.

(C)An assessment of the effect of the transaction on access to care and health disparities.

(D)An assessment of the effect of the transaction on reducing health disparities.

(E)An assessment of the effectiveness of any mitigation measures proposed by the applicant to reduce any potential adverse effect on cost, quality, access to services, or health disparities identified in the independent impact statement.

(F)Recommendations for additional feasible mitigation measures that would reduce or eliminate any significant adverse effect on cost, quality, access to services, or health disparities identified in the impact statement.

(2)The information contained in the independent health care impact statement shall be used in considering whether the transaction meets the criteria set forth in paragraph (2) of subdivision (a). Copies of the health care impact statement shall be made available to the public at least 30 days before the department’s public hearing.

(c)If the entity involved in the transaction is a nonprofit corporation described in Section 5046 of the Corporations Code, the department shall seek an independent valuation of the assets of the nonprofit corporation in order to ensure that the assets of the nonprofit corporation are not undervalued in the transaction.

(d)The director may give conditional approval for any transaction or agreement described in Section 1399.65 if the parties to the transaction or agreement commit to taking action to prevent adverse impacts on competition, or health care costs, access, and quality of care in this state.

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 purchases, exchanges, mergers, or other acquisitions of control may not be made until the director approves the purchases, exchanges, mergers, or other acquisitions of control.
(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, any modified exhibits for plan licensure pursuant to Section 1351, any approvals by federal or other state agencies required for the transaction, 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 or provide for a stable health care delivery system. The conditions shall require a health care service plan to improve quality and reduce health disparities. The director shall engage stakeholders in determining the measures for improvement.
(5) If an entity involved in the transaction 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 purchases, exchanges, mergers, or other acquisitions of control 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.
(c) Prior to approving, conditionally approving, or disapproving the transaction or agreement described in subdivision (a), the department may hold a public meeting on the proposed transaction. 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 agreement or transaction 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.
(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 an independent health care impact statement and make it available to the public. If the department holds a public meeting pursuant to subdivision (c), the health care impact statement shall be made available at least 30 days 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.

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 the opinion described in subdivision (b) of, the public meeting described in subdivision (c) of, and the independent health care impact statement described in subdivision (d) of, Section 1399.65. The reimbursement required by this subdivision shall be irrespective of the director’s approval, conditional approval, or disapproval of the transaction described in subdivision (a) of Section 1399.65.
(2) 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.