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SB-250 Health care coverage.(2021-2022)

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Date Published: 08/01/2022 09:00 PM
SB250:v96#DOCUMENT

Amended  IN  Assembly  August 02, 2022
Amended  IN  Assembly  June 06, 2022
Amended  IN  Senate  March 11, 2021

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Senate Bill
No. 250

Introduced by Senator Pan
(Coauthor: Senator Wiener)

January 25, 2021

An act to amend Section 1363.5 of, to add Section 1367.032 to, and to add Article 4.7 (commencing with Section 1366.70) to Chapter 2.2 of Division 2 of, the Health and Safety Code, and to amend Section 10123.135 of, to add Section 10123.134 to, and to add Article 1.3 (commencing with Section 10127.40) to Chapter 1 of Part 2 of Division 2 of, the Insurance Code, relating to health care coverage.


LEGISLATIVE COUNSEL'S DIGEST


SB 250, as amended, Pan. Health care coverage.
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 generally authorizes a health care service plan or health insurer to use prior authorization and other utilization review or utilization management functions, under which a licensed physician or a licensed health care professional who is competent to evaluate specific clinical issues may approve, modify, delay, or deny requests for health care services based on medical necessity. Existing law requires a health care service plan or health insurer, including those plans or insurers that delegate utilization review or utilization management functions to medical groups, independent practice associations, or to other contracting providers, to comply with specified requirements and limitations on their utilization review or utilization management functions. Existing law requires the criteria or guidelines used to determine whether or not to authorize, modify, or deny health care services to be developed with involvement from actively practicing health care providers.
This bill would specify that the health care providers involved with developing the above-described criteria or guidelines include a representative sample of physicians and surgeons that compose a plan’s or insurer’s prior authorization requests. contracted physicians and surgeons and other health professionals acting within their scopes of practice that have experienced, or are currently subject to, utilization review or utilization management. The bill would grant a physician and surgeon the right to have an appeal of a prior authorization decision conducted by a physician and surgeon of the same or similar specialty, and would prohibit a plan or insurer from requiring an appeal of an adverse prior authorization request result to be filed before filing an independent medical review.
On or after January 1, 2024, this bill would prohibit a health care service plan or health insurer from requiring a contracted health professional to complete or obtain a prior authorization for any health care services if the plan or insurer approved or would have approved not less than 80% 90% of the prior authorization requests they submitted in the most recent one-year contracted period. The bill would set standards for this exemption and its denial and appeal. The bill would authorize a plan or insurer to evaluate the continuation of an exemption not more than once every 2 years, 12 months, and would prohibit a plan or insurer from rescinding an exemption outside of the end of the 2-year period. 12-month period unless a contracted health professional has committed fraud or a pattern of abuse, as specified.
Under the bill, a “health care service” for prior authorization exemption purposes would include brand name prescription drugs until January 1, 2027. The bill would require the Department of Managed Health Care and the Department of Insurance to each conduct an analysis of the inclusion of brand name prescription drugs as a health care service and report its findings to the Legislature by July 1, 2026.
Because a willful violation of the bill’s requirements relative to health care service plans would be a crime, the bill 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.
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 requires a health care service plan or health insurer to establish criteria or guidelines that meet specified requirements to be used to determine whether or not to authorize, modify, or deny health care services.
This bill would authorize the Department of Managed Health Care and the Insurance Commissioner, as appropriate, to review a plan’s or insurer’s clinical criteria, guidelines, and utilization management policies to ensure compliance with existing law. If the criteria and guidelines are not in compliance with existing law, the bill would require the Director of the Department of Managed Health Care or the commissioner to issue a corrective action and send the matter to enforcement, if necessary. The bill would require each department, on or before July 1, 2022, to develop a methodology for a plan or insurer to report the number of prospective utilization review requests it denied in the preceding 12 months, as specified.
This bill would require a health care service plan contract or health insurance contract issued, amended, or renewed on or after January 1, 2022, to reimburse a contracting individual health professional, as defined, the in-network cost-sharing amount for services provided to an enrollee or insured at a contracting health facility, as defined. The bill would also require a plan or insurer and its delegated entities, on or before January 1, 2023, and annually thereafter, to report, among other things, its average number of denied prospective utilization review requests, as specified. The bill would require, on and after January 1, 2023, a plan or insurer to examine an individual health professional’s record of prospective utilization review requests during the preceding 12 months and grant the individual health professional “deemed approved” status for 2 years, meaning an exemption from the prospective utilization review process, if specified criteria are met. The bill would authorize a plan or insurer to request an audit of an individual health professional’s records after the initial 2 years of an individual health professional’s deemed approved status and every 2 years thereafter, and would specify the audit criteria by which an individual health professional would keep or lose that status. The bill would authorize the commissioner to adopt regulations to implement these provisions, as specified. 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.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

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


SECTION 1.

 Section 1363.5 of the Health and Safety Code is amended to read:

1363.5.
 (a)  A plan shall disclose or provide for the disclosure to the director and to network providers the process the plan, its contracting provider groups, or any entity with which the plan contracts for services that include utilization review or utilization management functions, uses to authorize, modify, or deny health care services under the benefits provided by the plan, including coverage for subacute care, transitional inpatient care, or care provided in skilled nursing facilities. A plan shall also disclose those processes to enrollees or persons designated by an enrollee, or to any other person or organization, upon request. The disclosure to the director shall include the policies, procedures, and the description of the process that are filed with the director pursuant to subdivision (b) of Section 1367.01.
(b)  The criteria or guidelines used by plans, or any entities with which plans contract for services that include utilization review or utilization management functions, to determine whether to authorize, modify, or deny health care services shall:
(1)  Be developed with involvement from actively practicing health care providers, including a representative sample of physicians and surgeons that compose a plan’s prior authorization requests. contracted physicians and surgeons and other health professionals acting within their scopes of practice that have experienced, or are currently subject to, utilization review or utilization management.
(2)  Be consistent with sound clinical principles and processes.
(3)  Be evaluated, and updated if necessary, at least annually.
(4)  If used as the basis of a decision to modify, delay, or deny services in a specified case under review, be disclosed to the provider and the enrollee in that specified case.
(5)  Be available to the public upon request. A plan shall only be required to disclose the criteria or guidelines for the specific procedures or conditions requested. A plan may charge reasonable fees to cover administrative expenses related to disclosing criteria or guidelines pursuant to this paragraph, limited to copying and postage costs. The plan may also make the criteria or guidelines available through electronic communication means.
(c)  The disclosure required by paragraph (5) of subdivision (b) shall be accompanied by the following notice: “The materials provided to you are guidelines used by this plan to authorize, modify, or deny care for persons with similar illnesses or conditions. Specific care and treatment may vary depending on individual need and the benefits covered under your contract.”

SEC. 2.

 Article 4.7 (commencing with Section 1366.70) is added to Chapter 2.2 of Division 2 of the Health and Safety Code, to read:
Article  4.7. Prior Authorization Exemptions

1366.70.
 For purposes of this article:
(a) “Clinical criteria” means the written policies, written screening procedures, drug formularies or lists of covered drugs, determination rules, determination abstracts, clinical protocols, practice guidelines, medical protocols, and any other criteria or rationale used by the health care service plan or its utilization review entity to determine the necessity and appropriateness of health care services.
(b) “Health professional” means a physician and surgeon or other professional who is licensed in California to deliver or furnish health care services. “Health professional” does not include a dentist licensed pursuant to the Dental Practice Act (Chapter 4 (commencing with Section 1600) of Division 2 of the Business and Professions Code).
(c) (1) “Health care service” means a health care procedure, treatment, or service that is either of the following:
(A) Provided at a facility licensed in California.
(B) Provided or ordered by a physician and surgeon or within the scope of practice for which a health care professional is licensed in California.
(2) “Health care service” also includes the provision of pharmaceutical products or services or durable medical equipment.
(3) “Health care service” shall include brand name prescription drugs until January 1, 2027. The department shall conduct an analysis of the inclusion of brand name prescription drugs as a health care service, including an analysis of the costs and savings, prospects for continuing or expanding the gold card program for brand name prescription drugs, feedback received from the provider community, and an assessment of the administrative costs to the insurer of administering or implementing the gold card program for brand name prescription drugs. The department shall submit a report on its findings to the Legislature by July 1, 2026. The report shall be submitted in compliance with Section 9795 of the Government Code.
(4) “Health care service” does not include the provision of any of the following:
(A) Tier four prescription drugs, as defined in Section 1342.73, under the applicable enrollee’s coverage.
(B) Experimental, investigational, or unproven drugs or products under the applicable enrollee’s coverage.
(C) Prescription drugs not approved by the federal Food and Drug Administration.
(d) “Prior authorization” means the process by which utilization review determines the medical necessity or medical appropriateness of otherwise covered health care services before or concurrent with the rendering of those health care services. “Prior authorization” also includes a health care service plan requirement that an enrollee or health professional notify the health care service plan before providing a health care service. service, including preauthorization, precertification, and prior approval.

1366.71.
 (a) (1) On or after January 1, 2024, a health care service plan shall not require a contracted health professional to complete or obtain a prior authorization for any health care services if, in the most recent one-year contracted period, the health care service plan approved or would have approved not less than 80 90 percent of the prior authorization requests submitted by the health professional for all the class of health care services or treatment subject to prior authorization for enrollees of the health care service plan.
(2) For purposes of this section, a modification by a plan of a prior authorization request that is ultimately approved shall count as an approval.
(3) A health professional’s exemption shall apply to services, items, and supplies, including drugs, within the contracted health professional’s medical licensure, board certification, specialty, or scope of practice.

(2)

(4) Paragraph (1) applies to any and all product types offered by the health care service plan that are regulated by the department. department, but shall include Medi-Cal managed care plans only to the extent permissible under federal law.
(b) A health care service plan shall evaluate if a contracted health professional without an exemption qualifies for an exemption from prior authorization requirements under subdivision (a) once every 12 months or upon the request of the health professional. professional, but no more often than once every 12 months. A health care service plan may evaluate if a contracted health care professional continues to qualify for an exemption from prior authorization requirements under subdivision (a) not more than once every two years. 12 months. This section does not require a health care service plan to evaluate an existing exemption or prevent the establishment of a longer exemption period. A contracted health professional is not required to request an exemption to qualify for the exemption.
(c) A health care service plan shall provide a health professional who receives an exemption with a notice that includes a statement that the health professional qualifies for an exemption from preauthorization requirements and a statement of the duration of the exemption.

1366.72.
 (a) Upon a health professional’s request, the health care service plan shall provide a health professional who is denied a prior authorization exemption with the facts and information that supports its denial, including statistics and data for the relevant prior authorization request evaluation period and detailed information sufficient to demonstrate that the health professional does not meet the criteria for an exemption pursuant to Section 1366.71.
(b) A health professional’s exemption from prior authorization shall remain in effect until the 30th calendar day after the date the health care service plan notifies the health professional of the health care service plan’s determination to rescind the exemption, or, if the health professional appeals the rescission determination, the fifth business day after the date the independent review organization affirms the health care service plan’s determination to rescind the exemption.

1366.73.
 (a) A health care service plan shall only rescind a prior authorization exemption at the end of the two-year 12-month period and if the health care service plan meets all of the following requirements:
(1) For exemptions pursuant to paragraph (1) of subdivision (a) of Section 1366.71, makes a determination that the health professional would not have met the 80-percent 90-percent approval criteria based on a retrospective review of a random sample of a minimum of 10, 15, but no more than 20, 25, claims for covered services for which the exemption applies for the previous two years. 12 months.
(2) Complies with other applicable requirements specified in this section, including both of the following:
(A) Notifies the health professional at least 30 calendar days before the proposed rescission is to take effect.
(B) Provides the notice required under subparagraph (A) with both of the following:
(i) The information and data relied on to make the determination.
(ii) A plain-language explanation of how the health professional may appeal and seek an independent review of the determination pursuant to this section.
(b) A determination to revoke rescind or deny a prior authorization exemption shall be made by a health professional licensed in California of the same or similar specialty as the health professional being considered for an exemption and who has experience in providing the type of services for which the exemption applies.
(c) If a health care service plan does not finalize a rescission determination as specified in subdivision (a), then the individual health professional is considered to have met the criteria under Section 1366.71 to continue to qualify for the exemption.
(d) (1) A health professional may appeal the decision to deny or rescind a prior authorization exemption and has a right to have the appeal conducted and completed by a health professional licensed in California of the same or similar specialty as the health professional being considered for an exemption. exemption who was not directly involved in making the initial denial or rescission of the exemption.
(2) A health professional may request that the reviewing health professional consider another random sample of claims submitted to the health care service plan by the health professional during the relevant evaluation period as part of their review.
(3) Within 30 calendar days of receipt of the appeal, the health care service plan shall reconsider the denial or rescission of the exemption and provide a written response to the health professional with the appeal determination and the basis for the determination, including pertinent facts and information relied upon in reaching the determination.

1366.74.
 A health care service plan shall be bound by the determination made pursuant to Section 1366.73. A health care service plan shall not retroactively deny or modify a health care service on the basis of a rescission of an exemption, even if the health care service plan’s determination to rescind the prior authorization exemption is affirmed pursuant to Section 1366.73.

1366.75.
 Following a final determination or review affirming the rescission or denial of an exemption, a health professional is eligible for consideration of an exemption after a 12-month period.

1366.76.

A health care service plan shall not deny or reduce payment to a health professional based on medical necessity or clinical criteria for health care services while the health professional is qualified for an exemption from prior authorization requirements pursuant to this article.

1366.76.
 A health care service plan shall not deny or reduce payment for a health care service exempted from a prior authorization requirement pursuant to paragraph (1) of subdivision (a) of Section 1366.71, including a health care service performed or supervised by another health care professional when the performing or supervising health care professional or other health care professional who ordered the service received a prior authorization exemption, unless the performing or supervising health care professional or other health care professional did either of the following:
(a) Knowingly and materially misrepresented the health care service in a request for payment submitted to a health care service plan with the specific intent to deceive and obtain an unlawful payment from the health care service plan.
(b) Failed to substantially perform the health care service.

1366.77.
 If a health care service plan delegates the responsibility for prospective, concurrent, or retrospective utilization review to a contracted entity, including a medical group or independent practice association, then the entity to which that responsibility is delegated shall comply with this article.

1366.78.
 This article does not prevent a health care service plan from taking action, including rescinding a prior authorization exemption granted under subdivision (a) of Section 1366.71 at any time, against a contracted health professional that has been found, through an investigation by the plan, to have committed fraud or to have a pattern of abuse in violation of the plan’s contract.

SEC. 3.

 Section 1367.032 is added to the Health and Safety Code, to read:

1367.032.
 (a) A physician and surgeon has the right to have an appeal of a prior authorization decision, pursuant to Section 1368, conducted by a physician and surgeon of the same or similar specialty.
(b) A health care service plan shall not require the filing of an appeal challenging an adverse result of a prior authorization request before the filing of an independent medical review pursuant to Section 1374.30.

SEC. 4.

 Section 10123.134 is added to the Insurance Code, to read:

10123.134.
 (a) A physician and surgeon has the right to have an appeal of a prior authorization decision conducted by a physician and surgeon of the same or similar specialty.
(b) A health care service plan insurer shall not require the filing of an appeal challenging an adverse result of a prior authorization request before the filing of an independent medical review pursuant to Section 10169.

SEC. 5.

 Section 10123.135 of the Insurance Code is amended to read:

10123.135.
 (a) Every disability insurer, or an entity with which it contracts for services that include utilization review or utilization management functions, that covers hospital, medical, or surgical expenses and that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b) A disability insurer that is subject to this section, or any entity with which an insurer contracts for services that include utilization review or utilization management functions, shall have written policies and procedures establishing the process by which the insurer prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for insureds. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to subdivision (f). These policies and procedures, and a description of the process by which an insurer, or an entity with which an insurer contracts for services that include utilization review or utilization management functions, reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, shall be filed with the commissioner, and shall be disclosed by the insurer to insureds and providers upon request, and by the insurer to the public upon request.
(c) If the number of insureds covered under health benefit plans in this state that are issued by an insurer subject to this section constitute at least 50 percent of the number of insureds covered under health benefit plans issued nationwide by that insurer, the insurer shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or the Osteopathic Initiative Act, or the insurer may employ a clinical director licensed in California whose scope of practice under California law includes the right to independently perform all those services covered by the insurer. The medical director or clinical director shall ensure that the process by which the insurer reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, complies with the requirements of this section. Nothing in this subdivision shall be construed as restricting the existing authority of the Medical Board of California.
(d) If an insurer subject to this section, or individuals under contract to the insurer to review requests by providers, approve the provider’s request pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e) An individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may not deny or modify requests for authorization of health care services for an insured for reasons of medical necessity. The decision of the physician or other health care provider shall be communicated to the provider and the insured pursuant to subdivision (h).
(f) (1) An insurer shall disclose, or provide for the disclosure, to the commissioner and to network providers, the process the insurer, its contracting provider groups, or any entity with which it contracts for services that include utilization review or utilization management functions, uses to authorize, delay, modify, or deny health care services under the benefits provided by the insurance contract, including coverage for subacute care, transitional inpatient care, or care provided in skilled nursing facilities. An insurer shall also disclose those processes to policyholders or persons designated by a policyholder, or to any other person or organization, upon request.
(2) The criteria or guidelines used by an insurer, or an entity with which an insurer contracts for utilization review or utilization management functions, to determine whether to authorize, modify, delay, or deny health care services, shall comply with all of the following:
(A) Be developed with involvement from actively practicing health care providers, including a representative sample of physicians and surgeons that compose an insurer’s prior authorization requests. contracted physicians and surgeons and other health professionals acting within their scopes of practice that have experienced, or are currently subject to, utilization review or utilization management.
(B) Be consistent with sound clinical principles and processes.
(C) Be evaluated, and updated if necessary, at least annually.
(D) If used as the basis of a decision to modify, delay, or deny services in a specified case under review, be disclosed to the provider and the policyholder in that specified case.
(E) Be available to the public upon request. An insurer shall only be required to disclose the criteria or guidelines for the specific procedures or conditions requested. An insurer may charge reasonable fees to cover administrative expenses related to disclosing criteria or guidelines pursuant to this paragraph that are limited to copying and postage costs. The insurer may also make the criteria or guidelines available through electronic communication means.
(3) The disclosure required by subparagraph (E) of paragraph (2) shall be accompanied by the following notice: “The materials provided to you are guidelines used by this insurer to authorize, modify, or deny health care benefits for persons with similar illnesses or conditions. Specific care and treatment may vary depending on individual need and the benefits covered under your insurance contract.”
(g) If an insurer subject to this section requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the insurer shall request only the information reasonably necessary to make the determination.
(h) In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, based in whole or in part on medical necessity, every insurer subject to this section shall meet the following requirements:
(1) Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with, the provision of health care services to insureds that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the insured’s condition, not to exceed five business days from the insurer’s receipt of the information reasonably necessary and requested by the insurer to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individual’s designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2) When the insured’s condition is such that the insured faces an imminent and serious threat to their health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the insured’s life or health or could jeopardize the insured’s ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to insureds shall be made in a timely fashion, appropriate for the nature of the insured’s condition, but not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the insurer’s receipt of the information reasonably necessary and requested by the insurer to make the determination.
(3) Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to insureds shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the insured’s treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the insured in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the insured’s treating provider has been notified of the insurer’s decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4) Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall be communicated to insureds in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the insurer’s decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification or a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the provider or the insured may file an appeal with the insurer or seek department review under the unfair practices provisions of Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1 and the regulations adopted thereunder.
(5) If the insurer cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the insurer is not in receipt of all of the information reasonably necessary and requested, or because the insurer requires consultation by an expert reviewer, or because the insurer has asked that an additional examination or test be performed upon the insured, provided that the examination or test is reasonable and consistent with good medical practice, the insurer shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2), or as soon as the insurer becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the insured, in writing, that the insurer cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The insurer shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the insurer, the insurer shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6) If the commissioner determines that an insurer has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the commissioner may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected. The administrative penalties shall not be deemed an exclusive remedy for the commissioner. These penalties shall be paid to the Insurance Fund.
(i) Every insurer subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j) Nothing in this section shall cause a disability insurer to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.

SEC. 6.

 Article 1.3 (commencing with Section 10127.40) is added to Chapter 1 of Part 2 of Division 2 of the Insurance Code, to read:
Article  1.3. Prior Authorization Exemptions

10127.40.
 For purposes of this article:
(a) “Clinical criteria” means the written policies, written screening procedures, drug formularies or lists of covered drugs, determination rules, determination abstracts, clinical protocols, practice guidelines, medical protocols, and any other criteria or rationale used by the health insurer or its utilization review entity to determine the necessity and appropriateness of health care services.
(b) “Health professional” means a physician and surgeon or other professional who is licensed in California to deliver or furnish health care services. “Health professional” does not include a dentist licensed pursuant to the Dental Practice Act (Chapter 4 (commencing with Section 1600) of Division 2 of the Business and Professions Code).
(c) (1) “Health care service” means a health care procedure, treatment, or service that is either of the following:
(A) Provided at a facility licensed in California.
(B) Provided or ordered by a physician and surgeon or within the scope of practice for which a health care professional is licensed in California.
(2) “Health care service” also includes the provision of pharmaceutical products or services or durable medical equipment.
(3) “Health care service” shall include brand name prescription drugs until January 1, 2027. The department shall conduct an analysis of the inclusion of brand name prescription drugs as a health care service, including an analysis of the costs and savings, prospects for continuing or expanding the gold card program for brand name prescription drugs, feedback received from the provider community, and an assessment of the administrative costs to the insurer of administering or implementing the gold card program for brand name prescription drugs. The department shall submit a report on its findings to the Legislature by July 1, 2026. The report shall be submitted in compliance with Section 9795 of the Government Code.
(4) “Health care service” does not include the provision of any of the following:
(A) Tier four prescription drugs, as defined in Section 10123.1932, under the applicable insured’s coverage.
(B) Experimental, investigational, or unproven drugs or products under the applicable insured’s coverage.
(C) Prescription drugs not approved by the federal Food and Drug Administration.
(d) “Prior authorization” means the process by which utilization review determines the medical necessity or medical appropriateness of otherwise covered health care services before or concurrent with the rendering of those health care services. “Prior authorization” also includes a health insurer requirement that an insured or health professional notify the health insurer before providing a health care service. service, including preauthorization, precertification, and prior approval.

10127.41.
 (a) (1) On or after January 1, 2024, a health insurer shall not require a contracted health professional to complete or obtain a prior authorization for any health care services if, in the most recent one-year contracted period, the health insurer approved or would have approved not less than 80 90 percent of the prior authorization requests submitted by the health professional for all the class of health care services or treatment subject to prior authorization for insureds of the health insurer.
(2) For purposes of this section, a modification by an insurer of a prior authorization request that is ultimately approved shall count as an approval.
(3) A health professional’s exemption shall apply to services, items, and supplies, including drugs, within the contracted health professional’s medical licensure, board certification, specialty, or scope of practice.

(2)

(4) Paragraph (1) applies to any and all product types offered by the health insurer that are regulated by the department.
(b) A health insurer shall evaluate if a contracted health professional without an exemption qualifies for an exemption from prior authorization requirements under subdivision (a) once every 12 months or upon the request of the health professional. professional, but no more often than once every 12 months. A health insurer may evaluate if a contracted health care professional continues to qualify for an exemption from prior authorization requirements under subdivision (a) not more than once every two years. 12 months. This section does not require a health insurer to evaluate an existing exemption or prevent the establishment of a longer exemption period. A contracted health professional is not required to request an exemption to qualify for the exemption.
(c) A health insurer shall provide a health professional who receives an exemption with a notice that includes a statement that the health professional qualifies for an exemption from preauthorization requirements and a statement of the duration of the exemption.

10127.42.
 (a) Upon a health professional’s request, the health insurer shall provide a health professional who is denied a prior authorization exemption with the facts and information that supports its denial, including statistics and data for the relevant prior authorization request evaluation period and detailed information sufficient to demonstrate that the health professional does not meet the criteria for an exemption pursuant to Section 10127.41.
(b) A health professional’s exemption from prior authorization shall remain in effect until the 30th calendar day after the date the health insurer notifies the health professional of the health insurer’s determination to rescind the exemption, or, if the health professional appeals the rescission determination, the fifth business day after the date the independent review organization affirms the health insurer’s determination to rescind the exemption.

10127.43.
 (a) A health insurer shall only rescind a prior authorization exemption at the end of the two-year 12-month period and if the health insurer meets all of the following requirements:
(1) For exemptions pursuant to paragraph (1) of subdivision (a) of Section 10127.41, makes a determination that the health professional would not have met the 80-percent 90-percent approval criteria based on a retrospective review of a random sample of a minimum of 10, 15, but no more than 20, 25, claims for covered services for which the exemption applies for the previous two years. 12 months.
(2) Complies with other applicable requirements specified in this section, including both of the following:
(A) Notifies the health professional at least 30 calendar days before the proposed rescission is to take effect.
(B) Provides the notice required under subparagraph (A) with both of the following:
(i) The information and data relied on to make the determination.
(ii) A plain-language explanation of how the health professional may appeal and seek an independent review of the determination pursuant to this section.
(b) A determination to revoke rescind or deny a prior authorization exemption shall be made by a health professional licensed in California of the same or similar specialty as the health professional being considered for an exemption and who has experience in providing the type of services for which the exemption applies.
(c) If a health insurer does not finalize a rescission determination as specified in subdivision (a), then the individual health professional is considered to have met the criteria under Section 10127.41 to continue to qualify for the exemption.
(d) (1) A health professional may appeal the decision to deny or rescind a prior authorization exemption and has a right to have the appeal conducted and completed by a health professional licensed in California of the same or similar specialty as the health professional being considered for an exemption. exemption who was not directly involved in making the initial denial or rescission of the exemption.
(2) A health professional may request that the reviewing health professional consider another random sample of claims submitted to the health insurer by the health professional during the relevant evaluation period as part of their review.
(3) Within 30 calendar days of receipt of the appeal, the health insurer shall reconsider the denial or rescission of the exemption and provide a written response to the health professional with the appeal determination and the basis for the determination, including pertinent facts and information relied upon in reaching the determination.

10127.44.
 A health insurer shall be bound by the determination made pursuant to Section 10127.43. A health insurer shall not retroactively deny or modify a health care service on the basis of a rescission of an exemption, even if the health insurer’s determination to rescind the prior authorization exemption is affirmed pursuant to Section 10127.43.

10127.45.
 Following a final determination or review affirming the rescission or denial of an exemption, a health professional is eligible for consideration of an exemption after a 12-month period.

10127.46.

A health insurer shall not deny or reduce payment to a health professional based on medical necessity or clinical criteria for health care services while the health professional is qualified for an exemption from prior authorization requirements pursuant to this article.

10127.46.
 A health insurer shall not deny or reduce payment for a health care service exempted from a prior authorization requirement pursuant to paragraph (1) of subdivision (a) of Section 10127.41, including a health care service performed or supervised by another health care professional when the performing or supervising health care professional or other health care professional who ordered the service received a prior authorization exemption, unless the performing or supervising health care professional or other health care professional did either of the following:
(a) Knowingly and materially misrepresented the health care service in a request for payment submitted to a health insurer with the specific intent to deceive and obtain an unlawful payment from the health insurer.
(b) Failed to substantially perform the health care service.

10127.47.
 If a health insurer delegates the responsibility for prospective, concurrent, or retrospective utilization review to a contracted entity, including a medical group or independent practice association, then the entity to which that responsibility is delegated shall comply with this article.

10127.48.
 This article does not prevent a health insurer from taking action, including rescinding a prior authorization exemption granted under subdivision (a) of Section 10127.41 at any time, against a contracted health professional that has been found, through an investigation by the insurer, to have committed fraud or to have a pattern of abuse in violation of the insurer’s contract.

SEC. 7.

 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.