Article 2. Administration of California Health And Safety Code >> Division 2. >> Chapter 2.2. >> Article 2.
(a) The director shall administer and enforce this chapter
and shall have the following powers:
(1) Recommend and propose the enactment of any legislation
necessary to protect and promote the interests of the public,
subscribers, enrollees, and providers of health care services in
health care service plans in the State of California.
(2) Provide information to federal and state legislative
committees and executive agencies concerning plans.
(3) Assist, advise, and cooperate with federal, state, and local
agencies and officials to protect and promote the interests of plans,
subscribers, enrollees, and the public.
(4) Study, investigate, research, and analyze matters affecting
the interests of plans, subscribers, enrollees, and the public.
(5) Hold public hearings, subpoena witnesses, take testimony,
compel the production of books, papers, documents, and other
evidence, and call upon other state agencies for information to
implement the purposes, and enforce this chapter.
(6) Conduct audits and examinations of the books and records of
plans and other persons subject to this chapter, and may prescribe by
rule or order, but is not limited to, the following:
(A) The form and contents of financial statements required under
(B) The circumstances under which consolidated statements shall be
(C) The circumstances under which financial statements shall be
audited by independent certified public accountants or public
(7) Conduct necessary onsite medical surveys of the health
delivery system of each plan.
(8) Propose, develop, conduct, and assist in educational programs
for the public, subscribers, enrollees, and licensees.
(9) Promote and establish standards of ethical conduct for the
administration of plans and undertake activities to encourage
responsibility in the promotion and sale of plan contracts and the
enrollment of subscribers or enrollees in the plans.
(10) Advise the Governor on all matters affecting the interests of
plans, subscribers, enrollees, and the public.
(11) Determine that investments of a plan's assets necessary to
meet the requirements of Section 1376 are acceptable. For those
purposes, reinvestment in the plan and investment in any obligations
set forth in Article 3 (commencing with Section 1170) of, and Article
4 (commencing with Section 1190) of, Chapter 2 of Part 2 of Division
1 of the Insurance Code shall be considered acceptable. All other
assets shall be invested in a prudent manner.
(b) The powers enumerated in subdivision (a) shall not limit,
diminish, or otherwise restrict the other powers of the director
specifically set forth in this chapter and other laws.
The department shall maintain a database indicating for
each county, the names of the health care service plans that operate
in that particular county.
The director shall, in coordination with the Insurance
Commissioner, review the Internet portal developed by the United
States Secretary of Health and Human Services under subdivision (a)
of Section 1103 of the federal Patient Protection and Affordable Care
Act (Public Law 111-148) and paragraph (5) of subdivision (c) of
Section 1311 of that act, and any enhancements to that portal
expected to be implemented by the secretary on or before January 1,
2015. The review shall examine whether the Internet portal provides
sufficient information regarding all health benefit products offered
by health care service plans and health insurers in the individual
and small employer markets in California to facilitate fair and
affirmative marketing of all individual and small employer products,
particularly outside the California Health Benefit Exchange created
under Title 22 (commencing with Section 100500) of the Government
Code. If the director and the Insurance Commissioner jointly
determine that the Internet portal does not adequately achieve those
purposes, they shall jointly develop and maintain an electronic
clearinghouse to achieve those purposes. In performing this function,
the director and the Insurance Commissioner shall routinely monitor
individual and small employer benefit filings with, and complaints
submitted by individuals and small employers to, their respective
departments, and shall use any other available means to maintain the
(a) The Legislature finds and declares all of the
(1) That millions of Californians are insured under health care
service plans regulated by the Knox-Keene Health Care Service Plan
Act of 1975, and that more Californians each year are insuring
themselves under these health plans.
(2) That greater awareness of the rights and protections afforded
by the Knox-Keene Health Care Service Plan Act of 1975 will further
the act's goal of providing access to quality health care.
(3) That the public, Knox-Keene providers, and those seeking to
form health care service plans under the act will benefit from having
the text of the act available to them, affording a greater
understanding of what the act does and making it easier for providers
to comply with its provisions.
(b) The director shall annually publish this chapter and make it
available for sale to the public.
If the director determines that an entity purporting to be
a health care service plan exempt from the provisions of Section 740
of the Insurance Code is not a health care service plan, the director
shall inform the Department of Insurance of that finding. However,
if the director determines that an entity is a health care service
plan, the director shall prepare and maintain for public inspection a
list of those persons or entities described in subdivision (a) of
Section 740 of the Insurance Code, which are not subject to the
jurisdiction of another agency of this or another state or the
federal government and which the director knows to be operating in
the state. There shall be no liability of any kind on the part of the
state, the director, and employees of the Department of Managed
Health Care for the accuracy of the list or for any comments made
with respect to it. Additionally, any solicitor or solicitor firm who
advertises or solicits health care service plan coverage in this
state described in subdivision (a) of Section 740 of the Insurance
Code, which is provided by any person or entity described in
subdivision (c) of that section, and where such coverage does not
meet all pertinent requirements specified in the Insurance Code, and
which is not provided or completely underwritten, insured or
otherwise fully covered by a health care service plan, shall advise
and disclose to any purchaser, prospective purchaser, covered person
or entity, all financial and operational information relative to the
content and scope of the plan and, specifically, as to the lack of
(a) There is hereby established in the Department of
Managed Health Care the Financial Solvency Standards Board composed
of eight members. The members shall consist of the director, or the
director's designee, and seven members appointed by the director. The
seven members appointed by the director may be, but are not
necessarily limited to, individuals with training and experience in
the following subject areas or fields: medical and health care
economics; accountancy, with experience in integrated or affiliated
health care delivery systems; excess loss insurance underwriting in
the medical, hospital, and health plan business; actuarial studies in
the area of health care delivery systems; management and
administration in integrated or affiliated health care delivery
systems; investment banking; and information technology in integrated
or affiliated health care delivery systems. The members appointed by
the director shall be appointed for a term of three years, but may
be removed or reappointed by the director before the expiration of
(b) The purpose of the board is to do all of the following:
(1) Advise the director on matters of financial solvency affecting
the delivery of health care services.
(2) Develop and recommend to the director financial solvency
requirements and standards relating to plan operations,
plan-affiliate operations and transactions, plan-provider contractual
relationships, and provider-affiliate operations and transactions.
(3) Periodically monitor and report on the implementation and
results of the financial solvency requirements and standards.
(c) Financial solvency requirements and standards recommended to
the director by the board may, after a period of review and comment
not to exceed 45 days, be noticed for adoption as regulations as
proposed or modified under the rulemaking provisions of the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code).
During the director's 45-day review and comment period, the director,
in consultation with the board, may postpone the adoption of the
requirements and standards pending further review and comment.
Nothing in this subdivision prohibits the director from adopting
regulations, including emergency regulations, under the rulemaking
provisions of the Administrative Procedure Act.
(d) The board shall meet at least quarterly and at the call of the
chair. In order to preserve the independence of the board, the
director shall not serve as chair. The members of the board may
establish their own rules and procedures. All members shall serve
without compensation, but shall be reimbursed from department funds
for expenses actually and necessarily incurred in the performance of
(e) For purposes of this section, "board" means the Financial
Solvency Standards Board.
(a) A health care service plan providing individual
coverage in the Exchange shall cooperate with requests from the
Exchange to collaborate in the development of, and participate in the
implementation of, the Medi-Cal program's premium and cost-sharing
payments under Sections 14102 and 14148.65 of the Welfare and
Institutions Code for eligible Exchange enrollees.
(b) A health care service plan providing individual coverage in
the Exchange shall not charge, bill, ask, or require an enrollee
receiving benefits under Section 14102 or 14148.65 of the Welfare and
Institutions Code to make any premium or cost-sharing payments for
any services that are subject to premium or cost-sharing payments by
the State Department of Health Care Services under Section 14102 or
14148.65 of the Welfare and Institutions Code.
(c) For purposes of this section, "Exchange" means the California
Health Benefit Exchange established pursuant to Title 22 (commencing
with Section 100500) of the Government Code.
(a) Every health care service plan licensed to do business in
this state shall establish an antifraud plan. The purpose of the
antifraud plan shall be to organize and implement an antifraud
strategy to identify and reduce costs to the plans, providers,
subscribers, enrollees, and others caused by fraudulent activities,
and to protect consumers in the delivery of health care services
through the timely detection, investigation, and prosecution of
suspected fraud. The antifraud plan elements shall include, but not
be limited to, all of the following: the designation of, or a
contract with, individuals with specific investigative expertise in
the management of fraud investigations; training of plan personnel
and contractors concerning the detection of health care fraud; the
plan's procedure for managing incidents of suspected fraud; and the
internal procedure for referring suspected fraud to the appropriate
(b) Every plan shall submit its antifraud plan to the department
no later than July 1, 1999. Any changes shall be filed with the
department pursuant to Section 1352. The submission shall describe
the manner in which the plan is complying with subdivision (a), and
the name and telephone number of the contact person to whom inquiries
concerning the antifraud plan may be directed.
(c) Every health care service plan that establishes an antifraud
plan pursuant to subdivision (a) shall provide to the director an
annual written report describing the plan's efforts to deter, detect,
and investigate fraud, and to report cases of fraud to a law
enforcement agency. For those cases that are reported to law
enforcement agencies by the plan, this report shall include the
number of cases prosecuted to the extent known by the plan. This
report may also include recommendations by the plan to improve
efforts to combat health care fraud.
(d) Nothing in this section shall be construed to limit the
director's authority to implement this section in accordance with
(e) For purposes of this section, "fraud" includes, but is not
limited to, knowingly making or causing to be made any false or
fraudulent claim for payment of a health care benefit.
(f) Nothing in this section shall be construed to limit any civil,
criminal, or administrative liability under any other provision of
A health care service plan shall comply with the provisions
of Section 56.107 of the Civil Code to the extent required by that
section. To the extent this chapter conflicts with Section 56.107 of
the Civil Code, the provisions of Section 56.107 of the Civil Code
(a) No contract between a health care service plan and a
physician, physician group, or other licensed health care
practitioner shall contain any incentive plan that includes specific
payment made directly, in any type or form, to a physician, physician
group, or other licensed health care practitioner as an inducement
to deny, reduce, limit, or delay specific, medically necessary, and
appropriate services provided with respect to a specific enrollee or
groups of enrollees with similar medical conditions.
(b) Nothing in this section shall be construed to prohibit
contracts that contain incentive plans that involve general payments,
such as capitation payments, or shared-risk arrangements that are
not tied to specific medical decisions involving specific enrollees
or groups of enrollees with similar medical conditions. The payments
rendered or to be rendered to physicians, physician groups, or other
licensed health care practitioners under these arrangements shall be
deemed confidential information in accordance with subdivision (d) of
(a) A health care service plan that provides, operates, or
contracts for telephone medical advice services to its enrollees and
subscribers shall do all of the following:
(1) Ensure that the in-state or out-of-state telephone medical
advice service is registered pursuant to Chapter 15 (commencing with
Section 4999) of Division 2 of the Business and Professions Code.
(2) Ensure that the staff providing telephone medical advice
services for the in-state or out-of-state telephone medical advice
service are licensed as follows:
(A) For full service health care service plans, the staff hold a
valid California license as a registered nurse or a valid license in
the state within which they provide telephone medical advice services
as a physician and surgeon or physician assistant, and are operating
in compliance with the laws governing their respective scopes of
(B) (i) For specialized health care service plans providing,
operating, or contracting with a telephone medical advice service in
California, the staff shall be appropriately licensed, registered, or
certified as a dentist pursuant to Chapter 4 (commencing with
Section 1600) of Division 2 of the Business and Professions Code, as
a dental hygienist pursuant to Article 7 (commencing with Section
1740) of Chapter 4 of Division 2 of the Business and Professions
Code, as a physician and surgeon pursuant to Chapter 5 (commencing
with Section 2000) of Division 2 of the Business and Professions Code
or the Osteopathic Initiative Act, as a registered nurse pursuant to
Chapter 6 (commencing with Section 2700) of Division 2 of the
Business and Professions Code, as a psychologist pursuant to Chapter
6.6 (commencing with Section 2900) of Division 2 of the Business and
Professions Code, as an optometrist pursuant to Chapter 7 (commencing
with Section 3000) of Division 2 of the Business and Professions
Code, as a marriage and family therapist pursuant to Chapter 13
(commencing with Section 4980) of Division 2 of the Business and
Professions Code, as a licensed clinical social worker pursuant to
Chapter 14 (commencing with Section 4991) of Division 2 of the
Business and Professions Code, as a professional clinical counselor
pursuant to Chapter 16 (commencing with Section 4999.10) of Division
2 of the Business and Professions Code, or as a chiropractor pursuant
to the Chiropractic Initiative Act, and operating in compliance with
the laws governing their respective scopes of practice.
(ii) For specialized health care service plans providing,
operating, or contracting with an out-of-state telephone medical
advice service, the staff shall be health care professionals, as
identified in clause (i), who are licensed, registered, or certified
in the state within which they are providing the telephone medical
advice services and are operating in compliance with the laws
governing their respective scopes of practice. All registered nurses
providing telephone medical advice services to both in-state and
out-of-state business entities registered pursuant to this chapter
shall be licensed pursuant to Chapter 6 (commencing with Section
2700) of Division 2 of the Business and Professions Code.
(3) Ensure that every full service health care service plan
provides for a physician and surgeon who is available on an on-call
basis at all times the service is advertised to be available to
enrollees and subscribers.
(4) Ensure that staff members handling enrollee or subscriber
calls, who are not licensed, certified, or registered as required by
paragraph (2), do not provide telephone medical advice. Those staff
members may ask questions on behalf of a staff member who is
licensed, certified, or registered as required by paragraph (2), in
order to help ascertain the condition of an enrollee or subscriber so
that the enrollee or subscriber can be referred to licensed staff.
However, under no circumstances shall those staff members use the
answers to those questions in an attempt to assess, evaluate, advise,
or make any decision regarding the condition of an enrollee or
subscriber or determine when an enrollee or subscriber needs to be
seen by a licensed medical professional.
(5) Ensure that no staff member uses a title or designation when
speaking to an enrollee or subscriber that may cause a reasonable
person to believe that the staff member is a licensed, certified, or
registered professional described in Section 4999.2 of the Business
and Professions Code unless the staff member is a licensed,
certified, or registered professional.
(6) Ensure that the in-state or out-of-state telephone medical
advice service designates an agent for service of process in
California and files this designation with the director.
(7) Requires that the in-state or out-of-state telephone medical
advice service makes and maintains records for a period of five years
after the telephone medical advice services are provided, including,
but not limited to, oral or written transcripts of all medical
advice conversations with the health care service plan's enrollees or
subscribers in California and copies of all complaints. If the
records of telephone medical advice services are kept out of state,
the health care service plan shall, upon the request of the director,
provide the records to the director within 10 days of the request.
(8) Ensure that the telephone medical advice services are provided
consistent with good professional practice.
(b) The director shall forward to the Department of Consumer
Affairs, within 30 days of the end of each calendar quarter, data
regarding complaints filed with the department concerning telephone
medical advice services.
(c) For purposes of this section, "telephone medical advice" means
a telephonic communication between a patient and a health care
professional in which the health care professional's primary function
is to provide to the patient a telephonic response to the patient's
questions regarding his or her or a family member's medical care or
treatment. "Telephone medical advice" includes assessment,
evaluation, or advice provided to patients or their family members.
(a) On or before July 1, 2003, the director shall adopt
regulations to establish the Consumer Participation Program, which
shall allow for the director to award reasonable advocacy and witness
fees to any person or organization that demonstrates that the person
or organization represents the interests of consumers and has made a
substantial contribution on behalf of consumers to the adoption of
any regulation or to an order or decision made by the director if the
order or decision has the potential to impact a significant number
(b) The regulations adopted by the director shall include
specifications for eligibility of participation, rates of
compensation, and procedures for seeking compensation. The
regulations shall require that the person or organization demonstrate
a record of advocacy on behalf of health care consumers in
administrative or legislative proceedings in order to determine
whether the person or organization represents the interests of
(c) This section shall apply to all proceedings of the department,
but shall not apply to resolution of individual grievances,
complaints, or cases.
(d) Fees awarded pursuant to this section may not exceed three
hundred fifty thousand dollars ($350,000) each fiscal year.
(e) The fees awarded pursuant to this section shall be considered
costs and expenses pursuant to Section 1356 and shall be paid from
the assessment made under that section. Notwithstanding the
provisions of this subdivision, the amount of the assessment shall
not be increased to pay the fees awarded under this section.
(f) The department shall report to the appropriate policy and
fiscal committees of the Legislature before March 1, 2004, and
annually thereafter, the following information:
(1) The amount of reasonable advocacy and witness fees awarded
each fiscal year.
(2) The individuals or organization to whom advocacy and witness
fees were awarded pursuant to this section.
(3) The orders, decisions, and regulations pursuant to which the
advocacy and witness fees were awarded.
(g) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
Commencing March 1, 2013, and at least annually
thereafter, every health care service plan, not including a health
care service plan offering specialized health care service plan
contracts, shall provide to the department, in a form and manner
determined by the department in consultation with the Department of
Insurance, the number of enrollees, by product type, as of December
31 of the prior year, that receive health care coverage under a
health care service plan contract that covers individuals, small
groups, large groups, or administrative services only business lines.
Health care service plans shall include the enrollment data in
specific product types as determined by the department, including,
but not limited to, HMO, point-of-service, PPO, grandfathered, and
Medi-Cal managed care. The department shall publicly report the data
provided by each health care service plan pursuant to this section,
including, but not limited to, posting the data on the department's
Internet Web site. The department shall consult with the Department
of Insurance to ensure that the data reported is comparable and
consistent, does not duplicate existing reporting requirements, and
utilizes existing reporting formats.
Any data submitted by a health care service plan to the
United States Secretary of Health and Human Services, or his or her
designee, for purposes of the risk adjustment program described in
Section 1343 of the federal Patient Protection and Affordable Care
Act (42 U.S.C. Sec. 18063) shall be concurrently submitted to the
department in the same format. The department shall use the
information to monitor federal implementation of risk adjustment in
the state and to ensure that health care service plans are in
compliance with federal requirements related to risk adjustment.