BILL ANALYSIS
SENATE COMMITTEE ON INSURANCE
Senator Herschel Rosenthal, Chair
SB 1658 (Peace) Hearing Date: April 1,
1998
As Amended: March 23, 1998
Fiscal: Yes
SUMMARY
SB 1658 would clarify and limit the authority of the
Department of Corporations to regulate Mexico-based HMOs
doing business in California.
DIGEST
Existing law
1. The Knox-Keene Act directs the Department of
Corporations (DOC) to regulate health care service
plans, and includes a definition of the term "health
care service plan."
2. Requires health care service plans doing business in
California to secure a license from DOC and to abide by
numerous provisions set forth in the Act to protect
health plan enrollees.
3. Requires DOC to investigate complaints filed by health
plan enrollees and take enforcement action when
appropriate.
This bill
1. Would change the definition of "health care service
plan" or "specialized health care service plan" to
include: "Any person, whether located within or
outside of this state, who solicits or contracts with a
subscriber or enrollee in this state to pay for or
reimburse any part of the cost of, or who undertakes to
arrange or arranges for, the provision of health care
services that are to be provided wholly or in part in a
foreign country in return for a prepaid or periodic
charge paid by or on behalf of the subscriber or
enrollee."
2. Would authorize a health plan licensed under the laws
of Mexico to apply for a license as a health care
service plan under the Knox Keene Act. A Mexico-based
health plan would have to demonstrate compliance with
specified requirements including but not limited to:
-operating lawfully under the laws of Mexico
-offering and selling in this state only group plan
contracts primarily for the benefit of citizens of
Mexico legally employed in this state
-paying for health care services that are to be
provided or delivered wholly in Mexico, except for
emergency and urgent care services
-soliciting business only through insurance brokers
and agents, and third-party administrators (TPA),
licensed in this state
-providing all basic health care services including
reimbursement for emergency and urgent care
services
-requiring specified plan documents to contain a
legend in 10-point type, in both English and
Spanish, declaring that the contract provided by a
Mexico-based plan may be limited as to benefits,
rights, and remedies under California law
-requiring the plan to establish a grievance
procedure, and brokers and TPAs to establish a
grievance procedure for enrollee complaints related
to out-of-area emergency and urgent care services
in the U.S.
-requiring a notice to enrollees that grievances
filed with DOC will be forwarded to the broker or
TPA and the Mexico-based health plan.
-requiring the plan to maintain a specified net
worth
-requiring the plan to agree to make its books and
records available to DOC, including the books and
records of the plan's providers
-requiring the plan to agree that disputes shall be
subject to the jurisdiction of the courts of this
state and the United States
3. A Mexico-based plan would also be subject to a limited
number of provisions of the Knox-Keene Act, thereby
exempting these health plans from other provisions of
the Act. However, DOC, by order, could designate and
apply the other provisions of the Act when consistent
with the intent and purpose of act, and in the public
interest.
COMMENTS
1. Purpose of the bill . According to the author, the
purpose of the bill is to bring Mexico-based health plans
doing business in California under some, but not all, of
the provisions of the Knox-Keene Act. The author notes
that Mexico-based plans are offering health coverage to
legal aliens and their dependents -- California employees
who work here legally and live across the border in Mexico
with their families. These cross-border plans are cheaper
for employers and employees than California-based plans.
However, according to the author, these plans do not
currently fall under California law and, therefore, no
oversight is in place and consumers have no redress for
problems involving their medical care.
2. Background . In September of 1997, DOC held an
informational hearing in San Diego regarding Mexico-based
health plans that offer health coverage to legal aliens
working in California and their alien dependents.
Increasingly, San Diego employers are using
Mexico-based health plans to offer health care services in
Mexico to their employees who work in the U.S. legally, and
live across the border with their families. Questions have
arisen about whether these Mexico-based health plans doing
business in San Diego need to be licensed and regulated by
the State. Two of the main issues raised at the DOC
hearing concerned the financial stability of Mexico-based
plans and whether grievance procedures were in place to
protect workers and their families.
3. Opposition . The California Association of Health Plans
(CAHP) opposes the bill unless it is amended. CAHP is
concerned about the provisions in the bill which exempt
Mexico-based plans doing business in California from
specified sections of the Knox-Keene Act. For example,
CAHP questions the provision directing complaints away from
DOC and towards brokers, third party administrators and the
plans. CAHP maintains there is need for DOC to review
complaints -- for example, to determine whether the plans
have failed to cover contracted benefits. CAHP also
questions the exemption pertaining to marketing of plan
contracts to employers in California. In addition, CAHP
requests clarification on why Mexico-based plans are
exempted from California's small group reforms, and the
related reforms in the federal Health Insurance Portability
and Accountability Act of 1996 (HIPAA, also known as
Kassebaum-Kennedy), which contain guaranteed issue and
renewal requirements as well as rating requirements for
employers with 2-50 employees. CAHP also questions why
Mexican plans are exempted from the pre-existing condition
limitations of Cal-COBRA and the extended COBRA benefits
for those 60-65. The California Association of Life
Underwriters (CALU) also opposes SB 1658, echoing CAHP's
concern that the bill does not require compliance with
Cal-COBRA, HIPAA, and the state's small group health reform
law, and adding its concern about the special burden placed
upon agents and brokers to process patient grievances and
complaints.
4. Possible amendment . In the event Mexico-based health
"insurers" (as opposed to "health plans") are involved in
providing health insurance to U.S. employers for the
benefit of employee legal aliens working in California, it
may be appropriate to consult with the Department of
Insurance to determine whether similar new provisions of
law need to be added to the Insurance Code .
POSITIONS
Support
None reported to the Committee.
Oppose
California Association of Health Plans (Unless amended)
California Association of Life Underwriters
Consultant: Michael E. Shapiro