BILL ANALYSIS                                                                                                                                                                                                    



                                                          AB 918
                                                          Page  1

Date of Hearing:   May 12, 1999

              ASSEMBLY COMMITTEE ON APPROPRIATIONS 
                    Carole Migden, Chairwoman

          AB 918 (Keeley) - As Amended: April 19, 1999 

Policy Committee:                              HealthVote:14 - 0

Urgency:     No                   State Mandated Local  
Program:YesReimbursable:          No

  SUMMARY  

This bill requires health plan capitation payments to providers  
be computed by a qualified actuary, and requires health plans to  
annually update an actuarial report.  

  FISCAL EFFECT  

The bill would result in minor enforcement costs to the  
Department of Corporations.  State costs that would result from  
an increase in health plan premiums due to the bill's provisions  
would probably be minor.

  COMMENTS  

  1)Purpose of the Bill  .  This bill is sponsored by the California  
  Medical Association.  The sponsor argues the bill is necessary  
  because health plans charge and receive money up front to pay  
  for treatment to be rendered in the future, and that the  
  actual costs of that treatment is uncertain.  Accordingly, the  
  sponsor believes the resulting risk to contracting providers  
  should be subject to an actuarial evaluation.  The sponsor  
  believes such an evaluation will indicate whether a health  
  plan has adequately "spread its risk" through the use of  
  polling, sufficient stop-loss insurance, and re-insurance, and  
  has adequate financial reserves to cover any eventuality.

  2)Current Practice  .  Existing regulations require plans to  
  submit a statement describing the method used to calculate  
  capitation rates.  However, the statement is neither publicly  
  available nor required to be updated.  This bill requires the  
  actuarial data used to compute capitation rates to be updated  
  annually and to be filed with the Department of Corporations.








                                                          AB 918
                                                          Page  2


 3)Opposition  .  The California Association of Health Plans  
  opposes the bill, arguing it improperly requires the  
  disclosure of confidential, proprietary, competitive  
  information and trade secrets and that such disclosure would  
  put health plans at a disadvantage when negotiating with their  
  contracting providers.  The association argues there is no  
  value in having an actuary certifying capitation rates because  
  they are based on negotiations, market competition and  
  individual physician income expectations.  Accordingly, plans  
  believe there is no "actuarially sound" price for physician  
  services.  

  4)Prior Legislation  .  This bill is identical to SB 317  
  (Calderon) from the 1997-98 session, which was vetoed.  In his  
  veto message, the governor said "Providers can and do retain  
  actuaries and employ negotiators now, without legislative  
  mandate, if they feel it necessary to do so.  The Department  
  of Corporations is required to intervene if a plan is found to  
  have set capitation rates too low to permit necessary care.   
  But this bill at least implies a larger role for the  
  department as a rate-setter, a role which the enabling  
  Knox-Keene Act expressly forbids."

  Analysis Prepared by  :    William Wehrle / APPR. / (916) 319-2081