Bill Text: CA AB1092 | 2023-2024 | Regular Session | Introduced
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Health care service plans: consolidation.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Engrossed) 2023-09-01 - In committee: Held under submission. [AB1092 Detail]
Download: California-2023-AB1092-Introduced.html
Bill Title: Health care service plans: consolidation.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Engrossed) 2023-09-01 - In committee: Held under submission. [AB1092 Detail]
Download: California-2023-AB1092-Introduced.html
CALIFORNIA LEGISLATURE—
2023–2024 REGULAR SESSION
Assembly Bill
No. 1092
| Introduced by Assembly Member Wood |
February 15, 2023 |
An act to amend Section 1399.65 of, and to amend the heading of Article 10.2 (commencing with Section 1399.65) of Chapter 2.2 of Division 2 of, the Health and Safety Code, relating to health care.
LEGISLATIVE COUNSEL'S DIGEST
AB 1092, as introduced, Wood.
Health care service plans: consolidation.
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 a health care service plan that intends to merge with, consolidate with, or enter into an agreement resulting in its purchase, acquisition, or control by, an entity, to give notice to, and secure prior approval from, the Director of the Department of Managed Health Care. Existing law authorizes the director to disapprove the transaction or agreement if the director finds it would substantially lessen competition in health care service plan products or create a monopoly in this state. Existing law authorizes the director to 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, provide for a stable health care delivery system, and impose other conditions specific to the transaction or agreement, as specified.
This bill would additionally require a health care service plan that intends to acquire or obtain control of an entity, as specified, to give notice to, and secure prior approval from, the director. Because a willful violation of this provision would be a crime, the bill would impose a state-mandated local program. The bill would also authorize the director to disapprove a transaction or agreement if it would substantially lessen competition in the health system or among a particular category of health care providers, and would require the director to provide information related to competition to the Attorney General. The bill would revise the director’s authority to conditionally approve a transaction or agreement, including authorizing the
director to review information from federal agencies and other state agencies, including agencies in other states, that is relevant to any of the parties to the transaction, as specified.
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.
Digest Key
Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: YESBill Text
The people of the State of California do enact as follows:
SECTION 1.
The heading of Article 10.2 (commencing with Section 1399.65) of Chapter 2.2 of Division 2 of the Health and Safety Code is amended to read:Article 10.2. Mergers and Acquisitions of and by Health Care Service Plans
SEC. 2.
Section 1399.65 of the Health and Safety Code is amended to read: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. A health care service plan that intends to acquire or obtain control of an entity through a change of governance or control of a material amount of assets of that entity shall give notice to, and secure prior approval from, the director.(2) The transactions or agreements described in paragraph (1) may
not be completed until the director approves the transaction or agreement.
(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 or agreement, any modified exhibits for plan licensure pursuant to Section 1351, any approvals by federal or other state agencies required for the transaction or agreement, 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, provide for a stable health care delivery system, control costs to subscribers and enrollees, and impose other conditions specific to the transaction or agreement in furtherance of this chapter. For purposes of this paragraph, the director shall also review information from federal agencies and other state agencies, including agencies in other states, that is relevant to any of the parties to the transaction, and may indicate compliance with state or federal laws, including the laws of other states. The director shall engage stakeholders in determining the measures for improvement. For a major transaction or agreement, the director shall obtain an independent analysis of the impact of the transaction or agreement on subscribers and
enrollees, the stability of the health care delivery system, and other relevant provisions of this chapter. For any other transaction or agreement, the director may obtain an independent analysis consistent with this paragraph.
(5) If an entity involved in the transaction or agreement 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) (1) 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 transaction or agreement 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 or agreement.
(2) 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) or paragraph (1) of this subdivision, the director may disapprove the transaction or agreement if the director finds the transaction or agreement would substantially lessen competition in the health system or among a particular category of health care
providers. In so doing, the director shall provide to the Attorney General information related to competition. The authority of the Attorney General to maintain competitive markets and prosecute state and federal antitrust and unfair competition violations shall not be narrowed, abrogated, or otherwise altered by this section.
(3) In making a finding pursuant to paragraph (1) or (2), the director may obtain an opinion from a consultant or consultants with the expertise to assess the competitive impact of the transaction or agreement.
(c) Prior to approving, conditionally approving, or disapproving a major transaction or agreement, the department shall hold a public meeting on the proposed transaction or agreement. For any other transaction or agreement, the department may hold a public meeting on the proposed transaction or agreement. 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 transaction or agreement 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 or agreement.
(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 a
statement describing the proposed transaction or agreement subject to subdivision (a) and make it available to the public. The statement shall be made available before the public meeting.
(e) This section does not limit the authority of the director to enforce any other provision of this chapter.
(f) The following definitions apply for purposes of this section:
(1) “Acquiring” an entity includes the sale, transfer, lease, exchange, option, conveyance, or other disposition of an entity’s assets by a health care service plan if a material amount of the assets of the entity are involved in the agreement or transaction.
(f)For purposes of this section, “entity”
(2) “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.
(g)(1)For purposes of this section, “major
(3) (A) “Major
transaction or agreement” means a transaction or agreement that meets any of the following criteria:
(A)
(i) Affects a significant number of enrollees.
(B)
(ii) Involves a material amount of assets.
(C)
(iii) Adversely affects either the subscribers or enrollees or the stability of the health care delivery system because of the entity’s market position, including, but not limited to, the entity’s market exit from a market segment or the entity’s dominance of a market segment.
(2)
(B) The director shall, upon request, make available to the public his or her
the director’s determination of whether a transaction or agreement meets the criteria set forth in this subdivision.
paragraph.
(4) “Obtaining control” of an entity occurs if the entity transfers control, responsibility, or governance of a material amount of its assets or operations to a health care service plan.
(5) “Transfer” includes the substitution of one or more new corporate members that would transfer the control of, responsibility for, or governance of the entity. “Transfer” also includes the substitution of one or more members of the entity’s governing body, or an arrangement, written or oral, that would transfer voting control of the members of the governing body.
