CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1124

Author:(Maienschein)

As Amended Ver:August 25, 2020

Majority vote

SUMMARY:

Authorizes the Department of Managed Health Care (DMHC), no later than May 1, 2021 and until January 1, 2028, to authorize two pilot programs that allow health care providers to undertake risk-bearing arrangements with a voluntary employees' beneficiary association (VEBA), as defined under federal and state law with enrollment of greater than 100,000 lives, or a trust fund that is a welfare plan, and a multiemployer plan, as defined in federal law, with enrollment greater than 25,000 lives.

The Senate amendments:

Delete the Assembly-approved version of this bill, and instead:

1. Allow the DMHC Director, no later than May 1, 2021, to authorize one pilot program in northern California, and one pilot program in southern California, whereby providers approved by the DMHC may undertake risk-bearing arrangements with a VEBA, as defined, with enrollment of greater than 100,000 lives, or a trust fund that is a welfare plan, as defined, and a multiemployer plan, as defined, with enrollment of greater than 25,000 lives, to December 31, 2025, inclusive, if all of the following criteria are met:
   1. The purpose of the pilot program is to demonstrate the control of costs for health care services and the improvement of health outcomes and quality of service when compared against a sole fee-for-service (FFS) provider reimbursement model;
   2. The VEBA or trust fund has entered into a contract with one or more health care providers under which each provider agrees to VEBA employees' beneficiary association or trust fund;
   3. Each risk-bearing provider is registered as a risk-bearing organization (RBO), as specified, and applicable DMHC regulations if the provider accepts professional capitation and is delegated the responsibility for the processing and payment of claims;
   4. Each global risk-bearing provider holds or will obtain in conjunction with the pilot program application a limited or restricted license, as specified;
   5. Each risk-bearing provider continues to comply with applicable financial solvency standards and audit requirements, including, but not limited to, financial reporting on a quarterly basis, during the term of the pilot program;
   6. Require the VEBA or trust fund to be responsible for providing all of the following:
      1. Basic health care services;
      2. Prescription drug benefits;
      3. Continuity of care;
      4. Standards for network adequacy and timely access to care, including, but not limited to, access to specialty care;
      5. Language assistance programs;
      6. A process for filing and resolving consumer grievances and appeals, including, but not limited to, independent medical review;
      7. Prohibitions against deceptive marketing;
      8. Member documents that include a description of the benefit coverage, any applicable copays, how to access services, and how to submit a grievance; and,
      9. Mechanisms for resolving provider disputes, including an appeals process.
   7. Require the contract between the VEBA or trust fund and each health care provider to include all of the following:
      1. Provisions dividing financial responsibility between the parties and defining which party is financially responsible for services rendered, including arrangements for member care should a global or risk-bearing provider become insolvent;
      2. A delegation agreement;
      3. Requirements regarding utilization review or utilization management;
      4. Provisions stating the RBO, limited licensee, or restricted licensee, as applicable, has the organizational and administrative capacity to provide services to covered employees, and that medical decisions are rendered by qualified medical providers, unhindered by fiscal and administrative management, including the disclosure of the percentage of risk assumed in relation to its total risk-based business;
      5. Requirements regarding the submission of claims by providers and the timely processing of provider claims, including a guarantee that the VEBA or trust fund will indemnify any outstanding unpaid provider claim in the event of the insolvency of a participating provider to the pilot program;
      6. Require the health care provider to comply with the VEBA or trust fund's requirements for all of the following:
         1. Continuity of care;
         2. Language assistance; and
         3. Consumer grievances and appeals, including, but not limited to, independent medical review.
      7. Prohibit the term of each contract between the VEBA or trust fund and a health care provider from exceeding the period of the pilot program; and,
      8. Requires each VEBA or trust fund, to participate in the pilot program, to submit to the DMHC an application. Allows the DMHC to select up to two qualified participants for the pilot program.
      9. Specify that each health care provider that has entered into a contract with the VEBA or trust fund is a party to the pilot program application submitted to the DMHC. Requires the application to include a copy of each contract between the VEBA or trust fund and a participating health care provider.
2. Require the VEBA or trust fund and each health care provider participating in the pilot program agree to collect and report to the DMHC, in each year of the pilot program, in a manner and frequency determined by DMHC, information regarding the comparative cost savings when compared to FFS payment, performance measurements for clinical patient outcomes, and enrollee satisfaction. Authorizes the DMHC to require additional reporting, not subject to the Administrative Procedure Act.
3. Allow the DMHC to authorize a public or private agency to receive the information and monitor the pilot program under the data standard currently used by the Integrated Healthcare Association's "Align. Measure. Perform." program and the California Regional Health Care Cost & Quality Atlas.
4. Specify that this bill does not exempt a health care provider that contracts with a VEBA or trust fund as part of a pilot program, as authorized, from the financial solvency requirements of existing law, nor does not it exempt a VEBA participating in a pilot program authorized by exemptions from the requirement to reimburse providers on a FFS basis.
5. Require the participating VEBA or trust fund to each appoint an ombudsperson to monitor and respond to any complaint lodged by a participating enrollee in their respective pilot programs. Requires the ombudsperson, if the enrollee is not satisfied with the result, to refer the enrollee to the DMHC's grievance and appeal process. Requires the DMHC determination to be binding upon the VEBA or trust fund.
6. Require the participating VEBA or trust fund to report on a quarterly basis to the DMHC any complaint lodged by a participating enrollee in their respective pilot programs, along with a description of the response and resolution.
7. Require the global and risk-bearing providers participating in a pilot program authorized by 1) above be approved by the DMHC. Specifies that the DMHC retains the rights to disapprove any pilot program application for any reason, including, but not limited to, failure to demonstrate to the DMHC's satisfaction adequate enrollee protection and compliance with this bill.
8. Requires the DMHC, after the termination of both pilot programs, and before January 1, 2027, to submit a report, consistent with existing law, to the Legislature regarding the costs and clinical patient outcomes of the pilot programs compared to FFS payment models, including data on consumer and provider grievances, appeals, and independent medical reviews. Allows the DMHC to authorize a public or private agency to prepare the report.
9. Require the pilot participants to reimburse the DMHC for reasonable regulatory costs of up to five hundred thousand dollars ($500,000) for all of the following:
   1. Commissioning the report in 8) above;
   2. Developing an application process for the pilot programs described in this bill;
   3. Monitoring compliance with this bill.
10. Sunset the provisions of this bill on January 1, 2028.

COMMENTS:

According to DMHC's Annual Report, in 2019, 80 full service health plans licensed by the DMHC provided health care services to more than 26 million Californians. DMHC assesses and monitors health plan networks and delivery systems for compliance with the Knox-Keene Act, and evaluates compliance through onsite surveys of health plan operations performed every three years. Surveys examine health plan processes related to access, utilization management, quality improvement, continuity and coordination of care, language access and enrollee grievances and appeals.

DMHC Licensure Requirements. According to a 2018 State Health and Value Strategies report, the Knox-Keene Act is the legal framework through which health care entities in the state are governed. The long-standing practice of providers accepting financial risk in California, and the bankruptcies of large provider groups in the 1990s, led DMHC to adopt prescriptive regulations governing health plans and provider RBOs. The Knox-Keene Act requires licensure by DMHC of health plans that accept global risk, defined as risk for both institutional and professional services, for the provision of health care services. DMHC is also authorized to exempt entities from Knox-Keene Act requirements under certain circumstances.

Risk Regulations. DMHC finalized regulations seeking to clarify the level of financial risk that would trigger health plan licensure. The regulations proposed different categories of licensure, including "full" and "restricted." Traditional health insurance plans would be required to obtain a full license to operate. Entities that accept global risk as a subcontractor to a fully-licensed health plan could obtain a restricted license. A restricted licensee would not be subject to rules concerning marketing and enrollment. Entities that have a small market share and/or operate in well-served areas could be granted an exemption from California's licensure requirements as those dynamics reduce the risk of disrupting the delivery of care in the event of insolvency.

RBOs. An entity in California that only takes financial risk within the scope of its professional license (e.g., primary care capitation) is required to register as an RBO. DMHC retains limited oversight of RBOs; most of the direct oversight is delegated to the health plans with which RBOs contract. RBOs are required to submit quarterly and annual reports to DMHC so the DMHC can evaluate their financial condition. DMHC conducted financial examinations on 24 RBOs in 2019 and all 24 RBOs were required to remediate underpaid claims. In total, the RBOs paid an additional $762,000 in payment, interest and penalties to providers.

AB 1249 (Maienschein) of 2019 would have allowed DMHC to authorize similar pilots as authorized under this bill. AB 1249 was vetoed by Governor Newsom. The Governor's veto message stated: "This bill would authorize a pilot program that would exempt risk-bearing provider groups taking on global risk from full licensure under the Knox-Keene Act. This proposed pilot project would undermine the fundamental purpose of the Knox-Keene Act by permitting such entities to operate in the State without providing the strong consumer protections guaranteed under the Act."

According to the Author:

According to the author, labor union trusts cannot utilize value-based payment mechanisms with the provider networks in their self-funded plan networks. This results in higher health care costs that could be avoided. Independent, impartial research on health care cost drivers and delivery system reform conducted by the U.C. Berkeley School of Public Health and the Integrated Healthcare Association (IHA) consistently show that the solution to rising health care costs is to increase the percentage of health care that is delivered through clinically integrated providers that share the financial risk with health plans, government and employer payers. To date, this kind of health care financing and delivery model has been used in the fully-insured employer-sponsored HMO, Medicare Advantage and Medi-Cal Managed Care market segments.

Arguments in Support:

According to America's Physician Groups (APG), public data on provider performance published by IHA for the California Healthcare Foundation's Regional Cost & Quality Atlas compares outcomes for 29 million Californians. In every category and region across the state, measured performance on cost and quality is better than unorganized provider networks paid on a fee for service basis. IHA data shows that for 2013, 2015 and 2017, provider systems that share financial risk for outcomes with their payer partners score higher on 10 clinical performance metrics, deliver lower total cost of care, and lower per-capita cost of care than their FFS paid counterparts. Patients also pay significantly lower out of pocket charges as well. This is the model that co-sponsor, California Schools VEBA wants to make available to its 65 school district members and across Southern California. With more than 65 participating employers and nearly 150,000 members, VEBA's large group of participants and uniquely designed programs allow them to keep health care premiums low while improving employee health. Direct contracting between large employer groups, such as VEBA, and accountable provider organizations, has become one of the most effective ways to accomplish health care cost control through improved performance. As such, VEBA is pleased to co-sponsor this bill with partners, APG, Sharp Healthcare, and many other organizations.

Arguments in Opposition:

The California Association of Health Plans and the Association of California Life and Health Insurance Companies write that these exemptions from the Knox-Keene Act create unfair competitive advantages and will leave consumers without important consumer protections. California's Knox-Keene licensed health plans are tightly regulated and comply with a vast array of requirements that protect the market and consumers of health services. Among many other things, fully licensed health plans are not only required to deliver basic health care services, they must also meet financial solvency requirements, ensure timely access to services, implement consumer grievances processes and participate in independent medical review. The California Association of Joint Powers Authorities (CAJPA) writes that CAJPA is concerned about public entity workers that rely on stability in their long-term healthcare benefits and believes the provisions of the Knox-Keene Act are too important to allow certain groups seeking competitive advantages in the market to have an exemption at the risk of consumers being left without important protections. CAJPA members have seen firsthand the impacts of local provider networks going out of business; they're ugly and have detrimentally impacted both consumers and providers. During this global healthcare pandemic, there is already too much confusion among consumers about access to medical care and this pilot may confuse them even more. Additionally, there is also confusion among medical providers in the current medical system with networks/non-networks, billings, authorizations, and different plan processes. DMHC is opposed to a previous version of this bill, and has strong concerns that allowing restricted health care service plans to contract with a VEBA or a trust fund without the involvement of a fully-licensed health care service plan, that provides both the consumer and financial protections guaranteed in the Knox-Keene Act, would negatively impact consumers.

FISCAL COMMENTS:

According to the Senate Appropriations Committee, the DMHC estimates $221,000 and 1.0 PY in FY 2020-21, $375,000 and 1.1 PY in FY 2021-22, $379,000 and 1.2 PY in FY 2022-23 through FY 2026-27, and $398,000 MCF and 0.8 PY in FY 2027-28. (*Managed Care Fund).

This bill would require the pilot participants reimburse the DMHC for regulatory costs up to $500,000.

VOTES:

ASM LABOR AND EMPLOYMENT: Vote not relevant

YES:

ASM APPROPRIATIONS: Vote not relevant

YES:

NO:

ASSEMBLY FLOOR: Vote not relevant

YES:

ABS, ABST OR NV:

SENATE FLOOR: 29-6-5

YES: Allen, Archuleta, Atkins, Beall, Bradford, Caballero, Dodd, Durazo, Galgiani, Glazer, Lena Gonzalez, Hertzberg, Hill, Hueso, Hurtado, Jackson, Leyva, McGuire, Mitchell, Monning, Pan, Portantino, Roth, Rubio, Skinner, Stern, Umberg, Wieckowski, Wiener

NO: Chang, Grove, Moorlach, Morrell, Nielsen, Wilk

ABS, ABST OR NV: Bates, Borgeas, Dahle, Jones, Melendez

UPDATED:

VERSION: August 25, 2020

CONSULTANT: Kristene Mapile / HEALTH / (916) 319-2097 FN: 0003465

CONCURRENCE IN SENATE AMENDMENTS

CSA2 Bill Id:AB 1124

Author:(Maienschein)

As Amended Ver:August 25, 2020

Majority vote

SUMMARY:

Authorizes the Department of Managed Health Care (DMHC), no later than May 1, 2021 and until January 1, 2028, to authorize two pilot programs that allow health care providers to undertake risk-bearing arrangements with a voluntary employees' beneficiary association (VEBA), as defined under federal and state law with enrollment of greater than 100,000 lives, or a trust fund that is a welfare plan, and a multiemployer plan, as defined in federal law, with enrollment greater than 25,000 lives.

The Senate Amendments:

1. Allow the DMHC Director, no later than May 1, 2021, to authorize one pilot program in northern California, and one pilot program in southern California, whereby providers approved by the DMHC may undertake risk-bearing arrangements with a VEBA, as defined, with enrollment of greater than 100,000 lives, or a trust fund that is a welfare plan, as defined, and a multiemployer plan, as defined, with enrollment of greater than 25,000 lives, to December 31, 2025, inclusive, if all of the following criteria are met:
   1. The purpose of the pilot program is to demonstrate the control of costs for health care services and the improvement of health outcomes and quality of service when compared against a sole fee-for-service (FFS) provider reimbursement model;
   2. The VEBA or trust fund has entered into a contract with one or more health care providers under which each provider agrees to VEBA employees' beneficiary association or trust fund;
   3. Each risk-bearing provider is registered as a risk-bearing organization (RBO), as specified, and applicable DMHC regulations if the provider accepts professional capitation and is delegated the responsibility for the processing and payment of claims;
   4. Each global risk-bearing provider holds or will obtain in conjunction with the pilot program application a limited or restricted license, as specified;
   5. Each risk-bearing provider continues to comply with applicable financial solvency standards and audit requirements, including, but not limited to, financial reporting on a quarterly basis, during the term of the pilot program;
   6. Require the VEBA or trust fund to be responsible for providing all of the following:
      1. Basic health care services;
      2. Prescription drug benefits;
      3. Continuity of care;
      4. Standards for network adequacy and timely access to care, including, but not limited to, access to specialty care;
      5. Language assistance programs;
      6. A process for filing and resolving consumer grievances and appeals, including, but not limited to, independent medical review;
      7. Prohibitions against deceptive marketing;
      8. Member documents that include a description of the benefit coverage, any applicable copays, how to access services, and how to submit a grievance; and,
      9. Mechanisms for resolving provider disputes, including an appeals process.
   7. Require the contract between the VEBA or trust fund and each health care provider to include all of the following:
      1. Provisions dividing financial responsibility between the parties and defining which party is financially responsible for services rendered, including arrangements for member care should a global or risk-bearing provider become insolvent;
      2. A delegation agreement;
      3. Requirements regarding utilization review or utilization management;
      4. Provisions stating the RBO, limited licensee, or restricted licensee, as applicable, has the organizational and administrative capacity to provide services to covered employees, and that medical decisions are rendered by qualified medical providers, unhindered by fiscal and administrative management, including the disclosure of the percentage of risk assumed in relation to its total risk-based business;
      5. Requirements regarding the submission of claims by providers and the timely processing of provider claims, including a guarantee that the VEBA or trust fund will indemnify any outstanding unpaid provider claim in the event of the insolvency of a participating provider to the pilot program;
      6. Require the health care provider to comply with the VEBA or trust fund's requirements for all of the following:
         1. Continuity of care;
         2. Language assistance; and
         3. Consumer grievances and appeals, including, but not limited to, independent medical review.
      7. Prohibit the term of each contract between the VEBA or trust fund and a health care provider from exceeding the period of the pilot program; and,
      8. Requires each VEBA or trust fund, to participate in the pilot program, to submit to the DMHC an application. Allows the DMHC to select up to two qualified participants for the pilot program.
      9. Specify that each health care provider that has entered into a contract with the VEBA or trust fund is a party to the pilot program application submitted to the DMHC. Requires the application to include a copy of each contract between the VEBA or trust fund and a participating health care provider.
2. Require the VEBA or trust fund and each health care provider participating in the pilot program agree to collect and report to the DMHC, in each year of the pilot program, in a manner and frequency determined by DMHC, information regarding the comparative cost savings when compared to FFS payment, performance measurements for clinical patient outcomes, and enrollee satisfaction. Authorizes the DMHC to require additional reporting, not subject to the Administrative Procedure Act.
3. Allow the DMHC to authorize a public or private agency to receive the information and monitor the pilot program under the data standard currently used by the Integrated Healthcare Association's "Align. Measure. Perform." program and the California Regional Health Care Cost & Quality Atlas.
4. Specify that this bill does not exempt a health care provider that contracts with a VEBA or trust fund as part of a pilot program, as authorized, from the financial solvency requirements of existing law, nor does not it exempt a VEBA participating in a pilot program authorized by exemptions from the requirement to reimburse providers on a FFS basis.
5. Require the participating VEBA or trust fund to each appoint an ombudsperson to monitor and respond to any complaint lodged by a participating enrollee in their respective pilot programs. Requires the ombudsperson, if the enrollee is not satisfied with the result, to refer the enrollee to the DMHC's grievance and appeal process. Requires the DMHC determination to be binding upon the VEBA or trust fund.
6. Require the participating VEBA or trust fund to report on a quarterly basis to the DMHC any complaint lodged by a participating enrollee in their respective pilot programs, along with a description of the response and resolution.
7. Require the global and risk-bearing providers participating in a pilot program authorized by 1) above be approved by the DMHC. Specifies that the DMHC retains the rights to disapprove any pilot program application for any reason, including, but not limited to, failure to demonstrate to the DMHC's satisfaction adequate enrollee protection and compliance with this bill.
8. Requires the DMHC, after the termination of both pilot programs, and before January 1, 2027, to submit a report, consistent with existing law, to the Legislature regarding the costs and clinical patient outcomes of the pilot programs compared to FFS payment models, including data on consumer and provider grievances, appeals, and independent medical reviews. Allows the DMHC to authorize a public or private agency to prepare the report.
9. Require the pilot participants to reimburse the DMHC for reasonable regulatory costs of up to five hundred thousand dollars ($500,000) for all of the following:
   1. Commissioning the report in 8) above;
   2. Developing an application process for the pilot programs described in this bill;
   3. Monitoring compliance with this bill.

Sunset the provisions of this bill on January 1, 2028.

COMMENTS:

According to DMHC's Annual Report, in 2019, 80 full service health plans licensed by the DMHC provided health care services to more than 26 million Californians. DMHC assesses and monitors health plan networks and delivery systems for compliance with the Knox-Keene Act, and evaluates compliance through onsite surveys of health plan operations performed every three years. Surveys examine health plan processes related to access, utilization management, quality improvement, continuity and coordination of care, language access and enrollee grievances and appeals.

DMHC Licensure Requirements. According to a 2018 State Health and Value Strategies report, the Knox-Keene Act is the legal framework through which health care entities in the state are governed. The long-standing practice of providers accepting financial risk in California, and the bankruptcies of large provider groups in the 1990s, led DMHC to adopt prescriptive regulations governing health plans and provider RBOs. The Knox-Keene Act requires licensure by DMHC of health plans that accept global risk, defined as risk for both institutional and professional services, for the provision of health care services. DMHC is also authorized to exempt entities from Knox-Keene Act requirements under certain circumstances.

Risk Regulations. DMHC finalized regulations seeking to clarify the level of financial risk that would trigger health plan licensure. The regulations proposed different categories of licensure, including "full" and "restricted." Traditional health insurance plans would be required to obtain a full license to operate. Entities that accept global risk as a subcontractor to a fully-licensed health plan could obtain a restricted license. A restricted licensee would not be subject to rules concerning marketing and enrollment. Entities that have a small market share and/or operate in well-served areas could be granted an exemption from California's licensure requirements as those dynamics reduce the risk of disrupting the delivery of care in the event of insolvency.

RBOs. An entity in California that only takes financial risk within the scope of its professional license (e.g., primary care capitation) is required to register as an RBO. DMHC retains limited oversight of RBOs; most of the direct oversight is delegated to the health plans with which RBOs contract. RBOs are required to submit quarterly and annual reports to DMHC so the DMHC can evaluate their financial condition. DMHC conducted financial examinations on 24 RBOs in 2019 and all 24 RBOs were required to remediate underpaid claims. In total, the RBOs paid an additional $762,000 in payment, interest and penalties to providers.

AB 1249 (Maienschein) of 2019 would have allowed DMHC to authorize similar pilots as authorized under this bill. AB 1249 was vetoed by Governor Newsom. The Governor's veto message stated: "This bill would authorize a pilot program that would exempt risk-bearing provider groups taking on global risk from full licensure under the Knox-Keene Act. This proposed pilot project would undermine the fundamental purpose of the Knox-Keene Act by permitting such entities to operate in the State without providing the strong consumer protections guaranteed under the Act."

According to the Author:

According to the author, labor union trusts cannot utilize value-based payment mechanisms with the provider networks in their self-funded plan networks. This results in higher health care costs that could be avoided. Independent, impartial research on health care cost drivers and delivery system reform conducted by the U.C. Berkeley School of Public Health and the Integrated Healthcare Association (IHA) consistently show that the solution to rising health care costs is to increase the percentage of health care that is delivered through clinically integrated providers that share the financial risk with health plans, government and employer payers. To date, this kind of health care financing and delivery model has been used in the fully-insured employer-sponsored HMO, Medicare Advantage and Medi-Cal Managed Care market segments.

Arguments in Support:

According to America's Physician Groups (APG), public data on provider performance published by IHA for the California Healthcare Foundation's Regional Cost & Quality Atlas compares outcomes for 29 million Californians. In every category and region across the state, measured performance on cost and quality is better than unorganized provider networks paid on a fee for service basis. IHA data shows that for 2013, 2015 and 2017, provider systems that share financial risk for outcomes with their payer partners score higher on 10 clinical performance metrics, deliver lower total cost of care, and lower per-capita cost of care than their FFS paid counterparts. Patients also pay significantly lower out of pocket charges as well. This is the model that co-sponsor, California Schools VEBA wants to make available to its 65 school district members and across Southern California. With more than 65 participating employers and nearly 150,000 members, VEBA's large group of participants and uniquely designed programs allow them to keep health care premiums low while improving employee health. Direct contracting between large employer groups, such as VEBA, and accountable provider organizations, has become one of the most effective ways to accomplish health care cost control through improved performance. As such, VEBA is pleased to co-sponsor this bill with partners, APG, Sharp Healthcare, and many other organizations.

Arguments in Opposition:

The California Association of Health Plans and the Association of California Life and Health Insurance Companies write that these exemptions from the Knox-Keene Act create unfair competitive advantages and will leave consumers without important consumer protections. California's Knox-Keene licensed health plans are tightly regulated and comply with a vast array of requirements that protect the market and consumers of health services. Among many other things, fully licensed health plans are not only required to deliver basic health care services, they must also meet financial solvency requirements, ensure timely access to services, implement consumer grievances processes and participate in independent medical review. The California Association of Joint Powers Authorities (CAJPA) writes that CAJPA is concerned about public entity workers that rely on stability in their long-term healthcare benefits and believes the provisions of the Knox-Keene Act are too important to allow certain groups seeking competitive advantages in the market to have an exemption at the risk of consumers being left without important protections. CAJPA members have seen firsthand the impacts of local provider networks going out of business; they're ugly and have detrimentally impacted both consumers and providers. During this global healthcare pandemic, there is already too much confusion among consumers about access to medical care and this pilot may confuse them even more. Additionally, there is also confusion among medical providers in the current medical system with networks/non-networks, billings, authorizations, and different plan processes. DMHC is opposed to a previous version of this bill, and has strong concerns that allowing restricted health care service plans to contract with a VEBA or a trust fund without the involvement of a fully-licensed health care service plan, that provides both the consumer and financial protections guaranteed in the Knox-Keene Act, would negatively impact consumers.

FISCAL COMMENTS:

According to the Senate Appropriations Committee, the DMHC estimates $221,000 and 1.0 personnel years (PY) in fiscal year (FY) 2020-21, $375,000 and 1.1 PY in FY 2021-22, $379,000 and 1.2 PY in FY 2022-23 through FY 2026-27, and $398,000 MCF and 0.8 PY in FY 2027-28. (*Managed Care Fund).

This bill would require the pilot participants reimburse the DMHC for regulatory costs up to $500,000.

VOTES:

ASM LABOR AND EMPLOYMENT: Vote Not Relevant

YES:

ASM APPROPRIATIONS: Vote Not Relevant

YES:

NO:

ASSEMBLY FLOOR: Vote Not Relevant

YES:

ABS, ABST OR NV:

SENATE FLOOR: 29-6-5

YES: Allen, Archuleta, Atkins, Beall, Bradford, Caballero, Dodd, Durazo, Galgiani, Glazer, Lena Gonzalez, Hertzberg, Hill, Hueso, Hurtado, Jackson, Leyva, McGuire, Mitchell, Monning, Pan, Portantino, Roth, Rubio, Skinner, Stern, Umberg, Wieckowski, Wiener

NO: Chang, Grove, Moorlach, Morrell, Nielsen, Wilk

ABS, ABST OR NV: Bates, Borgeas, Dahle, Jones, Melendez

ASM HEALTH: 10-0-5

YES: Wood, Aguiar-Curry, Bonta, Carrillo, Flora, Limón, Nazarian, Ramos, Rodriguez, Santiago

ABS, ABST OR NV: Mayes, Bigelow, Burke, McCarty, Waldron

UPDATED:

VERSION: August 25, 2020

CONSULTANT: Kristene Mapile / HEALTH / (916) 319-2097 FN: 0003632

 THIRD READING  

Bill No: AB 1124

Author: Maienschein (D)

Amended: 8/25/20 in Senate

Vote: 21

PRIOR VOTES NOT RELEVANT

SENATE HEALTH COMMITTEE: 7-0, 8/10/20 (Pursuant to Senate Rule 29.10)

AYES: Pan, Lena Gonzalez, Hurtado, Leyva, Mitchell, Monning, Rubio

NO VOTE RECORDED: Grove, Melendez

SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/20/20

AYES: Portantino, Bradford, Hill, Leyva, Wieckowski

NOES: Bates, Jones

SUBJECT: Health care service plans: regulations: exemptions

SOURCE: America’s Physician Groups

California Schools Voluntary Employee Benefits Association

DIGEST:

This bill authorizes the Department of Managed Health Care to authorize two pilot programs that allow health care providers to undertake risk-bearing arrangements with a voluntary employees’ beneficiary association, as defined under federal and state law with enrollment of greater than 100,000 lives, or a trust fund that is a welfare plan, and a multiemployer plan, as defined in federal law, with enrollment greater than 25,000 lives.

Senate Floor Amendments of 8/25/20 (1) change the date by which the Department of Managed Health Care (DMHC) director would authorize the pilot from no later than March 1, 2021, to, no later than May 1, 2021, and change the pilot period from July 1, 2021, to December 31, 2022, inclusive, to independent periods of time beginning no earlier than January 1, 2022 to December 31, 2025, inclusive; (2) delete the prohibition on a participating provider from agreeing to accept financial risk greater than 10% of its existing contracted risk-based business; (3) add to information the voluntary employees’ beneficiary association (VEBA) or trust fund and each participating health care provider must agree to collect and report to DMHC, enrollee satisfaction, and authorize DMHC to require additional information to be reported, and not subject to the Administrative Procedures Act; (4) add that if an enrollee is not satisfied with the result of internal ombudsperson, the enrollee should be referred to DMHC’s grievance and appeals process and that the results are binding on the VEBA or trust fund; (5) require DMHC to retain the right to disapprove any pilot program application for any reason consistent with the Knox-Keene Act; (6) change the date of the required DMHC report from June 1, 2027 to January 1, 2027, and allow DMHC to authorize a public or private agency to prepare the report, as specified; (8) sunset the bill on January 1, 2028; and, (9) delete the urgency clause.

ANALYSIS:

Existing law:

1. Establishes the Department of Managed Health Care (DMHC) to regulate health care service plans (health plans) under the Knox-Keene Health Care Service Plan Act (Knox-Keene Act). [HSC §1340, et seq.]
2. Permits the DMHC director to exempt from the Knox-Keene Act any class of persons or plan contracts if the DMHC director finds the action to be in the public interest and not detrimental to the protection of subscribers, enrollees, or persons regulated under the Knox-Keene Act, and that the regulation of the persons or plan contracts is not essential to the purposes of the Knox-Keene Act. [HSC §1343]

This bill:

1. Authorizes the DMHC director no later than May 1, 2021, to authorize one pilot program in northern California and one pilot program in southern California, whereby providers approved by DMHC may undertake risk-bearing arrangements with a VEBA, as defined under federal and state law, with enrollment of greater than 100,000 lives, or a trust fund that is a welfare plan, as defined in federal law, and a multiemployer plan, as defined in federal law, with enrollment of greater than 25,000 lives for the independent periods of January 1, 2022, to December 31, 2025, inclusive, if specified criteria are met, including, in part:
   1. The VEBA or trust fund has entered into a contract with one or more health care providers under which each provider agrees to accept risk-based or global risk payment from the VEBA or trust fund;
   2. Each risk-bearing provider is registered as a risk-bearing organization pursuant to existing law, and applicable DMHC regulations if the provider accepts professional capitation and is delegated the responsibility for processing and payment of claims;
   3. Each global risk-bearing provider holds or will obtain in conjunction with the pilot program application a limited or restricted license, pursuant to existing law and regulations;
   4. Each risk-bearing provider continues to comply with applicable financial solvency standards and audit requirements, including financial reporting on a quarterly basis, during the pilot;
   5. The VEBA or trust is responsible for providing basic health care services, prescription drug benefits, continuity of care, network adequacy and timely access to care, as well as other requirements;
   6. Submit an application for DMHC to select up to two qualified participants for the pilot program;
   7. The contract of each health care provider that has entered into a contract under the pilot, included in the pilot application; and,
   8. The VEBA or trust fund and each participating health care provider agree to collect and report to DMHC, in each year of the pilot, in a manner and frequency determined by DMHC, information regarding the comparative cost savings when compared to fee-for-service payment, performance measurements for clinical patient outcomes, and enrollee satisfaction. Authorizes DMHC to require additional information required by DMHC.
2. Requires the participating VEBA or trust fund to appoint an ombudsperson, and if the enrollee is not satisfied with the result refer the enrollee to DMHC grievance and appeal process, which is binding on the VEBA or trust fund.
3. Requires the global and risk-bearing providers participating in the pilot to be approved by DMHC. Requires DMHC to retain the right to disapprove any pilot program at any time, as specified.
4. Sunsets this bill on January 1, 2028.

Comments

Author’s statement. According to the author, labor union trusts cannot utilize value-based payment mechanisms with the provider networks in their self-funded plan networks.  This results in higher health care costs that could be avoided. Independent, impartial research on health care cost drivers and delivery system reform conducted by the U.C. Berkeley School of Public Health and the Integrated Healthcare Association consistently show that the solution to rising health care costs is to increase the percentage of health care that is delivered through clinically integrated providers that share the financial risk with health plans, government and employer payers. To date, this kind of health care financing and delivery model has been used in the fully-insured employer-sponsored HMO, Medicare Advantage and Medi-Cal Managed Care market segments.

DMHC. The DMHC licenses and regulates the full scope of managed care models, assesses and monitors health plan networks and delivery systems for compliance with the Knox-Keene Act, and evaluates compliance through onsite surveys (audits) of health plan operations performed every three years. DMHC reviews health plan financial statements and filings, and analyzes health plan reserves, financial management systems, and administrative arrangements. DMHC does not license provider organizations, but it monitors the financial solvency of risk-bearing organizations. Risk-bearing organizations are provider groups that, in their contracts with health plans, pay claims and assume financial risk for the cost of all health care services (inpatient and outpatient) by accepting a fixed monthly payment for each enrolled person assigned to the risk-bearing organization. This arrangement is typically referred to as “capitation.” Risk-bearing organizations are subject to financial reserve requirements and regular financial reporting. DMHC monitors the financial stability of risk-bearing organizations by analyzing financial filings, conducting financial examinations, reviewing claims payment practices and developing and monitoring corrective action plans. DMHC conducted financial examinations on 24 risk-bearing organizations in 2019. As a result, all 24 risk-bearing organizations were required to remediate underpaid claims. In total, the risk-bearing organizations paid an additional $762,000 in payment, interest and penalties to providers.

Related/Prior Legislation

AB 1249 (Maienschein, 2019) would have allowed DMHC to authorize for five years similar pilots as authorized under this bill. AB 1249 was vetoed by Governor Newsom. The Governor’s veto message stated:

This bill would authorize a pilot program that would exempt risk-bearing provider groups taking on global risk from full licensure under the Knox-Keene Act. This proposed pilot project would undermine the fundamental purpose of the Knox-Keene Act by permitting such entities to operate in the State without providing the strong consumer protections guaranteed under the Act.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee:

• DMHC estimates $221,000 and 1.0 PY in FY 2020-21, $375,000 and 1.1 PY in FY 2021-22, $379,000 and 1.2 PY in FY 2022-23 through FY 2026-27, and $398,000 MCF and 0.8 PY in FY 2027-28. (*Managed Care Fund).

The bill would require the pilot participants reimburse the DMHC for regulatory costs up to $500,000.

SUPPORT: (Verified 8/25/20)

America’s Physician Groups (co-source)

California Schools Voluntary Employees Benefits Association (co-source)

American Federation of State, County and Municipal Employees

Breathe California

California Environmental Justice Alliance

California Health Care Coalition

California Immigrant Policy Center

California Labor Federation

California State Association of Electrical Workers

California State Pipe Trades Council

California Teachers Association

Coalition of California Utility Employees

Heritage Provider Network

IBEW Local 18 Health and Welfare Trust

IBEW Local 234

IBEW Local 302

IBEW Local 332

IBEW Local 413

IBEW Local 440

IBEW Local 47

IBEW Local 617

IBEW Local Union 6

International Association of Sheet Metal, Air, Rail and Transportation Workers, Local 104

International Union of Elevator Constructors

Plumbers and Pipefitters Local 447

Plumbers and Pipefitters Local Union 442

Plumbers and Pipefitters UA Local 364

Plumbers and Steamfitters Local 230

Plumbers and Steamfitters UA Local 343

Plumbers and Steamfitters UA Local 398

Plumbers, Steamfitters and Refrigeration Fitters Local Union 467

Plumbers, Steamfitters, Pipefitters and HVAC/R Service Technicians UA Local Union 393

Scripps Health

Sharp Rees-Stealy Medical Group

Southern California Edison

Steam, Refrigerator, Air Conditioning, Pipe Fitters, Welders and Apprentices of the United Association Local Union 250

UA Plumbers Local 78

United Association of Plumbers and Pipefitters Local 761

United Association of Plumbers Pipe and Refrigerator Fitters Local No. 246

United Food and Commercial Workers

Western States Council of Sheet Metal, Air, Rail and Transportation

OPPOSITION: (Verified 8/25/20)

Association of California Life and Health Insurance Companies

California Association of Health Plans

California Association of Joint Powers Authorities

Department of Managed Health Care

ARGUMENTS IN SUPPORT: According to America’s Physician Groups (APG), there is a growing movement to pair self-funded health benefit plans with organized, integrated providers in a more aligned relationship to produce better care at lower cost. The trust and its contracted network providers can partner to address the specific issues in the employee population – setting performance targets and exchanging relevant data on progress. Many payers complain that they cannot get access to critical performance and cost data in the current health insurance marketplace. APG writes Integrated Healthcare Association data shows that for 2013, 2015, and 2017, provider systems that share financial risk for outcomes with their payer partners score higher on ten clinical performance metrics, deliver lower total cost of care, and lower per-capita cost of care than their fee-for-service paid counterparts. In these pilots, providers and payers will directly share data on cost, outcomes, and performance measures back and forth so that gaps in care can be addressed, and priorities continuously monitored. APG states that its’ California members operate under risk-based models seven days a week and have done so for the past 20 years. The quality scores delivered by these provider organizations could not be sustained if they were not financially and operationally stable – as they have been for the past 20 years. The California Health Care Coalition, a membership organization of private and public sector employers, unions and health and welfare trust funds in California, writes that employer plan sponsors would like to use more advanced value-based payment models in a direct relationship with provider organizations that have a proven public track record of delivering care that is more timely, higher quality, and more accountable for cost. International Association of Sheet Metal, Air, Rail and Transportation Workers, Local 104 writes that this bill would address a major shortcoming in California’s existing law by empowering Taft-Hartley Health and Welfare Trust Funds to by-pass HMOs and contract directly with health care providers today on a fee-for-service basis. California law (the Knox-Keene Act) is in essence a de-facto restriction on their trust funds by prohibiting providers from contracting on a capitated basis with any organization that does not hold a limited Knox-Keene license.

ARGUMENTS IN OPPOSITION: DMHC has strong concerns that allowing restricted health care service plans to contract with a VEBA or a trust fund without the involvement of a fully-licensed health care service plan, that provides both the consumer and financial protections guaranteed in the Knox-Keene Act, would negatively impact consumers. DMHC writes that currently, restricted health care service plans are permitted to contract only with fully-licensed health care service plans that act as a “parent plan.” The parent plan provides any of the Knox-Keene Act’s protections not provided by the restricted health care service plan, thus ensuring that together the restricted health care service plan and parent plan meet all the requirements of the Knox-Keene Act. If the director were to authorize the pilot and permit a VEBA or trust fund to contract directly with a restricted health care service plan, without a parent plan included in the contractual arrangement, the proposed pilot would circumvent the important consumer protections guaranteed in the Knox-Keene Act to enrollees of all licensed health care service plans. Additionally, this bill's exemption process is unnecessary because the DMHC director has authority to exempt any class, person, or plan contract from requirements of the Knox-Keene Act, when doing so is in the public interest. The director’s discretion in granting such exemptions is important, as the director considers exemption requests in light of the particular circumstances of the contract arrangements as well as the impact to enrollees and the health care market. As stated in meetings with bill sponsors earlier this year on January 28 and more recently on July 20, the DMHC encourages interested parties to work with the DMHC and seek an appropriate exemption from the Knox-Keene Act, which would allow sponsors to accomplish their goals while ensuring the DMHC has oversight over the important consumer protections in the Knox-Keene Act.

The California Association of Health Plans and the Association of California Life and Health Insurance Companies write that these exemptions from the Knox-Keene Act create unfair competitive advantages and will leave consumers without important consumer protections. The California Association of Joint Powers Authorities (CAJPA) writes that CAJPA is concerned about public entity workers that rely on stability in their long-term healthcare benefits and believes the provisions of the Knox-Keene Act are too important to allow certain groups seeking competitive advantages in the market to have an exemption at the risk of consumers being left without important protections. CAJPA members have seen firsthand the impacts of local provider networks going out of business; they’re ugly and have detrimentally impacted both consumers and providers. During this global healthcare pandemic, there is already too much confusion among consumers about access to medical care and this pilot may confuse them even more. Additionally, there is also confusion among medical providers in the current medical system with networks/non-networks, billings, authorizations, and processes in the dozens and dozens of health plans that they participate in.

ASSEMBLY FLOOR: 66-0, 5/6/19

AYES: Aguiar-Curry, Bauer-Kahan, Berman, Bloom, Boerner Horvath, Bonta, Burke, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Cooley, Cooper, Cunningham, Daly, Diep, Eggman, Flora, Frazier, Friedman, Gabriel, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Lackey, Levine, Limón, Low, Maienschein, Mayes, McCarty, Medina, Mullin, Muratsuchi, Nazarian, O'Donnell, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Santiago, Smith, Mark Stone, Ting, Voepel, Waldron, Weber, Wicks, Wood, Rendon

NO VOTE RECORDED: Arambula, Bigelow, Brough, Chen, Choi, Dahle, Fong, Gallagher, Kiley, Mathis, Melendez, Obernolte, Patterson, Salas

Prepared by: Teri Boughton / HEALTH / (916) 651-4111

8/26/20 14:31:05

**** END ***

 THIRD READING  

Bill No: AB 1124

Author: Maienschein (D)

Amended: 8/12/20 in Senate

Vote: 27 - Urgency

PRIOR VOTES NOT RELEVANT

SENATE HEALTH COMMITTEE: 7-0, 8/10/20 (Pursuant to Senate Rule 29.10)

AYES: Pan, Lena Gonzalez, Hurtado, Leyva, Mitchell, Monning, Rubio

NO VOTE RECORDED: Grove, Melendez

SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/20/20

AYES: Portantino, Bradford, Hill, Leyva, Wieckowski

NOES: Bates, Jones

SUBJECT: Health care service plans: regulations: exemptions

SOURCE: America’s Physician Groups

California Schools Voluntary Employee Benefits Association

DIGEST:

This bill authorizes the Department of Managed Health Care to authorize two pilot programs that allow health care providers to undertake risk-bearing arrangements with a voluntary employees’ beneficiary association, as defined under federal and state law with enrollment of greater than 100,000 lives, or a trust fund that is a welfare plan, and a multiemployer plan, as defined in federal law, with enrollment greater than 25,000 lives.

ANALYSIS:

Existing law:

1. Establishes the Department of Managed Health Care (DMHC) to regulate health care service plans (health plans) under the Knox-Keene Health Care Service Plan Act (Knox-Keene Act). [HSC §1340, et seq.]
2. Permits the DMHC director to exempt from the Knox-Keene Act any class of persons or plan contracts if the DMHC director finds the action to be in the public interest and not detrimental to the protection of subscribers, enrollees, or persons regulated under the Knox-Keene Act, and that the regulation of the persons or plan contracts is not essential to the purposes of the Knox-Keene Act. [HSC §1343]
3. Exempts a health plan, including a self-insured reimbursement plan that pays for or reimburses any part of the cost of health care services, operated by specified government entities (cities, counties, political subdivisions, etc) or public joint labor management trust that satisfies specified criteria including that providers are reimbursed solely on a fee-for-service basis and not at risk in contracting arrangements, reimburses at least part of the cost of all basic health care services, as defined, benefits are determined in collective bargaining, and maintains a fiscally sound operation. These plans are also referred to as voluntary employees’ beneficiary association or VEBA. [HSC §1349.2]
   

This bill:

1. Authorizes the DMHC director no later than March 1, 2021, to authorize one pilot program in northern California and one pilot program in southern California, whereby providers approved by DMHC may undertake risk-bearing arrangements with a VEBA, as defined under federal and state law, with enrollment of greater than 100,000 lives, or a trust fund that is a welfare plan, as defined in federal law, and a multiemployer plan, as defined in federal law, with enrollment of greater than 25,000 lives for the period of July 1, 2021, to December 31, 2022, inclusive, if specified criteria are met, including, in part:
2. The VEBA or trust fund has entered into a contract with one or more health care providers under which each provider agrees to accept risk-based or global risk payment from the VEBA or trust fund, and prohibits a participating provider from agreeing to accept financial risk greater than 10% of its existing contracted risk-based business;
3. Each risk-bearing provider is registered as a risk-bearing organization pursuant to existing law, and applicable DMHC regulations if the provider accepts professional capitation and is delegated the responsibility for processing and payment of claims;
4. Each global risk-bearing provider holds or will obtain in conjunction with the pilot program application a limited or restricted license, pursuant to existing law and regulations;
5. Each risk-bearing provider continues to comply with applicable financial solvency standards and audit requirements, including financial reporting on a quarterly basis, during the pilot;
6. The VEBA or trust is responsible for providing basic health care services, prescription drug benefits, continuity of care, network adequacy and timely access to care, as well as other requirements;
7. The term of each contract between the VEBA or trust fund and health care provider does not exceed the pilot period;
8. Submit an application for DMHC to select up to two qualified participants for the pilot program;
9. The contract of each health care provider that has entered into a contract under the pilot, included in the pilot application; and,
10. The VEBA or trust fund and each participating health care provider agree to collect and report to DMHC, in each year of the pilot, in a manner and frequency determined by DMHC, information regarding the comparative cost savings when compared to fee-for-service payment, performance measurements for clinical patient outcomes, and any other information required by DMHC.
11. Requires the participating VEBA or trust fund to report on a quarterly basis to DMHC any complaint lodged by a participating enrollee in their respective pilot programs, along with a description of the response and resolution.
12. Requires the global and risk-bearing providers participating in the pilot to be approved by DMHC.
13. Requires DMHC to submit a report to the Legislature before June 1, 2027, regarding the costs and clinical patient outcomes of the pilot compared to fee-for-service payment models, including data on consumer and provider grievances, appeals, and independent medical reviews.
14. Requires the pilot participants to reimburse DMHC for reasonable regulatory costs of up to $500,000, as specified.
15. Sunsets this bill on January 1, 2030.
    
16. Contains an urgency clause that will make this bill effective upon enactment.

Comments

Author’s statement. According to the author, labor union trusts cannot utilize value-based payment mechanisms with the provider networks in their self-funded plan networks.  This results in higher health care costs that could be avoided. Independent, impartial research on health care cost drivers and delivery system reform conducted by the U.C. Berkeley School of Public Health and the Integrated Healthcare Association consistently show that the solution to rising health care costs is to increase the percentage of health care that is delivered through clinically integrated providers that share the financial risk with health plans, government and employer payers. To date, this kind of health care financing and delivery model has been used in the fully-insured employer-sponsored HMO, Medicare Advantage and Medi-Cal Managed Care market segments.

DMHC. The DMHC licenses and regulates the full scope of managed care models, including all Health Maintenance Organizations (HMO) in California, as well as Preferred Provider Organizations (PPO), Exclusive Provider Organizations (EPO), Point-of Service (POS) products and Medi-Cal managed care plans. DMHC assesses and monitors health plan networks and delivery systems for compliance with the Knox-Keene Act, and evaluates compliance through onsite surveys (audits) of health plan operations performed every three years. DMHC conducts non-routine surveys when a specific issue or problem requires a focused review of a health plan’s operations. The surveys examine health plan practices related to access, utilization management, quality improvement, continuity and coordination of care, language access and enrollee grievances and appeals. DMHC monitors provider networks and the accessibility of services to enrollees by reviewing the geographic proximity of in-network providers to enrollee residences or work locations, provider-to-patient ratios and timely access to care. DMHC reviews health plan financial statements and filings, and analyzes health plan reserves, financial management systems, and administrative arrangements. DMHC does not license provider organizations, but it monitors the financial solvency of risk-bearing organizations. Risk-bearing organizations are provider groups that, in their contracts with health plans, pay claims and assume financial risk for the cost of all health care services (inpatient and outpatient) by accepting a fixed monthly payment for each enrolled person assigned to the risk-bearing organization. This arrangement is typically referred to as “capitation.” Risk-bearing organizations are subject to financial reserve requirements and regular financial reporting. DMHC monitors the financial stability of risk-bearing organizations by analyzing financial filings, conducting financial examinations, reviewing claims payment practices and developing and monitoring corrective action plans. DMHC conducted financial examinations on 24 risk-bearing organizations in 2019. As a result, all 24 risk-bearing organizations were required to remediate underpaid claims. In total, the risk-bearing organizations paid an additional $762,000 in payment, interest and penalties to providers.

Prior legislation. AB 1249 Maienschein of 2019 would have allowed DMHC to authorize for five years similar pilots as authorized under this bill. AB 1249 was vetoed by Governor Newsom. The Governor’s veto message stated:

This bill would authorize a pilot program that would exempt risk-bearing provider groups taking on global risk from full licensure under the Knox-Keene Act. This proposed pilot project would undermine the fundamental purpose of the Knox-Keene Act by permitting such entities to operate in the State without providing the strong consumer protections guaranteed under the Act.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee:

• DMHC estimates $221,000 and 1.0 PY in FY 2020-21, $375,000 and 1.1 PY in FY 2021-22, $379,000 and 1.2 PY in FY 2022-23 through FY 2026-27, and $398,000 MCF and 0.8 PY in FY 2027-28. (*Managed Care Fund).

The bill would require the pilot participants reimburse the DMHC for regulatory costs up to $500,000.

SUPPORT: (Verified 8/20/20)

America’s Physician Groups (co-source)

California Schools Voluntary Employees Benefits Association (co-source)

California Health Care Coalition

California State Association of Electrical Workers

California State Pipe Trades Council

California Teachers Association

Coalition of California Utility Employees

Heritage Provider Network

IBEW Local 18 Health and Welfare Trust

IBEW Local 234

IBEW Local 302

IBEW Local 332

IBEW Local 413

IBEW Local 440

IBEW Local 47

IBEW Local 617

IBEW Local Union 6

International Association of Sheet Metal, Air, Rail and Transportation Workers, Local 104

International Union of Elevator Constructors

Plumbers and Pipefitters Local 447

Plumbers and Pipefitters Local Union 442

Plumbers and Pipefitters UA Local 364

Plumbers and Steamfitters Local 230

Plumbers and Steamfitters UA Local 343

Plumbers and Steamfitters UA Local 398

Plumbers, Steamfitters and Refrigeration Fitters Local Union 467

Plumbers, Steamfitters, Pipefitters and HVAC/R Service Technicians UA Local Union 393

Scripps Health

Sharp Rees-Stealy Medical Group

Steam, Refrigerator, Air Conditioning, Pipe Fitters, Welders and Apprentices of the United Association Local Union 250

UA Plumbers Local 78

United Association of Plumbers and Pipefitters Local 761

United Association of Plumbers Pipe and Refrigerator Fitters Local No. 246

Western States Council of Sheet Metal, Air, Rail and Transportation

OPPOSITION: (Verified 08/20/20)

Association of California Life and Health Insurance Companies

California Association of Health Plans

California Association of Joint Powers Authorities

Department of Managed Health Care

ARGUMENTS IN SUPPORT: According to America’s Physician Groups (APG), there is a growing movement to pair self-funded health benefit plans with organized, integrated providers in a more aligned relationship to produce better care at lower cost. The trust and its contracted network providers can partner to address the specific issues in the employee population – setting performance targets and exchanging relevant data on progress. Many payers complain that they cannot get access to critical performance and cost data in the current health insurance marketplace. APG writes Integrated Healthcare Association data shows that for 2013, 2015, and 2017, provider systems that share financial risk for outcomes with their payer partners score higher on ten clinical performance metrics, deliver lower total cost of care, and lower per-capita cost of care than their fee-for-service paid counterparts. In these pilots, providers and payers will directly share data on cost, outcomes, and performance measures back and forth so that gaps in care can be addressed, and priorities continuously monitored. APG states that its’ California members operate under risk-based models seven days a week and have done so for the past 20 years. The quality scores delivered by these provider organizations could not be sustained if they were not financially and operationally stable – as they have been for the past 20 years. The California Health Care Coalition, a membership organization of private and public sector employers, unions and health and welfare trust funds in California, writes that employer plan sponsors would like to use more advanced value-based payment models in a direct relationship with provider organizations that have a proven public track record of delivering care that is more timely, higher quality, and more accountable for cost. International Association of Sheet Metal, Air, Rail and Transportation Workers, Local 104 writes that this bill would address a major shortcoming in California’s existing law by empowering Taft-Hartley Health and Welfare Trust Funds to by-pass HMOs and contract directly with health care providers today on a fee-for-service basis. California law (the Knox-Keene Act) is in essence a de-facto restriction on their trust funds by prohibiting providers from contracting on a capitated basis with any organization that does not hold a limited Knox-Keene license.

ARGUMENTS IN OPPOSITION: DMHC has strong concerns that allowing restricted health care service plans to contract with a VEBA or a trust fund without the involvement of a fully-licensed health care service plan, that provides both the consumer and financial protections guaranteed in the Knox-Keene Act, would negatively impact consumers. DMHC writes that currently, restricted health care service plans are permitted to contract only with fully-licensed health care service plans that act as a “parent plan.” The parent plan provides any of the Knox-Keene Act’s protections not provided by the restricted health care service plan, thus ensuring that together the restricted health care service plan and parent plan meet all the requirements of the Knox-Keene Act. If the director were to authorize the pilot and permit a VEBA or trust fund to contract directly with a restricted health care service plan, without a parent plan included in the contractual arrangement, the proposed pilot would circumvent the important consumer protections guaranteed in the Knox-Keene Act to enrollees of all licensed health care service plans. Additionally, this bill's exemption process is unnecessary because the DMHC director has authority to exempt any class, person, or plan contract from requirements of the Knox-Keene Act, when doing so is in the public interest. The director’s discretion in granting such exemptions is important, as the director considers exemption requests in light of the particular circumstances of the contract arrangements as well as the impact to enrollees and the health care market. As stated in meetings with bill sponsors earlier this year on January 28 and more recently on July 20, the DMHC encourages interested parties to work with the DMHC and seek an appropriate exemption from the Knox-Keene Act, which would allow sponsors to accomplish their goals while ensuring the DMHC has oversight over the important consumer protections in the Knox-Keene Act.

The California Association of Health Plans and the Association of California Life and Health Insurance Companies write that these exemptions from the Knox-Keene Act create unfair competitive advantages and will leave consumers without important consumer protections. The California Association of Joint Powers Authorities (CAJPA) writes that CAJPA is concerned about public entity workers that rely on stability in their long-term healthcare benefits and believes the provisions of the Knox-Keene Act are too important to allow certain groups seeking competitive advantages in the market to have an exemption at the risk of consumers being left without important protections. CAJPA members have seen firsthand the impacts of local provider networks going out of business; they’re ugly and have detrimentally impacted both consumers and providers. During this global healthcare pandemic, there is already too much confusion among consumers about access to medical care and this pilot may confuse them even more. Additionally, there is also confusion among medical providers in the current medical system with networks/non-networks, billings, authorizations, and processes in the dozens and dozens of health plans that they participate in.

ASSEMBLY FLOOR: 66-0, 5/6/19

AYES: Aguiar-Curry, Bauer-Kahan, Berman, Bloom, Boerner Horvath, Bonta, Burke, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Cooley, Cooper, Cunningham, Daly, Diep, Eggman, Flora, Frazier, Friedman, Gabriel, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Lackey, Levine, Limón, Low, Maienschein, Mayes, McCarty, Medina, Mullin, Muratsuchi, Nazarian, O'Donnell, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Santiago, Smith, Mark Stone, Ting, Voepel, Waldron, Weber, Wicks, Wood, Rendon

NO VOTE RECORDED: Arambula, Bigelow, Brough, Chen, Choi, Dahle, Fong, Gallagher, Kiley, Mathis, Melendez, Obernolte, Patterson, Salas

Prepared by: Teri Boughton / HEALTH / (916) 651-4111

8/21/20 17:34:03

**** END ***

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

AB 1124 (Maienschein) – Health care service plans: regulations: exemptions

Bill Summary:

Assembly Bill 1124 would authorize the Department of Managed Health Care, no later than March 1, 2021 and until January 1, 2030, to authorize two pilot programs – one in Northern California, the other in Southern California – that allows health care providers to undertake risk-bearing arrangements with a voluntary employees’ beneficiary association (VEBA), as defined under federal and state law with enrollment of greater than 100,000 lives, or a trust fund that is a welfare plan, and a multiemployer plan, as defined in federal law, with enrollment greater than 25,000 lives.

Fiscal Impact:

The DMHC estimates $221,000 and 1.0 PY in FY 2020-21, $375,000 and 1.1 PY in FY 2021-22, $379,000 and 1.2 PY in FY 2022-23 through FY 2026-27, and $398,000 MCF and 0.8 PY in FY 2027-28. (*Managed Care Fund).

The bill would require the pilot participants reimburse the DMHC for regulatory costs up to $500,000.

Background:

The DMHC assesses and monitors health plan networks and delivery systems for compliance with the Knox-Keene Act, and evaluates compliance through surveys on health plan practices related to access, utilization management, quality improvement, continuity and coordination of care, language access, and enrollee grievances and appeals.

Currently, a voluntary employees’ beneficiary association (VEBA) can contract directly with providers on a fee-for-service basis. However, many integrated physician groups contract with payers for a capitated rate. A contract could put the physician group at risk for costs of the services, which would normally require the VEBA to be licensed as a health care plan and to assume “global risk” (professional and institutional risk). Additionally, some entities contract with other health plans to provide services to enrollees and subscribers that do not pose as great of a risk because their overall impact on the health care market is limited. However, they would meet the definition of a health plan. This bill would provide an exception to this requirement on a pilot basis for two large VEBAs or trust funds, and would authorize one pilot in Northern and Southern California.

ERISA preempts state regulation of employer-provided health benefit plans. The proposed trust fund pilot participant under this bill is an ERISA plan and cannot be subject to Knox-Keene licensure. The VEBA is not an ERISA plan and currently has an exemption from the Knox-Keene Act because it reimburses providers on a fee-for-service basis. ERISA does not prevent state regulation of health insurance. State mandates passed by a Legislature can only apply to health insurance companies under state regulation, not ERISA plans. However, if an ERISA plan contracts with a state regulated health plan, the consumer protections in state law are applicable to the enrollees of the ERISA plan through the state regulated health plan.

Proposed Law: AB 1124 would authorize the Department of Managed Health Care, no later than March 1, 2021 and until January 1, 2030, to authorize two pilot programs – one in Northern California, the other in Southern California – that allow health care providers to undertake risk-bearing arrangements with a voluntary employees’ beneficiary association, as defined under federal and state law with enrollment of greater than 100,000 lives, or a trust fund that is a welfare plan, and a multiemployer plan, as defined in federal law, with enrollment greater than 25,000 lives. In addition the bill would:

• Provide it does not exempt a VEBA from the requirement to reimburse providers on a fee-for-service basis.
• Require participating VEBA or trust fund to each appoint an ombudsperson to monitor and respond to any complaint lodged by a participating enrollee in their respective pilot programs.
• Require the participating voluntary employees’ beneficiary association or trust fund shall report on a quarterly basis to the department any complaint lodged by a participating enrollee in their respective pilot programs, along with a description of the response and resolution.
• Require DMHC to approve the global and risk-bearing providers participating in a pilot program.
• Require DMHC, before June 1, 2027, after the termination of both pilot programs, submit a report to the Legislature regarding the costs and clinical patient outcomes of the pilot programs compared to fee-for-service payment models, including data on consumer and provider grievances, appeals, and independent medical reviews.
• Require the pilot program participants reimburse the department for reasonable regulatory costs of up to $500,000 for specified activities.

Related Legislation:

1. AB 1249 (Maienschein, 2019) was substantively similar to this bill and was vetoed. The veto message read:

This bill would authorize a pilot program that would exempt risk-bearing provider groups taking on global risk from full licensure under the Knox-Keene Act. This proposed pilot project would undermine the fundamental purpose of the Knox-Keene Act by permitting such entities to operate in the State without providing the strong consumer protections guaranteed under the Act.

Staff Comments:

The DMHC provided the following fiscal impact on specific units:

• Office of Legal Services (OLS). $33,000 and 0.2 PY in FY 2020-21 for short-term workload to conduct legal research and prepare legal memoranda.
• Office of Plan Licensing (OPL). $80,000 and 0.4 PY in FY2020-21, $38,000 and 0.2 PY in FY 2021-22, $36,000 and 0.2 PY in FY 2022-23 through FY 2026-27 for short-term workload to review pilot program applications and contract documents for compliance.
• Office of Enforcement (OE). $18,000 and 0.1 PY in FY 2021-22, $17,000 and 0.1 PY in FY 2022-23 through FY 2026-27 for workload to address two referrals per year from the Office of Plan Licensing.
• Office of Financial Review (OFR). $108,000 and 0.4 PY in FY 2020-21, $306,000 and 0.7 PY in FY 2021-22, $300,000 and 0.7 PY in FY 2022-23 through FY 2026-27, and $398,000 and 0.8 PY in FY 2027-28, to develop the reporting template and methodology and to review annual reports outlining comparative costs savings, and to prepare the legislative. These amounts include consultant resources of $32,000 in FY 2020-21 to assist with the development of the reporting template and methodology, $163,000 in FYs 2021-22 through 2026-27 to review the clinical patient outcomes reported by pilot participants, and $243,000 in FY 2027-28 to review the clinical patient outcome information for the final fiscal year of the pilot program and assist OFR with preparing the report for Legislature.
• Office of Administrative Services (OAS). $13,000 and 0.1 PY in FY 2021-22, $26,000 and 0.2 PY in FY 2022-23 through FY 2026-27 to process pilot participant reimbursements of reasonable costs.

-- END --

SENATE COMMITTEE ON HEALTH

Senator Dr. Richard Pan, Chair

BILL NO: AB 1124

SUBJECT: Health care service plans: regulations: exemptions

SUMMARY:

Authorizes the Department of Managed Health Care to authorize two pilot programs that allow health care providers to undertake risk-bearing arrangements with a voluntary employees’ beneficiary association, as defined under federal and state law with enrollment of greater than 100,000 lives, or a trust fund that is a welfare plan, and a multiemployer plan, as defined in federal law, with enrollment greater than 25,000 lives.

Existing law:

1. Establishes the Department of Managed Health Care (DMHC) to regulate health care service plans (health plans) under the Knox-Keene Health Care Service Plan Act (Knox-Keene Act). [HSC §1340, et seq.]
2. Permits the DMHC director to exempt from the Knox-Keene Act any class of persons or plan contracts if the DMHC director finds the action to be in the public interest and not detrimental to the protection of subscribers, enrollees, or persons regulated under the Knox-Keene Act, and that the regulation of the persons or plan contracts is not essential to the purposes of the Knox-Keene Act. [HSC §1343]
3. Makes it unlawful for any person to engage in business as a health plan in California or to receive advance or periodic consideration in connection with a plan from, or, on behalf of persons in California, unless such person has first secured from the DMHC director a license, then in effect, as a plan or unless such person is exempted, as specified. A person licensed pursuant to the Knox-Keene Act need not be licensed pursuant to the Insurance Code to operate a health plan or specialized health plan unless the plan is operated by an insurer, in which case, requires the insurer to also be licensed by the Insurance Commissioner. [HSC §1349]
4. Exempts a health plan, including a self-insured reimbursement plan that pays for or reimburses any part of the cost of health care services, operated by specified government entities (cities, counties, political subdivisions, etc) or public joint labor management trust that satisfies specified criteria including that providers are reimbursed solely on a fee-for-service basis and not at risk in contracting arrangements, reimburses at least part of the cost of all basic health care services, as defined, benefits are determined in collective bargaining, and maintains a fiscally sound operation. These plans are also referred to as voluntary employees’ beneficiary association or VEBA. [HSC §1349.2]
5. Establishes information and fees for submission for licensure under the Knox-Keene Act. [HSC §1351]
6. Requires every contract between a health plan and a risk-bearing organization to include provisions concerning the following, as to the risk-bearing organization’s administrative and financial capacity:
7. A requirement that the risk-bearing organization furnish financial information to the health plan or the plan’s designated agent and meet any other financial requirements that assist the health care service plan in maintaining the financial viability of its arrangements for the provision of health care services in a manner that does not adversely affect the integrity of the contract negotiation process;
8. A requirement that the health plan disclose information to the risk-bearing organization that enables the risk-bearing organization to be informed regarding the financial risk assumed under the contract; and,
9. A requirement that the health plans provide payments of all risk arrangements, excluding capitation, within 180 days after close of the fiscal year. [HSC §1375.4]
   
10. Defines, a “risk-bearing organization” as a professional medical corporation, other form of corporation controlled by physicians and surgeons, a medical partnership, a medical foundation exempt from licensure, as specified, or another lawfully organized group of physicians that delivers, furnishes, or otherwise arranges for or provides health care services, but does not include an individual or a health plan, and that contracts directly with a health plan or arranges for health care services for the health plan’s enrollees, receives compensation for those services on any capitated or fixed periodic payment basis, and, is responsible for the processing and payment of claims made by providers for services rendered by those providers on behalf of a health plan that are covered under the capitation or fixed periodic payment made by the plan to the risk-bearing organization.

This bill:

1. Authorizes the DMHC director no later than March 1, 2021, to authorize one pilot program in northern California and one pilot program in southern California, whereby providers approved by DMHC may undertake risk-bearing arrangements with a VEBA, as defined under federal and state law, with enrollment of greater than 100,000 lives, or a trust fund that is a welfare plan, as defined in federal law, and a multiemployer plan, as defined in federal law, with enrollment of greater than 25,000 lives for independent periods beginning no earlier than July 1, 2021, to no later than June 30, 2027, inclusive, if the following criteria are met:
2. The purpose of the pilot program is to demonstrate the control of costs for health care services and the improvement of health outcomes and quality of services when compared against a sole fee-for-service provider reimbursement model;
3. The VEBA or trust fund has entered into a contract with one or more health care providers under which each provider agrees to accept risk-based or global risk payment from the VEBA or trust fund, and prohibits a participating provider from agreeing to accept financial risk greater than 10% of its existing contracted risk-based business;
4. Each risk-bearing provider is registered as a risk-bearing organization pursuant to existing law, and applicable DMHC regulations if the provider accepts professional capitation and is delegated the responsibility for processing and payment of claims;
5. Each global risk-bearing provider holds or will obtain in conjunction with the pilot program application a limited or restricted license, pursuant to existing law and regulations;
6. Each risk-bearing provider continues to comply with applicable financial solvency standards and audit requirements, including financial reporting on a quarterly basis, during the pilot;
7. The VEBA or trust is responsible for providing:
   • 1. Basic health care services;
     2. Prescription drug benefits;
     3. Continuity of care;
     4. Standards for network adequacy and timely access to care, including, but not limited to, access to specialty care;
     5. Language assistance programs;
     6. A process for filing and resolving consumer grievances and appeals, including, but not limited to, independent medical review;
     7. Prohibitions against deceptive marketing;
     8. Member documents that include a description of the benefit coverage, any applicable copays, how to access services, and how to submit a grievance; and,
     9. Mechanisms for resolving provider disputes.
   1. The contract between the VEBA or trust fund and each health care provider includes:
8. Provisions dividing financial responsibility between the parties and defining which party is financially responsible for services rendered, including arrangements for member care should a global or risk-bearing provider become insolvent;
9. A delegation agreement;
10. Requirements regarding utilization review or utilization management;
11. Assurances that the risk-based organization, limited licensee, or restricted licensee, as applicable, has the organizational and administrative capacity to provide services to covered employees, and that medical decisions are rendered by qualified medical providers, unhindered by fiscal and administrative management, including the disclosure of the percentage of risk assumed in relation to its total risk-based business;
12. Requirements regarding the submission of claims by providers and the timely processing of provider claims, including a guarantee that the VEBA or trust fund will indemnify any outstanding unpaid provider claim in the event of the insolvency of a participating provider to the pilot; and,
13. Requirements that the health care provider comply with the VEBA or trust fund’s requirements for all of the following:
    • • • 1. Continuity of care;
          2. Language assistance; and,
          3. Consumer grievances and appeals, including, but not limited to, independent medical review.
14. The term of each contract between the VEBA or trust fund and health care provider does not exceed the pilot period;
15. The contract of each health care provider that has entered into a contract under the pilot, included in the pilot application; and,
16. The VEBA or trust fund and each participating health care provider agree to collect and report to DMHC and the Office of Healthcare Affordability, in each year of the pilot, in a manner and frequency determined by DMHC, information regarding the comparative cost savings when compared to fee-for-service payment, performance measurements for clinical patient outcomes, and any other information required by DMHC.
17. Requires the participating VEBA or trust fund to report on a quarterly basis to DMHC any complaint lodged by a participating enrollee in their respective pilot programs, along with a description of the response and resolution.
18. Requires the global and risk-bearing providers participating in the pilot to be approved by DMHC.
19. Requires DMHC to submit a report to the Legislature before June 1, 2028, regarding the costs and clinical patient outcomes of the pilot compared to fee-for-service payment models.
20. Requires the pilot participants to reimburse DMHC for reasonable regulatory costs of up to $500,000, as specified.
21. Sunsets this bill on January 1, 2030.
    
22. Contains an urgency clause that will make this bill effective upon enactment.

FISCAL EFFECT:

This bill has not been analyzed by a fiscal committee.

PRIOR VOTES:

COMMENTS:

1. Author’s statement. According to the author, labor union trusts cannot utilize value-based payment mechanisms with the provider networks in their self-funded plan networks.  This results in higher health care costs that could be avoided. Independent, impartial research on health care cost drivers and delivery system reform conducted by the U.C. Berkeley School of Public Health and the Integrated Healthcare Association consistently show that the solution to rising health care costs is to increase the percentage of health care that is delivered through clinically integrated providers that share the financial risk with health plans, government and employer payers. To date, this kind of health care financing and delivery model has been used in the fully-insured employer-sponsored HMO, Medicare Advantage and Medi-Cal Managed Care market segments.
2. DMHC. According to DMHC’s Annual Report, in 2019, 80 full service health plans licensed by the DMHC provided health care services to more than 26 million Californians. This included approximately 13.9 million commercial enrollees and approximately 12.6 million government enrollees. In addition to full service health plans, the DMHC oversees 45 specialized health plans including chiropractic, dental, vision, psychological (behavioral health) and pharmacy. The DMHC licenses and regulates the full scope of managed care models, including all Health Maintenance Organizations (HMO) in California, as well as Preferred Provider Organizations (PPO), Exclusive Provider Organizations (EPO), Point-of Service (POS) products and Medi-Cal managed care plans. DMHC also licenses and conducts financial reviews of Medicare Advantage and Part D plans. DMHC assesses and monitors health plan networks and delivery systems for compliance with the Knox-Keene Act, and evaluates compliance through onsite surveys (audits) of health plan operations performed every three years. DMHC also conducts non-routine surveys when a specific issue or problem requires a focused review of a health plan’s operations. The surveys examine health plan practices related to access, utilization management, quality improvement, continuity and coordination of care, language access and enrollee grievances and appeals. DMHC monitors provider networks and the accessibility of services to enrollees by reviewing the geographic proximity of in-network providers to enrollee residences or work locations, provider-to-patient ratios and timely access to care. DMHC reviews health plan financial statements and filings, and analyzes health plan reserves, financial management systems, and administrative arrangements. DMHC does not license provider organizations, but it monitors the financial solvency of risk-bearing organizations. Risk-bearing organizations are provider groups that, in their contracts with health plans, pay claims and assume financial risk for the cost of all health care services (inpatient and outpatient) by accepting a fixed monthly payment for each enrolled person assigned to the risk-bearing organization. This arrangement is typically referred to as “capitation.” Risk-bearing organizations are subject to financial reserve requirements and regular financial reporting. DMHC monitors the financial stability of risk-bearing organizations by analyzing financial filings, conducting financial examinations, reviewing claims payment practices and developing and monitoring corrective action plans. DMHC conducted financial examinations on 24 risk-bearing organizations in 2019. As a result, all 24 risk-bearing organizations were required to remediate underpaid claims. In total, the risk-bearing organizations paid an additional $762,000 in payment, interest and penalties to providers.
   
3. Global risk regulations. On October 27, 2017, DMHC noticed intent for rulemaking to clarify licensure requirements for health plans, specifically requiring licensure for a person who accepts global risk (both institutional and professional risk) for services to subscribers or enrollees receiving “advance or periodic consideration” from or on behalf of subscribers or enrollees. The proposed regulation also set out requirements for a restricted license for entities that do not market directly to consumers or employers but otherwise meet the statutory definition of a health plan. In addition, the proposed regulation stated specific criteria DMHC may apply in considering a request for exemption from licensure requirements. On October 8, 2018, the Office of Administrative Law rejected the regulation on the basis of clarity and incorrect procedure. The regulation was approved after four revisions and four comment periods on March 5, 2019, and took effect on July 1, 2019.

According to DMHC in their statement of reasons, existing law requires a health plan to assume “full financial risk” for the provision of covered health care benefits to enrollees or subscribers. However, “full financial risk” is not defined. As a result, provider groups that contract with health plans or other organizations to provide health care services to enrollees assume at least some degree of risk for both professional and institutional (hospital) health care services (professional and institutional risk together is considered “global risk”). These provider groups otherwise meet the definition of a health plan by arranging for health care services for health plan enrollees and accepting at least a portion of global risk. Without a clear definition of what types and levels of risk may be assumed, entities that meet the definition of a health plan may be operating without a license. This is a violation of the law, which makes it unlawful to receive advance or periodic consideration in connection with a health plan without first securing a license or an exemption. In 2015, the California Court of Appeal, Second District, held that “the level of financial risk under a capitation agreement that causes a ‘risk bearing organization’ … to become a ‘health care service plan’ … is precisely the type of regulatory determination involving complex economic policy that should be made by DMHC…” Hambrick v. Healthcare Partners Medical Group, Inc., (2015) 238 Cal.App.4th 124, 149. Regulation is necessary to set the level of assumption of financial risk that triggers a requirement to obtain licensure. Additionally, there are entities that contract only with other health plans to provide services to that health plan’s enrollees and subscribers that do not pose as great a risk to the stability of the health care delivery system because their overall impact on the health care market is limited. However, they still meet the definition of a health plan under the Knox-Keene Act. The regulation provides a separate “restricted license” for these entities thereby limiting the confusion these entities have about the need for a license and the type of regulation that will be incurred.

1. Employee Retirement Income Security Act of 1974 (ERISA). ERISA preempts state regulation of employer-provided health benefit plans. The proposed trust fund pilot participant under this bill is an ERISA plan and cannot be subject to Knox-Keene licensure. The VEBA is not an ERISA plan and currently has an exemption from the Knox-Keene Act because it reimburses providers on a fee-for-service basis. ERISA does not prevent state regulation of health insurance. State mandates passed by a Legislature can only apply to health insurance companies under state regulation, not ERISA plans. However, if an ERISA plan contracts with a state regulated health plan, the consumer protections in state law are applicable to the enrollees of the ERISA plan through the state regulated health plan.
2. Prior legislation. AB 1249 Maienschein of 2019 would have allowed DMHC to authorize for five years similar pilots as authorized under this bill. AB 1249 was vetoed by Governor Newsom. The Governor’s veto message stated:

“This bill would authorize a pilot program that would exempt risk-bearing provider groups taking on global risk from full licensure under the Knox-Keene Act. This proposed pilot project would undermine the fundamental purpose of the Knox-Keene Act by permitting such entities to operate in the State without providing the strong consumer protections guaranteed under the Act.”

1. Support. According to America’s Physician Groups (APG), there is a growing movement to pair self-funded health benefit plans with organized, integrated providers in a more aligned relationship to produce better care at lower cost. The trust and its contracted network providers can partner to address the specific issues in the employee population – setting performance targets and exchanging relevant data on progress. Many payers complain that they cannot get access to critical performance and cost data in the current health insurance marketplace. APG writes Integrated Healthcare Association data shows that for 2013, 2015, and 2017, provider systems that share financial risk for outcomes with their payer partners score higher on ten clinical performance metrics, deliver lower total cost of care, and lower per-capita cost of care than their fee-for-service paid counterparts. In these pilots, providers and payers will directly share data on cost, outcomes, and performance measures back and forth so that gaps in care can be addressed, and priorities continuously monitored. APG states that its’ California members operate under risk-based models seven days a week and have done so for the past 20 years. The quality scores delivered by these provider organizations could not be sustained if they were not financially and operationally stable – as they have been for the past 20 years. The California Health Care Coalition, a membership organization of private and public sector employers, unions and health and welfare trust funds in California, writes that employer plan sponsors would like to use more advanced value-based payment models in a direct relationship with provider organizations that have a proven public track record of delivering care that is more timely, higher quality, and more accountable for cost. International Association of Sheet Metal, Air, Rail and Transportation Workers, Local 104 writes that this bill would address a major shortcoming in California’s existing law by empowering Taft-Hartley Health and Welfare Trust Funds to by-pass HMOs and contract directly with health care providers today on a fee-for-service basis. California law (the Knox-Keene Act) is in essence a de-facto restriction on their trust funds by prohibiting providers from contracting on a capitated basis with any organization that does not hold a limited Knox-Keene license.
   
2. Opposition. The California Association of Health Plans and the Association of California Life and Health Insurance Companies write that these exemptions from the Knox-Keene Act create unfair competitive advantages and will leave consumers without important consumer protections. California’s Knox-Keene licensed health plans are tightly regulated and comply with a vast array of requirements that protect the market and consumers of health services. Among many other things, fully licensed health plans are not only required to deliver basic health care services, they must also meet financial solvency requirements, ensure timely access to services, implement consumer grievances processes and participate in independent medical review. The California Association of Joint Powers Authorities (CAJPA) writes that CAJPA is concerned about public entity workers that rely on stability in their long-term healthcare benefits and believes the provisions of the Knox-Keene Act are too important to allow certain groups seeking competitive advantages in the market to have an exemption at the risk of consumers being left without important protections. CAJPA members have seen firsthand the impacts of local provider networks going out of business; they’re ugly and have detrimentally impacted both consumers and providers. During this global healthcare pandemic, there is already too much confusion among consumers about access to medical care and this pilot may confuse them even more. Additionally, there is also confusion among medical providers in the current medical system with networks/non-networks, billings, authorizations, and processes in the dozens and dozens of health plans that they participate in.
3. Policy comment. California has very strong consumer protections over risk-bearing entities such as HMOs, restricted licensees and other risk-bearing organizations, brought by the enactment of legislation over the years and enforcement of the Knox-Keene Act by DMHC. Financial standards have been put in place because of major provider group insolvencies of the past. As indicated in DMHC’s Annual Report in 2019 for the 24 reviewed, “all 24 risk-bearing organizations were required to remediate underpaid claims. In total, the risk-bearing organizations paid an additional $762,000 in payment, interest and penalties to providers.” With instability in the health care market because of COVID-19, now may not be the time to loosen oversight on important consumer protections. Furthermore, many provider payment disputes seem to focus on entities delegated responsibilities by health plans (risk-based organizations). In these instances, the plan is held accountable to enforce Knox-Keene standards on its delegated entities, and grievances can be brought to DMHC. Under these pilots, timely payment standards are not necessarily those required by the Knox-Keene Act. It is not clear what the policy rational is for permitting the organizations that would participate in this pilot to “by-pass” HMOs and the rules put in place to protect consumers that apply to HMOs and by extension their delegated entities.
4. Amendments requested by the author.

(a)(9) To participate in the pilot, each voluntary employees’ beneficiary association or trust fund shall submit to the department an application consistent with subsection (h)(2) of this section. The department may select up to two qualified participants for the pilot. Each health care provider that has entered into a contract with the voluntary employees’ beneficiary association or trust fund is a party to the pilot program application submitted to the department. The application shall include a copy of each contract between the voluntary employees’ beneficiary association or trust fund and a participating health care provider.

(a)(10) (A) The voluntary employees’ beneficiary association or trust fund and each health care provider participating in the pilot program agree to collect and report to the department and the Office of Healthcare Affordability, in each year of the pilot program, in a manner and frequency determined by the department, information regarding the comparative cost savings when compared to fee-for-service payment, performance measurements for clinical patient outcomes, and any other information required by the department.

(c) Notwithstanding paragraph (3) of subdivision (a), this section does not exempt a voluntary employees’ beneficiary association participating in a pilot program authorized by subdivision (a) of Section 1349.2 from the requirement to reimburse providers on a fee-for-services basis.

1. Amendments requested by the Chair.
   
   (a)(6)(I) Mechanisms for resolving provider disputes, including an appeals process.

(g) The department after the termination of both pilot programs, and before June 1, 2027, shall submit a report to the Legislature regarding the costs and clinical patient outcomes of the pilot programs compared to fee-for-service payment models, including data on consumer and provider grievances, appeals, and independent medical reviews. This report shall be submitted in compliance with Section 9795 of the Government Code.

SUPPORT AND OPPOSITION:

Support: California Health Care Coalition (sponsor)

America’s Physician Groups

California State Association of Electrical Workers

California State Pipe Trades Council

Coalition of California Utility Employees

Heritage Provider Network

IBEW Local Union 6

IBEW Local 18 Health and Welfare Trust

IBEW Local 47

IBEW Local 234

IBEW Local 302

IBEW Local 332

IBEW Local 413

IBEW Local 440

IBEW Local 617

International Association of Sheet Metal, Air, Rail and Transportation Workers, Local 104

International Union of Elevator Constructors

Plumbers and Steamfitters Local 230

Plumbers and Steamfitters UA Local 343

Plumbers and Pipefitters UA Local 364

Plumbers and Steamfitters UA Local 398

Plumbers and Pipefitters Local Union 442

Plumbers and Pipefitters Local 447

Plumbers, Steamfitters and Refrigeration Fitters Local Union 467

Plumbers, Steamfitters, Pipefitters and HVAC/R Service Technicians UA Local Union 393

Scripps Health

Sharp Rees-Stealy Medical Group

Steam, Refrigerator, Air Conditioning, Pipe Fitters, Welders and Apprentices of the United Association Local Union 250

UA Plumbers Local 78

United Association of Plumbers and Pipefitters Local 761

United Association of Plumbers Pipe and Refrigerator Fitters Local No. 246

Western States Council of Sheet Metal, Air, Rail and Transportation

Oppose: Association of California Life and Health Insurance Companies

California Association of Health Plans

California Association of Joint Powers Authorities

-- END -

 THIRD READING  

Bill No: AB 1124

Author: Maienschein (D)

Amended: 6/5/19 in Senate

Vote: 27 - Urgency

SENATE LABOR, PUB. EMP. & RET. COMMITTEE: 5-0, 6/12/19

AYES: Hill, Morrell, Jackson, Mitchell, Pan

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 66-0, 5/6/19 - See last page for vote

SUBJECT: Employment safety: outdoor workers: wildfire smoke

SOURCE: California Labor Federation, AFL-CIO

State Building and Construction Trades Council, AFL-CIO

WORKSAFE

DIGEST:

This bill requires that, by July 18, 2019, the Occupational Safety and Health Standards Board adopts emergency regulations that require employers to make respirators available to outdoor workers on any day the outdoor worker could reasonably be expected to be exposed to harmful levels of smoke from wildfires.

ANALYSIS:

Existing law:

1. Provides for the Occupational Safety and Health Standards Board (OSHSB), which consists of seven individuals appointed by the Governor for four year terms. Two members must be from the field of management, two members must be from the field of labor, one member must be from the field of occupational health, one member must be from the field of occupational safety and one member must be from the general public. (Labor Code §§140 and 141)
2. Empowers OSHSB, by an affirmative vote of four or more members, to adopt, amend, or repeal occupational safety and health standards. The procedure to adopt, repeal, or amend occupational safety and health standards must follow the process for promulgating regulations, unless otherwise stated in Labor Code. (Labor Code §§142.3 and 142.4)
3. Requires that the Department of Occupational Safety and Health (DOSH) enforce all occupational safety and health standards adopted by OSHSB. (Labor Code §142)
4. Allows any employer to apply to OSHSB for a permanent variance from any occupational safety and health standard if the employer has an alternative practice or program that will provide equal or superior safety for employees. The standards board must issue the variance if it determines on the record that the preponderance of evidence supports that the employer’s alternative practice or program are as safe as the standard. (Labor Code §143)
5. Requires that OSHSB develop or revise certain specific occupational safety and health standards, including bloodborne pathogens, hazardous substance removal work, agricultural field sanitation, and lead-related construction. (Labor Code §§144.7, 6380.5, 6712, and 6717)

This bill:

1. Makes findings and declarations regarding the economic, health, and loss of life impacts associated with California’s wildfires.
2. Requires the OSHSB, by June 13, 2019, to adopt emergency regulations that require employers to make respirators available to outdoor workers anytime they could reasonably be expected to be exposed to harmful levels of smoke from wildfires, or burning structures due to a wildfire, while working.
3. Requires OSHSB to utilize Local Air Quality Index (AQI) measures to determine when smoke from wildfires is expected to be harmful.
4. Permits temporary exemptions for employers from medical evaluation and fit testing requirements for respirators utilized in their respiratory protection program when air quality levels reach a certain amount due to wildfire smoke, if these exemptions do not provide a less effective level of protection than federal law.
5. Excludes firefighting safety regulations from the scope of the emergency regulation.
6. Declares that the above provisions are to take effect immediately as an urgency statute.

Comments

Need for this bill? According to the author, devastating wildfires in 2018 created significant respiratory health risks to workers who were often without adequate protective equipment. The author states the following:

“Millions of workers have been affected, in a variety of ways, by these tragedies. Some have been injured or killed, more have been displaced or left unemployed, and far more suffered unknown permanent physical damage due to smoke exposure.

Outdoor workers especially found themselves affected. Anecdotal evidence suggests that very few employers of outdoor workers provided appropriate respirators, thus leaving workers to inhale harmful smoke for hours at a time. We’ll never know how much lung function was lost or to what degree respiratory illnesses and heart disease worsened, but we do know it happened.”

Related/Prior Legislation

AB 1202 (Skinner, Chapter 678, Statutes of 2013) required OSHSB to create an occupational safety and health standard for the handling of antineoplastic drugs in health care facilities.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT: (Verified 6/24/19)

California Labor Federation, AFL-CIO (co-source)

State Building and Construction Trades Council, AFL-CIO (co-source)

WORKSAFE (co-source)

American Federation of State, County and Municipal Employees, AFL-CIO

California Conference Board of the Amalgamated Transit Union

California Conference of Machinists

California Employment Lawyers Association

California Environmental Justice Alliance

California Food and Farming Network

California Immigrant Policy Center

California Rural Legal Assistance Foundation

California Teamsters Public Affairs Council

California-Nevada Conference of Operating Engineers

Central Coast Alliance for a Sustainable Economy

Centro Laboral de Graton

Engineers and Scientists of California, IFPTE Local 20, AFL-CIO

Food Empowerment Project

Inlandboatmen’s Union of the Pacific

Instituto de Educacion Popular del Sur de California

International Longshore and Warehouse Union

North Bay Jobs with Justice

Professional and Technical Engineers, IFPTE Local 21, AFL-CIO

San Diego Food System Alliance

Southern California Edison

Street Level Health Project

Teamsters Public Affairs Council

UNITE-HERE, AFL-CIO

Utility Workers of America

OPPOSITION: (Verified 6/24/19)

None received

ARGUMENTS IN SUPPORT: The State Building and Construction Trades, the sponsor of the bill, argues the following in support of the bill:

“We appreciate the recent action taken by the Occupational Safety and Health Standards Board (OSHSB) that directed the Division of Occupational Safety and Health (Cal/OSHA) to begin stakeholder meetings to develop an emergency standard that can be put into place before the next fire season ‘officially’ begins. However, we believe that AB 1124 needs to continue to move forward so that both the emergency rulemaking and subsequent ‘regular’ rulemaking each take precedence at Cal/OSHA, get completed in an efficient and timely manner, and ensure that each standard base any action required of employers on the local Air Quality Index (AQI) model of air monitoring.”

In support, Worksafe argues that mandating the timely provision of respirators is “particularly important for workers who are paid piece rate or are vulnerable to workplace abuses from employers that compel them to work without any protections, even when exposed to hazardous wildfire smoke. When workers must continue to work, their employer at minimum must provide an appropriate respirator free of charge and other protections to reduce exposure to smoke during wildfires.”

ASSEMBLY FLOOR: 66-0, 5/6/19

AYES: Aguiar-Curry, Bauer-Kahan, Berman, Bloom, Boerner Horvath, Bonta, Burke, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Cooley, Cooper, Cunningham, Daly, Diep, Eggman, Flora, Frazier, Friedman, Gabriel, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Lackey, Levine, Limón, Low, Maienschein, Mayes, McCarty, Medina, Mullin, Muratsuchi, Nazarian, O'Donnell, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Santiago, Smith, Mark Stone, Ting, Voepel, Waldron, Weber, Wicks, Wood, Rendon

NO VOTE RECORDED: Arambula, Bigelow, Brough, Chen, Choi, Dahle, Fong, Gallagher, Kiley, Mathis, Melendez, Obernolte, Patterson, Salas

Prepared by: Gideon L. Baum / L., P.E. & R. / (916) 651-1556

6/26/19 15:58:59

**** END ****

SENATE COMMITTEE ON LABOR, PUBLIC EMPLOYMENT AND RETIREMENT

Senator Jerry Hill, Chair

2019 - 2020 Regular

Bill No: AB 1124 Hearing Date: June 12, 2019

SUBJECT: Employment safety: outdoor workers: wildfire smoke.

KEY ISSUE

Should the Legislature require that, by July 18, 2019, the Occupational Safety and Health Standards Board adopts emergency regulations that require employers to make respirators available to outdoor workers on any day the outdoor worker could reasonably be expected to be exposed to harmful levels of smoke from wildfires?

ANALYSIS

Existing law:

1. Provides for the Occupational Safety and Health Standards Board (OSHSB), which consists of seven individuals appointed by the Governor for four year terms. Two members must be from the field of management, two members must be from the field of labor, one member must be from the field of occupational health, one member must be from the field of occupational safety and one member must be from the general public.

(Labor Code §§140 and 141)

1. Existing law empowers OSHSB, by an affirmative vote of four or more members, to adopt, amend, or repeal occupational safety and health standards. The procedure to adopt, repeal, or amend occupational safety and health standards must follow the process for promulgating regulations, unless otherwise stated in Labor Code.
   (Labor Code §§142.3 and 142.4)
2. Existing law requires that the Department of Occupational Safety and Health (DOSH) enforce all occupational safety and health standards adopted by OSHSB.
   (Labor Code §142)
3. Existing law allows any employer to apply to OSHSB for a permanent variance from any occupational safety and health standard if the employer has an alternative practice or program that will provide equal or superior safety for employees. The standards board must issue the variance if it determines on the record that the preponderance of evidence supports that the employer’s alternative practice or program are as safe as the standard. (Labor Code §143)
4. Existing law requires that OSHSB develop or revise certain specific occupational safety and health standards, including bloodborne pathogens, hazardous substance removal work, agricultural field sanitation, and lead-related construction.

(Labor Code §§144.7, 6380.5, 6712, and 6717)

This bill:

1. Makes findings and declarations regarding the economic, health, and loss of life impacts associated with California’s wildfires.
2. Requires the Board, by June 13, 2019, to adopt emergency regulations that require employers to make respirators available to outdoor workers anytime they could reasonably be expected to be exposed to harmful levels of smoke from wildfires, or burning structures due to a wildfire, while working.
3. Requires the Board to utilize Local Air Quality Index (AQI) measures to determine when smoke from wildfires is expected to be harmful.
4. Permits temporary exemptions for employers from medical evaluation and fit testing requirements for respirators utilized in their respiratory protection program when air quality levels reach a certain amount due to wildfire smoke, if these exemptions do not provide a less effective level of protection than federal law.
5. Excludes firefighting safety regulations from the scope of the emergency regulation.
6. Declares that the above provisions are to take effect immediately as an urgency statute.

COMMENTS

1. Need for this bill?

According to the author, devastating wildfires in 2018 created significant respiratory health risks to workers who were often without adequate protective equipment. The author states the following:

“Millions of workers have been affected, in a variety of ways, by these tragedies. Some have been injured or killed, more have been displaced or left unemployed, and far more suffered unknown permanent physical damage due to smoke exposure.

Outdoor workers especially found themselves affected. Anecdotal evidence suggests that very few employers of outdoor workers provided appropriate respirators, thus leaving workers to inhale harmful smoke for hours at a time. We’ll never know how much lung function was lost or to what degree respiratory illnesses and heart disease worsened, but we do know it happened.”

2. Staff Comments:

As discussed above, the bill currently calls for the Occupational Safety and Health Standards Board to adopt an emergency wildfire safety regulation by July 18, 2019. With the urgency clause, AB 1124 could become law prior to July 18, 2019. However, the legislative hearing calendar does not generally move that quickly. If this bill is not on a path to become law prior to July 18, 2019, the author may wish to consider an implementation date later in the year. Otherwise, this bill creates the unique complication of a governmental entity being out of compliance with the law prior to the creation of the law.

3. Proponent Arguments

The State Building and Construction Trades, the sponsor of the bill, argues the following in support of the bill:

“We appreciate the recent action taken by the Occupational Safety and Health Standards Board (OSHSB) that directed the Division of Occupational Safety and Health (Cal/OSHA) to begin stakeholder meetings to develop an emergency standard that can be put into place before the next fire season ‘officially’ begins. However, we believe that AB 1124 needs to continue to move forward so that both the emergency rulemaking and subsequent ‘regular’ rulemaking each take precedence at Cal/OSHA, get completed in an efficient and timely manner, and ensure that each standard base any action required of employers on the local Air Quality Index (AQI) model of air monitoring.”

In support, Worksafe argues that mandating the timely provision of respirators is “particularly important for workers who are paid piece rate or are vulnerable to workplace abuses from employers that compel them to work without any protections, even when exposed to hazardous wildfire smoke. When workers must continue to work, their employer at minimum must provide an appropriate respirator free of charge and other protections to reduce exposure to smoke during wildfires.”

4. Opponent Arguments:

The Construction Employers’ Association, adopting an “oppose unless amended” position, argues the following:

“As drafted, [Section] 6722 (a)(1) requires employers to make ‘appropriate and effective respirators available to an outdoor worker on any day that outdoor workers could reasonably be expected to be exposed to harmful levels of smoke from wildfires, or burning structures due to a wildfire.’ This seems to suggest that employers must stock respirators, even if the policy of the employer is to shut down job sites when harmful levels of smoke exist. To the extent that a responsible employer elects to protect its workers by closing worksites on days when the AQI reaches a certain level, the obligation to stock respirators should clearly not apply as they would be unnecessary.”

5. Prior Legislation:

AB 1202 (Skinner), Chapter 678, Statutes of 2013, requires the Occupational Safety and Health Standards Board (OSHSB) to create an occupational safety and health standard for the handling of antineoplastic drugs in health care facilities.

SUPPORT

California Labor Federation, AFL-CIO (Co-Sponsor)

State Building and Construction Trades Council, AFL-CIO (Co-Sponsor)

WORKSAFE (Co-Sponsor)

American Federation of State, County and Municipal Employees, AFL-CIO

California Conference Board of the Amalgamated Transit Union

California Conference of Machinists

California Employment Lawyers Association

California Environmental Justice Alliance

California Food and Farming Network

California Immigrant Policy Center

California Rural Legal Assistance Foundation

California Teamsters Public Affairs Council

California-Nevada Conference of Operating Engineers

Central Coast Alliance for a Sustainable Economy

Centro Laboral de Graton

Engineers and Scientists of California, IFPTE Local 20, AFL-CIO

Inlandboatmen’s Union of the Pacific

Instituto de Educacion Popular del Sur de California

North Bay Jobs with Justice

Professional and Technical Engineers, IFPTE Local 21, AFL-CIO

San Diego Food System Alliance

Southern California Edison

State Building and Construction Trades Council, AFL-CIO

Street Level Health Project

Teamsters Public Affairs Council

UNITE-HERE, AFL-CIO

Utility Workers of America

OPPOSITION

Air Conditioning Sheet Metal Association

California Association of Sheet Metal and Air Conditioning Contractors, National

Association

California Chapters of the National Electrical Contractors Association

California Legislative Conference of the Plumbing, Heating and Piping Industry

Construction Employers Association

Northern California Allied Trades

Southern California Contractors Association

United Contractors

Wall and Ceiling Alliance

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 1124

Author:(Maienschein)

As Amended Ver:April 22, 2019

2/3 vote. Urgency

SUMMARY:

Requires the Occupational Safety and Health Standards Board (Board) to adopt emergency regulations by June 13, 2019, requiring employers to make respirators available to outdoor workers when it is reasonably expected that they will be exposed to harmful levels of wildfire smoke.

Major Provisions

1. Requires the Board, by June 13, 2019, to adopt emergency regulations that require employers to make respirators available to outdoor workers, excluding wildland firefighters, anytime they could reasonably be expected to be exposed to harmful levels of smoke from wildfires, or burning structures due to a wildfire, while working.
2. Requires the Board to utilize Local Air Quality Index (AQI) measures to determine when smoke from wildfires is expected to be harmful.
3. Exempts employers temporarily from medical evaluation and fit testing requirements for respirators utilized in their respiratory protection program when air quality levels reach a certain amount due to wildfire smoke.
4. Declares that the above provisions are to take effect immediately as an urgency statute.

COMMENTS:

Devastating wildfires in 2018 created significant respiratory health risks to workers who were often without adequate protective equipment.

According to the Author:

The author states, "Millions of workers have been affected, in a variety of ways, by these tragedies. Some have been injured or killed, more have been displaced or left unemployed, and far more suffered unknown permanent physical damage due to smoke exposure.

Outdoor workers especially found themselves affected. Anecdotal evidence suggests that very few employers of outdoor workers provided appropriate respirators, thus leaving workers to inhale harmful smoke for hours at a time. We'll never know how much lung function was lost or to what degree respiratory illnesses and heart disease worsened, but we do know it happened."

Arguments in Support:

The State Building and Construction Trades, a sponsor of the bill, believes that time is of the essence in creating respiratory protections for outdoor workers. They state, "We appreciate the recent action taken by the Occupational Safety and Health Standards Board (Board) that directed the Division of Occupational Safety and Health (Cal/OSHA) to begin stakeholder meetings to develop an emergency standard that can be put into place before the next fire season 'officially' begins. However, we believe that AB 1124 needs to continue to move forward so that both the emergency rulemaking and subsequent 'regular' rulemaking each take precedence at Cal/OSHA, get completed in an efficient and timely manner, and ensure that each standard base any action required of employers on the local Air Quality Index (AQI) model of air monitoring."

In support, Worksafe argues that mandating the timely provision of respirators is "particularly important for workers who are paid piece rate or are vulnerable to workplace abuses from employers that compel them to work without any protections, even when exposed to hazardous wildfire smoke. When workers must continue to work, their employer at minimum must provide an appropriate respirator free of charge and other protections to reduce exposure to smoke during wildfires."

Arguments in Opposition:

The Construction Employers' Association, is opposed unless amended, and states "As drafted, [Section] 6722(a)(1) requires employers to make 'appropriate and effective respirators available to an outdoor worker on any day that outdoor workers could reasonably be expected to be exposed to harmful levels of smoke from wildfires, or burning structures due to a wildfire.' This seems to suggest that employers must stock respirators, even if the policy of the employer is to shut down job sites when harmful levels of smoke exist. To the extent that a responsible employer elects to protect its workers by closing worksites on days when the AQI reaches a certain level, the obligation to stock respirators should clearly not apply as they would be unnecessary."

FISCAL COMMENTS:

According to the Assembly Appropriations Committee, minor and absorbable costs for the development of regulations. First, the Division of Occupational Safety and Health (Cal/OSHA) and the Board have worked significantly on this issue and can absorb the workload associated with the proposed standards. Second, recent amendments reduced costs by clarifying the scope of the proposed regulations.

VOTES:

ASM LABOR AND EMPLOYMENT: 7-0-0

YES: Kalra, Flora, Carrillo, Diep, Gonzalez, Jones-Sawyer, Luz Rivas

ASM APPROPRIATIONS: 14-4-0

YES: Gonzalez, Bloom, Bonta, Calderon, Carrillo, Chau, Diep, Eggman, Gabriel, Jones‑Sawyer, Maienschein, Petrie-Norris, Quirk, Robert Rivas

NO: Bigelow, Brough, Fong, Obernolte

UPDATED:

VERSION: April 22, 2019

CONSULTANT: Megan Lane / L. & E. / (916) 319-2091 FN: 0000232

Date of Hearing: April 24, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 1124

Author:(Maienschein) – As Amended Ver:April 22, 2019

Urgency: Yes State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill requires, by June 13, 2019, the Occupational Safety and Health Standards Board (Board) to adopt emergency regulations requiring employers to make respirators available to outdoor workers when it is reasonably expected those workers will be exposed to harmful levels of wildfire smoke. The Board must utilize Local Air Quality Index (AQI) measures and exempts employers temporarily from medical evaluation and fit testing requirements for respirators when AQI levels reach a certain threshold due to wildfire smoke.

FISCAL EFFECT:

Minor and absorbable costs for the development of regulations. First, the Division of Occupational Safety and Health (Cal/OSHA) and the Board have worked significantly on this issue and can absorb the workload associated with the proposed standards. Second, recent amendments reduced costs by clarifying the scope of the proposed regulations.

COMMENTS:

1. Background. On March 21, 2019, the Board voted to grant a petition to address worker exposure to wildfire smoke. This petition sought adoption of new standards though the regulatory rulemaking process to protect outdoor workers from unhealthy air. Currently, the Board is working with Cal/OSHA to develop these standards.
2. Recent amendments. The author amended AB 1124 to clarify the regulations proposed by the bill do not apply to wildland firefighters. Cal/OSHA is currently in the process of developing separate regulations for wildland firefighters and, as initially drafted, AB 1124 would have required Cal/OSHA to retrace and start over the regulatory process for that group.

Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081

Date of Hearing: April 3, 2019

ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT

Ash Kalra, Chair

ABPCA Bill Id:AB 1124 (

Author:Maienschein) – As Introduced Ver:February 21, 2019

SUBJECT: Employment safety: outdoor workers: wildfire smoke

SUMMARY: Requires the Occupational Safety and Health Standards Board (Board) to adopt emergency regulations requiring employers to make respirators available to outdoor workers when it is reasonably expected that they will be exposed to harmful levels of wildfire smoke.

Specifically, this bill:

1. Makes findings and declarations regarding the economic, health, and loss of life impacts associated with California’s wildfires.
2. Requires the Board, by June 13, 2019, to adopt emergency regulations that require employers to make respirators available to outdoor workers anytime they could reasonably be expected to be exposed to harmful levels of smoke from wildfires, or burning structures due to a wildfire, while working.
3. Requires the Board to utilize Local Air Quality Index (AQI) measures to determine when smoke from wildfires is expected to be harmful.
4. Exempts employers temporarily from medical evaluation and fit testing requirements for respirators utilized in their respiratory protection program when air quality levels reach a certain amount due to wildfire smoke.
5. Declares that the above provisions are to take effect immediately as an urgency statute.

EXISTING STATE LAW:

1. Establishes the Board within the Department of Industrial Relations to promulgate and enforce occupational safety and health standards for the state, including standards dealing with toxic materials and heat illness prevention standards for outdoor workers.
2. Establishes the Division of Occupational Safety and Health within the Department of Industrial Relations to enforce industrial safety orders, which require of employers, among other things, a written respiratory protection program with required worksite-specific procedures in order to protect employee health.
3. Provides that certain violations of a standard, order, or special order are a crime.

EXISTING FEDERAL LAW:

1. Establishes the Environmental Protection Administration that, among other things, monitors and publishes air quality levels based on the health effects for five major air pollutants in its AQI.

FISCAL EFFECT: Unknown

COMMENTS: According to the author, devastating wildfires in 2018 created significant respiratory health risks to workers who were often without adequate protective equipment. The author states, “Millions of workers have been affected, in a variety of ways, by these tragedies. Some have been injured or killed, more have been displaced or left unemployed, and far more suffered unknown permanent physical damage due to smoke exposure.

Outdoor workers especially found themselves affected. Anecdotal evidence suggests that very few employers of outdoor workers provided appropriate respirators, thus leaving workers to inhale harmful smoke for hours at a time. We’ll never know how much lung function was lost or to what degree respiratory illnesses and heart disease worsened, but we do know it happened.”

Arguments in Support

The State Building and Construction Trades, a sponsor of the bill, believes that time is of the essence in creating respiratory protections for outdoor workers. They state, “We appreciate the recent action taken by the Occupational Safety and Health Standards Board (OSHSB) that directed the Division of Occupational Safety and Health (Cal/OSHA) to begin stakeholder meetings to develop an emergency standard that can be put into place before the next fire season ‘officially’ begins. However, we believe that AB 1124 needs to continue to move forward so that both the emergency rulemaking and subsequent ‘regular’ rulemaking each take precedence at Cal/OSHA, get completed in an efficient and timely manner, and ensure that each standard base any action required of employers on the local Air Quality Index (AQI) model of air monitoring.”

In support, Worksafe argues that mandating the timely provision of respirators is “particularly important for workers who are paid piece rate or are vulnerable to workplace abuses from employers that compel them to work without any protections, even when exposed to hazardous wildfire smoke. When workers must continue to work, their employer at minimum must provide an appropriate respirator free of charge and other protections to reduce exposure to smoke during wildfires.”

Arguments in Opposition

The Construction Employers’ Association, is opposed unless amended, and states “As drafted, [Section] 6722 (a)(1) requires employers to make ‘appropriate and effective respirators available to an outdoor worker on any day that outdoor workers could reasonably be expected to be exposed to harmful levels of smoke from wildfires, or burning structures due to a wildfire.’ This seems to suggest that employers must stock respirators, even if the policy of the employer is to shut down job sites when harmful levels of smoke exist. To the extent that a responsible employer elects to protect its workers by closing worksites on days when the AQI reaches a certain level, the obligation to stock respirators should clearly not apply as they would be unnecessary.”

Related Legislation

AB 457 (Quirk) Would require the Division of Occupational Safety and Health to work with the Occupational Safety and Health Standards Board to adopt emergency regulations to establish a revised permissible exposure limit for lead in the workplace by February 1, 2020.

REGISTERED SUPPORT / OPPOSITION:

Support

American Federation Of State, County And Municipal Employees
California Employment Lawyers Association
California Environmental Justice Alliance
California Immigrant Policy Center
California Labor Federation (Sponsor)
California Rural Legal Assistance Foundation, Inc.(Cosponsor)
Central Coast Alliance United For A Sustainable Economy
Centro Laboral De Graton
Food Empowerment Project
Instituto De Educacion Popular Del Sur De California
International Union Of Operating Engineers, Cal-Nevada Conference
North Bay Jobs With Justice
State Building And Construction Trades Council Of Ca (Cosponsor)
Street Level Health Project
Worksafe (Cosponsor)

Oppose Unless Amended

Construction Employers’ Association

Analysis Prepared by: Megan Lane / L. & E. /