DMHC Discount Plan Regs: Don't Discount 'Em
For 28 years the public-policy-making machine of The Great State of California has struggled and sputtered to decide how to regulate discount fee health plans. These are basically arrangements wherein persons for a fee are granted access to networks of healthcare providers who have agreed to grant discounts off their fees. (This saga is of particular interest to this blogger both because he represented clients in various phases of it, and because he negotiated and prepared the application for the first licensure of a discount fee plan in California.)
Through a stream of Commissioner’s Opinions from the Department of Corporations and the Department of Managed Health Care, informal administrative actions, two AG Opinions, some tangential statutory language, much failed legislation, a burst of celebrated enforcement actions, a few Knox-Keene licensures, formal administrative law adjudications, and proposed regulations, attempts have been made to subject the discount plans to some form of public regulation (see article, “The Birth of a Reg”). While some discount plans have operated honorably, shady others have abused the trust of their members, too often from the more vulnerable categories of society.
In early 2008 the Legislature, weary of years of bills that died, punted the task of getting the discount plans into the administrative state to the Department of Managed Health Care. The Department at the time had already for months been working on a regulation, and after a protracted process of iterative drafts, “stakeholder” consultations, hearings, and engaging the formal procedures of adopting a regulation, in November it brought forth a final text and duly submitted it to the Office of Administrative Law (OAL) for review and approval.
The proposed regimen would comprehensively subject discount plans to licensure and many elements of the Knox-Keene Health Care Service Plan Act of 1975 (H&S section 1340 et seq.), the charter for regulation of HMO’s in California (final reg text). None of the industry “stakeholders” were very happy with the proposed regulation.
But OAL at the last procedural moment declared on December 31, 2010 that it did not like aspects of the regulation presented by the DMHC and rejected it. Paperwork deficiencies, failure to respond to certain public comments submitted in the formal process, and alleged inconsistency with two statutes (B&P section 650, H&S section 445) and two Attorney General’s Opinions construing them (82 Ops.Ca.Atty.Gen 1, 84 Ops.Ca.Atty.Gen 113) were invoked as the grounds for the inconsistency count of the rejection (OAL rejection opinion).
Steeled and dogged after years of pursuit, and deeply invested in the proposed regulations, the Department is finalizing an appeal to OAL. The paperwork glitches and the missing responses will be easily resolved, and the Department is confident it has crafted thoughtful and compelling replies to OAL’s assertion that the proposed regulations are inconsistent with the above Code sections and AG Opinions. The Department is likely to stress the co-existence and compatibility of the Knox-Keene Act with the two Code sections cited, the canonical mandate to try to interpret them to work together, the grounding of the proposed regulations in that Act, and also possibly that the OAL reasoning could be used to assert the invalidity of other health plan licensure frameworks.
The Department has until April 30th to submit its appeal to OAL but is expected to file it in February. If OAL rejects the appeal, an appeal then lies to the Governor’s Office. Whatever the outcomes, sound public policy cries out for a definitive resolution, after all these years.
