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By HOWARD FINE

Staff Reporter

HMOs, the latest whipping boy in Sacramento, are once again the center of attention as lawmakers convene for the 1998 session.

More than 50 bills to further regulate health maintenance organizations are already in the hopper, and more reform legislation is being drafted based on a recent report from a blue-ribbon panel on HMO reform.

The key reform battles this year will be over what type of body should replace the Department of Corporations as regulator of the HMO industry, the extent to which HMOs should be held liable for medical malpractice, the ways in which the HMO arbitration process could be improved, and how much access patients should have to specialists.

Unlike in past years when reform efforts fell short, substantial reforms will likely pass the Legislature this year, Sacramento observers predicted, and some of those bills will be signed into law by Gov. Pete Wilson.

The main factors fueling this legislative avalanche are surveys conveying widespread public dissatisfaction with HMOs and the threat of a November ballot initiative to remove liability caps on HMOs, observers said.

"(HMO reform) is one of the most crucial issues if not the most crucial issue before the Legislature this year," said Fred Main, executive vice president of the California Chamber of Commerce. "It will be a hard-fought battle. In the end, I'm sure some reform will emerge, if for no other reason than this is an election year and legislators see that this issue hits home with voters."

Just in case legislators don't act, a pair of consumer group-backed initiatives are being pushed for the November ballot.

One initiative sponsored by Assemblyman Martin Gallegos, D-Irwindale, and Consumers for Quality Care, an L.A.-based consumer health care group would remove the $250,000 liability cap on pain and suffering damages against HMOs, reform HMO arbitration procedures and set up a new HMO oversight agency.

Gallegos opted against mounting a costly signature drive to place it on the November ballot. Instead, he will seek to garner the required two-thirds approval of the state Legislature (but not the signature of Gov. Pete Wilson) to qualify the initiative for the November ballot.

"This initiative is the hammer that will force the Legislature and the Governor to act," said Jamie Court, executive director of Californians for Quality Care.

The other initiative is sponsored by a coalition of consumers, small businesses, physicians and senior-citizen advocates, headed by San Francisco-based consumer consultant John Metz. It goes further than the Gallegos initiative: It could dramatically alter the practice of capitation (whereby providers are paid a flat per-patient fee) by banning financial incentives for providers who withhold care.

It also bans HMOs from publishing ads that misrepresent the level of care they cover.

While the initiative has already been submitted to the state Attorney General's office for approval of its language, the measure may have a hard time qualifying. After the Attorney General's approval, expected within a month, organizers will only have about two months to gather 433,000 signatures.

Another major factor fueling the HMO reform frenzy in Sacramento is a report released this month by the state-appointed Managed Health Care Improvement Task Force, which contains more than 100 reform recommendations.

The report was sharply criticized by both sides of the health care debate: Consumer advocates said it did not go far enough to reform HMOs and provide adequate oversight, while HMOs and employers said it lacked cost analysis and could lead to micromanagement of the industry.

Last year, Wilson said he would not sign any HMO legislation until the task force completed its work; he vetoed a half-dozen bills and, as a result, another 80 bills that were on track to be passed were held back. About 50 of those bills have now been resubmitted to committees.

At the top of the list will be the bills held over by the two key committee chairs: Gallegos, who chairs the Assembly Health Committee, and Sen. Herschel Rosenthal, D-Van Nuys, who chairs the Senate Insurance Committee.

Dozens of other legislators will doubtless carry HMO reform legislation; however, it is these two committee chairs who will guide the key legislation.

Gallegos last year carried AB 974, which would prohibit HMOs from limiting coverage for a drug previously approved by the HMO. He also sponsored AB 536, which would require HMOs to establish criteria for authorizing or denying care, to make those criteria available to patients upon request and to disclose to patients the reasons for denying care.

Another Gallegos bill, AB 947, would require HMOs to disclose any limits on access to non-physician health care practitioners and to provide quarterly lists of member providers.

Rosenthal had six bills held over. Among them are:

- SB 324 would require HMOs to explain why they denied "medically necessary care" recommended by attending physicians.

- SB 750 would require HMOs that offer financial incentives to providers for limiting access to tell consumers of the arrangement.

- SB 406 would transfer jurisdiction for regulating HMOs from the Department of Corporations to a new HMO board in the Department of Consumer Affairs.

This last bill may provide the vehicle for the most far-reaching and controversial recommendation of the task force report: the setting up of a separate agency to regulate HMOs.

Assemblyman Scott Baugh, R-Huntington Beach, is also carrying a bill, AB 1515, that would also create a new HMO regulatory body.

Other recommendations in the task force report that will likely be translated into legislation: requiring HMOs to publish information about their plans so consumers can comparison shop; creating a new procedure to handle patient complaints; and establishing quality-of-care standards.

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