With Democrats in control of both the state legislature and the governor’s office, it looks as if regulation of the managed care industry will be taken away from the Department of Corporations and handed over to a new agency.
“I think the number one issue for us is going to be restructuring the governmental oversight of HMOs,” said Assemblyman Martin Gallegos, D-Baldwin Park, and chair of the Assembly Health Committee. “Clearly, the consensus is that the Department of Corporations needs to be removed as the oversight body.”
Rosenthal proposed such legislation last session, but the bill died on the desk of outgoing Gov. Pete Wilson. Now, with a newly energized Democratic majority, it is only a matter of time before an overhaul takes place.
“The Department of Corporations does not have the expertise to regulate this industry,” Gallegos said. “And they have been non-responsive to claims and charges consumers have made about quality of care.”
Health care advocates say the agency has been ineffective in its efforts to hold health plans accountable for violations of state regulations. Part of the problem, advocates say, is that the department was set up to regulate the banking and finance industries not health care.
“It is an example of the worst place you could possibly put the oversight of HMOs,” said Robert Fellmeth, director of the Center for Public Interest Law at the University of San Diego Law School, who co-sponsored and helped write the Rosenthal Bill.
The legislation, which Gallegos plans to reintroduce next session, would establish a five-member board appointed by the governor and Legislature under the State and Consumer Services Agency.
Called the Board of Managed Health Care, it would oversee regulation of the state’s 52 licensed HMOs, which serve about 21 million residents in California enrolled in managed health plans.
Walter Zelman, president and chief executive of the California Association of Health Plans, which represents all the state’s major HMOs, said the industry has no problem with oversight being taken away from the Department of Corporations. But it prefers one top regulator as opposed to a board of officials.
“What we objected to and what we still disagree with is having a commission rather than a single regulator. If you split up the authority you get less effective regulation,” said Zelman.
Not true, counters Gallegos.
“They want one person who is easier to talk to and deal with,” he said. “But it is difficult to find one individual who understands the intricacies of the health care industry. They want to keep the status quo. The more people we put as regulators, the more oversight.”
A Department of Corporations spokeswoman declined comment.
Regardless of whether there is a single regulator or a five-member board running the show, almost everyone agrees that there will be a significant change in the regulation of health care. And that change is likely to have a significant effect on health plans.
“Health care is in chaos in California,” said Dr. Jack Lewin, chief executive of the California Medical Association. “Health care will have to go through some dynamic changes this year. We need a referee. We are a $100 billion industry and there has not been enough oversight.”
