SECTIONS 1395-1399.5 - California Statutes

HEALTH AND SAFETY CODE

SECTION 1395-1399.5

1395. (a) Notwithstanding Article 6 (commencing with Section 650)
of Chapter 1 of Division 2 of the Business and Professions Code, any
health care service plan or specialized health care service plan may,
except as limited by this subdivision, solicit or advertise with
regard to the cost of subscription or enrollment, facilities and
services rendered, provided, however, Article 5 (commencing with
Section 600) of Chapter 1 of Division 2 of the Business and
Professions Code remains in effect. Any price advertisement shall be
exact, without the use of such phrases as "as low as," "and up,"
"lowest prices" or words or phrases of similar import. Any
advertisement that refers to services, or costs for the services, and
that uses words of comparison must be based on verifiable data
substantiating the comparison. Any health care service plan or
specialized health care service plan so advertising shall be prepared
to provide information sufficient to establish the accuracy of the
comparison. Price advertising shall not be fraudulent, deceitful, or
misleading, nor contain any offers of discounts, premiums, gifts, or
bait of similar nature. In connection with price advertising, the
price for each product or service shall be clearly identifiable. The
price advertised for products shall include charges for any related
professional services, including dispensing and fitting services,
unless the advertisement specifically and clearly indicates
otherwise.
(b) Plans licensed under this chapter shall not be deemed to be
engaged in the practice of a profession, and may employ, or contract
with, any professional licensed pursuant to Division 2 (commencing
with Section 500) of the Business and Professions Code to deliver
professional services. Employment by or a contract with a plan as a
provider of professional services shall not constitute a ground for
disciplinary action against a health professional licensed pursuant
to Division 2 (commencing with Section 500) of the Business and
Professions Code by a licensing agency regulating a particular health
care profession.
(c) A health care service plan licensed under this chapter may
directly own, and may directly operate through its professional
employees or contracted licensed professionals, offices and
subsidiary corporations, including pharmacies that satisfy the
requirements of subdivision (d) of Section 4080.5 of the Business and
Professions Code, as are necessary to provide health care services
to the plan's subscribers and enrollees.
(d) A professional licensed pursuant to the provisions of Division
2 (commencing with Section 500) of the Business and Professions Code
who is employed by, or under contract to, a plan may not own or
control offices or branch offices beyond those expressly permitted by
the provisions of the Business and Professions Code.
(e) Nothing in this chapter shall be construed to repeal, abolish,
or diminish the effect of Section 129450 of the Health and Safety
Code.
(f) Except as specifically provided in this chapter, nothing in
this chapter shall be construed to limit the effect of the laws
governing professional corporations, as they appear in applicable
provisions of the Business and Professions Code, upon specialized
health care service plans.
(g) No representative of a participating health, dental, or vision
plan or its subcontractor representative shall in any manner use
false or misleading claims to misrepresent itself, the plan, the
subcontractor, or the Healthy Families or Medi-Cal program while
engaging in application assistance activities that are subject to
this section. Notwithstanding any other provision of this chapter,
any representative of the health, dental, or vision care plan or of
the health, dental, or vision care plan's subcontractor who violates
any of the provisions of Section 12693.325 of the Insurance Code
shall only be subject to a fine of five hundred dollars ($500) for
each of those violations.
(h) A health care service plan shall comply with Section 12693.325
of the Insurance Code and Section 14409 of the Welfare and
Institutions Code. In addition to any other disciplinary powers
provided by this chapter, if a health care service plan violates any
of the provisions of Section 12693.325 of the Insurance Code, the
department may prohibit the health care service plan from providing
application assistance and contacting applicants pursuant to Section
12693.325 of the Insurance Code.

1395.5. (a) Except as provided in subdivisions (b) and (c), no
contract that is issued, amended, renewed, or delivered on or after
January 1, 1999, between a health care service plan, including a
specialized health care service plan, and a provider shall contain
provisions that prohibit, restrict, or limit the health care provider
from advertising.
(b) Nothing in this section shall be construed to prohibit plans
from establishing reasonable guidelines in connection with the
activities regulated pursuant to this chapter, including those to
prevent advertising that is, in whole or in part, untrue, misleading,
deceptive, or otherwise inconsistent with this chapter or the rules
and regulations promulgated thereunder. For advertisements mentioning
a provider's participation in a plan, nothing in this section shall
be construed to prohibit plans from requiring each advertisement to
contain a disclaimer to the effect that the provider's services may
be covered for some, but not all, plan contracts, or that plan
contracts may cover some, but not all, provider services.
(c) Nothing in this section is intended to prohibit provisions or
agreements intended to protect service marks, trademarks, trade
secrets, or other confidential information or property. If a health
care provider participates on a provider panel or network as a result
of a direct contractual arrangement with a health care service plan
that, in turn, has entered into a direct contractual arrangement with
another person or entity, pursuant to which enrollees, subscribers,
insureds, and other beneficiaries of that other person or entity may
receive covered services from the health care provider, then nothing
in this section is intended to prohibit reasonable provisions or
agreements in the direct contractual arrangement between the health
care provider and the health care service plan that protect the name
or trade name of the other person or entity or require that the
health care provider obtain the consent of the health care service
plan prior to the use of the name or trade name of the other person
or entity in any advertising by the health care provider.
(d) Nothing in this section shall be construed to impair or impede
the authority of the director to regulate advertising, disclosure,
or solicitation pursuant to this chapter.

1395.6. (a) In order to prevent the improper selling, leasing, or
transferring of a health care provider's contract, it is the intent
of the Legislature that every arrangement that results in a payor
paying a health care provider a reduced rate for health care services
based on the health care provider's participation in a network or
panel shall be disclosed to the provider in advance and that the
payor shall actively encourage beneficiaries to use the network,
unless the health care provider agrees to provide discounts without
that active encouragement.
(b) Beginning July 1, 2000, every contracting agent that sells,
leases, assigns, transfers, or conveys its list of contracted health
care providers and their contracted reimbursement rates to a payor,
as defined in subparagraph (A) of paragraph (3) of subdivision (d),
or another contracting agent shall, upon entering or renewing a
provider contract, do all of the following:
(1) Disclose to the provider whether the list of contracted
providers may be sold, leased, transferred, or conveyed to other
payors or other contracting agents, and specify whether those payors
or contracting agents include workers' compensation insurers or
automobile insurers.
(2) Disclose what specific practices, if any, payors utilize to
actively encourage a payor's beneficiaries to use the list of
contracted providers when obtaining medical care that entitles a
payor to claim a contracted rate. For purposes of this paragraph, a
payor is deemed to have actively encouraged its beneficiaries to use
the list of contracted providers if one of the following occurs:
(A) The payor's contract with subscribers or insureds offers
beneficiaries direct financial incentives to use the list of
contracted providers when obtaining medical care. "Financial
incentives" means reduced copayments, reduced deductibles, premium
discounts directly attributable to the use of a provider panel, or
financial penalties directly attributable to the nonuse of a provider
panel.
(B) The payor provides information to its beneficiaries, who are
parties to the contract, or, in the case of workers' compensation
insurance, the employer, advising them of the existence of the list
of contracted providers through the use of a variety of advertising
or marketing approaches that supply the names, addresses, and
telephone numbers of contracted providers to beneficiaries in advance
of their selection of a health care provider, which approaches may
include, but are not limited to, the use of provider directories, or
the use of toll-free telephone numbers or Internet web site addresses
supplied directly to every beneficiary. However, internet web site
addresses alone shall not be deemed to satisfy the requirements of
this subparagraph. Nothing in this subparagraph shall prevent
contracting agents or payors from providing only listings of
providers located within a reasonable geographic range of a
beneficiary.
(3) Disclose whether payors to which the list of contracted
providers may be sold, leased, transferred, or conveyed may be
permitted to pay a provider's contracted rate without actively
encouraging the payors' beneficiaries to use the list of contracted
providers when obtaining medical care. Nothing in this subdivision
shall be construed to require a payor to actively encourage the payor'
s beneficiaries to use the list of contracted providers when
obtaining medical care in the case of an emergency.
(4) Disclose, upon the initial signing of a contract, and within
30 calendar days of receipt of a written request from a provider or
provider panel, a payor summary of all payors currently eligible to
claim a provider's contracted rate due to the provider's and payor's
respective written agreement with any contracting agent.
(5) Allow providers, upon the initial signing, renewal, or
amendment of a provider contract, to decline to be included in any
list of contracted providers that is sold, leased, transferred, or
conveyed to payors that do not actively encourage the payors'
beneficiaries to use the list of contracted providers when obtaining
medical care as described in paragraph (2). Each provider's election
under this paragraph shall be binding on the contracting agent with
which the provider has the contract and any contracting agent that
buys, leases, or otherwise obtains the list of contracted providers.
A provider shall not be excluded from any list of contracted
providers that is sold, leased, transferred, or conveyed to payors
that actively encourage the payors' beneficiaries to use the list of
contracted providers when obtaining medical care, based upon the
provider's refusal to be included on any list of contracted providers
that is sold, leased, transferred, or conveyed to payors that do not
actively encourage the payors' beneficiaries to use the list of
contracted providers when obtaining medical care.
(6) Nothing in this subdivision shall be construed to impose
requirements or regulations upon payors, as defined in subparagraph
(A) of paragraph (3) of subdivision (d).
(c) Beginning July 1, 2000, a payor, as defined in subparagraph
(B) of paragraph (3) of subdivision (d), shall do all of the
following:
(1) Provide an explanation of benefits or explanation of review
that identifies the name of the network that has a written agreement
signed by the provider whereby the payor is entitled, directly or
indirectly, to pay a preferred rate for the services rendered.
(2) Demonstrate that it is entitled to pay a contracted rate
within 30 business days of receipt of a written request from a
provider who has received a claim payment from the payor. The failure
of a payor to make the demonstration within 30 business days shall
render the payor responsible for the amount that the payor would have
been required to pay pursuant to the applicable health care service
plan contract, including a specialized health care service plan
contract, covering the beneficiary, which amount shall be due and
payable within 10 business days of receipt of written notice from the
provider, and shall bar the payor from taking any future discounts
from that provider without the provider's express written consent
until the payor can demonstrate to the provider that it is entitled
to pay a contracted rate as provided in this paragraph. A payor shall
be deemed to have demonstrated that it is entitled to pay a
contracted rate if it complies with either of the following:
(A) Discloses the name of the network that has a written agreement
with the provider whereby the provider agrees to accept discounted
rates, and describes the specific practices the payor utilizes to
comply with paragraph (2) of subdivision (b).
(B) Identifies the provider's written agreement with a contracting
agent whereby the provider agrees to be included on lists of
contracted providers sold, leased, transferred, or conveyed to payors
that do not actively encourage beneficiaries to use the list of
contracted providers pursuant to paragraph (5) of subdivision (b).
(d) For the purposes of this section, the following terms have the
following meanings:
(1) "Beneficiary" means:
(A) For workers' compensation insurance, an employee seeking
health care services for a work-related injury.
(B) For automobile insurance, those persons covered under the
medical payments portion of the insurance contract.
(C) For group or individual health services covered through a
health care service plan contract, including a specialized health
care service plan contract, or a policy of disability insurance that
covers hospital, medical, or surgical benefits, a subscriber, an
enrollee, a policyholder, or an insured.
(2) "Contracting agent" means a health care service plan,
including a specialized health care service plan, while engaged, for
monetary or other consideration, in the act of selling, leasing,
transferring, assigning, or conveying, a provider or provider panel
to payors to provide health care services to beneficiaries.
(3) (A) For the purposes of subdivision (b), "payor" means a
health care service plan, including a specialized health care service
plan, an insurer licensed under the Insurance Code to provide
disability insurance that covers hospital, medical, or surgical
benefits, automobile insurance, workers' compensation insurance, or a
self-insured employer that is responsible to pay for health care
services provided to beneficiaries.
(B) For the purposes of subdivision (c), "payor" means only a
health care service plan, including a specialized health care service
plan that has purchased, leased, or otherwise obtained the use of a
provider or provider panel to provide health care services to
beneficiaries pursuant to a contract that authorizes payment at
discounted rates.
(4) "Payor summary" means a written summary that includes the
payor's name and the type of plan, including, but not limited to, a
group health plan, an automobile insurance plan, and a workers'
compensation insurance plan.
(5) "Provider" means any of the following:
(A) Any person licensed or certified pursuant to Division 2
(commencing with Section 500) of the Business and Professions Code.
(B) Any person licensed pursuant to the Chiropractic Initiative
Act or the Osteopathic Initiative Act.
(C) Any person licensed pursuant to Chapter 2.5 (commencing with
Section 1440) of Division 2.
(D) A clinic, health dispensary, or health facility licensed
pursuant to Division 2 (commencing with Section 1200).
(E) Any entity exempt from licensure pursuant to Section 1206.
(e) This section shall become operative on July 1, 2000.

1395.7. (a) A staff-model dental health care service plan that
arranges for or establishes credit extended by a third party shall
establish and comply with policies and procedures that ensure that
its dentists, employees, and agents, and employees or agents of its
dentists, comply with Section 654.3 of the Business and Professions
Code.
(b) A staff-model dental health care service plan that arranges
for or establishes credit extended by a third party shall establish
and comply with policies and procedures that ensure that, within 15
business days of an enrollee's request, the plan refunds to a lender
any payment received through that credit for treatment that has not
been rendered or costs that have not been incurred.
(c) A staff-model dental health care service plan that directly
extends credit or establishes a payment plan shall, at a minimum,
establish and comply with policies and procedures that ensure that,
within 15 business days of an enrollee's request, the plan refunds to
the enrollee any payment received through that credit or payment
plan for treatment that has not been rendered or costs that have not
been incurred.
(d) For purposes of this section, the following definitions shall
apply:
(1) "Staff-model dental health care service plan" means a
specialized health care service plan that contracts to provide
coverage for dental care services and that retains dentists as
employees to care for its enrollees.
(2) "Enrollee" includes, but is not limited to, an enrollee's
parent or other legal representative.

1396. It is unlawful for any person willfully to make any untrue
statement of material fact in any application, notice, amendment,
report, or other submission filed with the director under this
chapter or the regulations adopted thereunder, or willfully to omit
to state in any application, notice, or report any material fact
which is required to be stated therein.

1396.5. A nonprofit hospital corporation which substantially
indemnified subscribers and enrollees and was operating in 1965 under
Chapter 11A (commencing with Section 11490) of Part 2 of Division 2
of the Insurance Code and which is regulated under the Knox-Keene
Health Care Service Plan Act shall enjoy the privileges under the act
which would have been available to it had it been registered under
the Knox-Mills Health Plan Act and applied for a license under the
Knox-Keene Health Care Service Plan Act in 1976.

1397. (a) Whenever reference is made in this chapter to a hearing
before or by the director, the hearing shall be held in accordance
with the Administrative Procedure Act (Chapter 5 (commencing with
Section 11500) of Part 1 of Division 3 of Title 2 of the Government
Code), and the director shall have all of the powers granted under
that act.
(b) Every final order, decision, license, or other official act of
the director under this chapter is subject to judicial review in
accordance with the law.

1397.5. (a) The director shall make and file annually with the
Department of Managed Health Care as a public record, an aggregate
summary of grievances against plans filed with the director by
enrollees or subscribers. This summary shall include at least all of
the following information:
(1) The total number of grievances filed.
(2) The types of grievances.
(b) The summary set forth in subdivision (a) shall include the
following disclaimer:
THIS INFORMATION IS PROVIDED FOR STATISTICAL PURPOSES ONLY. THE
DIRECTOR OF THE DEPARTMENT OF MANAGED CARE HAS NEITHER INVESTIGATED
NOR DETERMINED WHETHER THE GRIEVANCES COMPILED WITHIN THIS SUMMARY
ARE REASONABLE OR VALID.
(c) Nothing in this section shall require or authorize the
disclosure of grievances filed with or received by the director and
made confidential pursuant to any other provision of law including,
but not limited to, the California Public Records Act (Chapter 3.5
(commencing with Section 6250) of Division 7 of Title 1 of the
Government Code) and the Information Practices Act of 1977 (Chapter 1
(commencing with Section 1798) of Title 1.8 of Part 4 of Division 3
of the Civil Code). Nothing in this section shall affect any other
provision of law including, but not limited to, the California Public
Records Act and the Information Practices Act of 1977.

1397.6. The director may contract with necessary medical
consultants to assist with the health care program. These contracts
shall be on a noncompetitive bid basis and shall be exempt from
Chapter 2 (commencing with Section 10290) of Part 2 of Division 2 of
the Public Contract Code.

1398.5. All references to the Knox-Mills Health Plan Act (Article
2.5 (commencing with Section 12530) of Chapter 6 of Part 2 of
Division 3 of the Government Code), which was repealed by Chapter 941
of the Statutes of 1975, shall be deemed to be references to the
Knox-Keene Health Care Service Plan Act of 1975.

1399. (a) Surrender of a license as a health plan becomes effective
30 days after receipt of an application to surrender the license or
within a shorter period of time as the director may determine, unless
a revocation or suspension proceeding is pending when the
application is filed or a proceeding to revoke or suspend or to
impose conditions upon the surrender is instituted within 30 days
after the application is filed. If this proceeding is pending or
instituted, surrender becomes effective at the time and upon the
conditions as the director by order determines.
(b) If the director finds that any plan is no longer in existence,
or has ceased to do business or has failed to initiate business
activity as a licensee within six months after licensure, or cannot
be located after reasonable search, the director may by order
summarily revoke the license of the plan.
(c) The director may summarily suspend or revoke the license of a
plan upon (1) failure to pay any fee required by this chapter within
15 days after notice by the director that the fee is due and unpaid,
(2) failure to file any amendment or report required under this
chapter within 15 days after notice by the director that the report
is due, (3) failure to maintain any bond or insurance pursuant to
Section 1376, (4) failure to maintain a deposit, insurance, or
guaranty arrangement pursuant to Section 1377, or (5) failure to
maintain a deposit pursuant to Section 1300.76.1 of Title 28 of the
California Code of Regulations.

1399.1. (a) All orders and other actions taken by the Commissioner
of Corporations pursuant to the authority contained in subdivision
(c) of Section 1350 on or before September 30, 1977, and all
administrative or judicial decisions or orders relating to the same
and all conditions imposed upon the same remain in effect against a
plan holding a transitional license.
(b) The Knox-Mills Health Plan Act as in effect prior to its
repeal continues to govern all suits, actions, prosecutions or
proceedings which are pending or which may be initiated under
subdivision (c) of Section 1350 on the basis of facts or
circumstances occurring on or before September 30, 1977.

1399.5. It is the intent of the Legislature that the provisions of
this chapter shall be applicable to any private or public entity or
political subdivision which, in return for a prepaid or periodic
charge paid by or on behalf of a subscriber or enrollee, provides,
administers or otherwise arranges for the provision of health care
services, as defined in this chapter, unless such entity is exempted
from the provisions of this chapter by, or pursuant to, Section 1343.