CHA News Article

CHA Submits Comments on Proposed Regulation Relating to Knox-Keene General Licensure Requirements

Yesterday, CHA submitted comments to the California Department of Managed Health Care (DMHC) on its modified proposed regulation that would set the level of financial risk that triggers a requirement to obtain licensure by the department. 

Under the regulation, entities that accept “global risk” would be required either to seek licensure as a health plan or request an exemption. DMHC defines global risk as accepting a payment from or on behalf of enrollees in return for assuming financial risk for both professional medical services and hospital inpatient, outpatient or ancillary services.

CHA developed comments in partnership with its Managed Care Committee and cautions DMHC that the proposed process would subject a number of providers to burdensome licensure requirements due to their adoption of innovative — yet low-risk — payment models. These models, which include bundled payment arrangements and accountable care organizations (ACOs), were not the intended subject of the Knox-Keene Act.

CHA asks DMHC to revise the regulation to strike a more appropriate balance between encouraging innovation and engaging in necessary oversight. CHA urges the department to:

  • Provide greater clarity around the procedures for seeking an exemption. 
  • Provide clear, quantitative standards that allow providers to determine whether they are entitled to an exemption from the licensure requirement. 
  • Identify when a person, provider or other organization is presumptively exempt from the licensure requirement, as well as payment arrangements that are not subject to the regulation. For example, DMHC should establish that a provider participating in low-risk payment arrangements that fall below quantitative risk thresholds is presumptively exempt. 
  • Establish that certain types of payment arrangements — including bundled payment arrangements, institutional risk pools and ACOs — are presumptively exempt from the regulation unless special circumstances warrant licensure.
  • Clarify that DMHC oversight is unnecessary when a provider participates in certain payment arrangements under state or federal law, and under careful regulation by the Medicare or Medi-Cal program.
  • Clarify that an exemption granted on the basis of a payment arrangement would remain in effect until there is a material change in the type of payment arrangement.
  • Re-engage with stakeholders prior to finalizing the proposed regulation, which — as drafted — is inconsistent with the Knox-Keene Act and unworkable.

DMHC will consider comments it received as it develops an updated regulation. CHA anticipates that DMHC will seek to finalize the regulation as quickly as possible; the earliest it could take effect is April 1, 2019. CHA will monitor developments and continue to keep members apprised via CHA News

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