CHA News Article

DMHC Modifies Proposed Regulation Related to Knox-Keene General Licensure Requirements
Comments due Dec. 17

Today, the California Department of Managed Health Care (DMHC) issued a notice of a fourth comment period for its proposed regulation that addresses general licensure requirements under the Knox-Keene Act. 

During this period, the department has released an updated statement of reasons for the changes and seeks input on the modified text, both of which incorporate feedback received during the third comment period, which closed June 1, 2018.

The modified text outlines criteria that the DMHC director must consider when granting an exemption from licensure, including:

  • The entity’s portion of contracted global risk as compared to its overall business; the portion of market share for which the entity assumes global risk in the geographical region, compared to the market share assumed by other entities within the region; and whether disruption will occur in the marketplace if the entity fails to maintain financial solvency
  • The entity’s financial capacity to assume a portion of global risk without jeopardizing enrollees’ access to basic health care services in the geographical region
  • The potential impact on the health care marketplace in the geographical region in which the entity operates, including the impact on contracted institutional and professional providers, if the entity is unable to maintain financial solvency
  • Whether issuing an exemption will have a negative impact on public interest or protection of the public, subscribers, enrollees or entities subject to the Knox-Keene Act, if the entity assumes global risk.  

The DMHC director would also be required to issue a decision on a request for exemption from licensure within 30 days of receipt by the department. 

DMHC began the process of updating these requirements in October 2017. The proposed regulation clarifies which entities meet the definition of a health care service plan by setting the level of financial risk that triggers a requirement to obtain licensure by the department. Under the proposed regulation, entities that accept “global risk” must seek licensure or an exemption from licensure as a health plan. The regulation defines “global risk” as the assumption of a prepaid or periodic charge from or on behalf of enrollees in return for assuming both professional risk (financial risk for professional medical services) and institutional risk (financial risk for hospital inpatient, outpatient or ancillary services). DMHC is concerned that, without a clear definition of what types and levels of risk may be assumed, entities that meet the definition of a health plan may be operating without a license. 

Comments on the proposed regulation are due to DMHC by 5 p.m. on Dec. 17. CHA, working closely with the CHA Managed Care Committee, will submit comments. More information about the proposed regulation, including where to submit comments, is available on the DMHC website.

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