CHA News Article

May 20 Marks Comment Deadline for DMHC Draft Implementation Guidance on Licensure Regulation
For CEOs, CFOs, Government Relations Executives

The Department of Managed Health Care (DMHC) has released draft guidance and accompanying forms — a confidentiality request form and an expedited exemption request form — related to its Knox-Keene licensure regulation. The regulation, among other things, defines various types of risk and requires entities that assume any amount of global risk to either obtain a license under the Knox-Keene Health Care Service Plan Act of 1975 or receive an exemption from DMHC. 

The regulation applies to any contract entered into, amended, or renewed on or after July 1.  

DMHC has determined that a number of contracts, although technically falling under the new regulation, do not need to comply with the regulation at this time. These types of contracts are bundled payment, case rate, diagnosis-related group payment, per diem arrangements, Centers for Medicare & Medicaid Services accountable care organizations, and arrangements where the payer is a California Department of Insurance-licensed insurer. Entities entering into these types of contracts do not need to file the contracts with DMHC. 

For all other contracts that involve the assumption of global risk, including those that involve only “upside” risk, DMHC will phase-in the exemption application process and temporarily expedite exemption requests to allow time to comply with the regulation. The phase-in period is July 1 to Dec. 31.

During the phase-in period, entities that assume global risk must file with DMHC their global risk contracts within 30 days of execution of the contract by all parties. They do not need to receive an exemption from DMHC before finalizing or beginning performance under the contract. As discussed in the draft guidance, during the phase-in period DMHC will automatically grant an exemption to contracts submitted to DMHC. The duration of the exemption is for either the term of the contract or one year, depending on whether a licensed health plan is a party to the contract.

DMHC asks stakeholders and interested parties to submit comments, questions, or concerns about the draft guidance and forms to Sarah Ream, acting general counsel, by May 20, before it finalizes the guidance. CHA is developing comments on the draft guidance; members who wish to provide feedback for inclusion in CHA’s comments should contact Amber Kemp, vice president, health care coverage, by close of business on May 13.

CHA encourages members to consult with their counsel to determine how the new regulation will impact their organization. CHA is sponsoring legislation — Senate Bill 714 (Umberg, D-Orange County) — that would give providers greater certainty around the exemption process. The bill would presumptively exempt from licensure certain low-risk payment arrangements that fall below quantitative risk thresholds.

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