Bill to Raise Fines on Health Plans Heads to Governor’s Desk

Today the Legislature approved passage of SB 858 by Senator Scott Wiener which updates penalty amounts that the state can levy on health plans that don’t meet state consumer protection standards. It now goes to Governor Newsom for final signature.
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For immediate release:  Thursday, August 25, 2022

  • SB 858 (Wiener) increases the level of fines for health plans who violate patient protections and modernizes outdated standards.
  • These DMHC fines have not been updated since 1975. The bill incentivizes plans to improve their practices, and not just pay the fine as the cost of doing business.

SACRAMENTO, CA – Today the Legislature approved passage of SB 858 by Senator Scott Wiener which updates penalty amounts that the state can levy on health plans that don’t meet state consumer protection standards. It now goes to Governor Newsom for final signature.

Despite strong consumer protections for Californians in health plans regulated at the Department of Managed Health Care (DMHC), many are still denied or delayed in getting medically necessary services. Yet fine amounts for violations related to grievance handling and other specific consumer protections have not been updated for decades, all while health insurance premiums have not just doubled, but quadrupled since 1999. Some fine amounts have not been updated since 1975 when gas was 59 cents a gallon.

The bill, sponsored by Health Access, increases the maximum fines imposed by DMHC from $2,500 per violation to $25,000 when they violate standards such as timely access to care, adequate network standards, language access, behavioral health care services, gender-affirming care, or other consumer protections.

“California has some of the strongest health consumer protections in the country, but those are meaningless if health plans don’t follow the law. Many people have been denied or delayed critical care while these plans only get a fine that amounts to a slap on the wrist,” said Diana Douglas, Health Access California’s director of policy and legislative advocacy. “We can’t let health corporations just skirt the law with minimal consequences. By signing this bill, Governor Newsom can help change the behavior of these health plans to ensure access to needed care for Californians.”

“California has many strong consumer protections for patients in our healthcare system,” said Senator Wiener. “But if health plans don’t comply with these laws – and don’t face any meaningful consequences when they don’t – then California residents aren’t going to get the care they need. Fine amounts have stayed the same over the past 47 years, while health plan premiums have skyrocketed. SB 858 updates fine amounts for plans, so they have a real incentive not to break the law.”

Even for the biggest, headline-making penalties in recent years, current fines don’t necessarily match the severity and breadth of the violations. Just this year, L.A. Care was fined a historic $35 million by DMHC for failure to appropriately handle grievances and for a severe backlog of authorization requests for services over a five year span. However, with over 67,000 grievances and over 9,000 requests for authorization, this seemingly large fine amounts to only a few hundred dollars per instance—essentially less than a speeding ticket for delaying or denying care to a patient. Meanwhile, the plan reports a tangible net equity of over $1 billion, an amount $923 million over that which is required by law

SB 858 gives DMHC the additional authority to levy higher fines and impose corrective action plans when necessary. SB 858 will modernize penalty amounts every 5 years, and updates the methodology to ensure the penalty amounts reflect the true harm caused to enrollees.

Governor Newsom has until September 30 to take action on the bill.

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