Record Fines Might Mean California Is Finally Serious About Improving Medi-Cal

Record Fines Might Mean California Is Finally Serious About Improving Medi- Cal | California HealthlineSource: Kaiser Health News, by Bernard J. Wolfson

Is California getting tougher on health plans that participate in Medi-Cal, the state’s insurance program for low-income residents?

A few weeks ago, state regulators imposed record $55 million in fines on L.A. Care, California’s largest Medi-Cal managed-care plan, for failing to ensure adequate care and allowing treatment delays that threatened enrollees’ health. Patient advocates hope the move signals stricter enforcement against other Medi-Cal insurers, which have many of the same shortcomings for which the regulators just fined L.A. Care.

Twenty-five managed-care plans across the state provide care for nearly 12 million of the more than 14 million Californians enrolled in Medi-Cal, and the state is often accused of failing to hold the plans accountable for subpar care. Medi-Cal members are among the state’s most vulnerable people: They can face language and cultural barriers and have disproportionately high rates of chronic illness.

The state Department of Health Care Services, which runs Medi-Cal, is drafting a new managed-care contract, scheduled to take effect in 2024, that officials say will improve care by holding participating health plans to higher standards. The state hopes to reduce health disparities and improve health outcomes by tightening surveillance and enforcement.

“They are trying to do more, and that’s really positive,” says Abbi Coursolle, senior attorney at the National Health Law Program in Los Angeles. “Obviously, they have a lot more to do.”

DHCS and the state Department of Managed Health Care, which also regulates Medi-Cal managed-care plans, launched coordinated investigations of L.A. Care, based in part on a 2020 Los Angeles Times report that highlighted long, sometimes deadly, delays in care at facilities run by the Los Angeles County Department of Health Services. That agency operates the county’s public safety-net system and contracts with L.A. Care to provide care for hundreds of thousands of the health plan’s members. In their investigations, state regulators also relied on information that L.A. Care reported to them.

That they relied on these sources, Coursolle says, raises questions about the effectiveness of their own surveillance and auditing.

On March 4, the Department of Managed Health Care hit L.A. Care with a $35 million penalty — more than triple its highest previous fine. The Department of Health Care Services levied $20 million, nearly eight times its earlier record.

The state cited L.A. Care for more than 100,000 violations, including late responses to patient complaints and appeals, delayed or denied authorizations for necessary medical care, and failure to ensure the county health services agency complied with patient care regulations. The California Department of Public Health, which regulates hospitals and other health care institutions, didn’t respond to a question about whether it’s investigating any of the county’s medical facilities.

In announcing the fines, state agency directors said: “The magnitude of L.A. Care’s violations, which has resulted in harm to its members, requires immediate action.” The health plan has 2.4 million Medi-Cal enrollees.

“The recent enforcement action against L.A. Care signals that DHCS intends to exercise our authorities to protect our Medi-Cal enrollees,” department spokesperson Anthony Cava told me in an email.

L.A. Care’s CEO, John Baackes, says the plan is not contesting the findings. “What we are contesting is the amount of the fines, which we believe are unreasonable,” Baackes said. The dispute could take months, or even years, to settle.

In a statement released after the fines were announced, L.A. Care noted Medi-Cal’s notoriously low payments to providers and said the penalties create “yet another financial hurdle for a public health plan that is a crucial part of the health care safety net.”

Although L.A. Care has generated millions of dollars in profits in recent years, it reported a loss of $132 million in fiscal year 2020. But the plan can weather the fines. At the end of last year, its tangible net equity — a key measure of solvency — was seven times as high as the minimum required by law.

The violations described by regulators are painfully familiar to Theresa Grant, a Culver City resident I wrote about late last year who has struggled to find relief from a debilitating pain in her rib cage. The violations are “horrific,” she says, “and I think it’s very true.”

But she believes the specialist physicians who have been unable or unwilling to help her deserve a big share of the blame. “You know how long I’ve been dealing with my problem,” she told me. “It’s been over a year now, and not a damn thing is being done.”

Despite the significant penalties levied on L.A. Care, consumer advocates and some state lawmakers think California needs the authority to levy even larger ones.

A bill sponsored by the consumer advocacy group Health Access would increase many of the fines that state health plan regulators can impose at least tenfold. Supporters say the legislation, SB 858, is needed because the amount the department can legally levy on health plans hasn’t been raised in some cases since 1975.

“We want to make sure that insurance companies do not view these fines as just the cost of doing business,” says the bill’s author, state Sen. Scott Wiener (D-San Francisco). “By raising them, they become less a cost of business and more an actual incentive to follow the law.”

The fines imposed on L.A. Care are outliers because of their size, which was determined in part by the sheer number of violations. “For every fine like that, there are many that are dramatically lower,” Wiener says. “I wouldn’t want to rely on one case and say, ‘Oh, no problem, because they got a big fine.’”

Another important factor in holding health plans’ feet to the fire, Wiener says, is consumer complaints, which can help bring problems to the attention of regulators — and to the plans themselves.

But a report last year by KFF showed that consumer appeals of denied care are exceedingly rare.

If you have a problem with your health plan or want to appeal a delay or denial of coverage, a good place to start is the Department of Managed Health Care (888-466-2219 or HealthHelp.ca.gov).

The state also has an ombudsman for Medi-Cal managed care (888-452-8609 or MMCDOmbudsmanOffice@dhcs.ca.gov).

You can also try the Health Consumer Alliance (888-804-3536 or www.healthconsumer.org), which assists people in public and private health plans. It offers free advice, provides legal services, and can help you get your documents in order for an appeal.

Regulators and health plans alike frequently say they are working on behalf of the patient. So if you’re not getting the care you need, stand up and be part of the solution.

Covered California Rates Jump 13% in 2017

Covered California Rising costs

Covered California’s premiums jumped 13.2% for 2017, up from about a 4% increase in each of the past two years. However, most consumers will see a much smaller increase or pay less next year if they switch to another plan. California executive director Peter Lee said, “Shopping will be more important this year…Almost 80% of our consumers will be able to pay less than they are paying now, or see their rates go up by no more than 5% if they shop and buy the lowest-cost plan at their same benefit level.”

While premiums will rise, the subsidies will rise as well. About 90% of Covered California enrollees get help to pay for their premiums. The average subsidy covers roughly 77% of the consumer’s monthly premium. “Even though the average rate increase is larger this year than the Past two years, the three-year average increase is 7% – substantially better than rate trends before the Affordable Care Act was enacted,” Lee said.

Covered CaliforniaPremium increases 2014-2015 2015-2016 2016-2017 3-year average
Average weighted increase 4.2% 4% 13.2% 7%
Lowest price Bronze plan 4.4% 3.3% 3.9% 3.9%
Lowest priced Silver plan 4.8% 1.5% 8.1% 4.8%
Second lowest priced Silver plan 2.6% 1.8% 8.1% 4.1%
If a consumer switches to the lowest priced plan in the same tier -4.5% -1.2%

 

Lee said the average rate increase reflects the following factors:

  • A one-year adjustment due to the end of the reinsurance funding mechanism in the Affordable Care Act. The provision was designed to moderate rate increases during the first three years when exchanges were being established. The American Academy of Actuaries estimates that this will add 4% to 7% to premiums for 2017.
  • Special enrollment by some consumers who sign up only after they become sick or need care, which has had a significant effect on rates for two insurance plans.
  • The rising cost of health care, especially for specialty drugs.
  • Pent-up demand for health care among those who were uninsured before the Affordable Care Act.

Lee said, “Covered California is working to address some of these issues on multiple fronts. The exchange is aggressively marketing to attract healthy consumers year-round, and is working to ensure special enrollment is available only to those who meet qualifying circumstances. It is also sampling the special enrollment population to better understand how to make any further improvements needed.”

Covered California is reducing the number of services that are subject to a consumer’s deductible. Starting in 2017, consumers in Silver 70 plans will save as much as $55 on an urgent care visit and $10 on a primary care visit. Consumers in Silver, Gold, and Platinum plans will pay a flat copay for emergency room visits without having to satisfy a deductible, which could save them thousands of dollars.

These improvements build on features already in place that ensure most outpatient services in Silver, Gold and Platinum plans are not subject to a deductible, including primary care visits, specialist visits, lab tests, X-rays and imaging. Some Enhanced Silver plans have little or no deductible and very low copays, such as $3 for an office visit. Consumers in Covered California’s most affordable Bronze plans can see their doctor or a specialist three times before the visits are subject to the deductible.

The contract with health insurers for 2017 ensures that consumers select or are provisionally assigned a primary care physician. Below are the companies selected for the 2017 exchange:

  • Anthem Blue Cross of California
  • Molina Healthcare
  • Blue Shield of California
  • Oscar Health Plan of California
  • Chinese Community Health Plan
  • Sharp Health Plan
  • Health Net
  • Valley Health Plan
  • Kaiser Permanente
  • Western Health Advantage
  • A. Care Health Plan

The following carriers are increasing their coverage areas in 2017:

  • Oscar will be entering the market in San Francisco, Santa Clara, and San Mateo counties.
  • Molina will expand into Orange County.
  • Kaiser will be available in Santa Cruz County.

With the expansion of carriers, 93% of consumers will be able to choose from three or more carriers, and all will have at least two to select from. In addition, more than 93% of hospitals in California will be available through at least one Covered California health insurance company in 2017, and 74% will be available in three or more plans. Rate details by pricing regions can be found in Covered California’s Health Insurance Companies and Plan Rates for 2017, posted online at: http://coveredca.com/news/pdfs/CoveredCA-2017-rate-booklet.pdf.

California’s Exchange Offers A Competitive Marketplace

The California exchange market is shaping up to be more competitive than its 2012 individual market, according to a report by the Kaiser Family Foundation. All three indicators point to increased competition (the Herfindahl–Hirschman Index, market share of largest insurer, and number of insurers with more than 5% of market share).

California’s individual market was highly concentrated in 2012, but the exchange market has only moderate concentration. Eleven insurers are participating in California’s exchange throughout the state, including eight plans that previously made up 90% of the 2012 individual market.  Four new plans (L.A. Care Health Plan, Molina Healthcare, Western Health Advantage, and Valley Health Plan) are also being offered, but together only make up 5% of the exchange’s market.

Not all plans are available in all areas of the state. WellPoint, the parent company of Anthem Blue Cross of California and the state’s largest individual market insurer, has significantly less market share in the exchange than it did in the 2012 individual market (30% versus 47%).  Blue Shield of California picked up substantial market share, most likely because it was able to offer the lowest premiums in several parts of the state.

Over time, the availability of premium tax credits, which are only available inside exchanges, should greatly increase the number of participants.  If these new avenues for enrollment are more or less competitive, the markets are likely to be as well, according to researchers. For more information, visit .http://kff.org/health-reform/issue-brief/sizing-up-exchange-market-competition.

Last Updated 08/10/2022

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