The tumult over MedPartners in California is adding momentum to a bill that would require HMOs to reveal how they set capitation rates.
Researchers from the National Council of State Legislatures say that if this bill passes, California will be the first state it knows of to require HMOs to provide financial information beyond such basics as revenues and earnings.
California Assembly Bill 918 would require HMOs to file annually with the state an actuarial report detailing their assumptions for setting capitation rates and explanations for why they are sufficient.
The California Association of Health Plans opposes the bill, saying it would reveal trade secrets and give providers an unfair advantage in contract talks.
However, the California Medical Association wrote the bill because it believes HMOs have an unfair advantage. The association asked Assembly member Fred Keeley, a Democrat from Santa Cruz, to sponsor it, and the bill passed the Assembly's Health Committee on a 9-2 vote April 13. Keeley is the Assembly's speaker pro tem, or second-ranking member.
The CMA has made no secret of its opinion that capitation rates in the state are too low. Under capitation, HMOs pay providers a monthly set rate per patient, regardless of actual treatment costs. According to the CMA, the state's health plans pay an average of $106 per enrollee per month, compared with $170 in New York and $165 in Florida.
Although the CMA hopes this bill will increase capitation rates, Keeley calls it a "disclosure bill." Anyone, not just providers and health plans, can look at the information.
"It doesn't contain a provision (saying if the rate) doesn't appear to be sound, you can't do it," Keeley says. "(But) we think what's happening in some cases out here now is the ball is being hidden a little bit."
A version of this bill was introduced last year in the wake of the bankruptcy of physician practice manager FPA Medical Management. Many doctors believe FPA accepted capitation rates that were too low to cover treatment costs. That version passed through the Democrat-controlled legislature but was vetoed by then-Gov. Pete Wilson, a Republican.
Keeley re-introduced the bill in late February, hoping for a friendlier reading from the new Democratic governor, Gray Davis.
The waters got even smoother after the state Department of Corporations took over MedPartners' contracting subsidiary in California and placed it in U.S. Bankruptcy Court on March 11. Legislators, especially those representing the 1.3 million Southern Californians with MedPartners doctors, received numerous calls from worried constituents.