Official Summary Text
AB 2327, as amended, Lowenthal.
Medi-Cal: subcontractors: rates.
Existing law establishes the Medi-Cal program, which is administered by the State Department of Health Care Services and under which qualified low-income individuals receive health care services under fee-for-service or managed care delivery systems. The Medi-Cal program is in part governed by, and funded pursuant to, federal Medicaid program provisions.
Existing law sets forth various provisions relating to the department determining capitation rates for Medi-Cal managed care plans using actuarial methods and a certain methodology that considers, among other factors, utilization and cost data.
Relative to these provisions of existing law, in 2023, the department entered into a multi-party settlement agreement for Medi-Cal managed care procurement for plan years
beginning January 1, 2024, with specified Medi-Cal managed care plans and certain subcontracting plans.
This bill would require the department, for rates effective on or after January 1, 2027, to require that a Medi-Cal managed care plan operating as a downstream fully or partially delegated subcontractor, as
defined, be paid actuarially sound rates developed in accordance with generally accepted actuarial rate development principles and practices. Under the bill, failure to pay the subcontractor in a manner consistent with these provisions would be deemed a violation, constituting an unlawful and unfair business practice, as specified. The bill would afford the contractor the opportunity to enforce these requirements by filing a notice of dispute with the department.
This bill would authorize a subcontracting plan subject to the above-described agreement to request a review of the Medi-Cal managed care rates paid by the primary plan for a particular rating period, as specified. The bill would require the department to direct an independent, qualified actuarial consultant to review those rates upon a showing by the subcontracting plan that certain conditions have
occurred or are likely to occur, including, among others, a medical loss ratio in excess of 93% for the preceding 12-month period. If the department determines that the rates paid by the primary plan to the subcontracting plan for a particular rating period are not actuarially sound, the bill would require the department to order a revision of those rates, as specified. The bill would make any failure by the department to comply with these provisions reviewable and subject to appeal at the request of the subcontracting plan through a notice of dispute pursuant to the terms of the Medi-Cal managed care contract. The bill would require these disputes to be concluded and resolved within 120 calendar days of the initial request. The bill would authorize the department to implement, interpret, or make specific these provisions through the use of all-county letters, plan letters, plan bulletins, amendments to the state Medi-Cal managed care contract, or similar instructions without taking any further regulatory
action.