On July 17th, the California Office of Administrative Law (“OAL”) approved an emergency regulation (effective until January 14, 2021) from the California Department of Managed Health Care (“DMHC”) that specifies COVID-19 diagnostic testing coverage requirements for California health care service plans. Medi-Cal managed care plans, Medicare Advantage plans, and specialized health plans are not subject to the regulation. The DMHC provided additional context to the emergency regulation in an all plan letter issued on July 23rd.

The regulation deems COVID-19 testing to be an urgent health care service during the California state of emergency. It also states that COVID-19 diagnostic testing is a medically necessary basic health care service for enrollees who are essential workers, regardless of whether the enrollee has symptoms of COVID-19 or a known or suspected exposure to a person with COVID-19. Essential workers are defined in the regulation to include a broad range of individuals working in the health care, emergency services, public transportation, congregate care, correctional, food service, and education sectors. Additionally, they include individuals who work in retail, manufacturing, agriculture, and food manufacturing that either have frequent interactions with the public or cannot regularly maintain at least six feet of space from other workers.

Between the regulation, all plan letter, and other applicable federal law, California health plans will need to comply with the following requirements for enrollees seeking COVID-19 testing:

Continue Reading Required Coverage of COVID-19 Testing for Essential Workers in California

Since their inception, California health care service plans have been considered not to be insurers for purposes of the State’s 2.35 percent gross premium tax. Under a controversial ruling issued by the Court of Appeal, this could change.

On September 25, the Court of Appeal held that a suit alleging that California’s Blue Shield and Blue Cross plans—which are otherwise regulated as health care service plans—are insurers for purposes of the State’s 2.35 percent gross premium tax, stated a claim for trial.1 The Court held that the test for whether a health care service plan is an insurer for purposes of the tax is whether “indemnifying” against future contingent medical expenses is a “significant financial proportion” of its business. The Court said that allegations that California Physicians’ Service, dba Blue Shield of California (Blue Shield) and Blue Cross of California, dba Anthem Blue Cross (Blue Cross) paid between 75-80 percent of member expenses under their PPO and HMO plans on a fee-for-service basis, rather than on a capitated basis, would be sufficient to find that they were predominantly providing “indemnity.”

This dispute is far from over. The Court of Appeal’s analysis can be criticized as failing to come to terms with the extent of California’s dual health plan regulatory system, which has long treated health care service plans differently and not considered them to be insurers, even when they provide so-called “indemnity” coverage. It can be criticized for failing to understand that plans today frequently contract with providers under other financial models, such as shared risk contracts, that do not fit neatly into the capitation versus fee-for-service dichotomy. It also potentially fails to understand the impact of its decision on the health care industry in California.  For non-self-insured commercial health benefit plans, the vast majority of California health plan enrollees are covered by plans regulated by the Department of Managed Health Care (DMHC) which do not currently pay the insurance premium tax.2

Continue Reading New California Court of Appeal Decision May Impose Premium Taxes on California Health Plans