HMO Panel to Call for Consumer Protections

California should strip an oft-criticized state agency of oversight responsibility for HMOs and enact dozens of new protections for consumers to address widespread public dissatisfaction with managed health care, a governor’s task force will recommend.

The pending report, which calls for a new state agency to oversee HMOs, is already drawing fire from critics for not going far enough. But it is expected to carry clout in Sacramento and Washington, where controversy over the growing influence of the managed care industry--and doubts about the quality of medical care it provides--have become a highly charged political issue.

Many of the more than 60 recommendations by the 30-member bipartisan panel are given a good chance of being enacted into state law. Its report, assembled over the last several months, is to be completed at the group’s final meeting Monday.

The panel called for easier access to medical specialists and prescription drugs, a better consumer complaint process when medical service is denied, requiring HMOs to collect and report more information on medical quality, making it easier for consumers to “comparison shop” among HMOs, and numerous other measures.

But the panel’s recommendations provide plenty of ammunition for both proponents and critics of managed care. Indeed, some of its proposals call for looser supervision of the industry than bills passed by the Legislature last year but vetoed by Gov. Pete Wilson.

Several task force members are charging that the panel ducked major issues, that its conclusions were formed without critical information from its own statewide public opinion poll, and that its proposals don’t go far enough in protecting HMO members.

And industry officials warned that the panel’s recommendations would have the effect of driving up health insurance premiums. The panel, led by a prominent Stanford University economist and Gov. Wilson’s chief economist, did not address the effect of its proposals on the cost of health care.

But some panel members who were selected to represent consumer interests--some of whom are frequently critical of HMO practices--saw a lot to like in the recommendations.

“I really think there is a lot of very positive recommendations that can make a huge difference for individual consumers,” said Peter Lee, a director at the Center for Health Care Rights, a Los Angeles patient advocacy group.

Wilson named the task force early this year, and he used its pending work as justification for his sharply criticized veto of numerous managed-care reform bills--many passed with strong bipartisan support--that reached his desk last summer. He said he wanted to see the task force’s comprehensive recommendation first rather than decide on the bills piecemeal.

Among the panel’s recommendations:

* Creation of a state agency that would regulate all managed care plans and have new powers to oversee medical groups and other health care providers that function similarly to health insurers. The California Department of Corporations, which has overseen HMOs for more than 20 years but is widely criticized as a weak regulator, would relinquish its powers in the health field.

* A legislative study of consolidating all health care regulatory functions under the new agency. Currently, three different state agencies--Corporations, the Department of Health Services and the Department of Insurance--oversee various types of health plans.

* Requiring HMOs to publish their approved list of prescription drugs, known as formularies. Also, that health plans be required to allow patients with chronic or ongoing medical conditions to continue receiving their drugs even after they are removed from the formulary.

* Establish by 2000 an “unbiased, independent, third-party” state review process for resolving HMO members’ complaints involving denials of medical care as unnecessary or experimental.

* Requiring HMOs to collect and publish more detailed information on members’ complaints. Currently, state regulators annually publish information on HMO complaints logged by the agency, but HMOs are not required to disclose the presumably much higher number of complaints made directly to the health plan.

* Establish mandatory, standardized procedures for resolving consumer complaints with HMOs. Members would have the right to appear in person at a plan’s grievance hearing--a process from which they now are often excluded.

* Require HMOs to establish “standard product descriptions” intended to make it easier for consumers to comparison shop among plans offering different benefits.

The committee voted down a proposal to recommend that HMOs be held accountable under state law for medical decisions that harm patients. A 1974 federal law exempts employer-funded health plans, which cover the vast majority of HMO members in California, from state malpractice liability. At least one state, Texas, has passed legislation imposing tougher malpractice standards for HMOs.

Among the criticisms of the task force report was that the panel didn’t consider the economic implications of its recommendations. The HMO industry has already begun sounding alarms that the recommendations could raise medical insurance premiums, forcing some small-business owners to drop health benefits for workers and increasing the uninsured population.

The recommendations “will be costly,” said Allan Zaremberg, executive vice president of the California Chamber of Commerce. “I don’t think we want to see people lose health insurance unless the benefit to consumers is significant.”

The task force’s chairman, Stanford University health economist Alain Enthoven, explains in the report that the panel “did not have the time or resources to estimate the costs of its recommendations, either in isolation or taken together.”

Regardless of the fate of the panel’s proposals, industry observers say that they anticipate another flood of managed care bills when the Legislature reconvenes next year. And the action has already begun.

Assemblyman Martin Gallegos (D-Baldwin Park), a practicing chiropractor who has blasted the panel’s pending recommendations as “mild and weak,” is set to propose a 1998 ballot initiative to seek tougher standards.

Gallegos’ measure will seek to make it easier for consumers to sue HMOs in state court for medical malpractice and to ban health plans--most notably Kaiser Permanente, the state’s biggest HMO--from requiring members to resolve legal disputes through a private arbitration process that the insurer administers itself, an aide to Gallegos said Tuesday.