Report Faults Agency’s Oversight of HMOs

The California Department of Corporations spent so little time and money policing health-maintenance organizations in 1998 that it closed the year with $6 million left over and a backlog of 305 consumer complaints, according to a state audit released this week.

Consumer advocates have long complained that the department, which was originally set up to oversee the sale of securities and other financial services, is not aggressively regulating managed care.

According to the report by state Auditor Kurt Sjoberg, the department failed to fill key positions and dragged its feet on financial examinations of health plans. That compromised its ability to ensure patient care was not disrupted by a plan’s financial problems, he said.

In addition, Sjoberg said, the plans were essentially overcharged, because it is the fees they pay that finance regulation.

“The health plans paid more fees than necessary for their regulation,” Sjoberg wrote, noting the $6-million 1998 surplus along with the $2.6 million in unspent funds from 1997.

Sjoberg recommended that Gov. Gray Davis remove the oversight of health care from the department’s jurisdiction. Davis has been promising such a move for months but has not decided how a new agency would be organized.