California Bill Could Lead to Higher Fees, Penalties for HMOs

State legislators are taking a closer look at fees and penalties levied against HMOs, prompting a recent bill that would redirect HMO fines to a loan assistance program for medical students, Capitol Weekly reports.

Senate Budget Committee Chair Denise Ducheny (D-San Diego) has authored a bill that would take about $2 million annually in funds collected by the Department of Managed Health Care and divert the money to a program that provides grants and loans to medical students who commit to serving in areas with physician shortages.

The loan assistance program is administered by the California Medical Association and traditionally has received funding from the state. However, that funding could be cut given the state's budget deficit, Capitol Weekly reports.

Under the existing system, DMHC budgets for a 5% reserve of fines, so even if high fines are collected, the department will lower other fees that it collects from HMOs to keep its reserves from rising above 5%.

Critics of the current practice say that money is being returned to the same insurers that the department is punishing with fines.

Consumer advocates said the urge to limit fines is an overreaction and unnecessary, Capitol Weekly reports.

Nicole Kasabian Evans, spokesperson for the California Association of Health Plans, said, "We don't see the concerns about the DMHC fee structure schedule or the way it functions ... It doesn't seem like the department has been reluctant to levy fines and penalties."

Sen. Alex Padilla (D-Van Nuys) said that with "all the attention the record fines have been receiving, when you hold that up against record profits from the [insurance] industry, you have to have to ask yourself, 'Is this enough?'" (Howard/York, Capitol Weekly, 3/6).