California Corner: California Enhances Oversight of Recordkeeping and Claim Reimbursement Requirements for Health Care Service Plans

On September 27, 2024, Governor Newsom signed Assembly Bills AB 3221 and AB 3275 into law. These laws aim to enhance accountability, transparency, and compliance for health care service plans regulated by the Department of Managed Health Care (“DMHC”) under the Knox-Keene Act of 1975 (as amended). California defines a “health care service plan” as any entity or person that arranges for health care services for enrollees, pays for or reimburses some or all the costs of those services, or receives a prepaid or periodic charge from enrollees or on their behalf in exchange. Common examples include Health Maintenance Organizations (“HMOs”) and Medi-Cal managed care plans. It should also be noted that self-funded plans are excluded from these legislative changes.

AB 3221 introduces updated recordkeeping requirements effective January 1, 2025. Health care service plans under DMHC’s jurisdiction will need to provide any requested records in a digitally searchable format. Additionally, AB 3275 establishes stricter rules around claims reimbursement, mandating timely and transparent payment processes, which will take effect on January 1, 2026. Collectively, these laws aim to enhance the operational integrity of health care service plans while protecting plan participants’ rights.

Employer Action Items

• Audit Recordkeeping Practices. Employers of health care service plans, along with their insurers, are required to maintain records and documents in a digitally searchable format that is readily accessible for DMHC inspections. To comply, employers should collaborate closely with brokers and insurers to ensure they can provide the necessary records when requested (eff. 1/1/25).
• Conversion to Electronic Records. It is vital that employers work with brokers and insurers to transition all documents and files to electronic formats as much as possible. Ensuring these records are digitally searchable is essential; failure to do so may result in penalties (eff. 1/1/25).
• Update Plan and Contract Language. Employers should review and update plan documents to ensure compliance with the law’s requirements about claims timelines and grievance processes. Updating contractual language to ensure responsibility and adherence to requirements will further aid in compliance efforts (eff. 1/1/26).
• Engage in Ongoing Communication. Employers must maintain open lines of communication with brokers and insurers to assess their plan’s compliance with these new laws. Schedule a meeting to discuss the impact of these new laws and better understand how the insurer will support compliance efforts.

Summary

AB 3211 – Effective 1/1/25

This law aims to update the oversight framework for health care services plans by mandating that records be easily searchable and accessible electronically. The law also enables the DMHC to take disciplinary measures against health plans that do not fully and promptly respond to records requests. Additionally, the law clarifies that the DMHC has the authority to engage in enforcement actions and initiate further investigations based on medical survey results, even if follow-up reviews are incomplete.

To comply, health care service plans (or employers) must align their operational strategies and compliance protocols to meet these new legal requirements and avoid potential penalties. Here are the key compliance points for health care service plans under the new law:

Key Compliance Requirements for Health Care Service Plans:

• Enhanced Records Inspection and Accessibility:
  • Plans must provide records, books, and papers in electronic forms wherever possible;
  • Records should be digitally searchable as much as possible;
  • Plans are responsible for conducting thorough reviews and ensuring timely responses to DMHC’s records requests. Failure to comply may lead to penalties, including disciplinary action.
• Mandatory Record Preservation:
  • Plans must retain records to the fullest extent possible, but no less than seven (7) years (in some cases up to 10 years);
  • DMHC’s Director has the authority to inspect, copy, and request records electronically and can seek administrative relief for non-compliance.
• Medical Survey/Onsite Review Compliance & Expansion of Disciplinary Action:
  • DMHC will continue to conduct periodic onsite reviews (or medical surveys) of each plan’s health delivery system and must publicly produce a final report within 180 days of completing their review. Plans are allowed to review and respond to findings before publication of the final report;
  • Plans that do not address deficiencies in a timely manner may face disciplinary action;
  • DMHC may impose penalties based on various factors, including the nature of violations, any harm caused to enrollees, and the plan’s compliance history.

AB 3275 – Effective 1/1/2026

This new law updates the reimbursement timelines and processes for health care service plans and insurers. It requires that claims be resolved within thirty (30) calendar days. Notifications for contested or denied claims must clearly specify the reasons for the denial and outline the necessary documentation, thereby promoting transparency for claimants. Additionally, the law imposes strict penalties, including interest and fees, for late payments. Employers and insurers must implement these provisions in their claims handling and grievance systems by January 1, 2026. Below, we’ve highlighted the key compliance requirements:

Key Compliance Requirements for Health Care Service Plans:

• Claim Reimbursement Timelines:
  • Plans must reimburse complete claims or notify claimants of denials or contested claims within thirty (30) calendar days after receipt of the claim by the plan. This timeline is extended to forty-five (45) days for HMOs;
  • For uncontested claims not reimbursed, interest will begin accruing at 15% per year starting the first day after the 30-day (or 45-day) window. Interest amounts must be included in payment without requiring claimants to make any additional requests.
• Grievance Process Improvements:
  • Enrollee complaints relating to a delayed or denied claim payment must be treated as a grievance and addressed through the plan’s formal grievance process. The word “grievance” is not required to be included in a complaint for it to be treated as such;
  • Plans are also required to notify enrollees and providers of grievance rights and provide clear instructions on how to dispute adverse claims decisions.

It is important to note that the DMHC has the authority to issue additional guidance regarding this law through the end of 2027. Such guidance will take effect immediately and will not be subject to any notice or comment requirements.

 Additional Resources:

• Assembly Bill 3275
• Assembly Bill 3221