Health care service plans: mergers and acquisitions.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes a willful violation of the act a crime. Existing law requires every nonprofit health care service plan applying to restructure, as defined, or convert its activities to secure the approval of the Director of the Department of Managed Health Care. Under existing law, a health care service plan is required to notify the director of any material modifications of its plan or operations, as specified. This bill would require a health care service plan that intends to merge or consolidate with, or enter into an agreement resulting in its purchase, acquisition, or control by, any entity, as defined, including another health care service plan or a licensed health insurer, to give notice to, and secure prior approval from, the Director of the Department of Managed Health Care. The bill would require the health care service plan to meet specified requirements and to provide information necessary for the director to make the determination to approve, conditionally approve, or disapprove the transaction or agreement, as specified. The bill also would require the department, prior to approval, conditional approval, or denial of the proposed agreement or transaction, to hold a public meeting on the proposal and make specified findings. The bill would require the director to prepare a statement if the director determines that a material amount of the health care service plan's assets are subject to merger, consolidation, acquisition, purchase, or control, as specified, and would require the department to make the statement available prior to the public meeting. The bill would authorize the director to give conditional approval for a transaction or agreement as described in the bill, under specified circumstances. The bill would deem any material modification filed by a health care service plan that is a transaction or agreement as described in the bill to be subject to specified fees and costs related to the approval, conditional approval, or disapproval process. Because a willful violation of the bill's provisions applicable to a health care service plan would be a crime, it would impose a state-mandated local program. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason.