California agency hits HMOs, and Kaiser and Blues hit back

Health plans are responding with lawsuits to penalties and fines levied by the California Dept. of Managed Health Care.

By Julie A. Jacob, AMNews staff. Jan. 14, 2002.

The California Dept. of Managed Health Care, created less than two years ago to oversee the state's health plans, is getting hit back by two of the health plans it has disciplined.

In tussles over the scope of the department's authority, Kaiser Permanente of California and Blue Shield of California have taken legal action against the state agency, alleging that it is overstepping its authority.

Kaiser is appealing a $1.1 million fine and tried unsuccessfully to get a federal court to hold the agency's director in contempt. Meanwhile, Blue Shield is challenging an agency order directing it to pay for a patient's weight-loss drug. The department, created in July 2000, took over supervision of managed care plans from the state's Dept. of Corporations.

A consumer activist said the managed care plans are trying to use legal action to stop the DMHC, and its director, Daniel Zingale, from regulating them.

"The health plans don't want to be accountable under the law," said Jamie Court, executive director of the Santa Monica-based Foundation for Taxpayer and Consumer Rights. "But they're making a problem for themselves and will just fuel more patient protection laws."

He noted that state newspapers have run editorials critical of Kaiser's legal battle with the DMHC. In a Nov. 29, 2001, editorial, the Sacramento Bee said, "Kaiser has made itself into the bad guy in the eyes of public opinion."

However, the president of the state's health plan association said the insurers are simply trying to get the courts to define the boundaries of the agency's scope of authority. [...]