SENATE BILL No. 301...2012/08/24 · AMENDED IN ASSEMBLY AUGUST 24, 2012 AMENDED IN ASSEMBLY JUNE 26, 2012 AMENDED IN ASSEMBLY MAY 31, 2011 AMENDED IN SENATE APRIL 7, 2011 SENATE

AMENDED IN ASSEMBLY AUGUST 24, 2012

AMENDED IN ASSEMBLY JUNE 26, 2012

AMENDED IN ASSEMBLY MAY 31, 2011

AMENDED IN SENATE APRIL 7, 2011

SENATE BILL No. 301

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Introduced by Senator Senators DeSaulnier, Cannella, Pavley, Rubio,Strickland, and Yee

(Principal coauthors: Assembly Members Pan and Swanson)(Coauthor: Senator Emmerson)

(Coauthors: Assembly Members Perea, V. Manuel Pérez, Wieckowski,and Williams)

February 14, 2011

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An act to amend Section 12098 of the Government Code, relating toeconomic development. An act to repeal Chapter 16.2 (commencingwith Section 12694.1) of Part 6.2 of Division 2 of the Insurance Code,to amend Sections 12009, 12201, 12204, 12207, 12242, 12251, 12253,12254, 12257, 12258, 12260, 12301, 12302, 12303, 12304, 12305,12307, 12412, 12413, 12421, 12422, 12423, 12427, 12428, 12429,12431, 12433, 12434, 12491, 12493, 12494, 12601, 12602, 12631,12632, 12636, 12636.5, 12679, 12681, 12801, 12951, 12977, 12983,12984, and 13108 of the Revenue and Taxation Code, to amend Sections14126.022, 14126.027, 14126.033, 14126.036, and 14301.11 of, andto add Section 14126.028 to, and to repeal Sections 14005.26 and14005.27 of, the Welfare and Institutions Code, and to repeal Section92 of Chapter 11 of the First Extraordinary Session of the Statutes of2011, relating to health, and making an appropriation therefor.

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legislative counsel’s digest

SB 301, as amended, DeSaulnier. Office of Small Business Advocate.Medi-Cal: managed care plan tax: Healthy Families Programtransition: skilled nursing facility and managed care plan charges.

(1) Existing law provides for the Medi-Cal program, which isadministered by the State Department of Health Care Services, underwhich qualified low-income individuals receive health care services.The Medi-Cal program is, in part, governed and funded by federalMedicaid Program provisions.

Under existing law, one of the methods by which Medi-Cal servicesare provided is through contracts with various types of managed careplans. Existing law imposes a tax at a specified rate on the grosspremiums of an insurer, as defined, and, until July 1, 2012, on the totaloperating revenue, as specified, of a Medi-Cal managed care plan, asdefined. Existing law exempts from that tax the total operating revenueof a Medi-Cal managed care plan, if specified events occur before July,1, 2012. Existing law continuously appropriates the revenues derivedfrom the tax on Medi-Cal managed care plans for specified purposes.

This bill would extend the imposition of the tax on the total operatingrevenue of Medi-Cal managed care plans until July 1, 2014, and wouldmake other conforming changes. This bill also would authorize theController to loan funds in the Children’s Health and Human ServicesSpecial Fund to the General Fund, as provided, until July 1, 2013. Byextending the imposition of a tax whose revenues are continuouslyappropriated, this bill would make an appropriation.

(2) Existing law requires, until July 1, 2012, every return requiredto be filed with the Insurance Commissioner pursuant to provisionsgoverning taxes on the total operating revenue of Medi-Cal managedcare plans to be signed by the insurer or the Medi-Cal managed careplan or an executive officer of the insurer or the plan and to be madeunder oath or contain a written declaration that is made under penaltyof perjury.

This bill would instead apply this signature requirement until July 1,2013. By expanding the crime of perjury, this bill would impose astate-mandated local program.

(3) Existing law creates the Healthy Families Program, administeredby the Managed Risk Medical Insurance Board (MRMIB), to arrangefor the provision of health, vision, and dental benefits to eligible children

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pursuant to a federal program, the Children’s Health InsuranceProgram.

Under existing law, the Director of Health Care Services may contractwith any qualified individual, organization, or entity to provide servicesto, arrange for, or case manage the care of Medi-Cal beneficiaries,subject to specified requirements. Existing law requires a Medi-Calapplicant or beneficiary to be informed of the managed care andfee-for-service options available regarding methods of receivingMedi-Cal benefits.

Existing law provides for the transition of specified enrollees of theHealthy Families Program to the Medi-Cal program, to the extent thatthose individuals are otherwise eligible, no sooner than January 1,2013. Existing law requires this transition to take place in 4 phases, asprescribed.

This bill would repeal the provisions requiring the transfer of HealthyFamilies Program enrollees into the Medi-Cal program.

(4) Existing law requires the State Department of Health CareServices to impose a uniform quality assurance fee on each skillednursing facility, with certain exceptions, in accordance with a prescribedformula. The formula is based on the determination of the projectednet revenues, as defined, of skilled nursing facilities. Under existinglaw, the charge will cease to be assessed after July 31, 2013, and theseprovisions will be repealed on January 1, 2014. Existing law, theMedi-Cal Long-Term Care Reimbursement Act, requires the departmentto implement a facility-specific reimbursement ratesetting system forcertain skilled nursing facilities. Reimbursement rates for freestandingskilled nursing facilities are funded by a combination of federal fundsand moneys collected pursuant to the skilled nursing uniform qualityassurance fee. Existing law also establishes the Skilled Nursing FacilityQuality and Accountability Special Fund in the State Treasury, whichis a continuously appropriated fund that contains moneys from theassessment of specified administrative penalties and set asides ofGeneral Fund moneys, for the purposes of making quality andaccountability payments. Existing law provides that this ratemethodology shall cease to be implemented after July 31, 2013, andthat these provisions shall be repealed on January 1, 2014.

This bill would modify the calculation of rates under theabove-referenced rate methodology, and would extend the assessmentof the charge, implementation of the rate methodology, andimplementation of related provisions until July 31, 2015. By extending

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the period of time during which transfers are made to the Skilled NursingFacility Quality and Accountability Special Fund, this bill would makean appropriation. This bill would also modify the amount of moneys tobe deposited into the Skilled Nursing Facility Quality and AccountabilitySpecial Fund, by, among other things, requiring that specified set-asidesunder the rate methodology remain in the General Fund instead oftransferring to the Skilled Nursing Facility Quality and AccountabilitySpecial Fund and increasing the amount of certain set-asides to betransferred to the fund. This bill would instead require that the qualityand accountability payments be made beginning with the 2013–14 rateyear.

(5) Existing federal Medicaid law requires nursing facilities, asdefined, to perform an assessment of each resident’s functional capacitythat is based on a uniform minimum data set, as specified.

This bill would require nursing facilities, the State Department ofHealth Care Services, and the State Department of Public Health toperform various duties with respect to the federal government’s nursinghome quality initiative and this assessment.

(6) Section 92 of Chapter 11 of the First Extraordinary Session ofthe Statutes of 2011 provides that act becomes inoperative if any of itsprovisions are amended or repealed.

This bill would repeal that provision and would provide that,notwithstanding Section 92 of Chapter 11 of the First ExtraordinarySession of the Statutes of 2011, the provisions of Chapter 11 of the FirstExtraordinary Session of the Statutes of 2011 do not become inoperativeupon the amendment or repeal of any provision of that chapter madeby this bill.

(7) The California Constitution requires the state to reimburse localagencies and school districts for certain costs mandated by the state.Statutory provisions establish procedures for making thatreimbursement.

This bill would provide that no reimbursement is required by this actfor a specified reason.

(8) This bill would include a change in state statute that would resultin a taxpayer paying a higher tax within the meaning of Section 3 ofArticle XIII A of the California Constitution, and thus would requirefor passage the approval of 2⁄3 of the membership of each house of theLegislature.

Existing law establishes a small business advocate within theDepartment of General Services, and requires that advocate to carry

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out various powers and duties relating to the support of small businesses.Existing law requires each state agency to designate a small businessadvocate to serve as a liaison to small business suppliers.

Existing law establishes the Office of Small Business Advocate withinthe Governor’s Office of Business and Economic Development. Existinglaw requires the advocate to carry out various duties relating topromoting small business, including, among others, posting on itsInternet Web site the name and telephone number of each small businessadvocate designated by a state agency to serve as a liaison to smallbusiness suppliers.

This bill would require the Office of Small Business Advocate to alsopost on its Internet Web site the name and telephone number of theDepartment of General Services’ small business advocate.

Vote: majority 2⁄3. Appropriation: no yes. Fiscal committee: yes.

State-mandated local program: no yes.

The people of the State of California do enact as follows:

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SECTION 1. Chapter 16.2 (commencing with Section 12694.1)of Part 6.2 of Division 2 of the Insurance Code is repealed.

SEC. 2. Section 12009 of the Revenue and Taxation Code isamended to read:

12009. (a) “Medi-Cal managed care plan” or “plan” meansany individual, organization, or entity, other than an insurer asdescribed in Section 12003 or a dental managed care plan asdescribed in Section 14087.46 of the Welfare and InstitutionsCode, that enters into a contract with the State Department ofHealth Care Services pursuant to Article 2.7 (commencing withSection 14087.3), Article 2.8 (commencing with Section 14087.5),Article 2.81 (commencing with Section 14087.96), Article 2.9(commencing with Section 14088), or Article 2.91 (commencingwith Section 14089) of Chapter 7 of, or pursuant to Article 1(commencing with Section 14200) or Article 7 (commencing withSection 14490) of Chapter 8 of, Part 3 of Division 9 of the Welfareand Institutions Code.

(b) This section shall become inoperative on July 1, 2012 2013,and, as of January 1, 2013 2014, is repealed, unless a later enactedstatute, that becomes operative on or before July 1, 2012 2013,deletes or extends the dates on which it becomes inoperative andis repealed.

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SEC. 3. Section 12201 of the Revenue and Taxation Code, asamended by Section 2 of Chapter 11 of the First ExtraordinarySession of the Statutes of 2011, is amended to read:

12201. (a) Every insurer and Medi-Cal managed care plandoing business in this state shall annually pay to the state a tax onthe bases, at the rates, and subject to the deductions from the taxhereinafter specified. For purposes of the tax imposed by thischapter, “insurer” shall be deemed to include a home protectioncompany as defined in Section 12740 of the Insurance Code.

(b) Notwithstanding Section 13340 of the Government Code,the revenues derived from the imposition of the tax by this chapteron Medi-Cal managed care plans are hereby continuouslyappropriated as follows:

(1) A percentage of the revenues derived from the impositionof the tax by this chapter on Medi-Cal managed care plans equalto the difference between 100 percent and the applicable federalmedical assistance percentage (FMAP) to the department forpurposes of the Medi-Cal program.

(2) After deducting the revenues appropriated pursuant toparagraph (1), any remaining revenue to the Managed Risk MedicalInsurance Board for purposes of the Healthy Families Program.

(c) The Insurance Commissioner shall report the amount ofrevenue derived from the tax imposed on Medi-Cal managed careplans pursuant to this section to the California Health and HumanServices Agency, the Joint Legislative Budget Committee, and theDepartment of Finance.

(d) Notwithstanding any other law, the Controller may use thefunds in the Children’s Health and Human Services Special Fundfor cashflow loans to the General Fund as provided in Sections16310 and 16381 of the Government Code.

(e) This section shall become inoperative on July 1, 2012 2013,and, as of January 1, 2013 2014, is repealed, unless a later enactedstatute, that becomes operative on or before July 1, 2012 2013,deletes or extends the dates on which it becomes inoperative andis repealed. Any tax imposed by this section shall continue to bedue and payable until the tax is paid.


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12201. (a) Every insurer doing business in this state shallannually pay to the state a tax on the bases, at the rates, and subjectto the deductions from the tax hereinafter specified. For purposesof the tax imposed by this chapter, “insurer” shall be deemed toinclude a home protection company as defined in Section 12740of the Insurance Code.

(b) This section shall become operative on July 1, 2012 2013.SEC. 5. Section 12204 of the Revenue and Taxation Code, as

amended by Section 4 of Chapter 11 of the First ExtraordinarySession of the Statutes of 2011, is amended to read:

12204. (a) The tax imposed on insurers by this chapter is inlieu of all other taxes and licenses, state, county, and municipal,upon those insurers and their property, except:

(1) Taxes upon their real estate.(2) Any retaliatory exactions imposed by paragraph (3) of

subdivision (f) of Section 28 of Article XIII of the Constitution.(3) The tax on ocean marine insurance.(4) Motor vehicle and other vehicle registration license fees and

any other tax or license fee imposed by the state upon vehicles,motor vehicles or the operation thereof.

(5) That each corporate or other attorney-in-fact of a reciprocalor interinsurance exchange shall be subject to all taxes imposedupon corporations or others doing business in the state, other thantaxes on income derived from its principal business asattorney-in-fact.

(b) This section shall not apply to any Medi-Cal managed careplan and to any tax imposed on that plan by this chapter.

(c) This section shall become inoperative on July 1, 2012 2013,and, as of January 1, 2013 2014, is repealed, unless a later enactedstatute, that becomes operative on or before July 1, 2012 2013,deletes or extends the dates on which it becomes inoperative andis repealed.


12204. (a) The tax imposed on insurers by this chapter is inlieu of all other taxes and licenses, state, county, and municipal,upon those insurers and their property, except:

(1) Taxes upon their real estate.

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(2) Any retaliatory exactions imposed by paragraph (3) ofsubdivision (f) of Section 28 of Article XIII of the CaliforniaConstitution.

(3) The tax on ocean marine insurance.(4) Motor vehicle and other vehicle registration license fees and

any other tax or license fee imposed by the state upon vehicles,motor vehicles or the operation thereof.

(5) That each corporate or other attorney-in-fact of a reciprocalor interinsurance exchange shall be subject to all taxes imposedupon corporations or others doing business in the state, other thantaxes on income derived from its principal business asattorney-in-fact.

(b) This section shall become operative on July 1, 2012 2013.SEC. 7. Section 12207 of the Revenue and Taxation Code is

amended to read:12207. (a) Notwithstanding any other provision of this part,

no credit shall be allowed under Section 12206, 12208, or 12209against the tax imposed on Medi-Cal managed care plans pursuantto Section 12201.


SEC. 8. Section 12242 of the Revenue and Taxation Code isamended to read:

12242. This article shall become inoperative on July 1, 20122013, and, as of January 1, 2013 2014, is repealed, unless a laterenacted statute, that becomes operative on or before July 1, 20122013, deletes or extends the dates on which it becomes inoperativeand is repealed.


12251. (a) For the calendar year 1970, and each calendar yearthereafter, insurers transacting insurance in this state and whoseannual tax for the preceding calendar year was five thousand dollars($5,000) or more shall make prepayments of the annual tax for thecurrent calendar year imposed by Section 28 of Article XIII of theCalifornia Constitution and this part, provided that no prepayments

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shall be made with respect to the tax on ocean marine insuranceunderwriting profit or any retaliatory tax.

(b) Medi-Cal managed care plans shall make prepayments ofthe tax imposed by Section 12201 for the current calendar year,except that no prepayments shall be required prior to the effectivedate of the act adding this subdivision, and no penalties and interestshall be imposed pursuant to Section 12261 for not making thoseprepayments.



12251. (a) For the calendar year 1970, and each calendar yearthereafter, insurers transacting insurance in this state and whoseannual tax for the preceding calendar year was five thousand dollars($5,000) or more shall make prepayments of the annual tax for thecurrent calendar year imposed by Section 28 of Article XIII of theCalifornia Constitution and this part, provided that no prepaymentsshall be made with respect to the tax on ocean marine insuranceunderwriting profit or any retaliatory tax.



12253. (a) Each insurer and Medi-Cal managed care planrequired to make prepayments shall remit them on or before eachof the dates of April 1st, June 1st, September 1st, and December1st of the current calendar year. Remittances for prepayments shallbe made payable to the Controller and shall be delivered to theoffice of the commissioner, accompanied by a prepayment formprescribed by the commissioner.


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12253. (a) Each insurer required to make prepayments shallremit them on or before each of the dates of April 1st, June 1st,September 1st, and December 1st of the current calendar year.Remittances for prepayments shall be made payable to theController and shall be delivered to the office of the commissioner,accompanied by a prepayment form prescribed by thecommissioner.



12254. (a) (1) For each insurer, the amount of eachprepayment shall be 25 percent of the amount of the annualinsurance tax liability reported on the return of the insurer for thepreceding calendar year.

(2) For each Medi-Cal managed care plan, the amount of eachprepayment shall be 25 percent of the amount of tax the planestimates as the amount of tax imposed by Section 12201 withrespect to the plan.

(b) In establishing the prepayment amount of an insurer thathas acquired the business of another insurer, the amount of taxliability of the acquiring insurer reported for the preceding calendaryear shall be deemed to include the amount of tax liability of theacquired insurer reported for that year.



12254. (a) The amount of each prepayment shall be 25 percentof the amount of the annual insurance tax liability reported on thereturn of the insurer for the preceding calendar year.

(b) In establishing the prepayment amount of an insurer thathas acquired the business of another insurer, the amount of tax

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liability of the acquiring insurer reported for the preceding calendaryear shall be deemed to include the amount of tax liability of theacquired insurer reported for that year.

(c) This section shall become operative on July 1, 2012 2013.SEC. 15. Section 12257 of the Revenue and Taxation Code, as


12257. (a) If the total amount of prepayments for any calendaryear exceeds the amount of annual tax for that year, the excessshall be treated as an overpayment of annual tax and, at the electionof the insurer or Medi-Cal managed care plan, may be creditedagainst the amounts due and payable for the first prepayment ofthe following year. Any amount of the overpayment not so creditedshall be allowed as a credit or refund under Article 2 (commencingwith Section 12977) of Chapter 7 of this part.



12257. (a) If the total amount of prepayments for any calendaryear exceeds the amount of annual tax for that year, the excessshall be treated as an overpayment of annual tax and, at the electionof the insurer, may be credited against the amounts due and payablefor the first prepayment of the following year. Any amount of theoverpayment not so credited shall be allowed as a credit or refundunder Article 2 (commencing with Section 12977) of Chapter 7of this part.



12258. (a) Any insurer or Medi-Cal managed care plan thatfails to pay any prepayment within the time required shall pay apenalty of 10 percent of the amount of the required prepayment,plus interest at the modified adjusted rate per month, or fractionthereof, established pursuant to Section 6591.5, from the due date

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of the prepayment until the date of payment but not for any periodafter the due date of the annual tax. Assessments of prepaymentdeficiencies may be made in the manner provided by deficiencyassessments of the annual tax.

(b) Notwithstanding any other law, the prepayment due onSeptember 1, 2011, shall be due no later than 30 days after theeffective date of this act for a Medi-Cal managed care plan asdefined in subdivision (a) of Section 12009.



12258. (a) Any insurer that fails to pay any prepayment withinthe time required shall pay a penalty of 10 percent of the amountof the required prepayment, plus interest at the modified adjustedrate per month, or fraction thereof, established pursuant to Section6591.5, from the due date of the prepayment until the date ofpayment but not for any period after the due date of the annualtax. Assessments of prepayment deficiencies may be made in themanner provided by deficiency assessments of the annual tax.



12260. (a) Notwithstanding any other provision of this article,the commissioner may relieve an insurer or Medi-Cal managedcare plan of its obligation to make prepayments where the insureror Medi-Cal managed care plan establishes to the satisfaction ofthe commissioner that the insurer has ceased to transact insurancein this state or the Medi-Cal managed care plan has ceased tooperate a plan in this state, or the insurer’s or Medi-Cal managedcare plan’s annual tax for the current year will be less than fivethousand dollars ($5,000).

(b) This section shall become inoperative on July 1, 2012 2013,and, as of January 1, 2013 2014, is repealed, unless a later enactedstatute, that becomes operative on or before July 1, 2012 2013,

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deletes or extends the dates on which it becomes inoperative andis repealed.


12260. (a) Notwithstanding any other provision of this article,the commissioner may relieve an insurer of its obligation to makeprepayments where the insurer establishes to the satisfaction ofthe commissioner that either the insurer has ceased to transactinsurance in this state, or the insurer’s annual tax for the currentyear will be less than five thousand dollars ($5,000).



12301. (a) The taxes imposed upon insurers by Section 28 ofArticle XIII of the California Constitution and this part, exceptwith respect to taxes on ocean marine insurance and retaliatorytaxes, are due and payable annually on or before April 1st of theyear following the calendar year in which the insurer engaged inthe business of insurance or transacted insurance in this state. Thetaxes imposed with respect to ocean marine insurance are due andpayable on or before June 15th of that year.

(b) With respect to Medi-Cal managed care plans, the taxesimposed by Section 12201 shall be due and payable on or beforeApril 1st of the year following the calendar year in which the plancontracted with the State Department of Health Care Services asdescribed in Section 12009.

(c) This section shall become inoperative on July 1, 2012 2013,and, as of January 1, 2013 2014, is repealed, unless a later enactedstatute, that becomes operative on or before July 1, 2012 2013,deletes or extends the dates on which it becomes inoperative andis repealed. However, any tax imposed by Section 12201 shallcontinue to be due and payable until the tax is paid.


12301. (a) The taxes imposed upon insurers by Section 28 ofArticle XIII of the California Constitution and this part, exceptwith respect to taxes on ocean marine insurance and retaliatory

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taxes, are due and payable annually on or before April 1st of theyear following the calendar year in which the insurer engaged inthe business of insurance or transacted insurance in this state. Thetaxes imposed with respect to ocean marine insurance are due andpayable on or before June 15th of that year.



12302. (a) On or before April 1st (or June 15th with respectto taxes on ocean marine insurance) every person that is subjectto any tax imposed by Section 28 of Article XIII of the CaliforniaConstitution or this part, in respect to the preceding calendar yearshall file, in duplicate, a tax return with the commissioner in theform as the commissioner may prescribe. The return shall showthat information pertaining to its insurance business, or in the caseof a Medi-Cal managed care plan, pertaining to contracts forproviding services as described in Section 12009, in this state aswill reflect the basis of its tax as set forth in Chapter 2(commencing with Section 12071) and Chapter 3 (commencingwith Section 12201) of this part, the computation of the amountof tax for the period covered by the return, the total amount of anytax prepayments made pursuant to Article 5 (commencing withSection 12251) of Chapter 3 of this part, and any other informationas the commissioner may require to carry out the purposes of thispart. Separate returns shall be filed with respect to the followingkinds of insurance:

(1) Life insurance (or life insurance and disability insurance).(2) Ocean marine insurance.(3) Title insurance.(4) Insurance other than life insurance (or life insurance and

disability insurance), ocean marine insurance or title insurance.(b) This section shall become inoperative on July 1, 2012 2013,

and, as of January 1, 2013 2014, is repealed, unless a later enactedstatute, that becomes operative on or before July 1, 2012 2013,deletes or extends the dates on which it becomes inoperative andis repealed.


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12302. (a) On or before April 1st (or June 15th with respectto taxes on ocean marine insurance) every person that is subjectto any tax imposed by Section 28 of Article XIII of the CaliforniaConstitution or this part, in respect to the preceding calendar yearshall file, in duplicate, an insurance tax return with thecommissioner in the form as the commissioner may prescribe. Thereturn shall show that information pertaining to its insurancebusiness in this state as will reflect the basis of its tax as set forthin Chapter 2 (commencing with Section 12071) and Chapter 3(commencing with Section 12201) of this part, the computationof the amount of tax for the period covered by the return, the totalamount of any tax prepayments made pursuant to Article 5(commencing with Section 12251) of Chapter 3 of this part, andany other information as the commissioner may require to carryout the purposes of this part. Separate returns shall be filed withrespect to the following kinds of insurance:

(1) Life insurance (or life insurance and disability insurance).(2) Ocean marine insurance.(3) Title insurance.(4) Insurance other than life insurance (or life insurance and

disability insurance), ocean marine insurance or title insurance.(b) This section shall become operative on July 1, 2012 2013.SEC. 25. Section 12303 of the Revenue and Taxation Code, as


12303. (a) Every return required by this article to be filed withthe commissioner shall be signed by the insurer or Medi-Calmanaged care plan or an executive officer of the insurer or planand shall be made under oath or contain a written declaration thatit is made under penalty of perjury. A return of a foreign insurermay be signed and verified by its manager residing within thisstate. A return of an alien insurer may be signed and verified bythe United States manager of the insurer.


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12303. (a) Every return required by this article to be filed withthe commissioner shall be signed by the insurer or an executiveofficer of the insurer and shall be made under oath or contain awritten declaration that it is made under penalty of perjury. Areturn of a foreign insurer may be signed and verified by itsmanager residing within this state. A return of an alien insurer maybe signed and verified by the United States manager of the insurer.



12304. (a) Blank forms of returns shall be furnished by thecommissioner on application, but failure to secure the form shallnot relieve any insurer or Medi-Cal managed care plan frommaking or filing a timely return.



12304. (a) Blank forms of returns shall be furnished by thecommissioner on application, but failure to secure the form shallnot relieve any insurer from making or filing a timely return.



12305. (a) The insurer or Medi-Cal managed care plan requiredto file a return shall deliver the return in duplicate, together witha remittance payable to the Controller, for the amount of taxcomputed and shown thereon, less any prepayments made pursuantto Article 5 (commencing with Section 12251) of Chapter 3 of thispart, to the office of the commissioner.

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12305. (a) The insurer required to file a return shall deliverthe return in duplicate, together with a remittance payable to theController, for the amount of tax computed and shown thereon,less any prepayments made pursuant to Article 5 (commencingwith Section 12251) of Chapter 3 of this part, to the office of thecommissioner.



12307. (a) Any insurer or Medi-Cal managed care plan towhich an extension is granted shall pay, in addition to the tax,interest at the modified adjusted rate per month, or fraction thereof,established pursuant to Section 6591.5, from April 1st until thedate of payment.



12307. (a) Any insurer that is granted an extension shall pay,in addition to the tax, interest at the modified adjusted rate permonth, or fraction thereof, established pursuant to Section 6591.5,from April 1st until the date of payment.



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12412. (a) Upon receipt of the duplicate copy of the return ofan insurer or Medi-Cal managed care plan the board shall initiallyassess the tax in accordance with the data as reported by the insureror Medi-Cal managed care plan on the return.



12412. (a) Upon receipt of the duplicate copy of the return ofan insurer the board shall initially assess the tax in accordancewith the data as reported by the insurer on the return.



12413. (a) The board shall promptly transmit notice of itsinitial assessment to the commissioner and the Controller, and ifthe initial assessment differs from the amount computed by theinsurer or Medi-Cal managed care plan, notice shall also be givento the insurer or Medi-Cal managed care plan.



12413. (a) The board shall promptly transmit notice of itsinitial assessment to the commissioner and the Controller, and ifthe initial assessment differs from the amount computed by theinsurer, notice shall also be given to the insurer.



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12421. (a) As soon as practicable after an insurer’s, surplusline broker’s, or Medi-Cal managed care plan’s return is filed, thecommissioner shall examine it, together with any informationwithin his or her possession or that may come into his or herpossession, and he or she shall determine the correct amount oftax of the insurer, surplus line broker, or Medi-Cal managed careplan.



12421. (a) As soon as practicable after an insurer’s or surplusline broker’s return is filed, the commissioner shall examine it,together with any information within his or her possession or thatmay come into his or her possession, and he or she shall determinethe correct amount of tax of the insurer or surplus line broker.



12422. (a) If the commissioner determines that the amount oftax disclosed by the insurer’s tax return and assessed by the boardis less than the amount of tax disclosed by his or her examination,he or she shall propose, in writing, to the board a deficiencyassessment for the difference. The proposal shall set forth the basisfor the deficiency assessment and the details of its computation.

(b) If the commissioner determines that the amount of taxdisclosed by the surplus line broker’s tax return is less than theamount of tax disclosed by his or her examination, he or she shallpropose, in writing, to the board a deficiency assessment for thedifference. The proposal shall set forth the basis for the deficiencyassessment and the details of its computation.

(c) If the commissioner determines that the amount of taxdisclosed by the Medi-Cal managed care plan’s tax return is lessthan the amount of tax disclosed by his or her examination, he orshe shall propose, in writing, to the board a deficiency assessment

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for the difference. The proposal shall set forth the basis for thedeficiency assessment and the details of its computation.

(d) This section shall become inoperative on July 1, 2012 2013,and, as of January 1, 2013 2014, is repealed, unless a later enactedstatute, that becomes operative on or before July 1, 2012 2013,deletes or extends the dates on which it becomes inoperative andis repealed.


12422. (a) If the commissioner determines that the amount oftax disclosed by the insurer’s tax return and assessed by the boardis less than the amount of tax disclosed by his or her examination,he or she shall propose, in writing, to the board a deficiencyassessment for the difference. The proposal shall set forth the basisfor the deficiency assessment and the details of its computation.

(b) If the commissioner determines that the amount of taxdisclosed by the surplus line broker’s tax return is less than theamount of tax disclosed by his or her examination, he or she shallpropose, in writing, to the board a deficiency assessment for thedifference. The proposal shall set forth the basis for the deficiencyassessment and the details of its computation.



12423. (a) If an insurer, surplus line broker, or Medi-Calmanaged care plan fails to file a return, the commissioner mayrequire a return by mailing notice to the insurer, surplus line broker,or Medi-Cal managed care plan to file a return by a specified dateor he or she may without requiring a return, or upon no returnhaving been filed pursuant to the demand therefor, make anestimate of the amount of tax due for the calendar year or years inrespect to which the insurer, surplus line broker, or Medi-Calmanaged care plan failed to file the return. The estimate shall bemade from any available information which is in thecommissioner’s possession or may come into his or her possession,and the commissioner shall propose, in writing, to the board adeficiency assessment for the amount of the estimated tax. The

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proposal shall set forth the basis of the estimate and the details ofthe computation of the tax.



12423. (a) If an insurer or surplus line broker fails to file areturn, the commissioner may require a return by mailing noticeto the insurer or surplus line broker to file a return by a specifieddate or he or she may without requiring a return, or upon no returnhaving been filed pursuant to the demand therefor, make anestimate of the amount of tax due for the calendar year or years inrespect to which the insurer or surplus line broker failed to file thereturn. The estimate shall be made from any available informationwhich is in the commissioner’s possession or may come into hisor her possession, and the commissioner shall propose, in writing,to the board a deficiency assessment for the amount of theestimated tax. The proposal shall set forth the basis of the estimateand the details of the computation of the tax.



12427. (a) The board shall promptly notify the insurer, surplusline broker, or Medi-Cal managed care plan of a deficiencyassessment made against the insurer, surplus line broker, orMedi-Cal managed care plan.



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12427. (a) The board shall promptly notify the insurer orsurplus line broker of a deficiency assessment made against theinsurer or surplus line broker.



12428. (a) An insurer, surplus line broker, or Medi-Calmanaged care plan against which a deficiency assessment is madeunder Section 12424 or 12425 may petition for redeterminationof the deficiency assessment within 30 days after service upon theinsurer, surplus line broker, or Medi-Cal managed care plan of thenotice thereof, by filing with the board a written petition settingforth the grounds of objection to the deficiency assessment andthe correction sought. At the time the petition is filed with theboard, a copy of the petition shall be filed with the commissioner.

If a petition for redetermination is not filed within the periodprescribed by this section, the deficiency assessment becomes finaland due and payable at the expiration of that period.



12428. (a) An insurer or surplus line broker against which adeficiency assessment is made under Section 12424 or 12425 maypetition for redetermination of the deficiency assessment within30 days after service upon the insurer or surplus line broker of thenotice thereof, by filing with the board a written petition settingforth the grounds of objection to the deficiency assessment andthe correction sought. At the time the petition is filed with theboard, a copy of the petition shall be filed with the commissioner.

If a petition for redetermination is not filed within the periodprescribed by this section, the deficiency assessment becomes finaland due and payable at the expiration of that period.

(b) This section shall become operative on July 1, 2012 2013.

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12429. (a) If a petition for redetermination of a deficiencyassessment is filed within the time allowed under Section 12428,the board shall reconsider the deficiency assessment and, if theinsurer, surplus line broker, or Medi-Cal managed care plan hasso requested in the petition, shall grant an oral hearing for thepresentation of evidence and argument before the board or itsauthorized representative. The board shall give the petitioner andthe commissioner at least 20 days’ notice of the time and place ofhearing. The hearing may be continued from time to time as maybe necessary.



12429. (a) If a petition for redetermination of a deficiencyassessment is filed within the time allowed under Section 12428,the board shall reconsider the deficiency assessment and, if theinsurer or surplus line broker has so requested in the petition, shallgrant an oral hearing for the presentation of evidence and argumentbefore the board or its authorized representative. The board shallgive the petitioner and the commissioner at least 20 days’ noticeof the time and place of hearing. The hearing may be continuedfrom time to time as may be necessary.



12431. (a) The order or decision of the board upon a petitionfor redetermination of a deficiency assessment becomes final 30days after service on the insurer, surplus line broker, or Medi-Calmanaged care plan of a notice thereof, and any resulting deficiencyassessment is due and payable at the time the order or decisionbecomes final.

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12431. (a) The order or decision of the board upon a petitionfor redetermination of a deficiency assessment becomes final 30days after service on the insurer or surplus line broker of a noticethereof, and any resulting deficiency assessment is due and payableat the time the order or decision becomes final.



12433. (a) If before the expiration of the time prescribed inSection 12432 for giving of a notice of deficiency assessment theinsurer, surplus line broker, or Medi-Cal managed care plan hasconsented in writing to the giving of the notice after that time, thenotice may be given at any time prior to the expiration of the timeagreed upon. The period so agreed upon may be extended bysubsequent agreements in writing made before the expiration ofthe period previously agreed upon.



12433. (a) If before the expiration of the time prescribed inSection 12432 for giving of a notice of deficiency assessment theinsurer or surplus line broker has consented in writing to the givingof the notice after that time, the notice may be given at any timeprior to the expiration of the time agreed upon. The period soagreed upon may be extended by subsequent agreements in writingmade before the expiration of the period previously agreed upon.

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12434. (a) Any notice required by this article shall be placedin a sealed envelope, with postage paid, addressed to the insurer,surplus line broker, or Medi-Cal managed care plan at its addressas it appears in the records of the commissioner or the board. Thegiving of notice shall be deemed complete at the time of depositof the notice in the United States Post Office, or a mailbox, subpostoffice, substation or mail chute or other facility regularlymaintained or provided by the United States Postal Service, withoutextension of time for any reason. In lieu of mailing, a notice maybe served personally by delivering to the person to be served andservice shall be deemed complete at the time of the delivery.Personal service to a corporation may be made by delivery of anotice to any person designated in the Code of Civil Procedure tobe served for the corporation with summons and complaint in acivil action.



12434. (a) Any notice required by this article shall be placedin a sealed envelope, with postage paid, addressed to the insureror surplus line broker at its address as it appears in the records ofthe commissioner or the board. The giving of notice shall bedeemed complete at the time of deposit of the notice in the UnitedStates Post Office, or a mailbox, subpost office, substation or mailchute or other facility regularly maintained or provided by theUnited States Postal Service, without extension of time for anyreason. In lieu of mailing, a notice may be served personally bydelivering to the person to be served and service shall be deemedcomplete at the time of the delivery. Personal service to acorporation may be made by delivery of a notice to any person

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designated in the Code of Civil Procedure to be served for thecorporation with summons and complaint in a civil action.



12491. (a) Every tax levied upon an insurer under Article XIIIof the California Constitution and this part is a lien upon allproperty and franchises of every kind and nature belonging to theinsurer, and has the effect of a judgment against the insurer.

(b) (1) Every tax levied upon a surplus line broker under Part7.5 (commencing with Section 13201) of Division 2 is a lien uponall property and franchises of every kind and nature belonging tothe surplus line broker, and has the effect of a judgment againstthe surplus line broker.

(2) A lien levied pursuant to this subdivision shall not exceedthe amount of unpaid tax collected by the surplus line broker.

(c) (1) Every tax levied upon a Medi-Cal managed care planunder Chapter 1 (commencing with Section 12001) is a lien uponall property and franchises of every kind and nature belonging tothe Medi-Cal managed care plan, and has the effect of a judgmentagainst the Medi-Cal managed care plan.

(2) A lien levied pursuant to this subdivision shall not exceedthe amount of unpaid tax collected by the Medi-Cal managed careplan.



12491. (a) Every tax levied upon an insurer under theprovisions of Article XIII of the California Constitution and ofthis part is a lien upon all property and franchises of every kindand nature belonging to the insurer, and has the effect of ajudgment against the insurer.

(b) (1) Every tax levied upon a surplus line broker under theprovisions of Part 7.5 (commencing with Section 13201) of

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Division 2 is a lien upon all property and franchises of every kindand nature belonging to the surplus line broker, and has the effectof a judgment against the surplus line broker.

(2) A lien levied pursuant to this subdivision shall not exceedthe amount of unpaid tax collected by the surplus line broker.



12493. (a) Every lien has the effect of an execution duly leviedagainst all property of a delinquent insurer, surplus line broker, orMedi-Cal managed care plan.



12493. (a) Every lien has the effect of an execution duly leviedagainst all property of a delinquent insurer or surplus line broker.



12494. (a) No judgment is satisfied nor lien removed untileither:

(1) The taxes, interest, penalties, and costs are paid.(2) The insurer’s, surplus line broker’s, or Medi-Cal managed

care plan’s property is sold for the payment thereof.(b) This section shall become inoperative on July 1, 2012 2013,



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12494. (a) No judgment is satisfied nor lien removed untileither:

(1) The taxes, interest, penalties, and costs are paid.(2) The insurer’s or surplus line broker’s property is sold for

the payment thereof.(b) This section shall become operative on July 1, 2012 2013.SEC. 61. Section 12601 of the Revenue and Taxation Code, as


12601. (a) Amounts of taxes, interest, and penalties notremitted to the commissioner with the original return of the insureror Medi-Cal managed care plan shall be payable to the Controller.



12601. (a) Amounts of taxes, interest, and penalties notremitted to the commissioner with the original return of the insurershall be payable to the Controller.



12602. (a) (1) On and after January 1, 1994, and beforeJanuary 1, 1995, each insurer whose annual taxes exceed fiftythousand dollars ($50,000) shall make payment by electronic fundstransfer, as defined by Section 45 of the Insurance Code. On andafter January 1, 1995, each insurer whose annual taxes exceedtwenty thousand dollars ($20,000) shall make payment byelectronic funds transfer. The insurer shall choose one of theacceptable methods described in Section 45 of the Insurance Codefor completing the electronic funds transfer.

(2) Each Medi-Cal managed care plan shall make payment byelectronic funds transfer, as defined by Section 45 of the InsuranceCode. The plan shall choose one of the acceptable methods

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described in Section 45 of the Insurance Code for completing theelectronic funds transfer.

(b) Payment shall be deemed complete on the date the electronicfunds transfer is initiated, if settlement to the state’s demandaccount occurs on or before the banking day following the datethe transfer is initiated. If settlement to the state’s demand accountdoes not occur on or before the banking day following the date thetransfer is initiated, payment shall be deemed to occur on the datesettlement occurs.

(c) (1) Any insurer or Medi-Cal managed care plan required toremit taxes by electronic funds transfer pursuant to this sectionthat remits those taxes by means other than an appropriateelectronic funds transfer, shall be assessed a penalty in an amountequal to 10 percent of the taxes due at the time of the payment.

(2) If the Department of Insurance finds that an insurer’s orMedi-Cal managed care plan’s failure to make payment by anappropriate electronic funds transfer in accordance with subdivision(a) is due to reasonable cause or circumstances beyond the insurer’sor Medi-Cal managed care plan’s control, and occurrednotwithstanding the exercise of ordinary care and in the absenceof willful neglect, that insurer or Medi-Cal managed care planshall be relieved of the penalty provided in paragraph (1).

(3) Any insurer or Medi-Cal managed care plan seeking to berelieved of the penalty provided in paragraph (1) shall file withthe Department of Insurance a statement under penalty of perjurysetting forth the facts upon which the claim for relief is based.



12602. (a) On and after January 1, 1994, and before January1, 1995, each insurer whose annual taxes exceed fifty thousanddollars ($50,000) shall make payment by electronic funds transfer,as defined by Section 45 of the Insurance Code. On and afterJanuary 1, 1995, each insurer whose annual taxes exceed twentythousand dollars ($20,000) shall make payment by electronic funds

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transfer. The insurer shall choose one of the acceptable methodsdescribed in Section 45 of the Insurance Code for completing theelectronic funds transfer.

(b) Payment shall be deemed complete on the date the electronicfunds transfer is initiated, if settlement to the state’s demandaccount occurs on or before the banking day following the datethe transfer is initiated. If settlement to the state’s demand accountdoes not occur on or before the banking day following the date thetransfer is initiated, payment shall be deemed to occur on the datesettlement occurs.

(c) (1) Any insurer required to remit taxes by electronic fundstransfer pursuant to this section that remits those taxes by meansother than an appropriate electronic funds transfer, shall be assesseda penalty in an amount equal to 10 percent of the taxes due at thetime of the payment.

(2) If the Department of Insurance finds that an insurer’s failureto make payment by an appropriate electronic funds transfer inaccordance with subdivision (a) is due to reasonable cause orcircumstances beyond the insurer’s control, and occurrednotwithstanding the exercise of ordinary care and in the absenceof willful neglect, that insurer shall be relieved of the penaltyprovided in paragraph (1).

(3) Any insurer seeking to be relieved of the penalty providedin paragraph (1) shall file with the Department of Insurance astatement under penalty of perjury setting forth the facts uponwhich the claim for relief is based.

(d) This section shall become operative on July 1, 2012 2013.SEC. 65. Section 12631 of the Revenue and Taxation Code, as


12631. (a) Any insurer or Medi-Cal managed care plan thatfails to pay any tax, except a tax determined as a deficiencyassessment by the board under Article 3 (commencing with Section12421) of Chapter 4, within the time required, shall pay a penaltyof 10 percent of the amount of the tax in addition to the tax, plusinterest at the modified adjusted rate per month, or fraction thereof,established pursuant to Section 6591.5, from the due date of thetax until the date of payment.

(b) This section shall become inoperative on July 1, 2012 2013,and, as of January 1, 2013 2014, is repealed, unless a later enacted

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statute, that becomes operative on or before July 1, 2012 2013,deletes or extends the dates on which it becomes inoperative andis repealed.


12631. (a) Any insurer that fails to pay any tax, except a taxdetermined as a deficiency assessment by the board under Article3 (commencing with Section 12421) of Chapter 4, within the timerequired, shall pay a penalty of 10 percent of the amount of thetax in addition to the tax, plus interest at the modified adjusted rateper month, or fraction thereof, established pursuant to Section6591.5, from the due date of the tax until the date of payment.



12632. (a) An insurer or Medi-Cal managed care plan thatfails to pay any deficiency assessment when it becomes due andpayable shall, in addition to the deficiency assessment, pay apenalty of 10 percent of the amount of the deficiency assessment,exclusive of interest and penalties. The amount of any deficiencyassessment, exclusive of penalties, shall bear interest at themodified adjusted rate per month, or fraction thereof, establishedpursuant to Section 6591.5, from the date on which the amount,or any portion thereof, would have been payable if properlyreported and assessed until the date of payment.



12632. (a) An insurer that fails to pay any deficiencyassessment when it becomes due and payable shall, in addition tothe deficiency assessment, pay a penalty of 10 percent of theamount of the deficiency assessment, exclusive of interest andpenalties. The amount of any deficiency assessment, exclusive of

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penalties, shall bear interest at the modified adjusted rate permonth, or fraction thereof, established pursuant to Section 6591.5,from the date on which the amount, or any portion thereof, wouldhave been payable if properly reported and assessed until the dateof payment.



12636. (a) If the board finds that an insurer’s or Medi-Calmanaged care plan’s failure to make a timely return or paymentis due to reasonable cause and to circumstances beyond theinsurer’s or Medi-Cal managed care plan’s control, and whichoccurred despite the exercise of ordinary care and in the absenceof willful neglect, the insurer or Medi-Cal managed care plan maybe relieved of the penalty provided by Section 12258, 12282,12287, 12631, 12632, or 12633.

Any(b) Any insurer or Medi-Cal managed care plan seeking to be

relieved of the penalty shall file with the board a statement underpenalty of perjury setting forth the facts upon which the claim forrelief is based.

(b)(c) This section shall become inoperative on July 1, 2012 2013,



12636. (a) If the board finds that an insurer’s failure to makea timely return or payment is due to reasonable cause and tocircumstances beyond the insurer’s control, and which occurreddespite the exercise of ordinary care and in the absence of willfulneglect, the insurer may be relieved of the penalty provided bySection 12258, 12282, 12287, 12631, 12632, or 12633.

Any

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(b) Any insurer seeking to be relieved of the penalty shall filewith the board a statement under penalty of perjury setting forththe facts upon which the claim for relief is based.

(b)(c) This section shall become operative on July 1, 2012 2013.SEC. 71. Section 12636.5 of the Revenue and Taxation Code,

as amended by Section 70 of Chapter 11 of the First ExtraordinarySession of the Statutes of 2011, is amended to read:

12636.5. (a) Every payment on an insurer’s, surplus linebroker’s, or Medi-Cal managed care plan’s delinquent annual taxshall be applied as follows:

(1) First, to any interest due on the tax.(2) Second, to any penalty imposed by this part.(3) The balance, if any, to the tax itself.(b) This section shall become inoperative on July 1, 2012 2013,


SEC. 72. Section 12636.5 of the Revenue and Taxation Code,as amended by Section 71 of Chapter 11 of the First ExtraordinarySession of the Statutes of 2011, is amended to read:

12636.5. (a) Every payment on an insurer’s or surplus linebroker’s delinquent annual tax shall be applied as follows:

(1) First, to any interest due on the tax.(2) Second, to any penalty imposed by this part.(3) The balance, if any, to the tax itself.(b) This section shall become operative on July 1, 2012 2013.SEC. 73. Section 12679 of the Revenue and Taxation Code, as


12679. (a) If an insurer’s or Medi-Cal managed care plan’sright to do business has been forfeited or its corporate powerssuspended, service of summons may be made upon the personsdesignated by law to be served as agents or officers of the insureror Medi-Cal managed care plan, and these persons are the agentsof the insurer or Medi-Cal managed care plan for all purposesnecessary in order to prosecute the action. In the case ofcorporations whose powers have been suspended, the personsconstituting the board of directors may defend the action.

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12679. (a) If an insurer’s right to do business has been forfeitedor its corporate powers suspended, service of summons may bemade upon the persons designated by law to be served as agentsor officers of the insurer, and these persons are the agents of theinsurer for all purposes necessary in order to prosecute the action.In the case of corporations whose powers have been suspended,the persons constituting the board of directors may defend theaction.



12681. (a) In the action, a certificate of the Controller or ofthe secretary of the board, showing unpaid taxes against an insureror Medi-Cal managed care plan is prima facie evidence of:

(1) The assessment of the taxes.(2) The delinquency.(3) The amount of the taxes, interest, and penalties due and

unpaid to the state.(4) That the insurer or Medi-Cal managed care plan is indebted

to the state in the amount of taxes, interest, and penalties appearingunpaid.

(5) That there has been compliance with all the requirementsof law in relation to the assessment of the taxes.



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12681. (a) In the action, a certificate of the Controller or ofthe secretary of the board, showing unpaid taxes against an insureris prima facie evidence of:

(1) The assessment of the taxes.(2) The delinquency.(3) The amount of the taxes, interest, and penalties due and

unpaid to the state.(4) That the insurer is indebted to the state in the amount of

taxes, interest, and penalties appearing unpaid.(5) That there has been compliance with all the requirements

of law in relation to the assessment of the taxes.(b) This section shall become operative on July 1, 2012 2013.SEC. 77. Section 12801 of the Revenue and Taxation Code, as


12801. (a) Annually, between December 10th and 15th, theController shall transmit to the commissioner a statement showingthe names of all insurers and Medi-Cal managed care plans thatfailed to pay on or before December 10th the whole or any portionof the tax that became delinquent in the preceding June or whichhas been unpaid for more than 30 days from the date it becamedue and payable as a deficiency assessment under this part or thewhole or any part of the interest or penalties due with respect tothe tax. The statement shall show the amount of the tax, interest,and penalties due from each insurer or Medi-Cal managed careplan.



12801. (a) Annually, between December 10th and 15th, theController shall transmit to the commissioner a statement showingthe names of all insurers that failed to pay on or before December10th the whole or any portion of the tax that became delinquentin the preceding June or which has been unpaid for more than 30days from the date it became due and payable as a deficiency

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assessment under this part or the whole or any part of the interestor penalties due with respect to the tax. The statement shall showthe amount of the tax, interest, and penalties due from each insurer.



12951. (a) If any amount has been illegally assessed, the boardshall set forth that fact in its records, certify the amount determinedto be assessed in excess of the amount legally assessed and theinsurer, surplus line broker, or Medi-Cal managed care plan againstwhich the assessment was made, and authorize the cancellation ofthe amount upon the records of the Controller and the board. Theboard shall mail a notice to the insurer, surplus line broker, orMedi-Cal managed care plan of any cancellation authorized. Anyproposed determination by the board pursuant to this section withrespect to an amount in excess of fifty thousand dollars ($50,000)shall be available as a public record for at least 10 days prior tothe effective date of that determination.



12951. (a) If any amount has been illegally assessed, the boardshall set forth that fact in its records, certify the amount determinedto be assessed in excess of the amount legally assessed and theinsurer or surplus line broker against which the assessment wasmade, and authorize the cancellation of the amount upon therecords of the Controller and the board. The board shall mail anotice to the insurer or surplus line broker of any cancellationauthorized. Any proposed determination by the board pursuant tothis section with respect to an amount in excess of fifty thousanddollars ($50,000) shall be available as a public record for at least10 days prior to the effective date of that determination.

(b) This section shall become operative on July 1, 2012 2013.

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12977. (a) If the board determines that any tax, interest, orpenalty has been paid more than once or has been erroneously orillegally collected or computed, the board shall set forth that factin its records of the board, certify the amount of the taxes, interest,or penalties collected in excess of what was legally due, and fromwhom they were collected or by whom paid, and certify the excessto the Controller for credit or refund.

(b) The Controller upon receipt of a certification for credit orrefund shall credit the excess on any amounts then due and payablefrom the insurer, surplus line broker, or Medi-Cal managed careplan under this part and refund the balance.

(c) Any proposed determination by the board pursuant to thissection with respect to an amount in excess of fifty thousand dollars($50,000) shall be available as a public record for at least 10 daysprior to the effective date of that determination.



12977. (a) If the board determines that any tax, interest, orpenalty has been paid more than once or has been erroneously orillegally collected or computed, the board shall set forth that factin its records of the board, certify the amount of the taxes, interest,or penalties collected in excess of what was legally due, and fromwhom they were collected or by whom paid, and certify the excessto the Controller for credit or refund.

(b) The Controller upon receipt of a certification for credit orrefund shall credit the excess on any amounts then due and payablefrom the insurer or surplus line broker under this part and refundthe balance.

(c) Any proposed determination by the board pursuant to thissection with respect to an amount in excess of fifty thousand dollars

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($50,000) shall be available as a public record for at least 10 daysprior to the effective date of that determination.

(d) This section shall become operative on July 1, 2012 2013.SEC. 83. Section 12983 of the Revenue and Taxation Code, as


12983. (a) Interest shall be allowed upon the amount of anyoverpayment of tax by an insurer or Medi-Cal managed care planpursuant to this part at the modified adjusted rate per monthestablished pursuant to Section 6591.5, from the first day of themonthly period following the period during which the overpaymentwas made. For purposes of this section, “monthly period” meansthe month commencing on the day after the due date of the paymentthrough the same date as the due date in each successive month.In addition, a refund or credit shall be made of any interest imposedupon the claimant with respect to the amount being refunded orcredited.

The interest shall be paid as follows:(1) In the case of a refund, to the last day of the calendar month

following the date upon which the claimant is notified in writingthat a claim may be filed or the date upon which the claim isapproved by the board, whichever date is the earlier.

(2) In the case of a credit, to the same date as that to whichinterest is computed on the tax or amount against which the creditis applied.



12983. (a) Interest shall be allowed upon the amount of anyoverpayment of tax by an insurer pursuant to this part at themodified adjusted rate per month established pursuant to Section6591.5, from the first day of the monthly period following theperiod during which the overpayment was made. For purposes ofthis section, “monthly period” means the month commencing onthe day after the due date of the payment through the same date

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as the due date in each successive month. In addition, a refund orcredit shall be made of any interest imposed upon the claimantwith respect to the amount being refunded or credited.

The interest shall be paid as follows:(1) In the case of a refund, to the last day of the calendar month

following the date upon which the claimant is notified in writingthat a claim may be filed or the date upon which the claim isapproved by the board, whichever date is the earlier.

(2) In the case of a credit, to the same date as that to whichinterest is computed on the tax or amount against which the creditis applied.



12984. (a) If the board determines that any overpayment hasbeen made intentionally or made not incident to a bona fide andorderly discharge of a liability reasonably assumed by the insurer,surplus line broker, or Medi-Cal managed care plan to be imposedby law, no interest shall be allowed on the overpayment.

(b) If any insurer, surplus line broker, or Medi-Cal managedcare plan which has filed a claim for refund requests the board todefer action on its claim, the board, as a condition to deferringaction, may require the claimant to waive interest for the periodduring which the insurer, surplus line broker, or Medi-Cal managedcare plan requests the board to defer action on the claim.



12984. (a) If the board determines that any overpayment hasbeen made intentionally or made not incident to a bona fide andorderly discharge of a liability reasonably assumed by the insureror surplus line broker to be imposed by law, no interest shall beallowed on the overpayment.

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(b) If any insurer or surplus line broker which has filed a claimfor refund requests the board to defer action on its claim, the board,as a condition to deferring action, may require the claimant towaive interest for the period during which the insurer or surplusline broker requests the board to defer action on the claim.



13108. (a) A judgment shall not be rendered in favor of theplaintiff when the action is brought by or in the name of an assigneeof the insurer paying the tax, interest, or penalties, or by any personother than the insurer or Medi-Cal managed care plan that has paidthe tax, interest, or penalties.



13108. (a) A judgment shall not be rendered in favor of theplaintiff when the action is brought by or in the name of an assigneeof the insurer paying the tax, interest, or penalties, or by any personother than the insurer that has paid the tax, interest, or penalties.

(b) This section shall become operative on July 1, 2012 2013.SEC. 89. Section 14005.26 of the Welfare and Institutions Code

is repealed.14005.26. (a) The department shall exercise the option

pursuant to Section 1902(a)(l0)(A)(ii)(XIV) of the federal SocialSecurity Act (42 U.S.C. Sec. 1396a(a)(10)(A)(ii)(XIV)) to providefull-scope benefits with no share of cost under this chapter andChapter 8 (commencing with Section 14200) to children who haveattained six years of age but have not attained 19 years of age, whoare optional targeted low-income children pursuant to Section1905(u)(2)(B) of the federal Social Security Act (42 U.S.C. Sec.1396d(u)(2)(B)), with family incomes up to and including 200percent of the federal poverty level. The department shall seek

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federal approval of a state plan amendment to implement thissubdivision.

(b) Pursuant to Section 1902(r)(2) of the federal Social SecurityAct (42 U.S.C. Sec. 1396a(r)(2)), the department shall adopt theoption to use less restrictive income and resource methodologiesto exempt all resources and disregard income at or above 200percent and up to and including 250 percent of the federal povertylevel for the individuals described in subdivision (a). Thedepartment shall seek federal approval of a state plan amendmentto implement this subdivision.

(c) For purposes of carrying out the provisions of this section,the department may adopt the option pursuant to Section1902(e)(13) of the federal Social Security Act (42 U.S.C. Sec.1396a(e)(13)) to rely upon findings of the Managed Risk MedicalInsurance Board (MRMIB) regarding one or more components ofeligibility.

(d) (1) The department shall exercise the option pursuant toSection 1916A of the federal Social Security Act (42 U.S.C. Sec.1396o-1) to impose premiums for individuals described insubdivision (a) whose family income has been determined to beabove 150 percent and up to and including 200 percent of thefederal poverty level, after application of the income disregardpursuant to subdivision (b). The department shall not imposepremiums under this subdivision for individuals described insubdivision (a) whose family income has been determined to beat or below 150 percent of the federal poverty level, afterapplication of the income disregard pursuant to subdivision (b).The department shall obtain federal approval for theimplementation of this subdivision.

(2) All premiums imposed under this section shall equal thefamily contributions described in paragraph (2) of subdivision (d)of Section 12693.43 of the Insurance Code and shall be reducedin conformity with subdivisions (e) and (f) of Section 12693.43of the Insurance Code.

(e) This section shall be implemented only to the extent that allnecessary federal approvals and waivers described in this sectionhave been obtained and the enhanced rate of federal financialparticipation under Title XXI of the federal Social Security Act(42 U.S.C. Sec. 1397aa et seq.) is available for targeted low-incomechildren pursuant to that act.

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(f) The department shall not enroll targeted low-income childrendescribed in this section in the Medi-Cal program until allnecessary federal approvals and waivers have been obtained, andno sooner than January 1, 2013.

(g) (1) To the extent the new budget methodology pursuant toparagraph (6) of subdivision (a) of Section 14154 is not fullyoperational, for the purposes of implementing this section, forindividuals described in subdivision (a) whose family income hasbeen determined to be up to and including 150 percent of thefederal poverty level, as determined pursuant to subdivision (b),the department shall utilize the budgeting methodology for thispopulation as contained in the November 2011 Medi-Cal LocalAssistance Estimate for Medi-Cal county administration costs foreligibility operations.

(2) For purposes of implementing this section, the departmentshall include in the Medi-Cal Local Assistance Estimate an amountfor Medi-Cal eligibility operations associated with the individualswhose family income is determined to be above 150 percent andup to and including 200 percent of the federal poverty level, afterapplication of the income disregard pursuant to subdivision (b).In developing an estimate for this activity, the department shallconsider the projected number of final eligibility determinationseach county will process and projected county costs. Within 60days of the passage of the annual Budget Act, the department shallnotify each county of their allocation for this activity based uponthe amount allotted in the annual Budget Act for this purpose.

(h) When the new budget methodology pursuant to paragraph(6) of subdivision (a) of Section 14154 is fully operational, thenew budget methodology shall be utilized to reimburse countiesfor eligibility determinations made for individuals pursuant to thissection.

(i) Eligibility determinations and annual redeterminations madepursuant to this section shall be performed by county eligibilityworkers.

(j) In conducting eligibility determinations for individualspursuant to this section and Section 14005.27, the followingreporting and performance standards shall apply to all counties:

(1) Counties shall report to the department, in a manner and fora time period prescribed by the department, in consultation withthe County Welfare Directors Association, the number of

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applications processed on a monthly basis, a breakout of theapplications based on income using the federal percentage ofpoverty levels, the final disposition of each application, includinginformation on the approved Medi-Cal program, if applicable, andthe average number of days it took to make the final eligibilitydetermination for applications submitted directly to the county andfrom the single point of entry (SPE).

(2) Notwithstanding any other provision of law, the followingperformance standards shall be applied to counties regardingeligibility determinations for individuals eligible pursuant to thissection:

(A) For children whose applications are received by the countyhuman services department from the SPE, the following standardsshall apply:

(i) Applications for children who are granted acceleratedenrollment by the SPE shall be processed according to thetimeframes specified in subdivision (d) of Section 14154.

(ii) Applications for children who are not granted acceleratedenrollment by the SPE due to the existence of an already activeMedi-Cal case shall be processed according to the timeframesspecified in subdivision (d) of Section 14154.

(iii) For applications for children who are not described in clause(i) or (ii), 90 percent shall be processed within 10 working daysof being received, complete and without client errors.

(iv) If an application described in this section also containsadults, and the adult applicants are required to submit additionalinformation beyond the information provided for the children, thecounty shall process the eligibility for the child or children withoutdelay, consistent with this section while gathering the necessaryinformation to process eligibility for the adults.

(B) The department, in consultation with the County WelfareDirectors Association, shall develop reporting requirements forthe counties to provide regular data to the state regarding thetimeliness and outcomes of applications processed by the countiesthat are received from the SPE.

(C) Performance thresholds and corrective action standards asset forth in Section 14154 shall apply.

(D) For applications submitted directly to the county, theseapplications shall be processed by the counties in accordance with

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the performance standards established under subdivision (d) ofSection 14154.

(3) This subdivision shall be implemented 90 days after theeffective date of the act that added this section, or October 1, 2012,whichever is later.

(4) Twelve months after implementation of this section pursuantto subdivision (f), the department shall provide enrollmentinformation regarding individuals determined eligible pursuant tosubdivision (a) to the fiscal and appropriate policy committees ofthe Legislature.

(k) (1) Notwithstanding Chapter 3.5 (commencing with Section11340) of Part 1 of Division 3 of Title 2 of the Government Code,for purposes of this transition, the department, without taking anyfurther regulatory action, shall implement, interpret, or makespecific this section by means of all-county letters, plan letters,plan or provider bulletins, or similar instructions until the timeregulations are adopted. It is the intent of the Legislature that thedepartment be allowed temporary authority as necessary toimplement program changes until completion of the regulatoryprocess.

(2) To the extent otherwise required by Chapter 3.5(commencing with Section 11340) of Part 1 of Division 3 of Title2 of the Government Code, the department shall adopt emergencyregulations implementing this section no later than July 1, 2014.The department may thereafter readopt the emergency regulationspursuant to that chapter. The adoption and readoption, by thedepartment, of regulations implementing this section shall bedeemed to be an emergency and necessary to avoid serious harmto the public peace, health, safety, or general welfare for purposesof Sections 11346.1 and 11349.6 of the Government Code, andthe department is hereby exempted from the requirement that itdescribe facts showing the need for immediate action and fromreview by the Office of Administrative Law.

(l) (1) If at any time the director determines that this section orany part of this section may jeopardize the state’s ability to receivefederal financial participation under the federal Patient Protectionand Affordable Care Act (Public Law 111-148), or any amendmentor extension of that act, or any additional federal funds that thedirector, in consultation with the Department of Finance,determines would be advantageous to the state, the director shall

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give notice to the fiscal and policy committees of the Legislatureand to the Department of Finance. After giving notice, this sectionor any part of this section shall become inoperative on the datethat the director executes a declaration stating that the departmenthas determined, in consultation with the Department of Finance,that it is necessary to cease to implement this section or a part orparts thereof, in order to receive federal financial participation,any increase in the federal medical assistance percentage availableon or after October 1, 2008, or any additional federal funds thatthe director, in consultation with the Department of Finance, hasdetermined would be advantageous to the state.

(2) The director shall retain the declaration described inparagraph (1), shall provide a copy of the declaration to theSecretary of the State, the Secretary of the Senate, the Chief Clerkof the Assembly, and the Legislative Counsel, and shall post thedeclaration on the department’s Internet Web site.

(3) In the event that the director makes a determination underparagraph (1) and this section ceases to be implemented, thechildren shall be enrolled back into the Healthy Families Program.

SEC. 90. Section 14005.27 of the Welfare and Institutions Codeis repealed.

14005.27. (a) Individuals enrolled in the Healthy FamiliesProgram pursuant to Part 6.2 (commencing with Section 12693)of Division 2 of the Insurance Code on the effective date of theact that added this section and who are determined eligible toreceive benefits pursuant to subdivisions (a) and (b) of Section14005.26, shall be transitioned into Medi-Cal, pursuant to thissection.

(b) To the extent necessary and for the purposes of carrying outthe provisions of this section, in performing initial eligibilitydeterminations for children enrolled in the Healthy FamiliesProgram pursuant to Part 6.2 (commencing with Section 12693)of Division 2 of the Insurance Code, the department shall adoptthe option pursuant to Section 1902(e)(13) of the federal SocialSecurity Act (42 U.S.C. Sec. 1396a(e)(13)) to allow the departmentor county human services departments to rely upon findings madeby the Managed Risk Medical Insurance Board (MRMIB)regarding one or more components of eligibility. The departmentshall seek federal approval of a state plan amendment to implementthis subdivision.

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(c) To the extent necessary, the department shall seek federalapproval of a state plan amendment or a waiver to providepresumptive eligibility for the optional targeted low-incomecategory of eligibility pursuant to Section 14005.26 for individualspresumptively eligible for or enrolled in the Healthy FamiliesProgram pursuant to Part 6.2 (commencing with Section 12693)of Division 2 of the Insurance Code. The presumptive eligibilityshall be based upon the most recent information contained in theindividual’s Healthy Families Program file. The timeframe for thepresumptive eligibility shall begin no sooner than January 1, 2013,and shall continue until a determination of Medi-Cal eligibility ismade, which determination shall be performed within one year ofthe individual’s Healthy Families Program annual review date.

(d) (1) The California Health and Human Services Agency, inconsultation with the Managed Risk Medical Insurance Board, theState Department of Health Care Services, the Department ofManaged Health Care, and diverse stakeholders groups, shallprovide the fiscal and policy committees of the Legislature witha strategic plan for the transition of the Healthy Families Programpursuant to this section by no later than October 1, 2012. Thisstrategic plan shall, at a minimum, address all of the following:

(A) State, county, and local administrative components whichfacilitate a successful subscriber transition such as communicationand outreach to subscribers and applicants, eligibility processing,enrollment, communication, and linkage with health plan providers,payments of applicable premiums, and overall systems operationfunctions.

(B) Methods and processes for diverse stakeholder engagementthroughout the entire transition, including all phases of thetransition.

(C) State monitoring of managed care health plans’ performanceand accountability for provision of services, and initial qualityindicators for children and adolescents transitioning to Medi-Cal.

(D) Health care and dental delivery system components suchas standards for informing and enrollment materials, networkadequacy, performance measures and metrics, fiscal solvency, andrelated factors that ensure timely access to quality health and dentalcare for children and adolescents transitioning to Medi-Cal.

(E) Inclusion of applicable operational steps, timelines, and keymilestones.

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(F) A time certain for the transfer of the Healthy FamiliesAdvisory Board, as described in Part 6.2 (commencing with Section12693) of Division 2 of the Insurance Code, to the StateDepartment of Health Care Services.

(2) The intent of this strategic plan is to serve as an overall guidefor the development of each plan for each phase of this transition,pursuant to paragraphs (1) to (8), inclusive, of subdivision (e), toensure clarity and consistency in approach and subscribercontinuity of care. This strategic plan may also be updated by theCalifornia Health and Human Services Agency as applicable andprovided to the Legislature upon completion.

(e) (1) The department shall transition individuals from theHealthy Families Program to the Medi-Cal program in four phases,as follows:

(A) Phase 1. Individuals enrolled in a Healthy Families Programhealth plan that is a Medi-Cal managed care health plan shall beenrolled in the same plan no earlier than January 1, 2013, pursuantto the requirements of this section and Section 14011.6, and to theextent the individual is otherwise eligible under this chapter andChapter 8 (commencing with Section 14200).

(B) Phase 2. Individuals enrolled in a Healthy Families Programmanaged care health plan that is a subcontractor of a Medi-Calmanaged health care plan, to the extent possible, shall be enrolledinto a Medi-Cal managed health care plan that includes theindividuals’ current plan pursuant to the requirements of thissection and Section 14011.6, and to the extent the individuals areotherwise eligible under this chapter and Chapter 8 (commencingwith Section 14200). The transition of individuals described inthis subparagraph shall begin no earlier than April 1, 2013.

(C) Phase 3. Individuals enrolled in a Healthy Families Programplan that is not a Medi-Cal managed care plan and does not contractor subcontract with a Medi-Cal managed care plan shall be enrolledin a Medi-Cal managed care plan in that county. Enrollment shallinclude consideration of the individuals’ primary care providerspursuant to the requirements of this section and Section 14011.6,and to the extent the individuals are otherwise eligible under thischapter and Chapter 8 (commencing with Section 14200). Thetransition of individuals described in this subparagraph shall beginno earlier than August 1, 2013.

(D) Phase 4.

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(i) Individuals residing in a county that is not a Medi-Calmanaged care county shall be provided services under the Medi-Calfee-for-service delivery system, subject to clause (ii). The transitionof individuals described in this subparagraph shall begin no earlierthan September 1, 2013.

(ii) In the event the department creates a managed health caresystem in the counties described in clause (i), individuals residingin those counties shall be enrolled in managed health care planspursuant to this chapter and Chapter 8 (commencing with Section14200).

(2) For the transition of individuals pursuant to subparagraphs(A), (B), (C), and (D) of paragraph (1), implementation plans shallbe developed to ensure state and county systems readiness, healthplan network adequacy, and continuity of care with the goal ofensuring there is no disruption of service and there is continuedaccess to coverage for all transitioning individuals. If an individualis not retained with his or her current primary care provider, theimplementation plan shall require the managed care plan to reportto the department as to how continuity of care is being provided.Transition of individuals described in subparagraphs (A), (B), (C),and (D) of paragraph (1) shall not occur until 90 days after thedepartment has submitted an implementation plan to the fiscal andpolicy committees of the Legislature. The implementation plansshall include, but not be limited to, information on health anddental plan network adequacy, continuity of care, eligibility andenrollment requirements, consumer protections, and familynotifications.

(3) The following requirements shall be in place prior toimplementation of Phase 1, and shall be required for all phases ofthe transition:

(A) Managed care plan performance measures shall be integratedand coordinated with the Healthy Families Program performancestandards including, but not limited to, child-only HealthcareEffectiveness Data and Information Set (HEDIS) measures, andmeasures indicative of performance in serving children andadolescents. These performance measures shall also be incompliance with all performance requirements under theKnox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2(commencing with Section 1340) of Division 2 of the Health andSafety Code) and existing Medi-Cal managed care performance

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measurements and standards as set forth in this chapter and Chapter8 (commencing with Section 14200), Title 22 of the CaliforniaCode of Regulations, and all-plan letters, including, but not limitedto, network adequacy and linguistic services, and shall be met priorto the transition of individuals pursuant to Phase 1.

(B) Medi-Cal managed care health plans shall allow enrolleesto remain with their current primary care provider. If an individualdoes not remain with the current primary care provider, the planshall report to the department as to how continuity of care is beingprovided.

(4) (A) As individuals are transitioned pursuant tosubparagraphs (A) and (B) of paragraph (1), for individuals residingin all counties except the Counties of Sacramento and Los Angeles,their dental coverage shall transition to fee-for-service dentalcoverage and may be provided by their current provider if theprovider is a Medi-Cal fee-for-service dental provider.

(B) For individuals residing in the County of Sacramento, theirdental coverage shall continue to be provided by their currentdental managed care plan if their plan is a Medi-Cal dentalmanaged care plan. If their plan is not a Medi-Cal dental managedcare plan, they shall select a Medi-Cal dental managed care plan.If they do not choose a Medi-Cal dental managed care plan, theyshall be assigned to a plan with preference to a plan with whichtheir current provider is a contracted provider. Any children in theHealthy Families Program transitioned into Medi-Cal dentalmanaged care plans shall also have access to the beneficiary dentalexception process, pursuant to Section 14089.09. Further, theSacramento advisory committee, established pursuant to Section14089.08, shall be consulted regarding the transition of childrenin the Healthy Families Program into Medi-Cal dental managedcare plans.

(C) (i) For individuals residing in the County of Los Angeles,for purposes of continuity of care, their dental coverage shallcontinue to be provided by their current dental managed care planif that plan is a Medi-Cal dental managed care plan. If their planis not a Medi-Cal dental managed care plan, they may select aMedi-Cal dental managed care plan or choose to move intoMedi-Cal fee-for-service dental coverage.

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(ii) It is the intent of the Legislature that children transitioningto Medi-Cal under this section have a choice in dental coverage,as provided under existing law.

(5) Dental health plan performance measures and benchmarksshall be in accordance with Section 14459.6.

(6) Medi-Cal managed care health and dental plans shall reportto the department, as frequently as specified by the department,specified information pertaining to transition implementation,enrollees, and providers, including, but not limited to, grievancesrelated to access to care, continuity of care requests and outcomes,and changes to provider networks, including provider enrollmentand disenrollment changes. The plans shall report this informationby county, and in the format requested by the department.

(7) The department may develop supplemental implementationplans to separately account for the transition of individuals fromthe Healthy Families Program to specific Medi-Cal deliverysystems.

(8) The department shall consult with the Legislature andstakeholders, including, but not limited to, consumers, families,consumer advocates, counties, providers, and health and dentalplans, in the development of implementation plans described inparagraph (3) for individuals who are transitioned to Medi-Cal inPhase 2 and Phase 3, as described in subparagraphs (B) and (C)of paragraph (1).

(9) (A) The department shall consult and collaborate with theDepartment of Managed Health Care in assessing Medi-Calmanaged care health plan network adequacy in accordance withthe Knox-Keene Health Care Service Plan Act of 1975 (Chapter2.2 (commencing with Section 1340) of Division 2 of the Healthand Safety Code) for purposes of the developed transition planspursuant to paragraph (2) for each of the phases.

(B) For purposes of individuals transitioning in Phase 1, asdescribed in subparagraph (A) of paragraph (1), network adequacyshall be assessed as described in this paragraph and findings fromthis assessment shall be provided to the fiscal and appropriatepolicy committees of the Legislature 60 days prior to the effectivedate of implementing this transition.

(10) The department shall provide monthly status reports to thefiscal and policy committees of the Legislature on the transitioncommencing no later than February 15, 2013. This monthly status

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transition report shall include, but not be limited to, informationon health plan grievances related to access to care, continuity ofcare requests and outcomes, changes to provider networks,including provider enrollment and disenrollment changes, andeligibility performance standards pursuant to subdivision (m). Afinal comprehensive report shall be provided within 90 days aftercompletion of the last phase of transition.

(f) (1) The department and MRMIB shall work collaborativelyin the development of notices for individuals transitioned pursuantto paragraph (1) of subdivision (d).

(2) The state shall provide written notice to individuals enrolledin the Healthy Families Program of their transition to the Medi-Calprogram at least 60 days prior to the transition of individuals inPhase 1, as described in subparagraph (A) of paragraph (1) ofsubdivision (d), and at least 90 days prior to transition ofindividuals in Phases 2 and 3, as described in subparagraphs (B)and (C) of paragraph (1) of subdivision (d).

(3) Notices developed pursuant to this subdivision shall ensureindividuals are informed regarding the transition, including, butnot limited to, how individuals’ systems of care may change, whenthe changes will occur, and whom they can contact for assistancewhen choosing a Medi-Cal managed care plan, if applicable,including a toll-free telephone number, and with problems theymay encounter. The department shall consult with stakeholdersregarding notices developed pursuant to this subdivision. Thesenotices shall be developed using plain language, and writtentranslation of the notices shall be available for those who arelimited English proficient or non-English speaking in all Medi-Calthreshold languages.

(4) The department shall designate department liaisonsresponsible for the coordination of the Healthy Families Programand may establish a children’s-focused section for this purposeand to facilitate the provision of health care services for childrenenrolled in Medi-Cal.

(5) The department shall provide a process for ongoingstakeholder consultation and make information publicly available,including the achievement of benchmarks, enrollment data,utilization data, and quality measures.

(g) (1) In order to aid the transition of Healthy Families Programenrollees, MRMIB, on the effective date of the act that added this

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section and continuing through the completion of the transition ofHealthy Families Program enrollees to the Medi-Cal program,shall begin requesting and collecting from health plans contractingwith MRMIB pursuant to Part 6.2 (commencing with Section12693) of Division 2 of the Insurance Code, information abouteach health plan’s provider network, including, but not limited to,the primary care and all specialty care providers assigned toindividuals enrolled in the health plan. MRMIB shall obtain thisinformation in a manner that coincides with the transition activitiesdescribed in subdivision (d), and shall provide all of the collectedinformation to the department within 60 days of the department’srequest for this information to ensure timely transitions of theHealthy Family Programs enrollees.

(2) The department shall analyze the existing Healthy FamiliesProgram delivery system network and the Medi-Cal fee-for-serviceprovider networks, including, but not limited to, Medi-Cal dentalproviders, to determine overlaps of the provider networks in eachcounty for which there are no Medi-Cal managed care plans ordental managed care plans. To the extent there is a lack of existingMedi-Cal fee-for-service providers available to serve the HealthyFamilies Program enrollees, the department shall work with theHealthy Families Program provider community to encourageparticipation of those providers in the Medi-Cal program, anddevelop a streamlined process to enroll them as Medi-Calproviders.

(3) (A) MRMIB, within 60 days of a request by the department,shall provide the department any data, information, or recordconcerning the Healthy Families Program as is necessary toimplement the transition of enrollment required pursuant to thissection.

(B) Notwithstanding any other provision of law, all of thefollowing shall apply:

(i) The term “data, information, or record” shall include, but isnot limited to, personal information as defined in Section 1798.3of the Civil Code.

(ii) Any data, information, or record shall be exempt fromdisclosure under the California Public Records Act (Chapter 3.5(commencing with Section 6250) of Division 7 of the GovernmentCode) and any other law, to the same extent that it was exempt

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from disclosure or privileged prior to the provision of the data,information, or record to the department.

(iii) The provision of any such data, information, or record tothe department shall not constitute a waiver of any evidentiaryprivilege or exemption from disclosure.

(iv) The department shall keep all data, information, or recordsprovided by MRMIB confidential to the full extent permitted bylaw, including, but not limited to, the California Public RecordsAct (Chapter 3.5 (commencing with Section 6250) of Division 7of the Government Code, and consistent with MRMIB’s contractualobligations to keep the data, information, or records confidential.

(h) This section shall be implemented only to the extent that allnecessary federal approvals and waivers have been obtained andthe enhanced rate of federal financial participation under Title XXIof the federal Social Security Act (42 U.S.C. Sec. 1397aa et seq.)is available for targeted low-income children pursuant to that act.

(i) (1) The department shall exercise the option pursuant toSection 1916A of the federal Social Security Act (42 U.S.C. Sec.1396o-1) to impose premiums for individuals described insubdivision (a) of Section 14005.26 whose family income has beendetermined to be above 150 percent and up to and including 200percent of the federal poverty level, after application of the incomedisregard pursuant to subdivision (b) of Section 14005.26. Thedepartment shall not impose premiums under this subdivision forindividuals described in subdivision (a) of Section 14005.26 whosefamily income has been determined to be at or below 150 percentof the federal poverty level, after application of the incomedisregard pursuant to subdivision (b) of Section 14005.26. Thedepartment shall obtain federal approval for the implementationof this subdivision.

(2) All premiums imposed under this section shall equal thefamily contributions described in paragraph (2) of subdivision (d)of Section 12693.43 of the Insurance Code and shall be reducedin conformity with subdivisions (e) and (f) of Section 12693.43of the Insurance Code.

(j) The department shall not enroll targeted low-income childrendescribed in this section in the Medi-Cal program until allnecessary federal approvals and waivers have been obtained, orno sooner than January 1, 2013.

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(k) (1) To the extent the new budget methodology pursuant toparagraph (6) of subdivision (a) of Section 14154 is not fullyoperational, for the purposes of implementing this section, forindividuals described in subdivision (a) whose family income hasbeen determined to be at or below 150 percent of the federalpoverty level, as determined pursuant to subdivision (b), thedepartment shall utilize the budgeting methodology for thispopulation as contained in the November 2011 Medi-Cal LocalAssistance Estimate for Medi-Cal county administration costs foreligibility operations.

(2) For purposes of implementing this section, the departmentshall include in the Medi-Cal Local Assistance Estimate an amountfor Medi-Cal eligibility operations associated with the transfer ofHealthy Families Program enrollees eligible pursuant to subdivision(a) of Section 14005.26 and whose family income is determinedto be above 150 percent and up to and including 200 percent ofthe federal poverty level, after application of the income disregardpursuant to subdivision (b) of Section 14005.26. In developing anestimate for this activity, the department shall consider theprojected number of final eligibility determinations each countywill process and projected county costs. Within 60 days of thepassage of the annual Budget Act, the department shall notify eachcounty of their allocation for this activity based upon the amountallotted in the annual Budget Act for this purpose.

(l) When the new budget methodology pursuant to paragraph(6) of subdivision (a) of Section 14154 is fully operational, thenew budget methodology shall be utilized to reimburse countiesfor eligibility determinations made for individuals pursuant to thissection.

(m) Except as provided in subdivision (b), eligibilitydeterminations and annual redeterminations made pursuant to thissection shall be performed by county eligibility workers.

(n) In conducting the eligibility determinations for individualspursuant to this section and Section 14005.26, the followingreporting and performance standards shall apply to all counties:

(1) Counties shall report to the department, in a manner and fora time period determined by the department, in consultation withthe County Welfare Directors Association, the number ofapplications processed on a monthly basis, a breakout of theapplications based on income using the federal percentage of

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poverty levels, the final disposition of each application, includinginformation on the approved Medi-Cal program, if applicable, andthe average number of days it took to make the final eligibilitydetermination for applications submitted directly to the county andfrom the single point of entry (SPE).

(2) Notwithstanding any other law, the following performancestandards shall be applied to counties for eligibility determinationsfor individuals eligible pursuant to this section:

(A) For children whose applications are received by the countyhuman services department from the SPE, the following standardsshall apply:

(i) Applications for children who are granted acceleratedenrollment by the SPE shall be processed according to thetimeframes specified in subdivision (d) of Section 14154.

(ii) Applications for children who are not granted acceleratedenrollment by the SPE due to the existence of an already activeMedi-Cal case shall be processed according to the timeframesspecified in subdivision (d) of Section 14154.

(iii) For applications for children who are not described in clause(i) or (ii), 90 percent shall be processed within 10 working daysof being received, complete and without client errors.

(iv) If an application described in this section also containsadults, and the adult applicants are required to submit additionalinformation beyond the information provided for the children, thecounty shall process the eligibility for the child or children withoutdelay, consistent with this section while gathering the necessaryinformation to process eligibility for the adults.

(B) The department, in consultation with the County WelfareDirectors Association, shall develop reporting requirements forthe counties to provide regular data to the state regarding thetimeliness and outcomes of applications processed by the countiesthat are received from the SPE.

(C) Performance thresholds and corrective action standards asset forth in Section 14154 shall apply.

(D) For applications received directly into the county, theseapplications shall be processed by the counties in accordance withthe performance standards established under subdivision (d) ofSection 14154.

(3) This subdivision shall be implemented 90 days afterenactment of this section or January 1, 2013, whichever is later.

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(4) Twelve months after implementation of this section pursuantto subdivision (d), the department shall provide enrollmentinformation regarding individuals determined eligible pursuant tosubdivision (a) to the fiscal and appropriate policy committees ofthe Legislature.

(o) (1) Notwithstanding Chapter 3.5 (commencing with Section11340) of Part 1 of Division 3 of Title 2 of the Government Code,for purposes of this transition, the department, without taking anyfurther regulatory action, shall implement, interpret, or makespecific this section by means of all-county letters, plan letters,plan or provider bulletins, or similar instructions until the timeregulations are adopted. It is the intent of the Legislature that thedepartment be allowed temporary authority as necessary toimplement program changes until completion of the regulatoryprocess.

(2) To the extent otherwise required by Chapter 3.5(commencing with Section 11340) of Part 1 of Division 3 of Title2 of the Government Code, the department shall adopt emergencyregulations implementing this section no later than July 1, 2014.The department may thereafter readopt the emergency regulationspursuant to that chapter. The adoption and readoption, by thedepartment, of regulations implementing this section shall bedeemed to be an emergency and necessary to avoid serious harmto the public peace, health, safety, or general welfare for purposesof Sections 11346.1 and 11349.6 of the Government Code, andthe department is hereby exempted from the requirement that itdescribe facts showing the need for immediate action and fromreview by the Office of Administrative Law.

(p) (1) If at any time the director determines that this sectionor any part of this section may jeopardize the state’s ability toreceive federal financial participation under the federal PatientProtection and Affordable Care Act (Public Law 111-148), or anyamendment or extension of that act, or any additional federal fundsthat the director, in consultation with the Department of Finance,determines would be advantageous to the state, the director shallgive notice to the fiscal and policy committees of the Legislatureand to the Department of Finance. After giving notice, this sectionor any part of this section shall become inoperative on the datethat the director executes a declaration stating that the departmenthas determined, in consultation with the Department of Finance,

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that it is necessary to cease to implement this section or a part orparts thereof in order to receive federal financial participation, anyincrease in the federal medical assistance percentage available onor after October 1, 2008, or any additional federal funds that thedirector, in consultation with the Department of Finance, hasdetermined would be advantageous to the state.

(2) The director shall retain the declaration described inparagraph (1), shall provide a copy of the declaration to theSecretary of the State, the Secretary of the Senate, the Chief Clerkof the Assembly, and the Legislative Counsel, and shall post thedeclaration on the department’s Internet Web site.

(3) In the event that the director makes a determination underparagraph (1) and this section ceases to be implemented, thechildren shall be enrolled back into the Healthy Families Program.

SEC. 91. Section 14126.022 of the Welfare and InstitutionsCode is amended to read:

14126.022. (a) (1) By August 1, 2011, the department shalldevelop the Skilled Nursing Facility Quality and AccountabilitySupplemental Payment System, subject to approval by the federalCenters for Medicare and Medicaid Services, and the availabilityof federal, state, or other funds.

(2) (A) The system shall be utilized to provide supplementalpayments to skilled nursing facilities that improve the quality andaccountability of care rendered to residents in skilled nursingfacilities, as defined in subdivision (c) of Section 1250 of theHealth and Safety Code, and to penalize those facilities that donot meet measurable standards.

(B) A freestanding pediatric subacute care facility, as definedin Section 51215.8 of Title 22 of the California Code ofRegulations, shall be exempt from the Skilled Nursing FacilityQuality and Accountability Supplemental Payment System.

(3) The system shall be phased in, beginning with the 2010–11rate year.

(4) The department may utilize the system to do all of thefollowing:

(A) Assess overall facility quality of care and quality of careimprovement, and assign quality and accountability payments toskilled nursing facilities pursuant to performance measuresdescribed in subdivision (i).

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(B) Assign quality and accountability payments or penaltiesrelating to quality of care, or direct care staffing levels, wages, andbenefits, or both.

(C) Limit the reimbursement of legal fees incurred by skillednursing facilities engaged in the defense of governmental legalactions filed against the facilities.

(D) Publish each facility’s quality assessment and quality andaccountability payments in a manner and form determined by thedirector, or his or her designee.

(E) Beginning with the 2011–12 fiscal year, establish a baseyear to collect performance measures described in subdivision (i).

(F) Beginning with the 2011–12 fiscal year, in coordinationwith the State Department of Public Health, publish the direct carestaffing level data and the performance measures required pursuantto subdivision (i).

(b) (1) There is hereby created in the State Treasury, the SkilledNursing Facility Quality and Accountability Special Fund. Thefund shall contain moneys deposited pursuant to subdivisions (g)and (j) to (l), inclusive. Notwithstanding Section 16305.7 of theGovernment Code, the fund shall contain all interest and dividendsearned on moneys in the fund.

(2) Notwithstanding Section 13340 of the Government Code,the fund shall be continuously appropriated without regard to fiscalyear to the department for making quality and accountabilitypayments, in accordance with subdivision (m), to facilities thatmeet or exceed predefined measures as established by this section.

(3) Upon appropriation by the Legislature, moneys in the fundmay also be used for any of the following purposes:

(A) To cover the administrative costs incurred by the StateDepartment of Public Health for positions and contract fundingrequired to implement this section.

(B) To cover the administrative costs incurred by the StateDepartment of Health Care Services for positions and contractfunding required to implement this section.

(C) To provide funding assistance for the Long-Term CareOmbudsman Program activities pursuant to Chapter 11(commencing with Section 9700) of Division 8.5.

(c) No appropriation associated with this bill is intended toimplement the provisions of Section 1276.65 of the Health andSafety Code.

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(d) (1) There is hereby appropriated for the 2010–11 fiscal year,one million nine hundred thousand dollars ($1,900,000) from theSkilled Nursing Facility Quality and Accountability Special Fundto the California Department of Aging for the Long-Term CareOmbudsman Program activities pursuant to Chapter 11(commencing with Section 9700) of Division 8.5. It is the intentof the Legislature for the one million nine hundred thousand dollars($1,900,000) from the fund to be in addition to the four millionone hundred sixty-eight thousand dollars ($4,168,000) proposedin the Governor’s May Revision for the 2010-11 2010–11 Budget.It is further the intent of the Legislature to increase this level ofappropriation in subsequent years to provide support sufficient tocarry out the mandates and activities pursuant to Chapter 11(commencing with Section 9700) of Division 8.5.

(2) The department, in partnership with the CaliforniaDepartment of Aging, shall seek approval from the federal Centersfor Medicare and Medicaid Services to obtain federal Medicaidreimbursement for activities conducted by the Long-Term CareOmbudsman Program. The department shall report to the fiscalcommittees of the Legislature during budget hearings on progressbeing made and any unresolved issues during the 2011–12 budgetdeliberations.

(e) There is hereby created in the Special Deposit Fundestablished pursuant to Section 16370 of the Government Code,the Skilled Nursing Facility Minimum Staffing Penalty Account.The account shall contain all moneys deposited pursuant tosubdivision (f).

(f) (1) Beginning with the 2010–11 fiscal year, the StateDepartment of Public Health shall use the direct care staffing leveldata it collects to determine whether a skilled nursing facility hasmet the nursing hours per patient per day requirements pursuantto Section 1276.5 of the Health and Safety Code.

(2) (A) Beginning with the 2010–11 fiscal year, the StateDepartment of Public Health shall assess a skilled nursing facility,licensed pursuant to subdivision (c) of Section 1250 of the Healthand Safety Code, an administrative penalty if the State Departmentof Public Health determines that the skilled nursing facility failsto meet the nursing hours per patient per day requirements pursuantto Section 1276.5 of the Health and Safety Code as follows:

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(i) Fifteen thousand dollars ($15,000) if the facility fails to meetthe requirements for 5 percent or more of the audited days up to49 percent.

(ii) Thirty thousand dollars ($30,000) if the facility fails to meetthe requirements for over 49 percent or more of the audited days.

(B) (i) If the skilled nursing facility does not dispute thedetermination or assessment, the penalties shall be paid in full bythe licensee to the State Department of Public Health within 30days of the facility’s receipt of the notice of penalty and depositedinto the Skilled Nursing Facility Minimum Staffing PenaltyAccount.

(ii) The State Department of Public Health may, upon writtennotification to the licensee, request that the department offset anymoneys owed to the licensee by the Medi-Cal program or any otherpayment program administered by the department to recoup thepenalty provided for in this section.

(C) (i) If a facility disputes the determination or assessmentmade pursuant to this paragraph, the facility shall, within 15 daysof the facility’s receipt of the determination and assessment,simultaneously submit a request for appeal to both the departmentand the State Department of Public Health. The request shallinclude a detailed statement describing the reason for appeal andinclude all supporting documents the facility will present at thehearing.

(ii) Within 10 days of the State Department of Public Health’sreceipt of the facility’s request for appeal, the State Departmentof Public Health shall submit, to both the facility and thedepartment, all supporting documents that will be presented at thehearing.

(D) The department shall hear a timely appeal and issue adecision as follows:

(i) The hearing shall commence within 60 days from the dateof receipt by the department of the facility’s timely request forappeal.

(ii) The department shall issue a decision within 120 days fromthe date of receipt by the department of the facility’s timely requestfor appeal.

(iii) The decision of the department’s hearing officer, whenissued, shall be the final decision of the State Department of PublicHealth.

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(E) The appeals process set forth in this paragraph shall beexempt from Chapter 4.5 (commencing with Section 11400) andChapter 5 (commencing with Section 11500), of Part 1 of Division3 of Title 2 of the Government Code. The provisions of Section100171 and 131071 of the Health and Safety Code shall not applyto appeals under this paragraph.

(F) If a hearing decision issued pursuant to subparagraph (D)is in favor of the State Department of Public Health, the skillednursing facility shall pay the penalties to the State Department ofPublic Health within 30 days of the facility’s receipt of thedecision. The penalties collected shall be deposited into the SkilledNursing Facility Minimum Staffing Penalty Account.

(G) The assessment of a penalty under this subdivision does notsupplant the State Department of Public Health’s investigationprocess or issuance of deficiencies or citations under Chapter 2.4(commencing with Section 1417) of Division 2 of the Health andSafety Code.

(g) The State Department of Public Health shall transfer, on amonthly basis, all penalty payments collected pursuant tosubdivision (f) into the Skilled Nursing Facility Quality andAccountability Special Fund.

(h) Nothing in this section shall impact the effectiveness orutilization of Section 1278.5 or 1432 of the Health and Safety Coderelating to whistleblower protections, or Section 1420 of the Healthand Safety Code relating to complaints.

(i) (1) Beginning in the 2010–11 fiscal year, the department,in consultation with representatives from the long-term careindustry, organized labor, and consumers, shall establish andpublish quality and accountability measures, benchmarks, and datasubmission deadlines by November 30, 2010.

(2) The methodology developed pursuant to this section shallinclude, but not be limited to, the following requirements andperformance measures:

(A) Beginning in the 2011–12 fiscal year:(i) Immunization rates.(ii) Facility acquired pressure ulcer incidence.(iii) The use of physical restraints.(iv) Compliance with the nursing hours per patient per day

requirements pursuant to Section 1276.5 of the Health and SafetyCode.

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(v) Resident and family satisfaction.(vi) Direct care staff retention, if sufficient data is available.(B) If this act is extended beyond the dates on which it becomes

inoperative and is repealed, in accordance with Section 14126.033,the department, in consultation with representatives from thelong-term care industry, organized labor, and consumers, beginningin the 2013–14 rate year, shall incorporate additional measuresinto the system, including, but not limited to, quality andaccountability measures required by federal health care reformthat are identified by the federal Centers for Medicare and MedicaidServices.

(C) The department, in consultation with representatives fromthe long-term care industry, organized labor, and consumers, mayincorporate additional performance measures, including, but notlimited to, the following:

(i) Compliance with state policy associated with the UnitedStates Supreme Court decision in Olmstead v. L.C. ex rel. Zimring(1999) 527 U.S. 581.

(ii) Direct care staff retention, if not addressed in the 2012–13rate year.

(iii) The use of chemical restraints.(j) (1) Beginning with the 2010–11 rate year, and pursuant to

subparagraph (B) of paragraph (5) of subdivision (a) of Section14126.023, the department shall set aside savings achieved fromsetting the professional liability insurance cost category, includingany insurance deductible costs paid by the facility, at the 75thpercentile. From this amount, the department shall transfer theGeneral Fund portion into the Skilled Nursing Facility Quality andAccountability Special Fund. A skilled nursing facility shallprovide supplemental data on insurance deductible costs tofacilitate this adjustment, in the format and by the deadlinesdetermined by the department. If this data is not provided, afacility’s insurance deductible costs will remain in theadministrative costs category.

(2) Notwithstanding paragraph (1), for the 2012–13 rate yearonly, savings from capping the professional liability insurancecost category pursuant to paragraph (1) shall remain in theGeneral Fund and shall not be transferred to the Skilled NursingFacility Quality and Accountability Special Fund.

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(k) Beginning with the 2012–13 2013–14 rate year, if there isa rate increase in the weighted average Medi-Cal reimbursementrate, the department shall set aside the first 1 percent of theweighted average Medi-Cal reimbursement rate, from which thedepartment shall transfer the General Fund portion into increasefor the Skilled Nursing Facility Quality and Accountability SpecialFund.

(l) If this act is extended beyond the dates on which it becomesinoperative and is repealed, in accordance with Section 14126.033,beginning with the 2013–14 2014–15 rate year, in addition to theamount set aside pursuant to subdivision (k), if there is a rateincrease in the weighted average Medi-Cal reimbursement rate,the department shall set aside at least one-third of the weightedaverage Medi-Cal reimbursement rate increase, up to a maximumof 1 percent, from which the department shall transfer the GeneralFund portion of this amount into the Skilled Nursing FacilityQuality and Accountability Special Fund.

(m) (1) (A) Beginning with the 2012–13 2013–14 rate year,the department shall pay a supplemental payment, by April 30,2013 2014, to skilled nursing facilities based on all of the criteriain subdivision (i), as published by the department, and accordingto performance measure benchmarks determined by the departmentin consultation with stakeholders.

(B) (i) The department may convene a diverse stakeholdergroup, including, but not limited to, representatives from consumergroups and organizations, labor, nursing home providers, advocacyorganizations involved with the aging community, staff from theLegislature, and other interested parties, to discuss and analyzealternative mechanisms to implement the quality and accountabilitypayments provided to nursing homes for reimbursement.

(ii) The department shall articulate in a report to the fiscal andappropriate policy committees of the Legislature theimplementation of an alternative mechanism as described in clause(i) at least 90 days prior to any policy or budgetary changes, andseek subsequent legislation in order to enact the proposed changes.

(2) Skilled nursing facilities that do not submit requiredperformance data by the department’s specified data submissiondeadlines pursuant to subdivision (i) shall not be eligible to receivesupplemental payments.

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(3) Notwithstanding paragraph (1), if a facility appeals theperformance measure of compliance with the nursing hours perpatient per day requirements, pursuant to Section 1276.5 of theHealth and Safety Code, to the State Department of Public Health,and it is unresolved by the department’s published due date, thedepartment shall not use that performance measure whendetermining the facility’s supplemental payment.

(4) Notwithstanding paragraph (1), if the department is unableto pay the supplemental payments by April 30, 2013 2014, thenon May 1, 2013 2014, the department shall use the funds availablein the Skilled Nursing Facility Quality and Accountability SpecialFund as a result of savings identified in subdivisions (k) and (l),less the administrative costs required to implement subparagraphs(A) and (B) of paragraph (3) of subdivision (b), in addition to anyMedicaid funds that are available as of December 31, 2012 2013,to increase provider rates retroactively to August 1, 2012 2013.

(n) The department shall seek necessary approvals from thefederal Centers for Medicare and Medicaid Services to implementthis section. The department shall implement this section only ina manner that is consistent with federal Medicaid law andregulations, and only to the extent that approval is obtained fromthe federal Centers for Medicare and Medicaid Services and federalfinancial participation is available.

(o) In implementing this section, the department and the StateDepartment of Public Health may contract as necessary, withCalifornia’s Medicare Quality Improvement Organization, or otherentities deemed qualified by the department or the StateDepartment of Public Health, not associated with a skilled nursingfacility, to assist with development, collection, analysis, andreporting of the performance data pursuant to subdivision (i), andwith demonstrated expertise in long-term care quality, datacollection or analysis, and accountability performance measurementmodels pursuant to subdivision (i). This subdivision establishesan accelerated process for issuing any contract pursuant to thissection. Any contract entered into pursuant to this subdivision shallbe exempt from the requirements of the Public Contract Code,through December 31, 2013.

(p) Notwithstanding Chapter 3.5 (commencing with Section11340) of Part 1 of Division 3 of Title 2 of the Government Code,the following shall apply:

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(1) The director shall implement this section, in whole or inpart, by means of provider bulletins, or other similar instructionswithout taking regulatory action.

(2) The State Public Health Officer may implement this sectionby means of all facility letters, or other similar instructions withouttaking regulatory action.

(q) Notwithstanding paragraph (1) of subdivision (m), if a finaljudicial determination is made by any state or federal court that isnot appealed, in any action by any party, or a final determinationis made by the administrator of the federal Centers for Medicareand Medicaid Services, that any payments pursuant to subdivisions(a) and (m), are invalid, unlawful, or contrary to any provision offederal law or regulations, or of state law, these subdivisions shallbecome inoperative, and for the 2011–12 rate year, the rate increaseprovided under subparagraph (A) of paragraph (4) of subdivision(c) of Section 14126.033 shall be reduced by the amounts describedin subdivision (j). For the 2012–13 rate year, any rate increaseshall be reduced by the amounts described in subdivisions (j) and(k). For the 2013–14 rate year, and for each subsequent rate year,any rate increase shall be reduced by the amounts described insubdivisions (j) and to (l), inclusive.


14126.027. (a) (1) The Director of Health Care Services, orhis or her designee, shall administer this article.

(2) The regulations and other similar instructions adoptedpursuant to this article shall be developed in consultation withrepresentatives of the long-term care industry, organized labor,seniors, and consumers.

(b) (1) The director may adopt regulations as are necessary toimplement this article. The adoption, amendment, repeal, orreadoption of a regulation authorized by this section is deemed tobe necessary for the immediate preservation of the public peace,health and safety, or general welfare, for purposes of Sections11346.1 and 11349.6 of the Government Code, and the departmentis hereby exempted from the requirement that it describe specificfacts showing the need for immediate action.

(2) The regulations adopted pursuant to this section may include,but need not be limited to, any regulations necessary for any ofthe following purposes:

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(A) The administration of this article, including the specificanalytical process for the proper determination of long-term carerates.

(B) The development of any forms necessary to obtain requiredcost data and other information from facilities subject to theratesetting methodology.

(C) To provide details, definitions, formulas, and otherrequirements.

(c) As an alternative to the adoption of regulations pursuant tosubdivision (b), and notwithstanding Chapter 3.5 (commencingwith Section 11340) of Part 1 of Division 3 of Title 2 of theGovernment Code, the director may implement this article, inwhole or in part, by means of a provider bulletin or other similarinstructions, without taking regulatory action, provided that nosuch bulletin or other similar instructions shall remain in effectafter July 31, 2013 2015. It is the intent of the Legislature thatregulations adopted pursuant to subdivision (b) shall be in placeon or before July 31, 2013 2015.

SEC. 93. Section 14126.028 is added to the Welfare andInstitutions Code, to read:

14126.028. (a) The Legislature finds and declares both of thefollowing:

(1) Section Q of the Minimum Data Set, Version 3.0, developedas part of the federal government’s nursing home quality initiative,uses a person-centered approach to ensure that all individualshave the opportunity to learn about home- and community-basedservices and have the opportunity to receive long-term careservices in the least restrictive setting possible.

(2) More community care services and support options andchoices are now available to meet the care preferences and needsin the least restrictive setting possible.

(b) Nursing facilities shall either meet the residents’ dischargeplanning and referral needs, or make referrals to a designatedlocal contact agency (LCA) as determined by the State Departmentof Health Care Services. The LCA is responsible for contactingreferred residents, and for providing information and counselingon available home- and community-based services. The LCA shallalso either assist directly with transition services or make referralsto organizations that assist with transition services, as appropriate.

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(c) It is the intent of the Legislature to ensure that nursing homeresidents who, during the Minimum Data Set, Version 3.0, SectionQ assessment, express interest in the possibility of receiving careand services in the community are appropriately referred bynursing facilities to the LCA, as appropriate.

(d) The State Department of Health Care Services, incollaboration with the State Department of Public Health, shall,by April 1, 2013, provide the Legislature an analysis of theappropriate sections of the Minimum Data Set, Version 3.0, SectionQ and nursing facilities referrals made to the LCA. This analysisshall also document the LCA’s response to referrals from nursingfacilities and the outcomes of those referrals.

(e) The State Department of Public Health and the StateDepartment of Health Care Services shall regularly, and at leastquarterly, meet with representatives from the long-term careindustry, organized labor, consumers, and consumer advocates toprovide updates and receive input on the planning for,implementation of, and progress of the skilled nursing facilityquality improvement program. To facilitate decisionmaking, theState Department of Public Health and the State Department ofHealth Care Services shall promptly convene this workgroup andprovide ongoing guidance to reach tangible outcomes forimplementation by no later than January 2013.


14126.033. (a) The Legislature finds and declares all of thefollowing:

(1) Costs within the Medi-Cal program continue to grow dueto the rising cost of providing health care throughout the state andalso due to increases in enrollment, which are more pronouncedduring difficult economic times.

(2) In order to minimize the need for drastically cuttingenrollment standards or benefits during times of economic crisis,it is crucial to find areas within the program where reimbursementlevels are higher than required under the standard provided inSection 1902(a)(30)(A) of the federal Social Security Act and canbe reduced in accordance with federal law.

(3) The Medi-Cal program delivers its services and benefits toMedi-Cal beneficiaries through a wide variety of health careproviders, some of which deliver care via managed care or other

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contract models while others do so through fee-for-servicearrangements.

(4) The setting of rates within the Medi-Cal program is complexand is subject to close supervision by the United States Departmentof Health and Human Services.

(5) As the single state agency for Medicaid in California, theState Department of Health Care Services has unique expertisethat can inform decisions that set or adjust reimbursementmethodologies and levels consistent with the requirements offederal law.

(b) Therefore, it is the intent of the Legislature for thedepartment to analyze and identify where reimbursement levelscan be reduced consistent with the standard provided in Section1902(a)(30)(A) of the federal Social Security Act and alsoconsistent with federal and state law and policies, including anyexemptions contained in the act that added this section, providedthat the reductions in reimbursement shall not exceed 10 percenton an aggregate basis for all providers, services, and products.

(c) This article, including Section 14126.031, shall be fundedas follows:

(1) General Fund moneys appropriated for purposes of thisarticle pursuant to Section 6 of the act adding this section shall beused for increasing rates, except as provided in Section 14126.031,for freestanding skilled nursing facilities, and shall be consistentwith the approved methodology required to be submitted to thefederal Centers for Medicare and Medicaid Services pursuant toArticle 7.6 (commencing with Section 1324.20) of Chapter 2 ofDivision 2 of the Health and Safety Code.

(2) (A) Notwithstanding Section 14126.023, for the 2005–06rate year, the maximum annual increase in the weighted averageMedi-Cal rate required for purposes of this article shall not exceed8 percent of the weighted average Medi-Cal reimbursement ratefor the 2004–05 rate year as adjusted for the change in the cost tothe facility to comply with the nursing facility quality assurancefee for the 2005–06 rate year, as required under subdivision (b) ofSection 1324.21 of the Health and Safety Code, plus the totalprojected Medi-Cal cost to the facility of complying with new stateor federal mandates.

(B) Beginning with the 2006–07 rate year, the maximum annualincrease in the weighted average Medi-Cal reimbursement rate

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required for purposes of this article shall not exceed 5 percent ofthe weighted average Medi-Cal reimbursement rate for the priorfiscal year, as adjusted for the projected cost of complying withnew state or federal mandates.

(C) Beginning with the 2007–08 rate year and continuingthrough the 2008–09 rate year, the maximum annual increase inthe weighted average Medi-Cal reimbursement rate required forpurposes of this article shall not exceed 5.5 percent of the weightedaverage Medi-Cal reimbursement rate for the prior fiscal year, asadjusted for the projected cost of complying with new state orfederal mandates.

(D) For the 2009–10 rate year, the weighted average Medi-Calreimbursement rate required for purposes of this article shall notbe increased with respect to the weighted average Medi-Calreimbursement rate for the 2008–09 rate year, as adjusted for theprojected cost of complying with new state or federal mandates.

(3) (A) For the 2010–11 rate year, if the increase in the federalmedical assistance percentage (FMAP) pursuant to the federalAmerican Recovery and Reinvestment Act of 2009 (ARRA)(Public Law 111-5) is extended for the entire 2010–11 rate year,the maximum annual increase in the weighted average Medi-Calreimbursement rate for the purposes of this article shall not exceed3.93 percent, or 3.14 percent, if the increase in the FMAP pursuantto ARRA is not extended for that period of time, plus the projectedcost of complying with new state or federal mandates. If theincrease in the FMAP pursuant to ARRA is extended at a differentrate, or for a different time period, the rate adjustment for facilitiesshall be adjusted accordingly.

(B) The weighted average Medi-Cal reimbursement rate increasespecified in subparagraph (A) shall be adjusted by the departmentfor the following reasons:

(i) If the federal Centers for Medicare and Medicaid Servicesdoes not approve exemption changes to the facilities subject to thequality assurance fee.

(ii) If the federal Centers for Medicare and Medicaid Servicesdoes not approve any proposed modification to the methodologyfor calculation of the quality assurance fee.

(iii) To ensure that the state does not incur any additionalGeneral Fund expenses to pay for the 2010–11 weighted averageMedi-Cal reimbursement rate increase.

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(C) If the maximum annual increase in the weighted averageMedi-Cal rate is reduced pursuant to subparagraph (B), thedepartment shall recalculate and publish the final maximum annualincrease in the weighted average Medi-Cal reimbursement rate.

(4) (A) Subject to the following provisions, for the 2011–12rate year, the increase in the Medi-Cal reimbursement rate for thepurpose of this article, for each skilled nursing facility as definedin subdivision (c) of Section 1250 of the Health and Safety Code,shall not exceed 2.4 percent of the rate on file that was applicableon May 31, 2011, plus the projected cost of complying with newstate or federal mandates. The percentage increase shall be appliedequally to each rate on file as of May 31, 2011.

(B) The weighted average Medi-Cal reimbursement rate increasespecified in subparagraph (A) shall be adjusted by the departmentfor the following reasons:



(iii) To ensure that the state does not incur any additionalGeneral Fund expenses to pay for the 2011–12 weighted averageMedi-Cal reimbursement rate increase.

(C) The department may recalculate and publish the weightedaverage Medi-Cal reimbursement rate increase for the 2011–12rate year if the difference in the projected quality assurance feecollections from the 2011–12 rate year, compared to the projectedquality assurance fee collections for the 2010–11 rate year, wouldresult in any additional General Fund expense to pay for the2011–12 rate year weighted average reimbursement rate increase.

(5) To the extent that rates are projected to exceed the adjustedlimits calculated pursuant to subparagraphs (A) to (D), inclusive,of paragraph (2) and, as applicable, paragraphs (3) and (4), thedepartment shall adjust each skilled nursing facility’s projectedrate for the applicable rate year by an equal percentage.

(6) (A) (i) Notwithstanding any other provision of law, andexcept as provided in subparagraph (B), payments resulting fromthe application of paragraphs (3) and (4), the provisions ofparagraph (5), and all other applicable adjustments and limits as

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required by this section, shall be reduced by 10 percent for datesof service on and after June 1, 2011, through July 31, 2012. Thisis a one-time reduction evenly distributed across all facilities toensure long-term stability of nursing homes serving the Medi-Calpopulation.

(ii) Notwithstanding any other provision of law, the directormay adjust the percentage reductions specified in clause (i), aslong as the resulting reductions, in the aggregate, total no morethan 10 percent.

(iii) The adjustments authorized under this subparagraph shallbe implemented only if the director determines that the paymentsresulting from the adjustments comply with paragraph (7).

(B) Payments to facilities owned or operated by the state shallbe exempt from the payment reduction required by this paragraph.

(7) (A) Notwithstanding any other provision of this section,the payment reductions and adjustments required by paragraph (6)shall be implemented only if the director determines that thepayments that result from the application of paragraph (6) willcomply with applicable federal Medicaid requirements and thatfederal financial participation will be available.

(B) In determining whether federal financial participation isavailable, the director shall determine whether the paymentscomply with applicable federal Medicaid requirements, includingthose set forth in Section 1396a(a)(30)(A) of Title 42 of the UnitedStates Code.

(C) To the extent that the director determines that the paymentsdo not comply with applicable federal Medicaid requirements orthat federal financial participation is not available with respect toany payment that is reduced pursuant to this section, the directorretains the discretion to not implement the particular paymentreduction or adjustment and may adjust the payment as necessaryto comply with federal Medicaid requirements.

(8) For managed care health plans that contract with thedepartment pursuant to this chapter and Chapter 8 (commencingwith Section 14200), except for contracts with the Senior CareAction Network and AIDS Healthcare Foundation, and to theextent that these services are provided through any of thosecontracts, payments shall be reduced by the actuarial equivalentamount of the reduced provider reimbursements specified in

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paragraph (6) pursuant to contract amendments or change orderseffective on July 1, 2011, or thereafter.

(9) (A) For the 2012–13 rate year, all of the following shallapply:

(i) The department shall determine the amounts of reducedpayments for each skilled nursing facility, as defined in subdivision(c) of Section 1250 of the Health and Safety Code, resulting fromthe 10-percent reduction imposed pursuant to clause (i) ofsubparagraph (A) of paragraph (6) for the period beginning onJune 1, 2011, through July 31, 2012.

(ii) For claims adjudicated through October 1, 2012, each skillednursing facility as defined in subdivision (c) of Section 1250 ofthe Health and Safety Code that is reimbursed under the Medi-Calfee-for-service program, shall receive the total payments calculatedby the department in clause (i), not later than December 31, 2012.

(iii) For managed care plans that contract with the departmentpursuant to this chapter or Chapter 8 (commencing with Section14200), except contracts with Senior Care Action Network andAIDS Healthcare Foundation, and to the extent that skilled nursingservices are provided through any of those contracts, paymentsshall be adjusted by the actuarial equivalent amount of thereimbursements calculated in clause (i) pursuant to contractamendments or change orders effective on July 1, 2012, orthereafter.

(B) Notwithstanding subparagraph (A), beginning on August1, 2012, through July 31, 2013, the department shall calculate ratespursuant to the reimbursement methodology provided in Section14126.023, except that pay the facility specific Medi-Calreimbursement rate calculated under this subparagraph shall notbe less than the Medi-Cal rate that was on file and applicable tothe specific skilled nursing facility on May 31 August 1, 2011,plus the projected cost of complying with new state or federalmandates. If the department was not able to increase the Medi-Calreimbursement rates by the maximum 2.4 percent as providedunder subparagraph (A) of paragraph (4) for the 2011–12 rate year,then the department may increase the rates for the 2012–13 rateyear by an amount equal to the difference between the actualpercentage increase in the 2011–12 rates and the maximum amountthat would have been received if the maximum 2.4 percent increasehad been implemented prior to and excluding any rate reduction

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implemented pursuant to clause (i) of subparagraph (A) ofparagraph (6) for the period beginning on June 1, 2011, to July31, 2012, inclusive, and adjusted for the projected costs ofcomplying with new state or federal mandates. These rates aredeemed to be sufficient to meet operating expenses.

(C) The weighted average Medi-Cal reimbursement rate increasespecified in subparagraph (B) shall be adjusted by the departmentif the federal Centers for Medicare and Medicaid Services doesnot approve any proposed modification to the methodology forcalculation of the skilled nursing quality assurance fee pursuantto Article 7.6 (commencing with Section 1324.20) of Chapter 2of Division 2 of the Health and Safety Code.

(D) The department shall set aside 1 percent of the weightedaverage Medi-Cal reimbursement rate, from which the departmentshall transfer the General Fund portion into the Skilled NursingFacility Quality and Accountability Special Fund, to be used forthe supplemental rate pool.

(E)(D) Notwithstanding any other provision of law, beginning on

January 1, 2013, Article 7.6 (commencing with Section 1324.20)of Chapter 2 of Division 2 of the Health and Safety Code, whichimposes a skilled nursing facility quality assurance fee, shall notbe enforceable against any skilled nursing facility unless eachskilled nursing facility is paid the rate provided for insubparagraphs (A) and (B). Any amount collected during the2012–13 rate year by the department pursuant to Article 7.6(commencing with Section 1324.20) of Chapter 2 of Division 2of the Health and Safety Code shall be refunded to each facilitynot later than February 1, 2013.

(F)(E) The provisions of this paragraph shall also be included as

part of a state plan amendment implementing the 2011–12 and2012–13 Medi-Cal reimbursement rates authorized under thisarticle.

(10) (A) Subject to the following provisions, for the 2013–14and 2014–15 rate years, the annual increase in the weightedaverage Medi-Cal reimbursement rate for the purpose of thisarticle, for each skilled nursing facility as defined in subdivision(c) of Section 1250 of the Health and Safety Code, shall be 3

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percent for each rate year, respectively, plus the projected cost ofcomplying with new state or federal mandates.

(B) (i) For the 2013–14 rate year, if there is a rate increase inthe weighted average Medi-Cal reimbursement rate, the departmentshall set aside 1 percent of the increase in the weighted averageMedi-Cal reimbursement rate, from which the department shalltransfer the nonfederal portion into the Skilled Nursing FacilityQuality and Accountability Special Fund, to be used for thesupplemental rate pool.

(ii) For the 2014–15 rate year, if there is a rate increase in theweighted average Medi-Cal reimbursement rate, the departmentshall set aside at least one-third of the weighted average Medi-Calreimbursement rate increase, up to a maximum of 1 percent, fromwhich the department shall transfer the nonfederal portion of thisamount into the Skilled Nursing Facility Quality and AccountabilitySpecial Fund.

(C) The weighted average Medi-Cal reimbursement rateincrease specified in subparagraph (A) shall be adjusted by thedepartment for the following reasons:



(10)(11) The director shall seek any necessary federal approvals for

the implementation of this section. This section shall not beimplemented until federal approval is obtained. When federalapproval is obtained, the payments resulting from the applicationof paragraph (6) shall be implemented retroactively to June 1,2011, or on any other date or dates as may be applicable.

(d) The rate methodology shall cease to be implemented afterJuly 31, 2013 2015.

(e) (1) It is the intent of the Legislature that the implementationof this article result in individual access to appropriate long-termcare services, quality resident care, decent wages and benefits fornursing home workers, a stable workforce, provider compliancewith all applicable state and federal requirements, andadministrative efficiency.

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(2) Not later than December 1, 2006, the Bureau of State Auditsshall conduct an accountability evaluation of the department’sprogress toward implementing a facility-specific reimbursementsystem, including a review of data to ensure that the new systemis appropriately reimbursing facilities within specified costcategories and a review of the fiscal impact of the new system onthe General Fund.

(3) Not later than January 1, 2007, to the extent information isavailable for the three years immediately preceding theimplementation of this article, the department shall provide baselineinformation in a report to the Legislature on all of the following:

(A) The number and percent of freestanding skilled nursingfacilities that complied with minimum staffing requirements.

(B) The staffing levels prior to the implementation of this article.(C) The staffing retention rates prior to the implementation of

this article.(D) The numbers and percentage of freestanding skilled nursing

facilities with findings of immediate jeopardy, substandard qualityof care, or actual harm, as determined by the certification surveyof each freestanding skilled nursing facility conducted prior to theimplementation of this article.

(E) The number of freestanding skilled nursing facilities thatreceived state citations and the number and class of citations issuedduring calendar year 2004.

(F) The average wage and benefits for employees prior to theimplementation of this article.

(4) Not later than January 1, 2009, the department shall providea report to the Legislature that does both of the following:

(A) Compares the information required in paragraph (2) to thatsame information two years after the implementation of this article.

(B) Reports on the extent to which residents who had expresseda preference to return to the community, as provided in Section1418.81 of the Health and Safety Code, were able to return to thecommunity.

(5) The department may contract for the reports required underthis subdivision.


14126.036. This article shall become inoperative on August 1,2013 2015, and as of January 1, 2014 2016, is repealed, unless a

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later enacted statute that is enacted before January 1, 2014 2016,deletes or extends that date.

SEC. 96. Section 14301.11 of the Welfare and Institutions Codeis amended to read:

14301.11. (a) The department shall use funds attributable tothe tax on Medi-Cal managed care plans imposed by Section 12201of the Revenue and Taxation Code for the purpose specified inparagraph (1) of subdivision (b) of Section 12201 of the Revenueand Taxation Code.


SEC. 97. Section 92 of Chapter 11 of the First ExtraordinarySession of the Statutes of 2011, is repealed.

Sec. 92. This act shall become inoperative if any of itsprovisions are amended or repealed.

SEC. 98. Notwithstanding Section 92 of Chapter 11 of the FirstExtraordinary Session of the Statutes of 2011, the provisions ofChapter 11 of the First Extraordinary Session of the Statutes of2011 shall not become inoperative upon the amendment or repealof those provisions made by this act.

SEC. 99. No reimbursement is required by this act pursuantto Section 6 of Article XIIIB of the California Constitution becausethe only costs that may be incurred by a local agency or schooldistrict will be incurred because this act creates a new crime orinfraction, eliminates a crime or infraction, or changes the penaltyfor a crime or infraction, within the meaning of Section 17556 ofthe Government Code, or changes the definition of a crime withinthe meaning of Section 6 of Article XIII B of the CaliforniaConstitution.

SECTION 1. Section 12098 of the Government Code isamended to read:

12098. (a) The Legislature finds and declares that it is in thepublic interest to aid, counsel, assist, and protect, insofar as ispossible, the interests of small business concerns in order topreserve free competitive enterprise and maintain a healthy stateeconomy.

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(b) In order to advocate the causes of small business and toprovide small businesses with the information they need to survivein the marketplace, there is created within the Governor’s Officeof Business and Economic Development the Office of SmallBusiness Advocate.

(c) The advocate shall post on his or her Internet Web site thename and telephone number of the Department of General Services’small business advocate, which is designated pursuant to Section14845 for the purpose of facilitating small businessprocurement-related issues, and each state agency’s small businessadvocate designated to serve as a liaison to small business supplierspursuant to Section 14846.

O

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Documents

SENATE BILL No. 301...2012/08/24 · AMENDED IN ASSEMBLY AUGUST 24, 2012 AMENDED IN ASSEMBLY JUNE 26, 2012 AMENDED IN ASSEMBLY MAY 31, 2011 AMENDED IN SENATE APRIL 7, 2011 SENATE