For Reference: The Original Blue Ribbon Advisory Panel on Kaiser Permanente Arbitration
Kaiser Permanente's Blue Ribbon Report and Initiative Measure to Be Submitted Directly to the Voters
VOLUNTARY HEALTH PLAN ARBITRATION ACT OF 2004
written and prepared by Dr. Harvey Frey
Related articles at:
The following is also posted at: http://www.harp.org/og/arbitinit.htm
Initiative Measure to Be Submitted Directly to the Voters
VOLUNTARY HEALTH PLAN ARBITRATION ACT OF 2004
SECTION 1. The People of the State of California find as follows:
Many health care service plans (HMOs) will not sell coverage unless the client agrees in advance to mandatory binding arbitration. But, under current law, arbitration is much more unfair to enrollees than an action in a real court, if they have a claim against their HMO. The reasons are:
Enrollees are currently forced to sign away many of their Constitutional Due Process rights in order to get coverage.
Arbitrators don't have to apply or follow the law. They can make gross errors about the facts. Their decisions cannot be appealed even if they make obvious errors.
Arbitrators are more
likely to be biased toward
the HMO than a judge
or a jury would be.
The procedures of
arbitration are not as fair to
enrollees as those
of a court trial.
enrollees more than equivalent
court trials. If an
enrollee can't pay the higher costs,
and the HMO won't, the enrollee can never get his case heard. Under
current law, enrollees must
often advance the costs of arbitration administration and arbitrators'
compensation before their case
can be heard. His or her share of the costs of a three arbitrator panel
may be in the range of $10,000 to
$20,000. The comparable cost to file a complaint in the California
Superior Court is less than $200,
plus jury fees and court reporter fees if the case goes to
Currently, the law allows the enrollee's constitutional right to a trial to be signed away by employers to save themselves money. This should not be allowed.
proceedings are more secret than
trials, inhibiting regulatory
oversight, and preventing other
enrollees from learning about bad HMOs and doctors.
Arbitration may not
decrease conflict in the long
Decisions are not reported and are not binding in future cases, so
the same issues may be arbitrated
again and again in the absence of binding precedent. Injunctions, which
might prevent repetitive
malpractice, are unavailable to arbitrators as remedies. The lower
awards typically given by arbitrators
are less likely to discourage repetitive malpractice.
Judges gain personal advantage from arbitration, which may cause them to overlook its potential for injustice. When salaried, their workload is eased by diverting cases out of the judicial system. They may look forward to a comfortable retirement, funded by acting as private arbitrators themselves. It is therefore to their financial benefit to insure a steady stream of cases to arbitration, in spite of the clearcut detriments to plaintiffs outlined above.
SECTION 2 [Arbitration must be voluntary]
(a) Health and Safety Code Section 1363.1 is amended to read as follows:
(a) Health care service plans must not require, as a condition of plan membership, that potential enrollees agree to binding arbitration or any other dispute resolution procedure which would require the enrollee to waive the right to a trial in a court of law.
(b) Any health care service plan that allows enrollees to voluntarily agree to pre-dispute binding arbitration, or to waive their right to a trial in a court of law, must provide, in clear and understandable language, a disclosure that meets all of the following conditions:
(1) It must clearly state that choosing arbitration is optional, and that full coverage will be provided even if the enrollee does not choose arbitration.
(2) It must clearly state whether the binding arbitration is used to settle claims of medical malpractice, coverage and/or utilization review disputes.
(3) It must be reciprocal, i.e.: it must apply to HMO claims against enrollees, including but not limited to subrogation, as well as to enrollee claims against the HMO.
(4) It must appear as a separate article in the agreement issued to the employer group or individual subscriber and must be prominently displayed on the enrollment form signed by each subscriber or enrollee.
(5) It must be expressed substantially in the wording provided in subdivision (a) of Section 1295 of the Code of Civil Procedure.
(c) The binding arbitration agreement must be individually signed by the individual enrollee, or in appropriate cases, by his parent, guardian, or conservator. The enrollee shall not be bound by the signature of a representative of the group contracting with a health care service plan, nor by an agent of an employer. The disclosure required by this section must be displayed immediately before the signature line provided for the individual enrollee.
binding arbitration agreements
must comply with the
requirements of this Act,
(b) Insurance Code Section 10127.14 is added to read as follows:
All contracts for health or disability insurance must comply with the requirements of Health and Safety Code § 1363.1, relating to pre-dispute arbitration agreements, Health and Safety Code § 1373.20 relating to arbitration procedures, Health and Safety Code § 1373.21 relating to reporting, and Health and Safety Code § 1373.22.
SECTION 3 [Arbitration Procedures]
(a) Health and Safety Code Section 1373.19 is hereby repealed:
(b) Health and Safety Code Section 1373.20 is amended to read as follows:
(a) All disputes arbitrated more than thirty days after the Effective Date of this Act, between health care service plans and their enrollees shall be subject to the following rules.
(b) The Department of Managed Health Care must establish a panel of arbitrators acceptable to the Director, by thirty days after the Effective Date of this Act.
(c) When an arbitration is initiated, the health care service plan must inform the Department, which must assign, within 15 days, by a mechanical or electronic randomization procedure, one neutral arbitrator to hear the case.
(d) The Arbitrator
may be challenged by the
parties only for such cause
as would be valid for
(e) The health care service plan must be responsible for all arbitration expenses greater than those of a corresponding court proceeding.
(f) Pre-hearing discovery procedures must be made available to enrollees, as in court proceedings.
(g) Procedural safeguards must be provided, at least some subset of the Rules of Civil Procedure, to be determined by the Director.
(h) While the arbitrator may relax procedural rules, he must apply substantive law.
(i) Judicial appeals from the arbitrator’s decision must be available for abuse of discretion or legal or factual error, on the same grounds as from that of a court.
(j) At the completion of the arbitration, the arbitrator must provide a written decision, naming the parties and witnesses, outlining the evidence and law relied upon, including evidence proffered but not admitted, and describing any awards, and the rationale therefore.
(k) Every health plan contract providing for binding arbitration must provide that any breach of the contractual or statutory arbitration rules by the plan, or its missing any contractual arbitration time requirements by thirty days or more, shall constitute waiver of the plan’s right to enforce arbitration.
(l) The hourly fee
for an arbitrator assigned by
the Department pursuant
to this section shall be
SECTION 4 [Reporting of decisions and settlements]
Health and Safety Code Section 1373.21 is amended to read as follows:
(a) All health plans
must provide to the Director
of the Department
of Managed Health Care,
(b) All documents relating to the arbitration or litigation, including but not limited to written decisions, deposition testimony, expert testimony, the record of the proceedings and all documents produced in discovery must be preserved by the plan for five years, and provided to the Director within thirty days of his written demand within that time.
(c) The Director or the Department of Managed Health Care must not make public any enrollee or patient-identified medical information without the written consent of the enrollee or patient, except as mandated by law.
(d) Unless confidentiality is required by law, court and arbitration records are presumed to be open.
(e) Any party may seek a court order to seal the records obtained by DMHC, subject to the qualification of 2001 California Rules of Court 243.1, i.e.: if the court expressly finds that:
(1) There exists an overriding interest that overcomes the right of public access;
(2) The overriding interest supports sealing the record;
(3) A substantial probability exists that the overriding interest will be prejudiced if the record is not sealed;
(4) The proposed sealing is narrowly tailored; and
(5) No less restrictive means exist to achieve the overriding interest.
(f) The Department may disclose the identity of physicians involved in actions against plans, under the same conditions the Medical Board would apply, as required by Business and Professions Code §803.1.
(g) Subject to sections (c),(d),(e),and (f) above, the Director must make public, in the Department's reading room and on the Internet, all records, including discovery materials used or submitted as a basis for adjudication, relating to arbitrations, litigations or settlements.
(h) These records may
be used in compiling the
"report cards" required
by Health and Safety
SECTION 5 [Miscellaneous]
Health and Safety Code Section 1373.22 is added to read as follows:
(a) Interpretation and Precedence
"This Act" consists
of Health and Safety Code
sections 1363.1, 1373.20,
1373.21 and 1373.22,
and Insurance Code Section 10127.14.
This Act shall be
liberally construed and applied
to promote its underlying
purpose, which is to
preserve the access of HMO enrollees to the courts. The provisions
of this Act shall take precedence
over any statute, regulation or decision in Common Law that may
with or limit the most expansive
interpretation of these provisions for the protection of every
No provision of this
Act may be amended by the
Legislature except to
further the purpose of that provision
by a statute passed in each house by roll call vote entered in the
journal, two-thirds of the membership
concurring, or by a statute that becomes effective only when approved
by the electorate. No amendment
by the Legislature shall be deemed to further the purposes of this
Act unless it furthers the purpose of the
specific provision of this Act that is being amended.
(c) Effective Date
The provisions of
this Act shall become effective
upon passage of the
Act and shall apply to all acts or
practices performed or contracts entered into from that date
(d) Legal Challenges
It is the will of the
People of California that
any legal challenge
to the validity of any provision of this
Act shall be acted upon by the Courts on an expedited basis and any
fees or costs incurred by the
taxpayers in connection with the defense of the Act shall be promptly
repaid to the taxpayers by any
person challenging the Act.
If any provision of
this Act or the application
thereof to any person
or circumstance is held invalid,
that invalidity shall not affect any other provision or application
of the Act which can be given effect
without the invalid provision or application, and to this end the
of this Act are severable.