Initiative Measure to Be Submitted Directly to the Voters
The Attorney General of California has prepared the following title and summary of the chief purposes and points of the proposed measure:
"ARBITRATION. HEALTH CARE DISPUTES. INITIATIVE STATUTE.
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:
Many arbitrators depend on repeat business for a significant portion of their income. HMOs arbitrate much more frequently than plaintiffs, so can and do maintain dossiers on arbitrators. They know who has ruled against them, and can refuse to use them for future cases. This threat of being blackballed by the HMOs represents a significant conflict of interest for an arbitrator, and an incentive to benefit the HMO, in order to safeguard his own future income. A judge's or jury member's income can not be affected by his decision, as an arbitrator's can.
The enrollee is less able to get needed information from the HMO than in a trial. HMOs can drag out the proceedings to enrollee's detriment. A frequent arbitrator, inured to malpractice, is less likely to reflect community sensibilities to the same degree as a jury of citizens. Arbitration actually results in lower awards than trials. It is precisely this unfairness which is the reason that HMOs push so aggressively for arbitration.
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 trial.
Since written arbitration decisions are generally less comprehensive than those of lawsuits, and since arbitrators are not required to follow the law, as judges are, the Department of Managed Health Care is not able to review arbitrated disputes for regulatory issues which may not have been addressed by the arbitrator.
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.
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:
Section 1363.1
(a) Health care service plans (hereinafter "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 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 plan claims against enrollees, including but not limited to subrogation, as well as to enrollee claims against the plan.
(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 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.
(d) Post-dispute binding arbitration agreements must comply with the requirements of this Act, mutatis mutandis.
(b) Insurance Code Section 10127.14 is added to read as follows:
Section 10127.14.
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:
Section 1373.20
(a) All disputes arbitrated more than thirty days after the Effective Date of this Act, between health care service plans (herinafter "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 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 disqualifying a judicial officer, as set forth in Section 170.1 of the Code of Civil Procedure. Peremptory challenges shall not be allowed.
(e) The 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 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 the current annual salary of a superior court judge divided by Two Thousand (2000) plus reasonable travel expenses. No additional fee or gift may be given to any arbitrator by any party.
SECTION 4 [Reporting of decisions and settlements]
Health and Safety Code Section 1373.21 is amended to read as follows:
Section 1373.21
(a) All health care service plans must provide to the Director of the Department of Managed Health Care, within 30 days of completion by decision or settlement, a complete report of all arbitrations and litigations with enrollees. These reports must indicate the names of all parties, the amount, other relevant terms, and the reasons for any award rendered, the name of the arbitrator or arbitrators, providers, health plan employees, and health facilities involved, as well as the complete written decision and a list of all evidence submitted to the arbitrator or judge, whether admitted by him or not.
(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 Code §1368.02(c)(3)(B).
SECTION 5 [Miscellaneous]
Health and Safety Code Section 1373.22 is added to read as follows:
(a) Interpretation and Precedence
(b) Amendment
(c) Effective Date
(d) Legal Challenges
(e) Severability
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 conflict with or limit the most expansive interpretation of these provisions for the protection of every person.