Consumer Advocates, Union, Cheer California's Health Plan Accountability Act

Civil penalties for illegal denial of coverage were increased from $2,500 to $25,000 per violation.

Advocates are cheering a new law that raises by tenfold the fines imposed against California payers for illegal denial of health insurance coverage.

The new law -- signed by Gov. Gavin Newsom in late September, and which takes effect on January 1, 2024 -- updates the antiquated fine structure in California under the Knox-Keene Act that had been in place since the 1970s, and which critics say left health insurers with a financial incentive to pay fines rather than provide care.

By increasing civil penalties from $2,500 to $25,000 per violation, the Health Plan Accountability Act (SB 858) will give regulators the necessary tools to make health plans deliver the care their patients are legally required to receive, says the bill's sponsor, state Sen. Scott Wiener, D-San Francisco.

"Californians rely on their health insurance to cover critical, even life-saving, care, and we must hold health plans accountable for following the rules and providing timely and adequate coverage," Wiener says. "California's low, outdated fine levels allow health plans to view these fines as a mere cost of doing business. SB 858 makes clear that when we pass a law requiring coverage, we mean it."

Diana Douglas, Health Access California director of policy and legislative advocacy, notes that health insurance premiums have quadrupled in the past 20 years, while fines haven't kept pace.

"For years health care corporations have been skirting consumer protection laws with minimal consequences. This new law will change the behavior of these health plans and ensure access to needed care for Californians," Douglas says.

The amended law notes that "other provisions of the Knox-Keene Act that include penalty amounts have not been updated since 1999 or 2000."

"Since then, health plan premiums in California for employer-sponsored coverage have quadrupled from one hundred sixty three dollars ($163) per month in 2000 to six hundred sixty-one dollars ($661) per month in 2020, according to the California Employer Health Benefits Survey," the amendment reads.

To avoid another decades-long delay in increasing the fines, starting in January 2028 and every five years after that the penalties will be adjusted "based on the average rate of change in premium rates for the individual and small group markets, and weighted by enrollment, since the previous adjustment," the law reads.

This amended law comes amid a nearly two-month-long walk out by mental health workers at Kaiser Permanente who claim that the massive health system has failed to fix chronic understaffing that is illegally delaying patient access.

The California's Department of Managed Health Care is reviewing Kaiser Permanente's mental healthcare access for potential violations of a law that went into effect in July ensuring that patients undergoing treatment for mental health or substance use disorders are getting follow-up within 10 business days of their prior appointment. 

National Union of Healthcare Workers President Sal Rosselli, whose union represents 16,000 caregivers in California, says the union strongly supports the bill "because our 4,000 members who provide mental health care at Kaiser Permanente have seen firsthand how the lack of an effective fine structure harms patients."

Rosselli says the state in 2013 fined Kaiser $4 million for failing to provide timely access to mental health care, but the HMO, which reported a $8.1 billion net profit last year, has continued to understaff its mental health clinics and flout state timely access laws.