January 09, 2011
Area(s) of Interest: Licensing & Regulatory Issues 


The Office of Administrative Law recently rejected regulation that would have legitimized "discount health plan" referral services. CMA vigorously fought these regulations, and has opposed a number of legislative attempts to legitimize these illegal referral services.

The Department of Managed Health Care (DMHC) proposed the regulations in February 2010, but OAL sided with CMA, ruling that the regulations are inconsistent with an opinion issued by the California Attorney General (AG) that concluded discount health plans are illegal. The AG in 2001 said that the discount health plan business model was illegal under California law, which prohibits a person or business from referring or recommending a person to a health care provider for any form of medical care or treatment for a profit.

Discount health plans charge patients a monthly membership fee in exchange for a list of physicians whose services they can supposedly access at a discounted rate. These plans are deceptive and harmful. The promised discounts are often illusory, and the physicians are often listed without their consent or knowledge.

Since 2008, CMA has opposed DMHC's attempts to legalize discount health plans in California via the regulatory process. Not only do we believe that they are illegal, but we also remain unconvinced that DMHC has jurisdiction to regulate them. From a public policy perspective, they bring little value to consumers, as the benefit they purport to provide is illusory at best.

The OAL ruling represents a significant victory for CMA, which will continue to monitor DMHC's response to the OAL ruling and be prepared to challenge any other efforts to legitimize discount health plans in California.