Making Sense of Managed Care Regulation in California

Debra L. Roth and Deborah Reidy Kelch

This report examines the history behind differences in health insurance regulation under California's Department of Managed Health Care and Department of Insurance, as well as how regulatory requirements differ based on carrier and product characteristics.

December 2001

In California, regulation and oversight of health insurance is split between two governmental departments. The Department of Managed Health Care (DMHC) primarily regulates health maintenance organizations (HMOs), while the California Department of Insurance (CDI) has jurisdiction over traditional health insurance.

The 1999 legislation establishing DMHC (AB 78) transferred regulatory responsibility for HMOs from the Department of Corporations (DOC) to DMHC. AB 78 also required DMHC to report to the Legislature by December 31, 2001, on the feasibility of transferring regulatory jurisdiction of CDI-regulated health insurers to DMHC.

The two regulatory models, and their deficiencies and strengths, are the result of history, changing political judgments and circumstances, and sweeping marketplace trends over a half-century. While the differences are rooted in distinct statutory frameworks and generally apply to discrete product types, there have been many twists and turns along the way. Today, it can be difficult to understand why one regulator rather than another has jurisdiction over a particular product or company.

This report considers the political history, recent statutory and regulatory requirements, and the predominant types of health insurance products available in today's market. The analysis provides background and context in order to support an informed discussion as policymakers and stakeholders evaluate options within the context of the AB 78 report.

The full report is available under Document Downloads below.