How do I know if my entity needs to be licensed by the Department of Managed Health Care?
Your health entity is required to be licensed as a health care service plan under the laws of the State of California if it meets the statutory definitions and business operations requiring it to be regulated by the Department of Managed Health Care (Department). Your first step is to review the laws and regulations that pertain to licensure. This information is available in the Knox-Keene Health Care Service Plan Act (Knox-Keene Act or Act), codified at Health and Safety Code section 1340, et seq., and Title 28 of the California Code of Regulations (CCR) (Rules). Specific relevant sections include: Health and Safety Code § 1345(f) and (o), and §§ 1349 through 1356.2 and California Code of Regulations, Title 28, §§ 1300.49, 1300.51 through 1300.52.4.
It is advisable, although not required, that you seek outside legal counsel to assist with the licensure process.
Where can I find the Knox Keene Act and California Code of Regulations?
Laws and regulations relating to health care service plans in California are available at the Laws & Regulation page.
You may also purchase a hardcopy of the law at LexisNexis.
How much does it cost to get licensed?
Costs vary; however, the amount for initial licensure is not to exceed twenty-five thousand dollars ($25,000). See section 1356 of the Health and Safety Code pertaining to fees. In addition to the application fee, there are additional financial requirements that need to be satisfied prior to licensure, e.g., tangible net equity.
Who do I talk to if I have questions?
If, after reviewing the relevant sections of the law, you have further questions please provide written questions to the Department's Office of Plan Licensing at duty.counsel@DMHC.ca.gov.
Please be aware, while the Office of Plan Licensing may provide you with information and answer general questions, staff are prohibited from providing you with legal advice. Legal advice is the application of law to a specific set of facts. If your question requires legal advice, you should seek independent legal counsel from a licensed attorney competent to represent you.
What does the licensing process entail?
Once an entity determines it is appropriate or necessary to become licensed under the Knox Keene Act, the entity should contact the Department to set a pre-filing conference. The application process involves working with the Department to bring plan documents and operations into compliance with the Act and Rules to ensure a stable health care delivery system.
Applications are reviewed by Department staff to determine whether the entity meets network, financial, medical management, and administrative/contracting requirements, in addition to determining whether the entity proposes to provide benefits and services consistent with requirements of the Act.
The process requires the entity to file documents demonstrating compliance with the Act, and to respond to Department comments, or questions, including making changes to those documents if necessary. If the Department determines the entity meets the requirements to be licensed as a health care service plan, the Department issues a formal license to the health care service plan.
Be aware: licensure is an ongoing process. Plans are required to continually update the plan license through Notice of Material Modification, Amendment, and Report/Other filings as the plan makes changes to its license or to demonstrate continued compliance with the Act and Rules. See Sections 1352-1355.
What is a Pre-filing Conference?
Entities seeking licensure should schedule a pre-filing conference with the Department to discuss the process and receive information important to submitting a thorough application filing. A pre-filing conference may be scheduled by submitting a pre-filing conference request form to the Office of Plan Licensing at Duty.Counsel@DMHC.ca.gov. A pre-filing conference is a meeting (virtual or in person) with Department's divisions prior to submitting a filing to receive instructions on what/how to file, and to address any questions/concerns from the applicant and the Department. The requesting entity should develop an agenda for the meeting.
After the pre-filing conference, if the entity decides to move forward with the application for licensure, the Department works with the applicant to provide access to the eFiling portal, where required documents should be submitted in a timely and complete fashion.
How long does it take to get licensed?
Timeframes vary, but entities interested in submitting an application for licensure should estimate between at least 12-18 months for a complete process.
Is an attorney required?
Whether you hire an attorney to represent you and assist your entity with the licensing process is completely at your discretion. Entities are not required to be represented by counsel at the pre-filing conference or during the application process. However, many entities find obtaining counsel to navigate the regulatory requirements of licensure to be helpful.
What exhibits will I need to submit?
California Code of Regulations, title 28, section 1300.51 describes most of exhibits required to be submitted as part of your entity’s license application. During the review process, the Department may require additional documents to be filed to demonstrate regulatory compliance.
What is eFiling?
eFiling is the electronic portal the Department uses to receive and review application filings, as well as filings required to demonstrate ongoing compliance with the Act and Rules. Access to eFiling is typically granted to entities that attend a pre-filing conference and intend to submit an application for licensure.
What happens if a health care service plan is out of compliance with the Knox-Keene Act?
Through filing review, financial and medical surveys, as well as through complaints submitted to the Department's Help Center, the Department may determine a health care service plan is out of compliance with the Act and Rules. This can result in a referral to the Office of Enforcement, which has the right to asses fines against the plan and represents the Department in settlements and court. See Sections 1386-1389 of the Health and Safety Code for more information.
What happens with the fines assessed against a health plan?
The fines assessed are deposited into the Managed Care Administrative Fines and Penalties Fund, which supports the Medically Underserved Account for Physicians in the Health Professions Education Fund (a loan repayment program for physicians who serve medically underserved populations) and the Health Care Services Plan Fines and Penalties Fund. See Sections 1341.4 and 1341.45 of the Health and Safety Code for more information.
Does the enrollee get the money?
The Department does not represent the enrollee in enforcement actions against a health care service plan. Thus, the enrollee does not receive any portion of either standard fees assessed through the licensing process or fines levied against a plan through an enforcement action. Enforcement investigations are not a substitute for civil litigation or any remedies an enrollee may seek against a plan. However, at times enforcement actions require plans to pay back mischarged or miscalculated monies to enrollees.
As a health care service plan, am I required to file reports under Senate Bill 260 (1999)?
Every health care service plan that contracts with a risk-bearing organization shall submit a quarterly survey listing all its contracting organizations, including the organizations’ names, addresses, contact persons, telephone numbers, and number of enrollees assigned to the organization as of the last day of the quarter being reported and not more than forty five (45) days after the close of each subsequent calendar quarter.
Along with the quarterly report, every plan shall submit an annual survey report due by May 15 of each year, containing the specific information as required under California Code of Regulations, title 28, section 1300.75.4.3.
The reports are filed via the Web Portal Login in the Plan Financial Solvency Reporting application.
As a health care service plan, what are my reporting obligations under Assembly Bill 1455 (2000)?
Within 60 days of the close of each calendar quarter, the health care service plan shall disclose to the Department: (A) any emerging patterns of claims payment deficiencies; (B) whether any of its claims processing organizations or capitated providers failed to timely and accurately reimburse 95% of its claims (including the payment of interest and penalties); and, (C) the corrective action that has been undertaken over the preceding two quarters.
Within 15 days of the close of each calendar year, beginning with the 2004 calendar year, the plan shall submit to the Director, as part of the Annual Plan Claims Payment and Dispute Resolution Mechanism Report information disclosing the claims payment compliance status of the plan and each of its claims processing organizations and capitated providers. The Annual Plan Claims Payment and Dispute Resolution Mechanism Report shall include claims payment and dispute resolution data received for each fiscal year (October 1 through September 30).
The reports are filed via the Web Portal Login in the Claims Settlement Practices & Dispute Resolution Report application.
Last revised: March 28, 2024