20250AB__011696CHP INTRODUCED 2025-01-08 AMENDED_SENATE 2025-06-24 PASSED_ASSEMBLY 2025-06-27 PASSED_SENATE 2025-06-27 ENROLLED 2025-06-27 CHAPTERED 2025-06-30 APPROVED 2025-06-30 FILED 2025-06-30 2025 AB CHP CHP 0 Introduced by Committee on Budget (Assembly Members Gabriel (Chair), Addis, Ahrens, Alvarez, Bennett, Bonta, Connolly, Fong, Haney, Hart, Jackson, Lee, Muratsuchi, Ortega, Patel, Petrie-Norris, Quirk-Silva, Ramos, Rogers, Schiavo, Schultz, Sharp-Collins, Solache, Ward, and Wilson) LEAD_AUTHOR ASSEMBLY Committee on Budget Assembly Members Gabriel (Chair), Addis, Ahrens, Alvarez, Bennett, Bonta, Connolly, Fong, Haney, Hart, Jackson, Lee, Muratsuchi, Ortega, Patel, Petrie-Norris, Quirk-Silva, Ramos, Rogers, Schiavo, Schultz, Sharp-Collins, Solache, Ward, and Wilson

An act to amend Sections 1276.4, 1276.66, 1280.15, 1280.19, 1342.2, 1374.55, 1385.002, 1385.004, 1385.006, 1417.2, 1418.22, 120956, 120960, 127672, 127672.9, 127825, and of, to amend the heading of

Article 6.1 (commencing with

Section 1385.001) of

Chapter 2.2 of Division of, to amend and repeal Sections 1265.9 and 1385.005 of, to add Sections 1356.3, 1385.008, 1385.009, 1385.0010, 1385.0011, 1385.0012, 1385.0013, 1385.0014, 1385.0015, 1385.0016, 1385.0017, 1385.0018, 1385.0019, 1385.0020, 1385.0021, 1385.0022, 1385.0023, 1385.0024, 1385.0025, 1385.026, and 127673.05 to, and to repeal and add Sections 1385.001 and of, the Health and Safety Code, to amend

Section 10119.6 of, and to add

Section 10125.2 to, the Insurance Code, to amend

Section of the Penal Code, and to amend Sections 5961.2, 14006, 14006.01, 14006.15, 14006.2, 14006.5, 14006.6, 14007.5, 14007.65, 14007.8, 14015, 14126.033, 14132, 14132.36, 14132.171, 14165.57, 14184.200, 14197.7, and 14199.128 of, to amend and repeal Sections 14000, 14005.11, 14005.20, 14005.40, 14005.401, 14006.3, 14006.4, 14007.9, 14009.6, 14009.7, 14011, 14013.3, 14051, 14051.5, 14105.33, 14126.024, 14133.85, 14148.5, and 14166.17 of, to amend, repeal, and add Sections 14005.62, 14105.436, and 14132.100 of, to add Sections 14107.115 and 14132.994 to, to repeal

Section 14006.1 of, to repeal

Chapter 16.5 (commencing with

Section 18998) of Part of Division of, and to repeal and add

Section 14105.38 of, the Welfare and Institutions Code, and to amend

Section of

Chapter of the Statutes of 2024, relating to health, and making an appropriation therefor, to take effect immediately, bill related to the budget. health, and making an appropriation therefor, to take effect immediately, bill related to the budget Health omnibus trailer bill.

(1) Existing law provides for the licensure and regulation of health facilities, including general acute care hospitals, acute psychiatric hospitals, and special hospitals, by the State Department of Public Health. Existing law requires the department to adopt regulations that establish minimum, specific, and numerical licensed nurse-to-patient ratios by licensed nurse classification and by hospital unit for all general acute care hospitals, acute psychiatric hospitals, and special hospitals.

Existing law requires the regulations adopted by the department for acute psychiatric hospitals that are not operated by the State Department of State Hospitals to take into account the special needs of the patients served in the psychiatric units. Existing law generally makes a willful violation of those licensing provisions a crime.

Under existing law, on and after July 1, 2015, any acute psychiatric hospital that submits a completed application and is operated by the State Department of State Hospitals may be approved by the State Department of Public Health to offer, as a supplemental service, an Enhanced Treatment Program (ETP) that meets certain conditions, including sufficient and documented evaluation of violence risk of the patient. Existing law requires an ETP to meet certain requirements relating to staffing and patient room features and to implement certain policies and procedures on patient care.

Under existing law, those ETP provisions remain in effect for each pilot ETP until January of the 5th calendar year after each pilot ETP site has admitted its first patient, and the provisions are repealed as of January of the 5th calendar year after each pilot ETP site has admitted its first patient. Existing law requires the State Department of State Hospitals to post a declaration on its internet website regarding the timing of that repeal condition. This bill would delete the above-described provisions regarding ETP repeal. The bill would instead repeal those provisions on January 1, 2030, as specified.

To the extent that the bill would extend the operation of certain ETP sites, and by extending ETP requirements, the violation of which would be a crime, the bill would impose a state-mandated local program.

This bill would specify regulations for acute psychiatric hospitals not operated by the State Department of State Hospitals are deemed to be an emergency and necessary for the immediate preservation of the public peace, health and safety, and general welfare, and would require the department to adopt emergency regulations for these facilities no later than January 31, 2026, and permanent regulations thereafter, as specified. The bill would authorize the department to readopt the emergency regulations, as specified.

The bill would authorize the emergency regulations to include, among other things, staffing standards specific to acute psychiatric hospitals.

(2) Existing law requires the State Department of Public Health to use the direct care staffing level data it collects to determine whether a skilled nursing facility has met its nursing hours or direct care service hours per patient per day requirements, as specified. Existing law requires the department to assess specified administrative penalties on skilled nursing facilities that fail to meet these requirements and establishes an administrative process that skilled nursing facilities may use to appeal determinations or assessments made by the department.

Existing law continues in the Special Deposit Fund the Skilled Nursing Facility Minimum Staffing Penalty Account and requires the administrative penalties described above to be deposited into that account. Under existing law, the account is continuously appropriated to the department to support the implementation of these provisions. This bill would remove the Skilled Nursing Facility Minimum Staffing Penalty Account from the Special Deposit Fund.

The bill would, notwithstanding any other law, authorize the State Controller to use the funds in the Skilled Nursing Facility Minimum Staffing Penalty Account for cash flow loans to the General Fund, as specified.

(3) Existing law requires a clinic, health facility, home health agency, or hospice to prevent unlawful or unauthorized access to, and use or disclosure of, patients’ medical information, as defined. Existing law requires the clinic, health facility, home health agency, or hospice to report any unlawful or unauthorized access to, or use or disclosure of, a patient’s medical information to the State Department of Public Health and to the affected patient or the patient’s representative, as specified.

Existing law authorizes the department to assess administrative penalties for violation of these provisions and gives the department discretion to consider all factors when determining the amount of a penalty. Existing law requires these and other specified penalty moneys to be deposited into the Internal Departmental Quality Improvement Account, which is established within the Special Deposit Fund. Upon appropriation by the Legislature, existing law requires the moneys in the account to be expended for internal quality improvement activities in the Licensing and Certification Program.

This bill would remove the Internal Departmental Quality Improvement Account from the Special Deposit Fund and, notwithstanding specified provisions of law, require all interest earned on the moneys deposited in the account to be retained in the account. The bill would also, notwithstanding any other law, authorize the State Controller to use the funds in the Internal Departmental Quality Improvement Account for cash flow loans to the General Fund, as specified.

(4) Existing law also establishes the Internal Health Information Integrity Quality Improvement Account. Existing law requires all administrative fines assessed by the State Department of Public Health for unlawful disclosures of confidential medical information, as specified, to be deposited in that account. Upon appropriation by the Legislature, existing law requires money in the account to be used for purposes of supporting quality improvement activities of the department.

The bill would, effective July 1, 2025, abolish the Internal Health Information Integrity Quality Improvement Account and transfer all moneys in the account to the Internal Departmental Quality Improvement Account. The bill would require all remaining balances, assets, liabilities, and encumbrances of the Internal Health Information Integrity Quality Improvement Account as of July 1, 2025, to be transferred to, and become part of, the Internal Departmental Quality Improvement Account.

The bill would require the administrative fines assessed for unlawful disclosures of confidential medical information described above to be deposited in the Internal Departmental Quality Improvement Account. The bill would, upon appropriation by the Legislature, require money in the account to be used for purposes of supporting quality improvement activities of the Licensing and Certification Program. The bill would also, notwithstanding any other provision of law, authorize the State Controller to use the funds in the account for cash flow loans to the General Fund, as specified.

(5) Existing law provides for the licensure of long-term health care facilities by the State Department of Public Health. Existing law establishes the State Health Facilities Citation Penalties Account and the Federal Health Facilities Citation Penalties Account in the Special Deposit Fund into which moneys from civil penalties for violations of state and federal law, respectively, are deposited.

Existing law requires the moneys in those accounts to be used, upon appropriation by the Legislature, in accordance with state and federal law for the protection of health or property of residents of long-term health care facilities, as specified. This bill would remove the State Health Facilities Citation Penalties Account and the Federal Health Facilities Citation Penalties Account from the Special Deposit Fund.

(6) Existing law requires a skilled nursing facility, by January 1, 2026, to have an alternative source of power, as defined, to protect resident health and safety, as defined, for no fewer than hours during any type of power outage. Existing law imposes specific compliance requirements based on whether a skilled nursing facility uses a generator as its alternative source of power, or batteries or a combination of batteries in tandem with a renewable electrical generation facility.

This bill would instead require a skilled nursing facility to comply with these provisions on or after January 1, 2026, commencing on the first day of the Medi-Cal skilled nursing facility rate year for which the State Department of Health Care Services publishes a written notice on its internet website that the Legislature has appropriated sufficient funds for the express purpose of providing an add-on to the Medi-Cal skilled nursing facility per diem rate for the projected Medi-Cal cost compliance, as specified.

The bill would authorize the State Department of Health Care Services to implement these requirements by means of provider bulletins, policy letters, or other similar instructions, without taking regulatory action.

(7) Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care, and makes a willful violation of the act a crime. Existing law provides for the regulation of health insurers by the Department of Insurance. Existing law requires a pharmacy benefit manager under contract with a health care service plan to, among other things, register with the Department of Managed Health Care.

This bill would instead require a pharmacy benefit manager contracting with a health care service plan or health insurer to secure a license from the Department of Managed Health Care on or after January 1, 2027, or the date on which the department has established the licensure process, whichever is later. The bill would establish application requirements, and would require a pharmacy benefit manager applying for licensure to reimburse the Director of the Department of Managed Health Care for the actual cost of processing the application, including overhead, up to an amount not to exceed $25,000.

The bill would require a pharmacy benefit manager to submit financial statements to the department at specified intervals, and would require those statements and other proprietary information to be kept confidential, as specified. The bill would authorize the director to suspend or revoke a pharmacy benefit manager license, but would provide that, once issued, a license remains in effect until revoked or suspended.

The bill would authorize a pharmacy benefit manager whose license has been revoked, or suspended for more than one year to petition the director to reinstate the license, and would authorize the director to prescribe a fee, not to exceed $500, for the actual cost of processing the petition.

The bill would create the Pharmacy Benefit Manager Fund in the State Treasury, into which fees, fines, penalties, and reimbursements collected from pharmacy benefit managers would be deposited, except fines and administrative penalties for specified acts or omissions would be deposited into the newly created Pharmacy Benefit Manager Administrative Fines and Penalties Fund in the State Treasury. Because a violation of these provisions would be a crime, the bill would impose a state-mandated local program.

Existing law requires the Department of Health Care Access and Information to implement and administer the Health Care Payments Data System to learn about and seek to improve public health, population health, social determinants of health, and the health care system. This bill would require a pharmacy benefit manager to provide specified data to the Department of Health Care Access and Information regarding drug pricing, fees, and other information.

The bill would require a licensed health care service plan to pay an annual fee for the 2025–26 and 2026–27 fiscal years for the reasonably necessary expenses of the Department of Health Care Access and Information to fund the Health Care Payments Data Program.

The bill would also require a licensed pharmacy benefit manager to pay amounts twice per year to fund the actual and reasonably necessary expenses of the department to implement pharmacy benefit manager licensing and the actual and reasonably necessary expenses of the Department of Health Care Access and Information pertaining to data reporting by pharmacy benefit managers. The bill would require the Health Care Payments Data Program advisory committee to include pharmacy benefit managers.

(8) Existing law requires large group health care service plan contracts and disability insurance policies issued, amended, or renewed on or after July 1, 2025, to provide coverage for the diagnosis and treatment of infertility and fertility services, including a maximum of completed oocyte retrievals with unlimited embryo transfers, as specified. Existing law also requires small group health care service plan contracts and disability insurance policies issued, amended, or renewed on or after July 1, 2025, to offer coverage for the diagnosis and treatment of infertility and fertility services.

This bill would instead require compliance with the above-described provisions by large and small group health care service plan contracts and disability insurance policies issued, amended, or renewed on or after January 1, 2026. The bill would authorize the Director of the Department of Managed Health Care and the Insurance Commissioner to issue guidance regarding these provisions until January 1, 2027, and would require the departments to consult with each other and stakeholders in issuing that guidance.

(9) Existing law authorizes the State Public Health Officer, to the extent allowable under federal law, and upon the availability of funds, to expend moneys from the continuously appropriated AIDS Drug Assistance Program (ADAP) Rebate Fund for a program to cover the costs of prescribed ADAP formulary medications for the prevention of HIV infection and other specified costs.

Existing law authorizes the State Department of Public Health, to the extent that the activities are an allowable use of funds, to spend up to $23,000,000 from the ADAP Rebate Fund to implement certain programs, including an allocation of $5,000,000 annually for years, beginning on July 1, 2024, to the Transgender, Gender Nonconforming, and Intersex (TGI) Wellness and Equity Fund to fund services related to care and treatment for eligible individuals living with HIV and AIDS.

Under existing law, expenditure from the ADAP Rebate Fund also includes an allocation of $5,000,000, in the 2024–25 fiscal year, available until June 30, 2027, to distribute funding to a community-based organization to make internal and external condoms available, if Senate Bill of the 2023–24 Regular Session becomes effective, aimed at preventing the transmission of HIV and sexually transmitted infections. This bill would additionally allow the moneys allocated to the TGI Wellness and Equity Fund to fund services related to HIV prevention, and would have the allocation begin instead on July 1, 2025.

With regard to funding for condoms, the bill would remove the condition that Senate Bill become effective, and would authorize the allocation until June, 30, 2028. This bill would authorize the State Department of Public Health to spend up to $75,000,000 from the ADAP Rebate Fund to support current or eligible HIV services and programs, as specified. The bill would specify the allocation of those funds, including by authorizing up to $65,000,000 of that $75,000,000 to be spent to supplement or fund services, programs, or initiatives for which federal funding has been reduced or eliminated.

By adding to the purposes of the ADAP Rebate Fund, and by extending the terms of certain allocations, the bill would make an appropriation.

(10) Existing law requires the Office of Health Equity within the State Department of Public Health to administer the TGI Wellness and Equity Fund for purposes of funding grants to create programs, or funding existing programs, focused on coordinating trans-inclusive health care for individuals who identify as transgender, gender nonconforming, or intersex. This bill would instead refer only to the State Department of Public Health, without specifying the office, for purposes of administering the fund.

Existing law authorizes use of the moneys in the fund, upon appropriation, to fund grants for certain purposes, including grants to TGI-serving organizations for the purpose of facilitating therapeutic arts programs, such as dancing, painting, or writing. This bill would restructure that specific purpose by having the grants be made available to TGI-serving organizations for facilitating evidence-based therapeutic arts programs. The bill would make conforming changes to related provisions.

(11) Existing law, the California Affordable Drug Manufacturing Act of 2020, requires the California Health and Human Services Agency (CHHSA) to enter into partnerships, in consultation with other state departments as necessary, to, among other things, increase patient access to affordable drugs. Existing law authorizes CHHSA to enter into partnerships regarding over-the-counter naloxone products to allow the development, manufacturing, or distribution of those products by an entity that is authorized to do so under federal or state law.

This bill, subject to an appropriation by the Legislature, would additionally authorize CHHSA to enter into partnerships to increase competition, lower prices, and address supply shortages for generic or brand name drugs to address emerging health concerns, for the development, production, procurement, or distribution of vaccines, as specified, and for the manufacture, purchase, or distribution of medical supplies or medical devices.

(12) Existing law requires, when a defendant pleads not guilty by reason of insanity, that a jury determine whether the defendant was sane or insane at the time the offense was committed. Under existing law, if a defendant is found to be not guilty by reason of insanity, the court is required to commit the person to the State Department of State Hospitals or any other appropriate public or private treatment facility, as specified.

If a defendant is confined in a state hospital or other treatment facility as an inpatient, existing law requires the medical director of the facility to submit a report, at 6-month intervals, to the court and the community program director of the county of commitment setting forth the status and progress of the defendant. This bill would instead require the above-described report to be submitted every months.

(13) Existing law establishes the Medi-Cal program, which is administered by the State Department of Health Care Services, under which qualified low-income individuals receive health care services. The Medi-Cal program is, in part, governed by, and funded pursuant to, federal Medicaid program provisions. Existing law sets forth a

schedule of benefits under the Medi-Cal program, including prescribed drugs subject to the Medi-Cal list of contract drugs. Existing law requires a specified health care service plan contract, including a Medi-Cal managed care plan, to cover the costs for COVID-19 diagnostic and screening testing, as provided, regardless of whether the services are provided by an in-network or out-of-network provider. Existing law prohibits this coverage from being subject to copayment, coinsurance, deductible, or any other form of cost sharing.

Existing law also prohibits a health care service plan from imposing prior authorization or any other utilization management requirements on COVID-19 diagnostic and screening testing. Existing law requires the State Department of Health Care Services to seek any federal approval it deems necessary to implement those provisions regarding COVID-19.

This bill would require a Medi-Cal managed care plan, as defined, to cover COVID-19 screening, testing, immunizations, and therapeutics in accordance with applicable statutes, regulations, all plan letters, the Medi-Cal provider manual, Medi-Cal managed care plan contracts with the department, as specified, and other guidance. The bill would exclude Medi-Cal managed care plans from the above-described prohibitions against cost sharing and utilization management by a health care service plan for COVID-19 diagnostic and screening testing.

The bill would remove the above-described requirement on the State Department of Health Care Services to seek federal approval.

(14) Existing law sets forth a

schedule of benefits covered under the Medi-Cal program, including hospice service that is certified under the federal Medicare Program, subject to utilization controls. Under existing law, coverage is available only to the extent that no additional net program costs are incurred. Under existing law, prior authorization is not required for hospice services, with exceptions in the case of any admission that violates federal law or for inpatient hospice services. This bill would make the above-described restriction on prior authorization inoperative on July 1, 2026, and would repeal it as of January 1, 2027.

Under the bill, hospice services would be covered under Medi-Cal in accordance with Medicare requirements and subject to utilization controls, while maintaining the condition on net program costs. The bill would condition implementation of this coverage on the availability of federal financial participation and receipt of any necessary federal approvals.

(15) Existing law authorizes the department to enter into contracts with manufacturers of single-source and multiple-source drugs, on a bid or nonbid basis, for drugs from each major therapeutic category.

Existing law requires all pharmaceutical manufacturers to provide to the department a state rebate equal to an amount not less than 10% of the average manufacturer price based on Medi-Cal utilization data for any drug products that have been added to the Medi-Cal list of contract drugs under provisions relating to treatment of acquired immunodeficiency syndrome (AIDS) or an AIDS-related condition or to treatment of cancer.

Existing law authorizes the department to restrict the availability of the drug products of certain manufacturers by requiring prior authorization when the department has not received a timely rebate payment, but authorizes a beneficiary to continue obtaining those drugs if the beneficiary qualifies for continuing care status.

Continuing care status requires a beneficiary to have been taking the drug at the time the manufacturer is placed on prior authorization status and the department to receive a claim for the drug with a date of service that is within days prior to the date the manufacturer was placed on prior authorization status.

This bill would delete the above-described provisions on continuing care status and, instead, beginning January 1, 2026, would authorize beneficiaries to continue to receive drugs previously prescribed but subject to prior authorization if their pharmacy provider or prescriber initiates a prior authorization request that is subsequently approved by the department.

This bill would, effective January 1, 2026, for pharmaceutical manufacturers renewing or entering new state rebate agreements, require that the rebate amount be in an amount not less than 20% of the average manufacturer price if the federal rebate is less than 50% of that price, or an amount not less than 15% of that price if the federal rebate is 50% or greater of that price.

Under existing law, for purposes of the above-described drug products, if the pharmaceutical manufacturer does not enter into a supplemental rebate agreement within days after the addition of the drug to the Medi-Cal list of contract drugs, the manufacturer is required to provide to the department a state rebate equal to not less than 20% of the average manufacturer price, as specified. This bill would increase the state rebate minimum threshold to not less than 25% of the price. The bill would make a conforming change to a related provision.

Existing law establishes the Medi-Cal Drug Rebate Fund, into which nonfederal moneys collected by the department under the above-described rebate provisions are deposited. Under existing law, funds deposited into the Medi-Cal Drug Rebate Fund are continuously appropriated to the department for purposes of funding the nonfederal share of health care services for children, adults, seniors, and persons with disabilities enrolled in the Medi-Cal program. By increasing the state rebate minimum threshold for the above-described drug products, the bill would make an appropriation.

Existing law requires the department, when it determines that a drug should be removed from the list of contract drugs, to conduct a public hearing to receive comment on the impact of removing the drug. This bill would, instead of a public hearing, require the department to provide individual notice to impacted beneficiaries that the drug is only obtainable through the prior authorization process. The bill would require that the notice include a description of the beneficiary’s right to a fair hearing and would encourage the beneficiary to consult a physician.

The bill would require the department to also provide provider notice about the removal of the drug, as specified.

(16) Existing law requires, with exceptions, the temporary placement of a Medi-Cal provider under payment suspension upon receipt of a credible allegation of fraud for which an investigation is pending under the Medi-Cal program against the provider. Existing law sets forth related provisions regarding the department’s collection of overpayments, appeal procedures afforded to the provider, offsetting of the overpayments to satisfy audit or appeal findings if the findings are against the provider, and return of the overpayments if the findings are in favor of the provider, as specified.

Existing law authorizes the lifting of a payment suspension upon resolution of an investigation for fraud or abuse. This bill would create the Medi-Cal Anti-Fraud Special Deposit Fund for the deposit of outstanding Medi-Cal payments intercepted as a result of a payment suspension.

Under the bill, moneys would be continuously appropriated and allocated, but would remain in the fund until the department lifts the suspension, after which the department would be authorized to return the intercepted Medi-Cal payments to the provider or to offset the payments against any liabilities or restitution owed by the provider to the department.

(17) Existing law, the Medi-Cal Long-Term Care Reimbursement Act, requires the department to implement a facility-specific ratesetting system for certain skilled nursing facilities using a cost-based reimbursement rate methodology. Existing law requires the department, subject to any necessary federal approvals, for managed care rating periods that begin between January 1, 2023, and December 31, 2026, inclusive, to establish and implement the Workforce and Quality Incentive Program.

Under that program, a network provider furnishing skilled nursing facility services to a Medi-Cal managed care enrollee is authorized to earn performance-based directed payments from the Medi-Cal managed care plan with which they contract, as specified, in addition to other certain payments. Existing law repeals the act on January 1, 2028, as specified. This bill would instead apply the program to managed care rating periods that begin between January 1, 2023, and December 31, 2025, inclusive.

The bill would make the provisions relating to the program inoperative on January 1, 2026, and authorize the department to conduct all necessary closeout activities applicable to any managed care rating period before January 1, 2026. The bill would repeal those provisions on January 1, 2027, or on the date that the Director of Health Care Services certifies to the Secretary of State that all necessary closeout activities have been completed, whichever is later, but no later than January 1, 2028.

The bill would delete a related provision regarding the supplementation of funds available for payments made under the program, as described above, for the calendar year.

(18) Existing law, subject to an appropriation by the Legislature for this purpose, expands the

schedule of benefits to include an annual cognitive health assessment for Medi-Cal beneficiaries who are years of age or older if they are otherwise ineligible for a similar assessment as part of an annual wellness visit under the Medicare Program. Existing law makes a Medi-Cal provider eligible to receive the payment for this benefit only if they comply with certain requirements, including completing cognitive health assessment training, as specified.

Existing law requires the department, by January 1, 2024, and every years thereafter, to consolidate and analyze data related to the benefit, and to post information on the utilization of, and payment for, the benefit on its internet website. This bill would delete the requirement that a Medi-Cal provider complete specified cognitive health assessment training to be eligible to receive the payment. The bill would also delete the requirement that the department consolidate and analyze data and post information related to the benefit every years.

(19) Existing law authorizes the Director of Health Care Services to terminate a contract or impose sanctions if the director finds that an entity that contracts with the department for the delivery of health care services, known as a contractor, fails to comply with contract requirements, state or federal law or regulations, or the state plan or approved waivers, or for other good cause. Existing law includes various entities as part of the definition of “contractor” for purposes of these provisions, including Medi-Cal managed care plans and Drug Medi-Cal organized delivery systems.

This bill would add, to the list of contractors subject to the above-described provisions, entities under the Home- and Community-Based Alternatives (HCBA) Waiver and the Program of All-Inclusive Care for the Elderly (PACE), as specified.

(20) Under existing law, to the extent that federal financial participation is available, federally qualified health center (FQHC) services and rural health clinic (RHC) services are covered Medi-Cal benefits. Under existing law, FQHC and RHC services are reimbursed on a per-visit basis, as defined. This bill would, commencing July 1, 2026, require reimbursement for FQHC and RHC services that are eligible for federal financial participation.

The bill would revise the definition of visit for purposes of this provision to mean a face-to-face encounter between an FQHC or RHC patient and specified health professionals that is eligible for federal financial participation or an encounter between an FQHC or RHC patient and specified health professionals using specified modalities, including, among others, video synchronous interaction, when services delivered through those modalities meet the applicable standard of care and are eligible for federal participation.

(21) Existing law requires the department to establish the Nondesignated Public Hospital Intergovernmental Transfer Program to provide supplemental payments to nondesignated public hospitals in a manner that maximizes federal financial participation in the resulting supplemental payments.

Existing law authorizes a transferring entity, as defined, to agree to transfer its intergovernmental transfer (IGT) allocation, as defined, to the state in accordance with the program, and requires the state to deposit the transferred funds into the Medi-Cal Inpatient Payment Adjustment Fund, which is a continuously appropriated fund. Existing law authorizes the state to retain 9% of each intergovernmental transfer amount to reimburse the department, or transfer to the General Fund, for the administrative costs of operating the program and for the benefit of Medi-Cal children’s health care programs.

This bill would require a nondesignated public hospital participating in the program to reimburse the department for specified administrative costs as a condition of receiving the above-described supplemental payments. Beginning with the 2026–27 fiscal year and every fiscal year thereafter, the bill would require the state to retain a percentage of each IGT amount associated with interim supplemental payments such that the total amount retained is equal to the projected administrative cost to the department, as specified.

The bill would require the department to project the specified administrative costs each fiscal year to determine the percentage to be retained. To the extent the bill would continuously appropriate additional moneys, the bill would make an appropriation.

(22) Existing law establishes the Medi-Cal Hospital/Uninsured Care Demonstration Project Act, which revises hospital reimbursement methodologies under the Medi-Cal program to maximize the use of federal funds consistent with federal Medicaid law and stabilize the distribution of funding for hospitals that provide care to Medi-Cal beneficiaries and uninsured patients. Existing law provides funding, in supplementation of Medi-Cal reimbursement, to various hospitals, including nondesignated public hospitals, in accordance with certain provisions relating to disproportionate share hospitals.

Existing law establishes the Nondesignated Public Hospital Supplemental Fund, a continuously appropriated fund, in the State Treasury, and requires all amounts in the fund for a project year in excess of the amount necessary to make specified supplemental payments to be available for negotiation by the California Medical Assistance Commission, as provided.

For the 2025–26 fiscal year, this bill would require additional supplemental payments to be made to nondesignated public hospitals that meet certain criteria such that the specified payments made are equal to the prescribed amount transferred from the General Fund plus the applicable amount of federal financial participation that is available for the nonfederal share of payments. The bill would require the remaining amounts in the fund to be used for supplemental payments to nondesignated public hospitals pursuant to a methodology developed by the department, as specified.

The bill would make these provisions inoperative on June 30, 2026, abolish the fund effective December 31, 2028, and repeal these provisions on July 1, 2030. The bill would authorize the department to conduct any necessary and remaining duties, as specified, even after these provisions become inoperative.

(23) The federal Medicaid program prohibits payment to a state for medical assistance furnished to an alien who is not lawfully admitted for permanent residence or otherwise permanently residing in the United States under color of law. Existing state law extends Medi-Cal eligibility for the full scope of Medi-Cal benefits to an individual who does not have satisfactory immigration status if they are otherwise eligible for those benefits, as specified.

This bill would instead exclude an individual who is years of age or older and does not have satisfactory immigration status from dental benefits under Medi-Cal, as specified and would, beginning no sooner than July 1, 2027, require individuals who are not pregnant and who are to years of age, inclusive, to pay a monthly premium of $30, subject to certain exceptions. The bill would make an individual who is years of age or older and does not have satisfactory immigration status and who applies for Medi-Cal on or after January 1, 2026, eligible only for pregnancy-related services and emergency medical treatment.

The bill would delay the implementation of certain provisions until the director makes specified communications to the Department of Finance. The bill would make other conforming changes. Because counties are required to make Medi-Cal eligibility determinations and this bill would alter Medi-Cal eligibility, the bill would impose a state-mandated local program.

(24) Existing law prohibits the use of an assets or resources test for individuals whose income eligibility for Medi-Cal is determined based on the application of a modified adjusted gross income (MAGI). Existing federal law authorizes a state to establish a non-MAGI standard for determining the eligibility of certain populations. Existing law, subject to receipt of any necessary federal approvals, prohibits the use of resources, including property or other assets, to determine Medi-Cal eligibility for applicants or beneficiaries whose eligibility is not determined using the MAGI-based financial methods.

Existing law requires the department to seek federal authority to disregard all resources as authorized by the flexibilities provided pursuant to federal law. This bill would, commencing on January 1, 2026, remove the above-described prohibition on the use of resources for determining Medi-Cal eligibility in non-MAGI cases and implement a disregard of $130,000 in nonexempt property for a case with one member and $65,000 for each additional household member, up to a maximum of members, as specified.

As part of conforming changes, the bill would make certain provisions inoperative on January 1, 2026, and would repeal them as of January 1, 2027. The bill would make certain inoperative provisions operative for purposes of reinstating references to resources or assets. The bill would make certain additional changes to the above-described provisions, including modifying the timeline of certain regulations and changing certain reporting requirements.

By creating new duties for counties relating to the consideration of resources for determining Medi-Cal eligibility, the bill would impose a state-mandated local program.

(25) Existing law establishes the Children and Youth Behavioral Health Initiative, administered by the California Health and Human Services Agency and its departments, with the purpose of transforming the state’s behavioral health system into an innovative ecosystem in which all children and youth years of age and younger, regardless of payer, are screened, supported, and served for emerging and existing behavioral health needs.

Existing law requires, subject to an appropriation, that the initiative include, among other things, grants to qualified entities to support implementation of the initiative for behavioral health services in schools and investments for behavioral health workforce, education, and training. Existing law authorizes the Department of Health Care Access and Information to award competitive grants to qualified entities and individuals to expand the supply of behavioral health counselors, coaches, peer supports, and other allied health care providers serving children and youth, including those at schoolsites.

Existing law defines a “behavioral health coach,” for purposes of those provisions, to mean a new category of behavioral health provider who, among other things, (

A) is trained specifically to help address the unmet mental health and substance use needs of children and youth, (

B) receives appropriate supervision from licensed staff, and (

C) has training and qualifications, including psychoeducation, system navigation, crisis deescalation, safety planning, coping skills, and motivational interviewing. This bill would revise these provisions to replace the term “behavioral health coach” with “certified wellness coach.” The bill would specify that a certified wellness coach receives appropriate supervision and coordination from staff who are licensed or who hold a pupil personnel services credential or school nurse services credential. The bill would add crisis referral to, and remove crisis deescalation and safety planning from, the list of a certified wellness coach’s training and qualifications.

(26) Existing law, as a component of the Children and Youth Behavioral Health Initiative, authorizes the State Department of Health Care Services to award competitive grants to entities that it deems qualified to, among other things, expand access to licensed medical and behavioral health professionals, counselors, peer support specialists, community health workers, and behavioral health coaches serving children and youth. This bill would revise that provision to replace the term “behavioral health coaches” with “certified wellness coaches.”

(27) Existing law establishes a Department of Health Care Access and Information within the California Health and Human Services Agency. Existing law requires the department, on or before July 1, 2023, to develop and approve statewide requirements for community health worker certificate programs and to approve the curriculum required for programs to certify community health workers. Existing law requires the department, on or before July 1, 2023, to review, approve, or renew evidence-based curricula and community-defined curricula for core competencies, specialized programs, and training.

Existing law requires an organization that seeks approval or renewal of a community health worker certificate program to submit a community health worker certificate program plan, submit to periodic reviews, and submit annual community health worker certificate program reports, as specified. Existing law authorizes the department, in consultation with stakeholders, to request that an individual who is either enrolled in, or who has completed, a community health worker certificate program submit specified workforce data.

Existing law defines “community health worker” to, among other things, include nonlicensed health workers with the qualifications developed pursuant to these provisions. This bill would repeal these provisions. The bill would make conforming changes to provisions defining “community health worker” by cross-reference to the above-described definition.

(28) Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest. This bill would make legislative findings to that effect.

(29) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that with regard to certain mandates no reimbursement is required by this act for a specified reason. With regard to any other mandates, this bill would provide that, if the Commission on State Mandates determines that the bill contains costs so mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

(30) This bill would declare that it is to take effect immediately as a bill providing for appropriations related to the Budget Bill. MAJORITY YES YES YES YES NO NO NO NO NO YES The people of the State of California do enact as follows:

SECTION

Section 1265.9 of the Health and Safety Code is amended to read: 1265.9. (

a) On and after July 1, 2015, any acute psychiatric hospital that submits a completed application and is operated by the State Department of State Hospitals may be approved by the State Department of Public Health to offer, as a supplemental service, an Enhanced Treatment Program (ETP) that meets the requirements of this section,

Section of the Welfare and Institutions Code, and applicable regulations. (b)

(1) Prior to the admission of the first patient into the last pilot ETP, the State Department of Public Health may adopt emergency regulations in accordance with the Administrative Procedure Act (Chapter 3.5 (commencing with

Section 11340) of Part of Division of Title of the Government Code) to implement this section. The adoption of an emergency regulation under this paragraph is deemed to address an emergency, for purposes of Sections 11346.1 and 11349.6 of the Government Code, and the State Department of Public Health is hereby exempted for this purpose from the requirements of subdivision (

b) of

Section 11346.1 of the Government Code.

(2) As an alternative to paragraph (1) and notwithstanding the rulemaking provisions of Administrative Procedures Act (Chapter 3.5 (commencing with

Section 11340) of Part of Division of Title of the Government Code), the director of the State Department of Public Health may implement this section, in whole or in part, by means of an all facility letter or other similar instruction. (

c) An ETP shall meet all of the following requirements:

(1) Maintain a staff-to-patient ratio of one to five.

(2) Limit each room to one patient.

(3) Each patient room shall allow visual access by staff hours per day.

(4) Each patient room shall have a toilet and sink in the room.

(5) Each patient room door shall have the capacity to be locked externally. The door may be locked when clinically indicated and determined to be the least restrictive treatment environment for the patient’s care and treatment pursuant to

Section of the Welfare and Institutions Code, but shall not be considered seclusion, as defined in subdivision (

e) of

Section 1180.1, for purposes of Division 1.5 (commencing with

Section 1180).

(6) Provide emergency egress for ETP patients.

(7) In the event that seclusion or restraints, as defined in

Section 1180.1, are used in an ETP, all state licensing and regulations shall be followed.

(8) A full-time independent patients’ rights advocate who provides patients’ rights advocacy services shall be assigned to each ETP. (

d) The ETPs shall adopt and implement policies and procedures necessary to encourage patient improvement, recovery, and a return to a standard treatment environment, and to create identifiable facility requirements and benchmarks. The policies and procedures shall also provide all of the following:

(1) Criteria and process for admission into an ETP pursuant to

Section of the Welfare and Institutions Code.

(2) Clinical assessment and review focused on behavior, history, high risk of most dangerous behavior, and clinical need for patients to receive treatment in an ETP as the least restrictive treatment environment.

(3) A process for identifying an ETP along a continuum of care that will best meet the patient’s needs, including least restrictive treatment environment.

(4) A process for creating and implementing a treatment plan with regular clinical review and reevaluation of placement back into a standard treatment environment and discharge and reintegration planning as specified in subdivision (

e) of

Section of the Welfare and Institutions Code. (

e) Patients who have been admitted to an ETP shall have the same rights guaranteed to patients not in an ETP with the exception set forth in paragraph (5) of subdivision (c). (

f) For purposes of paragraph (1) of subdivision (c), “staff” means licensed nurses and psychiatric technicians providing direct patient care. (

g) This

section shall remain in effect only until January 1, 2030, and as of that date is repealed, unless a later enacted statute that is enacted before January 1, 2030, deletes or extends that date.

SEC.

Section 1276.4 of the Health and Safety Code is amended to read: 1276.4. (

a) By January 1, 2002, the State Department of Public Health shall adopt regulations that establish minimum, specific, and numerical licensed nurse-to-patient ratios by licensed nurse classification and by hospital unit for all health facilities licensed pursuant to subdivision (

a) or (

f) of

Section 1250. No later than July 31, 2027, or one and one-half years after adoption of emergency regulations pursuant to subdivision (k), whichever is sooner, the State Department of Public Health shall adopt regulations pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with

Section 11340) of Part of Division of Title of the Government Code), as specified in subdivision (k), that establish minimum, specific, and numerical licensed nurse-to-patient ratios for health facilities licensed pursuant to subdivision (

b) of

Section 1250. The State Department of Public Health shall adopt these regulations in accordance with the department’s licensing and certification regulations as stated in Sections 70053.2, 70215, and of Title of the California Code of Regulations, and the professional and vocational regulations in

Section 1443.5 of Title of the California Code of Regulations. The department shall review these regulations five years after adoption and shall report to the Legislature regarding any proposed changes. Flexibility shall be considered by the department for rural general acute care hospitals in response to their special needs.

As used in this subdivision, “hospital unit” means a critical care unit, burn unit, labor and delivery room, postanesthesia service area, emergency department, operating room, pediatric unit, step-down/intermediate care unit, specialty care unit, telemetry unit, general medical care unit, subacute care unit, and transitional inpatient care unit. The regulation addressing the emergency department shall distinguish between regularly scheduled core staff licensed nurses and additional licensed nurses required to care for critical care patients in the emergency department. (

b) These ratios shall constitute the minimum number of registered and licensed nurses that shall be allocated. Additional staff shall be assigned in accordance with a documented patient classification system for determining nursing care requirements, including the severity of the illness, the need for specialized equipment and technology, the complexity of clinical judgment needed to design, implement, and evaluate the patient care plan and the ability for self-care, and the licensure of the personnel required for care. (c) “Critical care unit” as used in this

section means a unit that is established to safeguard and protect patients whose severity of medical conditions requires continuous monitoring, and complex intervention by licensed nurses. (

d) All health facilities licensed under subdivision (a), (b), or (

f) of

Section shall adopt written policies and procedures for training and orientation of nursing staff. (

e) No registered nurse shall be assigned to a nursing unit or clinical area unless that nurse has first received orientation in that clinical area sufficient to provide competent care to patients in that area, and has demonstrated current competence in providing care in that area. (

f) The written policies and procedures for orientation of nursing staff shall require that all temporary personnel shall receive orientation and be subject to competency validation consistent with Sections 70016.1 and of Title of the California Code of Regulations. (

g) Requests for waivers to this

section that do not jeopardize the health, safety, and well-being of patients affected and that are needed for increased operational efficiency may be granted by the department to rural general acute care hospitals meeting the criteria set forth in

Section 70059.1 of Title of the California Code of Regulations. (

h) In case of conflict between this

section and any provision or regulation defining the scope of nursing practice, the scope of practice provisions shall control. (

i) The regulations adopted by the department shall augment and not replace existing nurse-to-patient ratios that exist in regulation or law for the intensive care units, the neonatal intensive care units, or the operating room. (

j) The regulations adopted by the department shall not replace existing licensed staff-to-patient ratios for hospitals operated by the State Department of State Hospitals. (k)

(1) The regulations adopted by the department for health facilities licensed under subdivision (

b) of

Section that are not operated by the State Department of State Hospitals shall take into account the special needs of the patients served in the psychiatric units.

(2) The department shall adopt emergency regulations pursuant to this subdivision no later than January 31, 2026. The department may readopt any emergency regulation authorized by this subdivision that is the same as, or substantially equivalent to, an emergency regulation previously adopted under this subdivision.

(3) The adoption of emergency regulations pursuant to this subdivision and two readoptions of emergency regulations shall be deemed an emergency and necessary for the immediate preservation of the public peace, health, safety, or general welfare. Emergency regulations and readoptions authorized by this

section shall be exempt from review by the Office of Administrative Law. The emergency regulations and the readoptions authorized by this

section shall be submitted to the Office of Administrative Law for filing with the Secretary of State. Notwithstanding any other provision of law, the adoption and readoptions of these emergency regulations shall be exempt from the requirements of subdivision (

b) of

Section 11346.1 of the Government Code and each shall remain in effect for no more than days.

(4) The emergency regulations adopted pursuant to this subdivision may include, but are not limited to, the following: (

A) Staffing standards, including nurse-to-patient, specific to acute psychiatric hospitals. (

B) Requirements used to determine appropriate staffing based on patient acuity and care needs. (

C) Requirements that the State Department of Public Health deems necessary or relevant to staffing policies and procedures to promote patient safety. (

l) The department may take into consideration the unique nature of the University of California teaching hospitals as educational institutions when establishing licensed nurse-to-patient ratios. The department shall coordinate with the Board of Registered Nursing to ensure that staffing ratios are consistent with the Board of Registered Nursing approved nursing education requirements. This includes nursing clinical experience incidental to a work-study program rendered in a University of California clinical facility approved by the Board of Registered Nursing provided there will be sufficient direct care registered nurse preceptors available to ensure safe patient care.

SEC.

Section 1276.66 of the Health and Safety Code is amended to read: 1276.66. (a)

(1) The Skilled Nursing Facility Minimum Staffing Penalty Account is hereby established in the State Treasury. The account shall contain all moneys deposited pursuant to subdivision (b).

(2) Notwithstanding

Section of the Government Code or any other law, the Skilled Nursing Facility Minimum Staffing Penalty Account is hereby continuously appropriated, without regard to fiscal years, to the State Department of Public Health to support the implementation of this section. (b)

(1) The State Department of Public Health shall use the direct care staffing level data it collects to determine whether a skilled nursing facility has met the nursing hours or direct care service hours per patient per day requirements pursuant to

Section 1276.5 or 1276.65, as applicable. (2) (

A) The State Department of Public Health shall assess a skilled nursing facility, licensed pursuant to subdivision (

c) of

Section 1250, an administrative penalty if the State Department of Public Health determines that the skilled nursing facility fails to meet the nursing hours or direct care service hours per patient per day requirements pursuant to

Section 1276.5 or 1276.65, as applicable, as follows: (

i) Twenty-five thousand dollars ($25,000) if the facility fails to meet the requirements for percent or more of the audited days up to percent. (ii) Fifty thousand dollars ($50,000) if the facility fails to meet the requirements for over percent or more of the audited days. (B) (

i) If the skilled nursing facility does not dispute the determination or assessment, the penalties shall be paid in full by the licensee to the State Department of Public Health within days of the facility’s receipt of the notice of penalty and deposited into the Skilled Nursing Facility Minimum Staffing Penalty Account. (ii) The State Department of Public Health may, upon written notification to the licensee, request that the State Department of Health Care Services offset any moneys owed to the licensee by the Medi-Cal program or any other payment program administered by the State Department of Health Care Services to recoup the penalty provided for in this section. (C) (

i) If a facility disputes the determination or assessment made pursuant to this paragraph, the facility shall, within days of the facility’s receipt of the determination and assessment, simultaneously submit a request for appeal to both the State Department of Health Care Services and the State Department of Public Health. A request for an appeal may be made by a facility based upon a determination that does not result in an assessment.

The request shall include a detailed statement describing the reason for appeal and include all supporting documents the facility will present at the hearing. (ii) Within days of the State Department of Public Health’s receipt of the facility’s request for appeal, the State Department of Public Health shall submit, to both the facility and the State Department of Health Care Services, its responsive arguments and all supporting documents that the State Department of Public Health will present at the hearing. (

D) The State Department of Health Care Services shall hear a timely appeal and issue a decision as follows: (

i) The hearing shall commence within days from the date of receipt by the State Department of Health Care Services of the facility’s timely request for appeal. (ii) The State Department of Health Care Services shall issue a decision within days from the date of receipt by the State Department of Health Care Services of the facility’s timely request for appeal. (iii) The decision of the State Department of Health Care Services’ hearing officer, when issued, shall be the final decision of the State Department of Public Health. (

E) The appeals process set forth in this paragraph shall be exempt from

Chapter 4.5 (commencing with

Section 11400), and

Chapter 5 (commencing with

Section 11500), of Part of Division of Title of the Government Code. The provisions of Sections and do not apply to appeals under this paragraph. (

F) If a hearing decision issued pursuant to subparagraph (

D) is in favor of the State Department of Public Health, the skilled nursing facility shall pay the penalties to the State Department of Public Health within days of the facility’s receipt of the decision. The penalties collected shall be deposited into the Skilled Nursing Facility Minimum Staffing Penalty Account. (

c) The assessment of a penalty under this

section shall not prohibit any state or federal enforcement action, including, but not limited to, State Department of Public Health’s investigation process or issuance of deficiencies or citations under

Chapter 2.4 (commencing with

Section 1417). (

d) Notwithstanding

Chapter 3.5 (commencing with

Section 11340) of Part of Division of Title of the Government Code, the State Department of Public Health may implement this

section by means of all-facility letters or other similar instructions without taking regulatory action. (

e) In implementing this section, the State Department of Public Health may contract, as necessary, with California’s Medicare Quality Improvement Organization, or other entities deemed qualified by the State Department of Public Health, not associated with a skilled nursing facility. The department may enter into exclusive or nonexclusive contracts, or amend existing contracts, on a bid or negotiated basis for purposes of implementing this subdivision. Contracts entered into or amended pursuant to this subdivision shall be exempt from

Chapter 6 (commencing with

Section 14825) of

Part 5.5 of Division of Title of the Government Code,

Part 2 (commencing with

Section 10100) of Division of the Public Contract Code, the State Administrative Manual, and the State Contracting Manual, and shall be exempt from the review or approval of any division of the State Department of General Services. (

f) Notwithstanding any other law, the State Controller may use the funds in the Skilled Nursing Facility Minimum Staffing Penalty Account for cash flow loans to the General Fund as provided in Sections and of the Government Code.

SEC.

Section 1280.15 of the Health and Safety Code is amended to read: 1280.15. (

a) A clinic, health facility, home health agency, or hospice licensed pursuant to

Section 1204, 1250, 1725, or shall prevent unlawful or unauthorized access to, and use or disclosure of, patients’ medical information, as defined in

Section 56.05 of the Civil Code and consistent with

Section 1280.18. For purposes of this section, internal paper records, electronic mail, or facsimile transmissions inadvertently misdirected within the same facility or health care system within the course of coordinating care or delivering services shall not constitute unauthorized access to, or use or disclosure of, a patient’s medical information. The department, after investigation, may assess an administrative penalty for a violation of this

section of up to twenty-five thousand dollars ($25,000) per patient whose medical information was unlawfully or without authorization accessed, used, or disclosed, and up to seventeen thousand five hundred dollars ($17,500) per subsequent occurrence of unlawful or unauthorized access, use, or disclosure of that patient’s medical information. For purposes of the investigation, the department shall consider the clinic’s, health facility’s, agency’s, or hospice’s history of compliance with this

section and other related state and federal statutes and regulations, the extent to which the facility detected violations and took preventative action to immediately correct and prevent past violations from recurring, and factors outside its control that restricted the facility’s ability to comply with this section. The department shall have full discretion to consider all factors when determining whether to investigate and the amount of an administrative penalty, if any, pursuant to this section. (b)

(1) A clinic, health facility, home health agency, or hospice to which subdivision (

a) applies shall report any unlawful or unauthorized access to, or use or disclosure of, a patient’s medical information to the department no later than business days after the unlawful or unauthorized access, use, or disclosure has been detected by the clinic, health facility, home health agency, or hospice.

(2) Subject to subdivision (c), a clinic, health facility, home health agency, or hospice shall also report any unlawful or unauthorized access to, or use or disclosure of, a patient’s medical information to the affected patient or the patient’s representative at the last known address, or by an alternative means or at an alternative location as specified by the patient or the patient’s representative in writing pursuant to

Section 164.522(

b) of Title of the Code of Federal Regulations, no later than business days after the unlawful or unauthorized access, use, or disclosure has been detected by the clinic, health facility, home health agency, or hospice. Notice may be provided by email only if the patient has previously agreed in writing to electronic notice by email. (c)

(1) A clinic, health facility, home health agency, or hospice shall delay the reporting, as required pursuant to paragraph (2) of subdivision (b), of any unlawful or unauthorized access to, or use or disclosure of, a patient’s medical information beyond business days if a law enforcement agency or official provides the clinic, health facility, home health agency, or hospice with a written or oral statement that compliance with the reporting requirements of paragraph (2) of subdivision (

b) would likely impede the law enforcement agency’s investigation that relates to the unlawful or unauthorized access to, and use or disclosure of, a patient’s medical information and specifies a date upon which the delay shall end, not to exceed days after a written request is made, or days after an oral request is made.

A law enforcement agency or official may request an extension of a delay based upon a written declaration that there exists a bona fide, ongoing, significant criminal investigation of serious wrongdoing relating to the unlawful or unauthorized access to, and use or disclosure of, a patient’s medical information, that notification of patients will undermine the law enforcement agency’s investigation, and that specifies a date upon which the delay shall end, not to exceed days after the end of the original delay period.

(2) If the statement of the law enforcement agency or official is made orally, then the clinic, health facility, home health agency, or hospice shall do both of the following: (

A) Document the oral statement, including, but not limited to, the identity of the law enforcement agency or official making the oral statement and the date upon which the oral statement was made. (

B) Limit the delay in reporting the unlawful or unauthorized access to, or use or disclosure of, the patient’s medical information to the date specified in the oral statement, not to exceed calendar days from the date that the oral statement is made, unless a written statement that complies with the requirements of this subdivision is received during that time.

(3) A clinic, health facility, home health agency, or hospice shall submit a report that is delayed pursuant to this subdivision not later than business days after the date designated as the end of the delay. (

d) If a clinic, health facility, home health agency, or hospice to which subdivision (

a) applies violates subdivision (b), the department may assess the licensee a penalty in the amount of one hundred dollars ($100) for each day that the unlawful or unauthorized access, use, or disclosure is not reported to the department or the affected patient, following the initial 15-day period specified in subdivision (b). However, the total combined penalty assessed by the department under subdivision (

a) and this subdivision shall not exceed two hundred fifty thousand dollars ($250,000) per reported event. For enforcement purposes, it shall be presumed that the facility did not notify the affected patient if the notification was not documented. This presumption may be rebutted by a licensee only if the licensee demonstrates, by a preponderance of the evidence, that the notification was made. (

e) In enforcing subdivisions (

a) and (d), the department shall take into consideration the special circumstances of small and rural hospitals, as defined in

Section 124840, and primary care clinics, as defined in subdivision (

a) of

Section 1204, in order to protect access to quality care in those hospitals and clinics. When assessing a penalty on a skilled nursing facility or other facility subject to

Section 1423, 1424, 1424.1, or 1424.5, the department shall issue only the higher of either a penalty for the violation of this

section or a penalty for violation of

Section 1423, 1424, 1424.1, or 1424.5, not both. (

f) All penalties collected by the department pursuant to this section, Sections 1280.1, 1280.3, 1280.4, and 1280.19, shall be deposited into the Internal Departmental Quality Improvement Account, which is hereby established in the State Treasury. Notwithstanding

Section 16305.7 of the Government Code, all interest earned on the moneys deposited into the account shall be retained in the account. Upon appropriation by the Legislature, moneys in the account shall be expended for internal quality improvement activities in the Licensing and Certification Program. (

g) If the licensee disputes a determination by the department regarding a failure to prevent or failure to timely report unlawful or unauthorized access to, or use or disclosure of, patients’ medical information, or the imposition of a penalty under this section, the licensee may, within days of receipt of the penalty assessment, request a hearing pursuant to

Section 131071. Penalties shall be paid when appeals have been exhausted and the penalty has been upheld. (

h) In lieu of disputing the determination of the department regarding a failure to prevent or failure to timely report unlawful or unauthorized access to, or use or disclosure of, patients’ medical information, transmit to the department percent of the total amount of the administrative penalty, for each violation, within business days of receipt of the administrative penalty. (

i) For purposes of this section, the following

definitions shall apply: (1) “Reported event” means all breaches included in any single report that is made pursuant to subdivision (b), regardless of the number of breach events contained in the report. (2) “Unauthorized” means the inappropriate access, review, or viewing of patient medical information without a direct need for medical diagnosis, treatment, or other lawful use as permitted by the Confidentiality of Medical Information Act (Part 2.6 (commencing with

Section 56) of Division of the Civil Code) or any other statute or regulation governing the lawful access, use, or disclosure of medical information. (

j) Notwithstanding any other provision of law, the State Controller may use the funds in the Internal Departmental Quality Improvement Account for cash flow loans to the General Fund as provided in Sections and of the Government Code.

SEC.

Section 1280.19 of the Health and Safety Code is amended to read: 1280.19. (

a) Effective July 1, 2025, the Internal Health Information Integrity Quality Improvement Account is hereby abolished. All moneys in the fund shall be transferred to the Internal Departmental Quality Improvement Account created pursuant to subdivision (

f) of

Section 1280.15. Any remaining balance, assets, liabilities, and encumbrances of the Internal Health Information Integrity Quality Improvement Account as of July 1, 2025, shall be transferred to, and become part of, the Internal Departmental Quality Improvement Account. All administrative fines assessed by the department pursuant to

Section 56.36 of the Civil Code shall be deposited into the Internal Departmental Quality Improvement Account. Notwithstanding

Section 16305.7 of the Government Code, all interest earned on the moneys deposited in the account shall be retained in the account. Upon appropriation by the Legislature, moneys in the account shall be used for the purpose of supporting quality improvement activities in the Licensing and Certification Program. (

b) Notwithstanding any other provision of law, the State Controller may use the funds in the Internal Departmental Quality Improvement Account for cash flow loans to the General Fund as provided in Sections and of the Government Code.

SEC.

Section 1342.2 of the Health and Safety Code is amended to read: 1342.2. (

a) Notwithstanding any other law, a health care service plan contract that covers medical, surgical, and hospital benefits, excluding a specialized health care service plan contract, shall cover the costs for COVID-19 diagnostic and screening testing and health care services related to diagnostic and screening testing approved or granted emergency use authorization by the federal Food and Drug Administration for COVID-19, regardless of whether the services are provided by an in-network or out-of-network provider. Coverage required by this

section shall not be subject to copayment, coinsurance, deductible, or any other form of cost sharing. Services related to COVID-19 diagnostic and screening testing include, but are not limited to, hospital or health care provider office visits for the purposes of receiving testing, products related to testing, the administration of testing, and items and services furnished to an enrollee as part of testing. Services related to COVID-19 diagnostic and screening testing do not include bonus payments for the use of specialized equipment or expedited processing.

(1) To the extent a health care provider would have been entitled to receive cost sharing but for this section, the health care service plan shall reimburse the health care provider the amount of that lost cost sharing.

(2) A health care service plan contract shall not impose prior authorization or any other utilization management requirements on COVID-19 diagnostic and screening testing.

(3) With respect to an enrollee, a health care service plan shall reimburse the provider of the testing according to either of the following: (

A) If the health plan has a specifically negotiated rate for COVID-19 diagnostic and screening testing with such provider in effect before the public health emergency declared under

Section of the Public Health Service Act (42 U.S.C.

Sec. 247d), such negotiated rate shall apply throughout the period of such declaration. (

B) If the health plan does not have a specifically negotiated rate for COVID-19 diagnostic and screening testing with such provider, the plan may negotiate a rate with such provider.

(4) For an out-of-network provider with whom a health care service plan does not have a specifically negotiated rate for COVID-19 diagnostic and screening testing and health care services related to testing, a plan shall reimburse the provider for all testing items or services in an amount that is reasonable, as determined in comparison to prevailing market rates for testing items or services in the geographic region where the item or service is rendered.

An out-of-network provider shall accept this payment as payment in full, shall not seek additional remuneration from an enrollee for services related to testing, and shall not report adverse information to a consumer credit reporting agency or commence civil action against the enrollee.

(5) Beginning six months after the federal public health emergency expires, a health care service plan shall no longer be required to cover the cost sharing for COVID-19 diagnostic and screening testing and health care services related to testing when delivered by an out-of-network provider, except as otherwise required by law. All other requirements of this subdivision shall remain in effect after the federal public health emergency expires.

(6) Changes to a contract between a health care service plan and a provider delegating financial risk for diagnostic and screening testing related to a declared public health emergency shall be considered a material change to the parties’ contract. A health care service plan shall not delegate the financial risk to a contracted provider for the cost of enrollee services provided under this

section unless the parties have negotiated and agreed upon a new provision of the parties’ contract pursuant to

Section 1375.7. (b)

(1) A health care service plan contract that covers medical, surgical, and hospital benefits shall cover without cost sharing any item, service, or immunization that is intended to prevent or mitigate COVID-19 and that is either of the following with respect to the individual enrollee: (

A) An evidence-based item or service that has in effect a rating of “A” or “B” in the current recommendations of the United States Preventive Services Task Force. (

B) An immunization that has in effect a recommendation from the Advisory Committee on Immunization Practices of the federal Centers for Disease Control and Prevention, regardless of whether the immunization is recommended for routine use.

(2) The item, service, or immunization covered pursuant to paragraph (1) shall be covered no later than business days after the date on which the United States Preventive Services Task Force or the Advisory Committee on Immunization Practices of the federal Centers for Disease Control and Prevention makes a recommendation relating to the item, service, or immunization. A recommendation from the Advisory Committee on Immunization Practices of the federal Centers for Disease Control and Prevention is considered in effect after it has been adopted, or granted emergency use authorization, by the Director of the Centers for Disease Control and Prevention. (3) (

A) A health care service plan subject to this subdivision shall not impose any cost-sharing requirements, including a copayment, coinsurance, or deductible, for any item, service, or immunization described in paragraph (1), regardless of whether such service is delivered by an in-network or out-of-network provider. (

B) To the extent a health care provider would have been entitled to receive cost sharing but for this section, the health care service plan shall reimburse the health care provider the amount of that lost cost sharing. (

C) With respect to an enrollee, a health care service plan shall reimburse the provider of the immunization according to either of the following: (

i) If the health plan has a negotiated rate with such provider in effect before the public health emergency declared under

Section of the Public Health Service Act (42 U.S.C.

Sec. 247d), such negotiated rate shall apply throughout the period of such declaration. (ii) If the health plan does not have a negotiated rate with such provider, the plan may negotiate a rate with such provider. (

D) A health care service plan shall not impose cost sharing for any items or services that are necessary for the furnishing of an item, service, or immunization described in paragraph (1), including, but not limited to, provider office visits and vaccine administration, regardless of whether the service is delivered by an in-network or out-of-network provider. (E) (

i) For an out-of-network provider with whom a health care service plan does not have a negotiated rate for an item, service, or immunization described in paragraph (1), a health care service plan shall reimburse the provider for all related items or services, including any items or services that are necessary for the furnishing of an item, service, or immunization described in paragraph (1), in an amount that is reasonable, as determined in comparison to prevailing market rates for such items or services in the geographic region in which the item or service is rendered.

An out-of-network provider shall accept this payment as payment in full, shall not seek additional remuneration from an enrollee, and shall not report adverse information to a consumer credit reporting agency or commence civil action against the enrollee for items, services, and immunizations described in subdivision (b), including any items or services that are necessary for the furnishing of an item, service, or immunization described in paragraph (1). (ii) Beginning six months after the federal public health emergency expires, a health care service plan shall no longer be required to cover the cost sharing for any item, service, or immunization described in paragraph (1) and to cover items or services that are necessary for the furnishing of the items, services, or immunizations described in paragraph (1) when delivered by an out-of-network provider, except as otherwise required by law.

All other requirements of this

section shall remain in effect after the federal public health emergency expires.

(4) A health care service plan subject to this subdivision shall not impose prior authorization or any other utilization management requirements on any item, service, or immunization described in paragraph (1) or to items or services that are necessary for the furnishing of the items, services, or immunizations described in subparagraph (

D) of paragraph (3).

(5) Changes to a contract between a health care service plan and a provider delegating financial risk for immunization related to a declared public health emergency, shall be considered a material change to the parties’ contract. A health plan shall not delegate the financial risk to a contracted provider for the cost of enrollee services provided under this

section unless the parties have negotiated and agreed upon a new provision of the parties’ contract pursuant to

Section 1375.7. (

c) The director may issue guidance to health care service plans regarding compliance with this section. This guidance shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with

Section 11340) of Part of Division of Title of the Government Code). The department shall consult with the Department of Insurance in issuing the guidance specified in this subdivision. (

d) This section, excluding subdivision (h), shall apply retroactively beginning from the Governor’s declared State of Emergency related to the SARS-CoV-2 (COVID-19) pandemic on March 4, 2020. Notwithstanding

Section 1390, this subdivision does not create criminal liability for transactions that occurred before January 1, 2022. (

e) For purposes of this section: (1) “Diagnostic testing” means all of the following: (

A) Testing intended to identify current or past infection and performed when a person has signs or symptoms consistent with COVID-19, or when a person is asymptomatic but has recent known or suspected exposure to SARS-CoV-2. (

B) Testing a person with symptoms consistent with COVID-19. (

C) Testing a person as a result of contact tracing efforts. (

D) Testing a person who indicates that they were exposed to someone with a confirmed or suspected case of COVID-19. (

E) Testing a person after an individualized clinical assessment by a licensed health care provider. (2) “Screening testing” means tests that are intended to identify people with COVID-19 who are asymptomatic and do not have known, suspected, or reported exposure to SARS-CoV-2. Screening testing helps to identify unknown cases so that measures can be taken to prevent further transmission. Screening testing includes all of the following: (

A) Workers in a workplace setting. (

B) Students, faculty, and staff in a school setting. (

C) A person before or after travel. (

D) At home for someone who does not have symptoms associated with COVID-19 and does not have a known exposure to someone with COVID-19. (

f) This

section does not relieve a health care service plan from continuing to cover testing as required by federal law and guidance. (

g) The department shall hold health care service plans accountable for timely access to services required under this

section and coverage requirements established under federal law, regulations, or guidelines. (h)

(1) This subdivision applies to a health care service plan contract issued, amended, or renewed on or after the operative date of this subdivision that covers medical, surgical, and hospital benefits, excluding a specialized health care service plan contract, with respect to therapeutics for COVID-19 covered under the contract, which shall include therapeutics approved or granted emergency use authorization by the federal Food and Drug Administration for treatment of COVID-19 when prescribed or furnished by a licensed health care provider acting within their scope of practice and the standard of care.

(2) A health care service plan shall reimburse a provider for the therapeutics described in paragraph (1) at the specifically negotiated rate for those therapeutics, if the plan and provider have negotiated a rate. If the plan does not have a negotiated rate with a provider, the plan may negotiate a rate with the provider.

(3) For an out-of-network provider with whom a health care service plan does not have a negotiated rate for the therapeutics described in paragraph (1), a health care service plan shall reimburse the provider for the therapeutics in an amount that is reasonable, as determined in comparison to prevailing market rates for the therapeutics in the geographic region in which the therapeutic was delivered.

An out-of-network provider shall accept this payment as payment in full, shall not seek additional remuneration from an enrollee, and shall not report adverse information to a consumer credit reporting agency or commence civil action against the enrollee for therapeutics described in this subdivision.

(4) A health care service plan shall cover COVID-19 therapeutics without cost sharing, regardless of whether the therapeutics are provided by an in-network or out-of-network provider, and without utilization management. If a provider would have been entitled to receive cost sharing but for this section, the health care service plan shall reimburse the provider for the amount of that lost cost sharing. A provider shall accept this payment as payment in full, shall not seek additional remuneration from an enrollee, and shall not report adverse information to a consumer credit reporting agency or commence civil action against the enrollee for therapeutics pursuant to this subdivision.

(5) Beginning six months after the federal public health emergency expires, a health care service plan shall no longer be required to cover the cost sharing for COVID-19 therapeutics delivered by an out-of-network provider, unless otherwise required by law. All other requirements of this subdivision shall remain in effect after the federal public health emergency expires.

(6) This

section does not apply to a Medi-Cal managed care plan that contracts with the State Department of Health Care Services pursuant to

Chapter 7 (commencing with

Section 14000) and

Chapter 8 (commencing with

Section 14200) of Part of Division of the Welfare and Institutions Code.

SEC.

Section 1356.3 is added to the Health and Safety Code , immediately following

Section 1356.2 , to read: 1356.3. (

a) For the 2025–26 to 2026–27 fiscal years, inclusive, a health care service plan licensed by the department shall be assessed an annual fee in an amount determined by the department, in consultation with the Department of Health Care Access and Information. The annual fee shall be limited to the amount necessary to fund the actual and reasonably necessary expenses of the department to implement

Article 6.1 (commencing with

Section 1385.001) and the actual and reasonably necessary expenses of the Department of Health Care Access and Information pertaining to data reporting by pharmacy benefit managers, including that portion of the Health Care Payments Data Program established by

Section 127671.1 that concerns pharmacy benefit managers. (

b) The fees received pursuant to this

section shall be transferred from the Managed Care Fund to the Pharmacy Benefit Manager Fund established by

Section 1385.0017 and disbursed pursuant to that section, upon appropriation by the Legislature.

SEC.

Section 1374.55 of the Health and Safety Code is amended to read: 1374.55. (a)

(1) A large group health care service plan contract, except a specialized health care service plan contract, that is issued, amended, or renewed on or after January 1, 2026, shall provide coverage for the diagnosis and treatment of infertility and fertility services, including a maximum of three completed oocyte retrievals with unlimited embryo transfers in accordance with the guidelines of the American Society for Reproductive Medicine (ASRM), using single embryo transfer when recommended and medically appropriate.

(2) A small group health care service plan contract, except a specialized health care service plan contract, that is issued, amended, or renewed on or after January 1, 2026, shall offer coverage for the diagnosis and treatment of infertility and fertility services. This paragraph shall not be construed to require a small group health care service plan contract to provide coverage for infertility services.

(3) A health care service plan shall include notice of the coverage specified in this

section in the plan’s evidence of coverage. (

b) For purposes of this section, “infertility” means a condition or status characterized by any of the following:

(1) A licensed physician’s findings, based on a patient’s medical, sexual, and reproductive history, age, physical findings, diagnostic testing, or any combination of those factors. This definition shall not prevent testing and diagnosis of infertility before the 12-month or 6-month period to establish infertility in paragraph (3).

(2) A person’s inability to reproduce either as an individual or with their partner without medical intervention.

(3) The failure to establish a pregnancy or to carry a pregnancy to live birth after regular, unprotected sexual intercourse. For purposes of this section, “regular, unprotected sexual intercourse” means no more than months of unprotected sexual intercourse for a person under years of age or no more than months of unprotected sexual intercourse for a person years of age or older. Pregnancy resulting in miscarriage does not restart the 12-month or 6-month time period to qualify as having infertility. (

c) The contract may not include any of the following:

(1) Any exclusion, limitation, or other restriction on coverage of fertility medications that are different from those imposed on other prescription medications.

(2) Any exclusion or denial of coverage of any fertility services based on a covered individual’s participation in fertility services provided by or to a third party. For purposes of this section, “third party” includes an oocyte, sperm, or embryo donor, gestational carrier, or surrogate that enables an intended recipient to become a parent.

(3) Any deductible, copayment, coinsurance, benefit maximum, waiting period, or any other limitation on coverage for the diagnosis and treatment of infertility, except as provided in subdivision (

a) that are different from those imposed upon benefits for services not related to infertility. (

d) This

section does not in any way deny or restrict any existing right or benefit to coverage and treatment of infertility or fertility services under an existing law, plan, or policy. (

e) Consistent with

Section 1365.5, coverage for the treatment of infertility and fertility services shall be provided without discrimination on the basis of age, ancestry, color, disability, domestic partner status, gender, gender expression, gender identity, genetic information, marital status, national origin, race, religion, sex, or sexual orientation. This subdivision shall not be construed to interfere with the clinical judgment of a physician and surgeon. (

f) This

section does not apply to Medi-Cal managed care health care service plan contracts or any entity that enters into a contract with the State Department of Health Care Services for the delivery of health care services pursuant to

Chapter 7 (commencing with

Section 14000),

Chapter 8 (commencing with

Section 14200),

Chapter 8.75 (commencing with

Section 14591), or

Chapter 8.9 (commencing with

Section 14700) of Part of Division of the Welfare and Institutions Code. (

g) This

section shall not apply to a religious employer, as defined in

Section 1367.25. (

h) This

section shall not apply to a health care benefit plan or contract entered into with the Board of Administration of the Public Employees’ Retirement System pursuant to the Public Employees’ Medical and Hospital Care Act (Part 5 (commencing with

Section 22750) of Division of Title of the Government Code) until July 1, 2027. (i)

(1) Until January 1, 2027, the director may issue guidance regarding compliance with this section, and that guidance shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with

Section 11340) of Part of Division of Title of the Government Code).

(2) The department shall consult with the Department of Insurance and stakeholders in issuing the guidance specified in paragraph (1).

SEC. 9. The heading of

Article 6.1 (commencing with

Section 1385.001) of

Chapter 2.2 of Division of the Health and Safety Code is amended to read: 6.1. Pharmacy Benefit Managers

SEC.

Section 1385.001 of the Health and Safety Code is repealed.

SEC.

Section 1385.001 is added to the Health and Safety Code , to read: 1385.001. For the purposes of this article: (a) “Department” means the Department of Managed Health Care. (b) “Director” means the Director of the Department of Managed Health Care. (c) “Drug” has the same meaning as defined in

Section of the Business and Professions Code. (d) “Health insurer” means an entity licensed to provide health insurance, as defined in

Section of the Insurance Code. (e) “Manufacturer” has the same meaning as defined in

Section of the Business and Professions Code. (f) “Payer” means a health care service plan licensed by the department or a health insurer licensed by the Department of Insurance. (g) “Pharmacist” has the same meaning as defined in

Section of the Business and Professions Code. (h) “Pharmacy” has the same meaning as defined in

Section of the Business and Professions Code. (i) (1) “Pharmacy benefit manager” means a person, business, or other entity that, either directly or through an intermediary, affiliate, or both, acts as a price negotiator or group purchaser on behalf of a payer, or manages the prescription drug coverage provided by the payer, including, but not limited to, the processing and payment of claims for prescription drugs, the performance of drug utilization review, the processing of drug prior authorization requests, the adjudication of appeals or grievances related to prescription drug coverage, contracting with network pharmacies, or controlling the cost of covered prescription drugs. (2) “Pharmacy benefit manager” includes an entity performing the duties specified in paragraph (1) that is under common ownership with, or control by, a payer. (3) “Pharmacy benefit manager” does not include any of the following: (

A) An entity providing services pursuant to a contract authorized by

Section 4600.2 of the Labor Code. (

B) A fully self-insured employee welfare benefit plan under the Employee Retirement Income Security Act of 1974 (Public Law 93-406), as amended (29 U.S.C.

Sec. 1001 et seq.). (

C) A health care service plan licensed pursuant to this

chapter or an individual employee of a health care service plan. (

D) A health insurer licensed to provide health insurance, as defined in

Section of the Insurance Code, or an individual employee of a health insurer. (

E) A city or county that develops or manages drug coverage programs for uninsured patients for which no reimbursement is received. (

F) An entity exclusively providing services to patients covered by

Part 418 (commencing with

Section 418.1) of Subchapter B of

Chapter IV of Title of the Code of Federal Regulations. (

G) The State Department of Health Care Services, including any contracts between the State Department of Health Care Services and another entity related to the negotiation and collection of drug or medical supply rebates. (j) “Plan participant” means an individual who is enrolled in health care coverage provided by a payer.

SEC.

Section 1385.002 of the Health and Safety Code is amended to read: 1385.002. (

a) The department has the authority to enforce the provisions of this article, including the authority to adopt, amend, or repeal any rules and regulations, not inconsistent with the laws of this state, as may be necessary for the protection of the public and to implement this article, including, but not limited to, the director’s enforcement authority under this chapter. (

b) Notwithstanding

Chapter 3.5 (commencing with

Section 11340) of Part of Division of Title of the Government Code, the department may implement, interpret, or make specific this

article by means of all-plan letters or similar instructions to plans and pharmacy benefit managers, without taking regulatory action, until such time as regulations are adopted. (

c) Until June 30, 2028, for purposes of implementing this article, the department may contract with a consultant or consultants, including information technology consultants and vendors, with relevant expertise to assist the department with implementing this article. The department’s contract with a consultant shall include conflict-of-interest provisions to prohibit a person from participating in any report in which the person knows or has reason to know the person has a material financial interest, including, but not limited to, a person who has a consulting or other agreement with a person or organization that would be affected by the results of the report. (

d) Contracts entered into pursuant to the authority in this

section shall be exempt from

Chapter 6 (commencing with

Section 14825) of

Part 5.5 of Division of Title of the Government Code,

Section of the Government Code, and

Part 2 (commencing with

Section 10100) of Division of the Public Contract Code, and shall be exempt from the review or approval of any division of the Department of General Services.

SEC.

Section 1385.004 of the Health and Safety Code is amended to read: 1385.004. (

a) A health care service plan that contracts with a pharmacy benefit manager for management of any or all of its prescription drug coverage shall require the pharmacy benefit manager to do all of the following:

(1) Comply with the provisions of

Section 1385.003.

(2) Register with the department pursuant to the requirements of this article, or, if licensure of the pharmacy benefit manager is required pursuant to this article, obtain a license and keep it in good standing with the department.

(3) Exercise good faith and fair dealing in the performance of its contractual duties to a health care service plan.

(4) Comply with the requirements of

Chapter 9.5 (commencing with

Section 4430) of Division of the Business and Professions Code, as applicable.

(5) Inform all pharmacists under contract with or subject to contracts with the pharmacy benefit manager of the pharmacist’s rights to submit complaints to the department under

Section 1371.39 and of the pharmacist’s rights as a provider under

Section 1375.7. (

b) Contracts issued, amended, or renewed on or after January 1, 2026, between a health care service plan and a pharmacy benefit manager shall require the pharmacy benefit manager to submit to the Department of Health Care Access and Information all information required to be reported pursuant to

Chapter 8.5 (commencing with

Section 127671) of Part of Division 107. (

c) A pharmacy benefit manager shall notify a health care service plan in writing of any activity, policy, or practice of the pharmacy benefit manager that directly or indirectly presents a conflict of interest that interferes with the discharge of the pharmacy benefit manager’s duty to the health care service plan to exercise good faith and fair dealing in the performance of its contractual duties pursuant to subdivision (a).

SEC.

Section 1385.005 of the Health and Safety Code is amended to read: 1385.005. (

a) A pharmacy benefit manager required to register with the department pursuant to

Section 1385.004 shall complete an application for registration with the department that shall include, but not be limited to, all of the information required by subdivision (c). (

b) A pharmacy benefit manager registration obtained pursuant to this

section is not transferable. (

c) The department shall develop an application form for pharmacy benefit manager registration. The application form for a pharmacy benefit manager registration shall require the pharmacy benefit manager to submit the following information to the department:

(1) The name of the pharmacy benefit manager.

(2) The address and contact telephone number for the pharmacy benefit manager.

(3) The name and address of the pharmacy benefit manager’s agent for service of process in the state.

(4) The name and address of each person beneficially interested in the pharmacy benefit manager.

(5) The name and address of each person with management or control over the pharmacy benefit manager. (

d) If the applicant is a partnership or other unincorporated association, a limited liability company, or a corporation, and the number of partners, members, or stockholders, as the case may be, exceeds five, the application shall so state, and shall further state the name, address, usual occupation, and professional qualifications of each of the five partners, members, or stockholders who own the five largest interests in the applicant entity.

Upon request by the department, the applicant shall furnish the department with the name, address, usual occupation, and professional qualifications of partners, members, or stockholders not named in the application, or shall refer the department to an appropriate source for that information. (

e) The application shall contain a statement to the effect that the applicant has not been convicted of a felony and has not violated any of the provisions of this article. If the applicant cannot make this statement, the application shall contain a statement of the violation, if any, or shall describe the reasons that prevent the applicant from being able to comply with the requirements with respect to the statement. (

f) The department may set a fee for a registration required by this article. The application fee shall not exceed the reasonable costs of the department in carrying out its duties under this article. (

g) Within days of a change in any of the information disclosed to the department on an application for a registration, the pharmacy benefit manager shall notify the department of that change in writing. (

h) For purposes of this section, “person beneficially interested” with respect to a pharmacy benefit manager means and includes the following:

(1) If the applicant is a partnership or other unincorporated association, each partner or member.

(2) If the applicant is a corporation, each of its officers, directors, and stockholders, provided that a natural person shall not be deemed to be beneficially interested in a nonprofit corporation.

(3) If the applicant is a limited liability company, each officer, manager, or member. (

i) This

section shall become inoperative on January 1, 2027, or the date on which the department has established the licensure process pursuant to

Section 1385.009, whichever is later and, as of the following January is repealed.

SEC.

Section 1385.006 of the Health and Safety Code is amended to read: 1385.006. The failure by a health care service plan to comply with the contractual requirements and to maintain appropriate oversight of a contracted pharmacy benefit manager to ensure the pharmacy benefit manager’s compliance pursuant to this

article shall constitute grounds for disciplinary action. The director shall, as appropriate, investigate and take enforcement action against a health care service plan that fails to comply with these requirements and shall periodically evaluate contracts between health care service plans and pharmacy benefit managers to determine if any audit, evaluation, or enforcement actions should be undertaken by the department.

SEC.

Section 1385.008 is added to the Health and Safety Code , to read: 1385.008. On or after January 1, 2027, or the date on which the department has established the licensure process pursuant to

Section 1385.009, whichever is later, a person shall not engage in business as a pharmacy benefit manager for a payer in this state unless that person has first secured a license from the director. A license issued pursuant to this

article is not transferable without the express and specific permission of the director.

SEC.

Section 1385.009 is added to the Health and Safety Code , to read: 1385.009. An application for licensure as a pharmacy benefit manager under this

article shall be verified by an authorized representative of the applicant and shall be in a form prescribed by the department. To the extent applicable, the department may direct licensure applicants to use the forms and processes available to and required of health care service plan licensure applicants and licensees created pursuant to this

chapter and its implementing regulations, including

Section and the forms and exhibits described in regulations, as amended, implementing that section. The application for licensure as a pharmacy benefit manager shall be accompanied by the fee prescribed by

Section 1385.0016 and shall set forth or be accompanied by all of the following: (

a) The basic organizational documents of the applicant, such as the articles of incorporation, articles of association, partnership agreement, trust agreement, or other applicable documents, and all amendments to those documents. (

b) A copy of the bylaws, rules and regulations, or similar documents regulating the conduct of the internal affairs of the applicant. (

c) A list of the names, addresses, and official positions of the persons who are to be responsible for the conduct of the affairs of the applicant, including all members of the board of directors, board of trustees, executive committee, or other governing board or committee, the principal officers, each shareholder with more than percent interest in the case of a corporation, all partners or members in the case of a partnership or association, and each person who has loaned funds to the applicant for the operation of its business. (

d) A statement of whether, within the preceding years, the applicant, its management company, an affiliate of the applicant, a controlling person, officer, director, or other person occupying a principal management or supervisory position in the pharmacy benefit manager, management company, or affiliate, or a person intended to hold that relationship or position, has been convicted of or pleaded nolo contendere to a felony, been held to have committed

an act involving dishonesty, fraud, or deceit in a judicial or administrative proceeding to which the person was a party, or has had a license or certificate to operate as a pharmacy benefit manager denied or revoked in another jurisdiction. (

e) For an applicant not domiciled in this state, a power of attorney duly executed appointing the director the true and lawful attorney in fact of the applicant for the purposes of service of all lawful process in a legal action or proceeding against the pharmacy benefit manager on a cause of action arising in this state. (

f) Financial statements accompanied by a report, certificate, or opinion of an independent certified public accountant that demonstrates the financial viability of the applicant. Submission of financial statements may, at the direction of the department, be completed using the same forms and processes as required for health care service plans licensed pursuant to this chapter. (

g) An affirmation that the applicant’s business practices and contracts comply with the applicable provisions of this chapter, including the requirements of pharmacy benefit manager contracts and business practices set forth in this article. (

h) An affirmation that the applicant shall comply with all requirements for reporting data to the Department of Health Care Access and Information in accordance with this

article and

Chapter 8.5 (commencing with

Section 127671) of Part of Division 107. (

i) A description of the business operations of the applicant, including descriptions of its services, facilities, and personnel. (

j) A list of all jurisdictions in which the applicant operates as a pharmacy benefit manager, including those in which the applicant holds a license, registration, or certification as a pharmacy benefit manager. (

k) The applicant’s organization chart or charts that show the lines of responsibility and authority in the administration of the applicant’s business as a pharmacy benefit manager. The applicant shall include a narrative explanation of the organization chart, including the responsibility and authority of each entity, board, committee, and position, and identify the persons who serve on the boards and committees and in those positions. (

l) A list of all pharmaceutical supply chain entities, including drug manufacturers, wholesalers, and distributors, that are contracted or affiliated with the applicant. (

m) A list of all health care providers, including pharmacies and pharmacists, that are contracted or affiliated with the applicant. (

n) A list of each payer with which the applicant is affiliated or has a contract for the provision of pharmacy benefit manager services, including a description of all services provided and the number of individual enrollees covered under the contract or contracts with each payer. (

o) A statement describing how the applicant shall provide for separation of medical and clinical decisionmaking from fiscal and administrative management to ensure that medical and clinical decisions shall not be unduly influenced by fiscal and administrative management, including a description of what controls will be put into place to assure compliance with this requirement.

SEC.

Section 1385.0010 is added to the Health and Safety Code , to read: 1385.0010. In addition to the requirements of

Section 1385.009, and upon request of the director, an application shall be accompanied by authorization for disclosure to the director of financial records of each pharmacy benefit manager licensed under this chapter, pursuant to

Section of the Government Code. For purposes of this chapter, the authorization for disclosure shall also include the financial records of an association, partnership, or corporation controlling, controlled by, or otherwise affiliated with the pharmacy benefit manager.

SEC.

Section 1385.0011 is added to the Health and Safety Code , to read: 1385.0011. (

a) A pharmacy benefit manager shall submit to the department financial statements prepared as of the close of its fiscal year within days after the close of the fiscal year. These financial statements shall be accompanied by a report, certificate, or opinion of an independent certified public accountant or independent public accountant. An audit shall be conducted in accordance with generally accepted auditing standards and the rules and regulations of the director. (

b) Within days after the close of each quarter of its fiscal year, a pharmacy benefit manager shall submit its quarterly unaudited financial statement, prepared in accordance with generally accepted accounting principles and consisting of at least a balance sheet, statement of income, statement of cash flows, statement of changes in equity, and notes to financial statements as of the date and for the period specified by the director. The director may require the submission of these reports on a monthly or other periodic basis. (

c) A pharmacy benefit manager shall make special reports to the director as the director may require. (

d) For good cause and upon written request, the director may extend the time for compliance with subdivisions (

a) to (c), inclusive. (

e) If the report, certificate, or opinion of the independent accountant required pursuant to subdivision (

a) is qualified, the director may require the pharmacy benefit manager to take action that the director deems appropriate to permit an independent accountant to remove the qualification from the report, certificate, or opinion. (

f) The director may reject a financial statement, report, certificate, or opinion filed pursuant to this

section by notifying the pharmacy benefit manager of the rejection and its cause. Within days after the receipt of the notice, the pharmacy benefit manager shall correct the deficiency, and the failure so to do shall be deemed a violation of this chapter. The director shall retain a copy of all rejected filings. (

g) The director may make rules and regulations specifying the form and content of the reports and financial statements required by this section, and may require that these reports and financial statements be verified by the pharmacy benefit manager in a manner as the director may prescribe. Revenue reported by pharmacy benefit managers shall include revenue from manufacturers, payers, and other sources, including from affiliates. Types of revenue reported shall be inclusive of rebates of any type or form.

Expenses reported by pharmacy benefit managers shall include payments to pharmacies, claims processing, special programs, administrative costs, and all other expenses. The director may require the reporting of any additional revenue, expenses, or related information that the department requires to assist in determining the overall impact of pharmacy benefit manager business practices on the cost of drugs in this state. (

h) To the extent applicable, the department may direct licensure applicants to use the forms and processes available to and required of health care service plans and other entities reporting financial data created pursuant to this

chapter and their implementing regulations, including

Section and the forms and exhibits described in regulations, as amended, implementing that section. (

i) Financial and other records produced, disclosed, or otherwise made available by an organization pursuant to this

section shall be received and maintained on a confidential basis and protected from public disclosure.

SEC.

Section 1385.0012 is added to the Health and Safety Code , to read: 1385.0012. (

a) A pharmacy benefit manager licensed pursuant to this

article shall submit to the Department of Health Care Access and Information all information required to be reported pursuant to

Chapter 8.5 (commencing with

Section 127671) of Part of Division 107. (

b) The obligation of a pharmacy benefit manager to comply with this

section shall not be waived if the pharmacy benefit manager delegates any of its services or business operations to another entity via a contractual relationship or otherwise. (

c) Failure by a pharmacy benefit manager to timely or completely submit required reporting to the Department of Health Care Access and Information shall be grounds for enforcement action by the department pursuant to this chapter.

SEC.

Section 1385.0013 is added to the Health and Safety Code , to read: 1385.0013. (a)

(1) A licensed pharmacy benefit manager shall, within days after a change in the information contained in its application, other than financial or statistical information, file an amendment to the application in the manner prescribed by rule by the director.

(2) Notwithstanding paragraph (1), if an association, partnership, or corporation is added in a controlling, controlled, or affiliated status relative to the pharmacy benefit manager, the pharmacy benefit manager shall file within days an authorization for disclosure to the director of financial records of the person pursuant to

Section of the Government Code. (

b) Before a material modification of its operations, a pharmacy benefit manager shall give notice of the change to the director, who shall approve, disapprove, suspend, or postpone the effectiveness of the change by order, within business days or within additional time specified by the pharmacy benefit manager, subject to

Section 1385.0014. (

c) A pharmacy benefit manager shall, within five days, give written notice to the director, in the form prescribed by rule by the director, of a change in the officers, directors, partners, controlling shareholders, principal creditors, or persons occupying similar positions or performing similar functions, of the pharmacy benefit manager, any parent company of the pharmacy benefit manager, or a management company of the pharmacy benefit manager or its parent company. The director may define by rule the positions, duties, and relationships that shall be reported pursuant to this subdivision. (

d) The fee for filing a notice of material modification pursuant to subdivision (

b) shall be the actual cost to the director of processing the notice, including overhead, but shall not exceed seven hundred fifty dollars ($750). (

e) Rules and regulations promulgated and amended by the department pursuant to this

chapter relating to health care service plan license amendments and material modifications, including those promulgated to implement and make specific

Section 1352, shall, to the extent applicable, apply to pharmacy benefit managers licensed pursuant to this article.

SEC.

Section 1385.0014 is added to the Health and Safety Code , to read: 1385.0014. Upon denial of an application for licensure, or the issuance of an order pursuant to

Section 1385.0013 disapproving, suspending, or postponing a material modification, the director shall notify the applicant in writing, stating the reason for the denial and that the applicant has the right to a hearing if the applicant makes a written request within days after the dat