Article 2 - Office of Health Care Affordability

California Health and Safety Code — §§ 127501-127501.12

Sections (4)

Amended by Stats. 2025, Ch. 641, Sec. 2. (AB 1415) Effective January 1, 2026.

(a)There is hereby established, within the Department of Health Care Access and Information, the Office of Health Care Affordability. The Director of the Department of Health Care Access and Information shall be the director of the office and shall carry out all functions of that position, including enforcement.

(b)The office shall be responsible for analyzing the health care market for cost trends and drivers of spending, developing data-informed policies for lowering health care costs for consumers and purchasers, creating a state strategy for controlling the cost of health care and ensuring affordability for consumers and purchasers, and enforcing cost targets.

(c)The office shall do all of the following:

(1)Increase cost transparency through public reporting of per capita total health care spending and factors contributing to health care cost growth.

(2)Support the board, through data collection and analysis and recommendations, to establish a statewide health care cost target for per capita total health care spending.

(3)Support the board, through data collection and analysis and recommendations, to establish specific health care cost targets by health care sector, including fully integrated delivery systems, geographic regions, and individual health care entities, as appropriate.

(4)Collect and analyze data from existing and emerging public and private data sources that allow the office to track spending, set cost targets, approve performance improvement plans, monitor impacts on health care workforce stability, and carry out all other functions of the office.

(5)Analyze cost and quality trends for drugs covered by pharmaceutical and medical benefits. The office shall consider the data in the reports required pursuant to Section 1367.243 and Section 10123.205 of the Insurance Code and pharmaceutical data reported in the Health Care Payments Data Program, established pursuant to Chapter 8.5 (commencing with Section 127671).

(6)Oversee the state’s progress towards meeting the health care cost

target by providing technical assistance, requiring public testimony, requiring submission of and monitoring compliance with performance improvement plans, and assessing administrative penalties through enforcement actions, including escalating administrative penalties for noncompliance.

(7)Promote, measure, and publicly report performance on quality and health equity through the adoption of a priority set of standard quality and equity measures for health care entities, with consideration for minimizing administrative burden and duplication.

(8)Advance standards for promoting the adoption of alternative payment models.

(9)Measure and promote sustained systemwide investment in primary care and behavioral

health.

(10)Advance standards for health care workforce stability and training, as these relate to costs.

(11)Disseminate best practices from entities that comply with the cost target, including a summary of affordability efforts that enable the entity to meet the cost target.

(12)Review and evaluate consolidation, market power, and other market failures through cost and market impact reviews of mergers, acquisitions, or corporate affiliations involving health care service plans, health insurers, hospitals, physician organizations, pharmacy benefit managers, and other health care entities.

(13)Analyze trends in the price of health care technologies.

(14)Analyze trends in the cost of labor for both management and administration, as well as nonsupervisorial health care workforce, as well as analyzing the profits of health care entities, if that data is available.

(15)Conduct ongoing research and evaluation on payers, fully integrated delivery systems, management services organizations, and providers, including physician organizations, to determine whether the definitions or other provisions of this chapter include those entities that significantly affect health care cost, quality, equity, and workforce stability.

(16)Adopt and promulgate regulations for the purpose of carrying out this chapter.

(17)Establish advisory or technical committees, as necessary.

(d)For purposes of implementing this chapter, including hiring staff and consultants, through the procurement authority and processes of the department, facilitating and conducting meetings, conducting research and analysis, and developing the required reports, the office may enter into exclusive or nonexclusive contracts on a bid or negotiated basis. Until January 1, 2026, contracts entered into or amended pursuant to this chapter are exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Part 2 (commencing with Section 10100) of Division 2 of the Public Contract Code, and the State Administrative Manual, and are exempt from the review or approval of any division of the Department of General

Services.

§ 127501.10

Added by Stats. 2022, Ch. 47, Sec. 19. (SB 184) Effective June 30, 2022.

(a)There is hereby established, within the office, the Health Care Affordability Board. The board shall be composed of eight members, as follows:

(1)Four members shall be appointed by the Governor and confirmed by the Senate.

(2)One member shall be appointed by the Senate Committee on Rules.

(3)One member shall be appointed by the Speaker of the Assembly.

(4)The Secretary of Health and Human Services or their designee.

(5)The CalPERS Chief Health Director or their deputy shall

serve as a nonvoting member of the board.

(b)Members of the board who are appointed shall be appointed for a term of four years, except that the initial appointment by the Senate Committee on Rules shall be for a term of five years, the initial appointment by the Speaker of the Assembly shall be for a term of two years, and one of the initial appointments by the Governor shall be for a term of three years. A member of the board may continue to serve until the appointment and qualification of a successor. Vacancies shall be filled by appointment for the unexpired term.

(c)(1) Each person appointed to the board shall have demonstrated and acknowledged expertise in at least one of the following areas: health care economics; health care delivery; health care management or health care finance and administration, including payment methodologies; health plan

administration and finance; health care technology; research and treatment innovations; competition in health care markets; primary care; behavioral health, including mental health and substance use disorder services; purchasing or self-funding group health care coverage for employees; enhancing value and affordability of health care coverage; or organized labor that represents health care workers.

(2)Appointing authorities shall consider the expertise of the other members of the board and attempt to make appointments so that the board’s composition of members reflects a diversity of expertise on health care entities, purchasers, and consumer advocacy groups, who also meet the requirements of paragraph (1).

(3)In making appointments to the board, the appointing authorities shall take into consideration the state’s diversity in culture, race, ethnicity, sexual orientation, gender

identity, and geography so that the board’s composition reflects the communities of California. Appointing authorities shall consider the experience the board member has as a patient or caregiver of a patient with a chronic condition requiring ongoing health care, which may include behavioral health care or a disability.

(4)(A) An appointee to the board shall not receive financial compensation from, or be employed by, a health care entity that is subject to the cost targets, an entity subject to cost and market impact reviews, or an exempted provider.

(B)For purposes of this paragraph, an appointee’s prohibited financial compensation and employment does not include employment by a health care entity solely as a tenured academic instructor with duties and compensation unrelated to the health care operations of the entity.

(C)For purposes of this paragraph, financial compensation does not include compensation received pursuant to a retirement plan.

(D)For purposes of this paragraph, financial compensation does not include clinical volunteer services if all of the following conditions are met:

(i)The board member is a health care professional who was actively participating in that profession prior to appointment to the board.

(ii) The board member does not receive compensation for performing volunteer services and does not have an ownership interest or other financial interest in the entity, facility, clinic, or provider group.

(iii) The clinical volunteer services are performed at the University of

California or a nonprofit educational institution; a facility, clinic, or provider group operated by, or affiliated with, an academic medical center of either the University of California or a nonprofit educational institution; or a facility, clinic, or provider group operated by a state agency or county health system that does not directly contract with the office.

(E) For purposes of subparagraph (D), compensation and financial interest for a health care professional who performs clinical volunteer services does not include either of the following:

(i)A contribution to a professional liability insurance program made by the entity, facility, clinic, or provider group for the member or staff.

(ii) The provision of physical space, equipment, support staff, or other supports made by the entity, facility, clinic, or

provider group for the member or staff necessary for the performance of clinical volunteer services described in subparagraph (D).

(5)The board shall elect a chair.

(d)(1) Each member of the board shall receive a per diem of five hundred dollars ($500) for each day actually spent in the discharge of official duties, not to exceed 30 days per year, and shall be reimbursed for traveling and other expenses necessarily incurred in the performance of official duties. After June 30, 2026, the per diem shall be one hundred dollars ($100) per day.

(2)Notwithstanding any other law, a public officer or employee shall not receive per diem salary compensation for serving on the board on any day when the officer or employee also received compensation for their regular public employment.

(e)(1) The board shall meet at least quarterly or at the call of the chair.

(2)The board shall be subject to the Bagley-Keene Open Meeting Act (Article 9 (commencing with Section 11120) of Chapter 1 of Part 1 of Division 3 of Title 2 of the Government Code), except that the board may hold closed sessions when considering matters related to the office assessing administrative penalties, requiring performance improvement plans under Section 127502.5, and discussing nonpublic information and documents received by the office and board under this chapter.

(3)The board shall be subject to Article 3 (commencing with Section 87300) of Chapter 7 of Title 9 of the Government Code, and the regulations promulgated thereunder.

§ 127501.11

Added by Stats. 2022, Ch. 47, Sec. 19. (SB 184) Effective June 30, 2022.

(a)After receiving input, including recommendations, from the office and the advisory committee, and receiving public comments, the board shall establish all of the following:

(1)A statewide health care cost target.

(2)The definitions of health care sectors, which may include geographic regions and individual health care entities, as appropriate, except fully integrated delivery systems as defined in subdivision (h) of Section 127500.2, and specific targets by health care sector, which may include fully integrated delivery systems, geographic regions, and individual health care entities, as appropriate.

(3)The standards that need to be met for exemption from health care cost targets or submitting data directly to the office, including the definition of exempted providers.

(b)The board shall approve all of the following:

(1)Methodology for setting cost targets and adjustment factors to modify cost targets when appropriate.

(2)The scope and range of administrative penalties and the penalty justification factors for assessing penalties.

(3)The benchmarks for primary care and behavioral health spending.

(4)The statewide goals for the adoption of alternative payment models and standards that may be used between payers and providers during contracting.

(5)The standards to advance the stability of the health workforce that may apply in the approval of performance improvement plans.

(c)The director shall present to the board for discussion all of the following:

(1)Options for statewide health care cost targets, specific targets by health care sector, including fully integrated delivery systems, geographic regions, and individual health care entities, as appropriate.

(2)The collection, analysis, and public reporting of data for the purposes of implementing this chapter.

(3)The risk adjustment methodologies for the reporting of data on total health care expenditures and per capita total health care expenditures.

(4)Review and input on performance improvement plans prior to approval, including delivery of periodic updates about compliance with performance improvement plans to inform any adjustment to the standards for imposing those plans.

(5)Review and input on administrative penalties to inform any adjustments to the scope and range of administrative penalties and the penalty justification for assessing penalties.

(6)Factors that contribute to cost growth within the state’s health care system, including the pharmaceutical sector.

(7)Strategies to improve affordability for both individual consumers and purchasers of health care, including data collection, targets, and other steps.

(8)Recommendations for administrative simplification in the health care delivery system.

(9)Approaches for measuring access, quality, and equity of care.

(10)Recommendations for updates to statutory provisions necessary to promote innovation and to enable the increased adoption of alternative payment models.

(11)Methods of addressing consolidation, market power, and other market failures.

(d)(1) To support the board’s decisionmaking, the board may request data analysis to be conducted or collected by the office.

(2)The office may establish advisory or technical committees, as necessary. The office shall establish advisory or technical committees at

the request of the board. These committees may be standing committees or time-limited workgroups, at the discretion of the board. Members of these committees shall comply with the requirements in paragraph (1) of subdivision (c) of Section 127501.10. A committee established by the board may include members who are health care entities, consumer organizations representing health care consumers or patients, organized labor representing health care workers, or patients or caregivers of patients with a chronic condition requiring ongoing health care, which may include behavioral health care or a disability.

§ 127501.12

Added by Stats. 2022, Ch. 47, Sec. 19. (SB 184) Effective June 30, 2022.

(a)(1) The board shall establish a Health Care Affordability Advisory Committee to provide input, including recommendations, to the board and the office on a range of areas, including, but not limited to, all of the following:

(A) A statewide health care cost target and specific targets by health care sector and geographic region.

(B) The methodology for setting cost targets and adjustment factors to modify cost targets when appropriate.

(D) Benchmarks for primary care and behavioral

health spending.

(E) Statewide goals for the adoption of alternative payment models and standards.

(F) Quality and equity metrics.

(G) Standards to advance the stability of the health care workforce.

(H) Other areas requested by the board or the office.

(2)The advisory committee may provide input, including recommendations, to the board regarding board requests for data analysis performed by the office, but does not have authority to direct data analysis or any other work performed by the office.

(b)(1) The board shall appoint the members of the advisory committee. Appointments shall be made by a

majority vote of the voting members of the board. When appointing members to the advisory committee, the board shall aim for broad representation, including, at a minimum, representatives of consumer and patient groups, payers, fully integrated delivery systems, hospitals, organized labor, health care workers, medical groups, physicians, and purchasers, and shall apply the same considerations of demonstrated knowledge, expertise, diversity, and personal experience outlined in paragraphs (1) to (3), inclusive, of subdivision (c) of Section 127501.10.

(2)Each appointed member shall serve at the discretion of the board and may be removed at any time by a majority vote of the voting members of the board.

(3)The advisory committee members shall not have access to confidential, nonpublic information that is accessible to the board and office. Instead, the advisory committee shall only

have access to information that is publicly available. Neither the board nor the office shall disclose any confidential, nonpublic information to the advisory committee members.

(4)Advisory committee members shall receive reimbursement for travel and other actual costs.

(c)(1) The advisory committee shall meet at least four times per year or when requested by the board.

(2)At least one member of the board shall attend the advisory committee meetings.

(3)Advance notice of any advisory committee meetings shall be posted on the office’s internet website to allow for public participation at the meetings. Meeting minutes of all advisory committee meetings and input, including recommendations, on proposed cost targets shall be posted

on the office’s internet website.

(d)The board shall consider input, including recommendations, from the advisory committee, along with public comments, in the board’s deliberation and decisionmaking.