The California attorney general will help oversee healthcare giant Kaiser Permanente’s medical arbitration system to ensure it operates fairly under legislation Gov. Gavin Newsom signed late Sunday.
Patients, their families and lawyers have complained that Kaiser’s private and confidential system of handling medical malpractice complaints is designed to favor the health plan over those bringing the claims.
Under legislation known as Assembly Bill 1770, the attorney general will decide what actions justice officials should take to ensure private arbitrations required by any health plan are handled fairly and in line with state law.
To do that work, the state plans to add as many as four deputy attorneys general, a legal analyst and three legal secretaries, according to a legislative analyst’s report.
“We look forward to continuing to resolve claims through an independently administered system that provides a fair and efficient process for members and patients,” Kaiser Permanente said in a statement Monday.
Roughly 1 of every 4 Californians get healthcare from Kaiser. To join the plan, each one had to check a box, agreeing to use arbitration to settle any dispute.
Many companies and other organizations, including some hospitals and physician groups, require customers or patients to take their complaints to private arbitration rather than to court.
But unlike most other companies, which send claims to large arbitration firms, Kaiser created its own system.
Under Kaiser’s system, once a neutral arbitrator is selected, either party can opt to disqualify that person without cause. There is no limit on the number of disqualifications.
While the health plan designed the system to be fair, patients and their lawyers have alleged that Kaiser’s greater knowledge of arbitrators’ past rulings and its ability to veto arbitrators gives it an advantage to pick favorable judges.
Critics also say the hourly fees paid to arbitrators provide them with a financial incentive to rule in Kaiser’s favor so they will be selected for future cases. Most of the arbitrators are retired judges.
Kaiser has previously defended its arbitration system, saying it was fair for both patients and for the nonprofit.
The bill was authored by Assemblyman Robert Garcia (D-Rancho Cucamonga), a longtime Kaiser member.
Support for it was led by Stephen Martinez, a retired aerospace engineer from Bellflower, who with his wife, Lindalee Iverson, spent $350,000 to bring two arbitration cases against Kaiser. The arbitrator ruled against the couple in both cases.
Iverson died of cancer in 2023.
Martinez told legislators at a hearing this year how his wife had found a lump in her breast and asked for an appointment with her longtime caregiver at Kaiser to examine it. Instead she was sent to a physician assistant, who dismissed it, he said. Later, it was found to be cancer that had spread.
A chief breast surgeon at Kaiser and another surgeon who had retired from that job both testified that the Kaiser physician assistant failed to follow the health system’s guidelines.
Kaiser’s expert argued that the physician assistant did an appropriate exam and that his low suspicion of breast cancer was reasonable. The neutral arbitrator sided with the health plan’s expert.
Martinez has spent years trying to get legislation to make the system more fair.
“I’m elated,” Martinez said of Newsom’s signing of the bill, which was named Lindalee’s Law. “It’s been a long road.”
According to the annual report prepared by the independent administrator of Kaiser’s system, the “most common” complaint the office heard last year was about the neutral arbitrator.
“Most complained that the arbitrator was biased, partisan, unjust, and in Kaiser’s favor,” the report said.
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