California leaders are pushing legislation aimed at boosting insurance companies' contracts with LGBT-owned firms and other certified minority-owned businesses. It comes as lawmakers are also seeking to increase hospital contracts for such businesses.
Under Senate Bill 534, introduced by state Senator Steven Bradford (D-Gardena), the state's $310 billion insurance industry would be required to biennially report how much it is contracting with businesses owned by women, people of color, veterans, and LGBT individuals.
Gay Insurance Commissioner Ricardo Lara, a former state senator who will be the commencement speaker May 24 at City College of San Francisco, is a co-sponsor of the legislation. It revives the state agency's Insurance Diversity Initiative that expired in January and would expand its scope to include LGBT- and veteran-owned businesses.
"California's nation-leading insurance industry can be an engine of prosperity for diverse businesses, benefiting our communities and the customers they serve," stated Lara, who took over leadership of the California Department of Insurance in January. "SB 534 will continue to leverage the rapid growth of the insurance sector's role in contributing to vibrant local economies."
When the state insurance agency was collecting data on insurers' contracts with certain diverse-owned firms, it saw procurement between insurers and such businesses increase by 93% over a five-year period. It went from $930 million in 2012 to $1.8 billion in 2017.
"California is a diverse state and becomes more diverse with each day," stated Bradford. "Ignoring that fact also ignores the proven value diverse businesses have and the importance of making our economy more inclusive. Insurance spending on diverse businesses increased 93% over the few years the supplier survey was administered. I think that difference speaks to the enormous impact this measure will have."
The bill passed out of the Senate's judiciary committee last Tuesday, April 23, and will now be taken up by the chamber's appropriations committee. In 2017 Bradford had introduced a similar bill but it died in the Assembly Appropriations Committee; it remains to be seen if this year's bill will survive.
Hospital contracting bill waits review
Similar legislation pending in the state Assembly would require California hospitals with annual operating budgets of more than $25 million to publicly disclose how much they are contracting with LGBT-owned businesses as well as those owned by women, minorities, and other disadvantaged groups.
As the Bay Area Reporter's Political Notes column reported April 8, the transparency requirement is aimed at seeing more such companies benefit from the estimated $230 billion the state's hospital industry spends annually. It mirrors recent efforts to encourage other industries in the state, from public utilities to transportation agencies, to also increase their contracts with minority-owned firms.
Assemblywoman Autumn Burke (D-Inglewood) and Assemblyman Rob Bonta (D-Oakland) co-authored the legislation, Assembly Bill 962. It currently is in the Assembly Appropriations Committee's suspense file, as it needs to be reviewed by California's Office of Statewide Health Planning and Development.
According to a fiscal analysis of the bill, AB 962 would result in "one-time contract costs in the hundreds of thousands of dollars to OSHPD for an information technology solution that will collect, store and make available supplier diversity reports (Health Data and Planning Fund)." The statewide office also noted that it could "necessitate an increase in the current level of assessments on hospitals and long-term care facilities to support the increased costs."
The California Hospital Association, United Hospital Association and Sharp Healthcare have expressed opposition to the bill unless it is amended. The lobbying groups contend that "manufacturing of specialized products is extremely limited and there are virtually no diverse suppliers for hospitals to consider in many cases." They have also argued that hospitals, in order to secure cheaper prices, participate in group purchasing organizations that have diversity policies.
The analysis by Assembly staff suggested that the bill's July 1, 2020 deadline to comply "seems aggressive" since it could take longer for the state to create a standard form that hospitals can use to submit the required information.
The Senate bill is also facing opposition unless amended by a coalition of organizations representing insurers doing business in California. It would require as of July 1, 2020 that each admitted insurer with California written premiums of $100 million or more submit a report in even-numbered years to the state's insurance commissioner on its minority, women, LGBT, veteran, and disabled veteran-owned business enterprise procurement efforts during the previous two years.
The bill would also require insurers to report on the diversity of their governing boards and set goals for supplier and board diversity. But that provision of the bill has raised objections from the insurer groups, which argued that asking and publishing information about a board member's sexual orientation or gender identity, for example, "may violate laws and is problematic," according to a Senate staff analysis.
Based on those concerns, the bill was amended to state that the board members would be asked to voluntarily disclose their personal demographic data and that "no adverse action" would result in their choosing not to. The bill was also amended to specify that only "the aggregate data collected for each demographic category will be reported."
Data collected by the Department of Insurance in 2017 showed that men held 80% of major insurers' governing board seats, with people of color holding just 12%. Of nearly 2,400 total board seats, only 14 members self-identified as LGBT, while 13% of insurance companies reported zero women and 35% reported zero persons of color on their boards.
"SB 534 will ensure that California's insurance providers think about diversity when they make procurement decisions and choose their boards of directors," stated Greenlining Institute Health Equity Director Anthony Galace. "California leads the nation in diverse-owned businesses, which creates the ideal environment and opportunity to advance diversity, equity, and inclusion among insurance companies and other large businesses."
The Oakland-based institute is co-sponsoring both of the bills requiring insurers and hospitals to report out on their diversity contracting.
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