BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 684
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          Date of Hearing:   April 14, 2009

                            ASSEMBLY COMMITTEE ON HEALTH
                                  Dave Jones, Chair
                   AB 684 (Ma) - As Introduced:  February 26, 2009
           
           SUBJECT:   Claim reimbursement:  late payments:  dental  
          services.

           SUMMARY  :   Increases the interest rate health plans and health  
          insurers covering dental services must pay for uncontested  
          claims that are not reimbursed within 60 working days (to 20%  
          per year) and 90 working days (to 25% per year).  Specifically,  
           this bill  :

          1)Requires health care service plans covering dental services  
            (health plans), health insurers covering dental services  
            (health insurers) and specialized health plans and health  
            insurers covering dental services (dental plans) to pay  
            interest at the rate of 20% per year on an uncontested claim  
            that is not reimbursed within 60 working days after receipt.   
            Requires interest to begin with the first calendar day after  
            the 60 working day period.

          2)Requires health plans, health insurers and dental plans to pay  
            interest at the rate of 25% per year on an uncontested claim  
            that is not reimbursed within 90 working days after receipt.   
            Requires interest to begin with the first calendar day after  
            the 90 working day period.

           EXISTING LAW  :

          1)Requires the regulation of health plans by the Department of  
            Managed Health Care (DMHC) and the regulation of health  
            insurers by the California Department of Insurance (CDI).

          2)Requires health plans and health insurers to reimburse  
            uncontested claims no later than 30 days for health insurers  
            and non-health maintenance organization (HMO) health plans and  
            45 working days for HMOs, after receipt of the claim.

          3)Requires, if a claim is not reimbursed within the 30 or 45  
            working day time period, that interest accrue at the rate of  
            15% per year, for health care service plans, and 10% per year  
            for health insurers, beginning with the first calendar day  








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            after the 30-working day period.

           FISCAL EFFECT  :   This bill has not been analyzed by a fiscal  
          committee.

           COMMENTS  :   

           1)PURPOSE  .  This bill is sponsored by the California Dental  
            Association (CDA) to establish tiered increases in the  
            interest penalties for non-payment of claims beyond the  
            current time requirements, to 20% per year for claims not paid  
            within 60 days of receipt, and 25% per year for claims not  
            paid within 90 days of receipt.  CDA believes that the current  
            penalty is too modest to induce payers to pay claims on time,  
            making the payment of penalties simply a cost of doing  
            business.  CDA indicates it receives a significant number of  
            calls from its member dentists requesting assistance in  
            dealing with issues of late payment on non-disputed dental  
            claims.  CDA states dental offices consistently reported that  
            while routine dental procedures (such as cleanings, exams,  
            restorations) are processed within the legally required period  
            of time, higher cost treatments (such as extensive crowns,  
            bridges, and removable prosthetics) take longer to be  
            processed and paid.  Two dental offices in particular have  
            been struggling with $20,000 and $30,000 respectively in  
            outstanding claims, which is a significant financial burden to  
            any small business.  CDA argues this bill is a reasonable  
            measure that will not impact those dental plans working within  
            the legally required timeframe and only penalize those  
            companies that do not.

           2)BACKGROUND  .  Prompt pay statutes require health plans and  
            insurers to pay claims within specified timeframes.  The  
            current interest penalty of 10% for CDI regulated plans and  
            15% for DMHC regulated plans would be increased by this bill  
            to 20% for claims paid between 61-90 days and to 25% for  
            claims paid after 90 days.  On an average dental claim of  
            $150, the amount owed in an interest penalty for CDI insurers  
            would increase from 4.2 cents per day to 8.3 cents per day for  
            claims reimbursed between 61-90 days (the interest penalty  
            increase from 10% to 20%).  For claims paid after 90 days, the  
            amount owed from the interest penalty would increase from 4.2  
            cents per day to 10.4 cents per day (the interest penalty  
            increase from 10% to 25%).  For DMHC plans, the amount owed  
            from the interest penalty would increase from 6.2 cents per  








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            day to 8.3 cents per day (the interest penalty increase from  
            15% to 20%) for claims paid within 61-90 days, and from 6.2  
            cents per day to 10.4 cents per day for claims paid past 90  
            days (the interest penalty increase from 15% to 25%).

          According to the DHMC web site, from 2002 through the present,  
            there have been 54 enforcement actions involving late claims  
            payment.  Of the 54, five involved dental plans with a  
            combined penalty of $74,000.  DMHC's Office of Provider  
            Oversight reports 7,064 complaints received from all providers  
            during 2008.  Of the 7,064 complaints, 48 were from dental  
            providers.  Of those 48 complaints, 16 dental provider  
            complaints involved an issue of untimely payment.

          3)OPPOSITION  .  This bill is opposed by the California  
            Association of Dental Plans (CADP), which argues current law  
            provides substantial specific penalties for late penalties,  
            that the DMHC has mechanisms in place to review provider  
            complaints and intervene when appropriate, that a review of  
            some claims of slower payment reveals that almost 30% of  
            dental claims are handwritten and sent by mail not using  
            computer billing technology, that dentists and dental plans  
            should be able to manage their insurance contracting  
            relationships without state involvement, and if dentists are  
            unhappy with the interaction with the plan, they can choose  
            not to contract.  CADP asks that dental plans and the dentists  
            settle their payment disputes amongst themselves.  Delta  
            Dental of California (DDC) argues it pays 99.995% of clean  
            claims in compliance with prompt payment requirements.  DDC  
            argues late dental claims are not a problem meriting a  
            legislation solution, there is no reason to legislate a  
            specific set of penalties for dental claims, and existing law  
            already sufficiently discourages late payment of claims.  

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          California Dental Association (sponsor)
          American Federation of State, County and Municipal Employees,  
          AFL-CIO
          California Medical Association

           Opposition 
           








                                                                  AB 684
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          Association of California Life & Health Insurance Companies
          California Association of Dental Plans
          Delta Dental of California
           

          Analysis Prepared by  :    Scott Bain / HEALTH / (916) 319-2097