BILL ANALYSIS AB 684 Page 1 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 AB 684 Page 2 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 AB 684 Page 3 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 Page 4 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