BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 684
                                                                  Page  1

          Date of Hearing:   April 29, 2009

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Kevin De Leon, Chair

                   AB 684 (Ma) - As Introduced:  February 26, 2009 

          Policy Committee:                              HealthVote:15-1

          Urgency:     No                   State Mandated Local Program:  
          Yes    Reimbursable:              No

           SUMMARY  

          This bill increases the interest rates paid by dental health  
          plans regulated by the California Department of Managed Health  
          Care (DMHC) and insurers regulated by the California Department  
          of Insurance (CDI) for failing to pay uncontested claims in a  
          prompt manner. Specifically, this bill:

          1)Requires penalties to accrue at a 20% annualized rate of  
            interest for claims paid 61-90 days after submission for  
            payment. 

          2)Requires penalties to accrue at a 25% annualized rate of  
            interest for claims paid more than 90 days after submission  
            for payment. 

           FISCAL EFFECT  

          1)Minor absorbable workload to DMHC and CDI to continue  
            oversight of requirements regarding prompt payment by health  
            plans and insurers. 

          2)According to data published by DMHC, which regulates a  
            majority of dental health coverage in California, only a  
            handful of specific dental payment claims of the kind  
            addressed in this bill have been made over the past few years.  
            According to the California Dental Association (CDA), the  
            sponsors of the bill, quantitative information from a  
            membership survey indicates late payments are an increasing  
            problem and far more common than what is reported to  
            regulators.  

          3)Any interest payments required by dental health plans and  








                                                                  AB 684
                                                                  Page  2

            insurers under provisions of this bill are minor, literally  
            pennies a day past certain accounts receivable time periods.  
            For example, a claim of $334 dollars not paid in a timely  
            manner would require interest payments of 18.5 cents per day  
            for a penalty for payment between 61 and 90 days and 23 cents  
            per day for a penalty of payment after 90 days. 

           COMMENTS  

           1)Rationale  .  This bill is sponsored by the California Dental  
            Association (CDA) to address late payments of uncontested  
            dental claims. Current prompt payment statutes require health  
            plans and insurers to pay dental claims within specified  
            timeframes.  The current interest penalty of 10% for  
            CDI-regulated plans and 15% for DMHC-regulated plans apply to  
            claims paid after 30 days and 45 days, respectively. This bill  
            increases these penalties to 20% for claims paid between 61-90  
            days and to 25% for claims paid after 90 days.  

          According to DMHC data, 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. Some portion of these DMHC  
            penalties may be attributable to civil or administrative  
            penalties authorized under other statutes for unfair payment  
            patterns.  The DMHC 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.

           2)Concerns  . This bill is opposed by the California Association  
            of Dental Plans (CADP) and a number of specific dental plans  
            and insurers. Opponents indicate current law provides adequate  
            protections and enforcement with regard to late payment of  
            dental claims. In addition, opponents indicate there is little  
            evidence of the problem addressed in AB 684. The CADP  
            indicates more than 99% of claims are paid in a timely fashion  
            and therefore this bill not needed. 

           Analysis Prepared by  :    Mary Ader / APPR. / (916) 319-2081