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