BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K Alquist, Chair
BILL NO: AB 684
A
AUTHOR: Ma
B
AMENDED: June 18, 2009
HEARING DATE: June 25, 2009
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CONSULTANT:
8
Park/
4
SUBJECT
Claim reimbursement: late payments: dental services
SUMMARY
Increases the interest rate health plans and health
insurers (collectively, carriers) covering dental services
must pay for uncontested claims and claims that the carrier
determines to be payable that are not reimbursed within 60
working days, as specified, and requires the interest that
accrues to be paid to the carriers' respective regulators
for enforcement of specified laws, upon appropriation.
Requires carriers offering dental coverage to follow a
specified process for requesting additional information
related to a claim.
CHANGES TO EXISTING LAW
Existing law:
Existing law 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).
Existing law requires carriers to reimburse uncontested
claims no later than 30 working days after the claim is
Continued---
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received (or 45 working days if the carrier is a health
maintenance organization (HMO)). Existing law requires an
uncontested claim that has not been paid in the required
time to accrue interest at a rate of 15 percent per year
for health plans and 10 percent per year for health
insurers, beginning with the first calendar day after the
30- or 45-working day period.
Existing law requires carriers to notify claimants in
writing that a claim is contested or denied, within 30
working days after receipt of a claim (or 45 days, if the
carrier is an HMO), and requires the notice to identify the
portion of the claim that is contested and the specific
reasons for contesting the claim. Existing law provides
that a claim, or portion thereof, is reasonably contested,
in the case that the carrier has not received the completed
claim and all the "information necessary to determine payer
liability for the claim," as defined, or has not been
granted reasonable access to information concerning
provider services. Existing law requires carriers to
complete reconsideration of the claim within 30 days (or if
the carrier is an HMO, 45 days) after receipt of additional
information.
Existing law provides that, if a carrier has received all
of the information necessary to determine payer liability
for a contested claim and has not reimbursed a claim it has
determined to be payable within 30 working days of the
receipt of that information (or 45 working days if the
carrier is an HMO), interest payable shall accrue at a rate
of 15 percent per year for health plans and 10 percent per
year for health insurers, beginning with the first calendar
day after the 30- or 45-working day period.
Existing law provides that fines and administrative
penalties collected for health plan violations of the
Knox-Keene Act (which excludes health insurers) shall be
deposited into a Managed Care Administrative Fines and
Penalties Fund, for transfer into the Medically Underserved
Account for Physicians and the Major Risk Medical Insurance
Fund, as specified.
Existing law prohibits health plans from engaging in an
unfair payment pattern, defined as: 1) engaging in a
demonstrable and unjust pattern, as defined by DMHC, of
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reviewing or processing complete and accurate claims that
result in payment delays; 2) engaging in a demonstrable and
unjust pattern, as defined by DMHC, of reducing the amount
of payment or denying complete and accurate claims; 3)
failing on a repeated basis to pay the uncontested portions
of a claim within the timeframes specified in current law;
or, 4) failing on a repeated basis to automatically include
the interest due on claims. Existing law allows the
director of DMHC, upon a final determination that a health
plan has engaged in an unfair payment pattern, to impose
monetary penalties, and require the health plan to pay
complete and accurate claims, as defined, from the provider
for a period of up to three years.
Existing law defines unfair methods of competition and
unfair and deceptive acts or practices in the business of
insurance, and includes in this definition, not attempting
in good faith to effectuate prompt, fair, and equitable
settlements of claims in which liability has become
reasonably clear. Existing law provides that any person
who engages in any unfair method of competition or any
unfair or deceptive act or practice in the business of
insurance is liable to the state for a civil penalty to be
fixed by the commissioner, not to exceed five thousand
dollars ($5,000) for each act, or, if the act or practice
was willful, a civil penalty not to exceed ten thousand
dollars ($10,000) for each act. Existing law allows the
commissioner to have the discretion to establish what
constitutes an act. Existing regulation provides that
specified claims settlement practices, when either
knowingly committed on a single occasion, or performed with
such frequency as to indicate a general business practice,
are considered to be unfair claims settlement practices and
are prohibited.
This bill:
This bill would require health 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), collectively referred to as "dental carriers," to
pay interest at the rate of 20 percent per year on an
uncontested claim that is not reimbursed within 60 working
days after receipt, and 25 percent per year on an
uncontested claim that is not reimbursed within 90 working
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days after receipt. The bill would require interest to
begin with the first calendar day after the 60-working day
period, or 90-working day period, respectively. The bill
would also require these increased interest rates apply
when dental carriers have received all of the information
necessary to determine payer liability for a contested
claim, and the dental carrier has not reimbursed the claim
within these additional time frames.
The bill would require that interest that accrues in excess
of 15 percent per year for health plans and specialized
health plans covering dental services, and 10 percent per
year for health insurers and specialized health insurance
policies covering dental services, to be paid to each
carrier's respective regulator for enforcement of specified
claims reimbursement requirements in law, upon
appropriation.
The bill would further require that, for dental carriers,
if a claim or portion thereof is contested on the basis
that the dental carrier has not received all information
necessary to determine payer liability, the dental carrier
must include a written request for the necessary
information and a clear and accurate explanation of the
necessity for that information within the notice that is
already required in current law for carriers to notify
claimants that a claim is contested. The bill would require
the dental carrier to acknowledge receipt of any
information requested by the dental carrier, within two
working days of receipt, if the claimant submits the
information electronically, or 15 working days after
receipt, if the claimant submits the information in paper
form. The bill would require dental carriers to process or
deny the claim, or portion thereof, within the timeframe
specified under current law.
FISCAL IMPACT
According to the Assembly Appropriations Committee, the
bill would result in minor absorbable workload to DMHC and
CDI to continue oversight of requirements regarding prompt
payment by health plans and insurers. The committee
analysis notes that any interest payments required by
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dental health plans and insurers under provisions of this
bill are minor. For example, a claim of $334 dollars not
paid in a timely manner would require interest payments of
18.3 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.
BACKGROUND AND DISCUSSION
Author's statement
According to the author, despite the penalties for late
payments on claims in current law, delays in claim
reimbursements continue to be experienced. The author
notes that, among all third-party payer issues that the
California Dental Association (CDA) hears about from member
dentists, complaints about late payment on claims are the
most numerous. The author points to internal CDA research,
which shows that, of claims that are not paid within 30
days, more than 60 percent are still unpaid after 60 days;
and, of all claims that are outstanding after 60 days, 82
percent are unpaid after 90 days. The author highlights
additional internal CDA research, which found that, on
average, dental offices are carrying $7,887.00 in claims
that have not been paid within 60 days.
The author notes that this bill leaves the penalty for
non-payment of claims from 30 to 60 days unchanged;
however, when a dental plan fails to pay a claim within 60
days, the author states that a higher penalty is justified,
and the penalty should be increased again when claims are
not paid within 90 days. The author believes that higher
late payment penalties provide a greater incentive for
dental plans to process and pay claims sooner, and not
allow claims to go outstanding for months.
Dental claims - complaints and late payments
According to the DMHC website, 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
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provider complaints involved an issue of untimely payment.
According to the California Dental Association,
extrapolating from numbers from the American Dental
Association's most recent Survey of Current Issues in
Dentistry, the average number of claims submitted by a
dental practice (regardless of type) to all payers per week
is 73.8, or 3,690 claims per year. According to the 2006
County Business Patterns report, U.S. Census Bureau, there
are 19,436 "dental establishments" in California (combining
both solo practices and group practices). Based on these
numbers, CDA believes that there are roughly 71.7 million
dental claims submitted each year in California. However,
it is unclear how may of these claims are covered under
state law or regulation. (Some employer groups "self-fund"
the costs of health care, in essence acting as the insurer.
Such groups are not subject to the same state laws or
regulations pertaining to health plans, insurers, or
specialized health plans or health policies.) Delta
Dental, which administers dental benefits for 17 million
Californians, processed 16 million claims for California
enrollees in 2008.
According to a survey conducted in February 2009 by the
California Dental Association, the sponsor of this measure,
which asked 29 dental offices how many claims were
outstanding, those offices reported a total 376 claims
worth $203,126 that were in the 31-60 day period, 159
claims worth $64,697 that were in the 61-90 day period, and
691 claims worth $164,038 that were over the 90-day period,
for a total of 1,226 claims worth $431,861 that had not
been paid within 30 days.
Prior legislation
SB 1387 (Padilla), Chapter 403, Statutes of 2008,
establishes specific requirements for overpayment notices
sent by dental plans to dental providers.
AB 1155 (Huffman) of 2008 would have required the director
of the Department of Managed Health Care, upon a final
determination that a health plan has underpaid or failed to
pay a provider in violation of the Knox-Keene prohibition
on an unfair payment pattern, to require the plan to pay
the provider not less than the amount owed plus interest as
well as pay an administrative penalty to the Managed Care
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Fund not less than the amount owed the provider plus
interest. Vetoed by the Governor.
AB 1455 (Scott), Chapter 827, Statutes of 2000, bars health
plans from engaging in unfair payment patterns in the
reimbursement of providers. AB 1455 additionally includes
a number of other provisions regarding payment practices of
health plans, including requiring health plans to make
their dispute resolution process available to
non-contracting providers.
Arguments in support
The California Dental Association (CDA), the sponsor of
this measure, writes 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. CDA highlights that 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.
The California Medical Association (CMA) writes that an
undue burden is placed on dental practices when uncontested
dental claims are paid late. CMA notes that, often times,
dentists, like physicians, cover the costs of the service
provided to the patient upfront, and when claims go unpaid,
practices run the risk of jeopardizing the cash flow of
their business.
Arguments in opposition
The California Association of Dental Plans (CADP) believes
that current law provides substantial specific penalties
for late penalties, and that the DMHC has mechanisms in
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place to review provider complaints and intervene when
appropriate. CADP notes that its member plans report that
uncontested late payments are often the result of errors by
dental office personnel, and that lack of technical
interface between the plan and providers, caused in some
cases by handwritten claims, slow down the reimbursement
process. CADP highlights that self-funded dental plans,
such as those sponsored by various corporations and labor
groups, are cited in sending late payments, but would not
be covered by this legislation. CADP also asserts that
there are a number of legal and administrative remedies,
including arbitration and mediation that are available to
settle private disputes about uncontested claims, and that
dentists and dental insurance plans should manage their
insurance relationships without state involvement.
Delta Dental of California (DDC) states that, last year,
Delta Dental paid nearly 30 million commercial dental
claims and paid 99.995 percent of all uncontested claims in
compliance with prompt payment requirements. (The number of
claims processed for California totaled 16 million for
2008.) DDC asserts that late dental claims are not a
problem meriting a legislative solution, existing law
already sufficiently discourages late payment of claims,
and that no justification exists for special, punitive
treatment of dental plans. DDC points out that the
regulatory standard under DMHC is 95 percent compliance
with the claims payment requirement, providing support that
not all uncontested claims can, realistically, be paid on
time. DDC believes that collaboration between plans and
providers on a solution would be a more effective way to
reduce these late dental claims payments, which tend to
involve more complex procedures. As an example, DDC states
it would assign a special claims liaison to work with CDA
and its member dentists.
The Association of California Life and Health Insurance
Companies, likewise, believes that the California
Department of Insurance has sufficient authority to
penalize insurers who demonstrate a pattern of unfair
payments, and that dental insurers already have enough
incentive to pay uncontested claims on time.
The DMHC and the Office of the Insurance Advisor, within
the State and Consumer Services Agency, state that this
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bill is unnecessary. DMHC states that it received just 16
complaints, or less than one percent of the total provider
complaints received by DMHC, in 2008 dealing with untimely
payments to dental providers.
PRIOR ACTIONS
Assembly Floor: 76-0
Assembly Appropriations:15-0
Assembly Health: 15-1
COMMENTS
1.Interest in excess of 10/15 percent per year goes to
regulators for specified enforcement.
The current language of the bill requires interest in
excess of the current 10-15 percent per year to go to
regulators for specified enforcement activities. SB 1379
(Ducheny), Chapter 607, Statutes of 2008, created a
separate fund to direct administrative fines and
penalties for transfer into the Medically Underserved
Account for Physicians and the Major Risk Medical
Insurance Fund. By earmarking these interest penalties
for a different purpose, this bill would depart from the
precedent set by SB 1379. Additionally, the bill creates
an incongruity between the type of enforcement activities
that would be undertaken by DMHC and CDI, related to
these additional penalty funds. The author may wish to
consider whether to conform these additional penalties to
SB 1379, or align enforcement activities more closely
between the two regulatory entities.
2.Bill applies to claims from one category of provider.
While there is evidence of late payment of claims
involving dentists, there is no evidence to suggest that
the problem is any more prevalent for dentists than for
other types of providers. In fact, the evidence suggests
that late payment of claims may be less prevalent for
dentists than for other providers. Although the rate of
interest tied to late claims payment already varies,
depending on whether the carrier is regulated by DMHC or
CDI (such as 15 percent per year under the Health and
Safety Code, and 10 percent per year under the Insurance
Code), it is unclear why the state should apply different
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penalties on late payment of claims, depending on the
provider's area of specialty, such as dentists. The
author may wish to elaborate on the need for the
differential interest penalty schedule.
3.Technical amendment.
The reference on Page 8, lines 3, should read as follows:
(C) Upon receipt of all of the information
requested pursuant
to this paragraph, the insurer shall process or
deny the claim
within the timeframe specified in paragraph
(2) (1).
POSITIONS
Support: California Dental Association (sponsor)
American Federation of State, County and
Municipal Employees, AFL-CIO
California Medical Association
Oppose: Association of California Life and Health
Insurance Companies
California Association of Dental Plans
Delta Dental of California
Department of Managed Health Care
Office of the Insurance Advisor
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