BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair AB 1059 (Huffman) Hearing Date: 8/15/2011 Amended: 7/12/2011 Consultant: Katie Johnson Policy Vote: Health 8-1 _________________________________________________________________ ____ BILL SUMMARY: AB 1059 would require the director of the Department of Managed Health Care (DMHC), upon making a final determination that a health care service plan has underpaid or failed to pay a provider, to compel the health plan to pay the provider the amount owed plus interest. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2011-12 2012-13 2013-14 Fund DMHC enforcement $400 to up to about $5,000 annually Special* *Managed Care Fund _________________________________________________________________ ____ STAFF COMMENTS: This bill meets the criteria for referral to the Suspense File. This bill would require the director of the Department of Managed Health Care (DMHC), upon making a final determination that a health care service plan (health plan) has underpaid or failed to pay a provider, to compel the health plan to pay the provider the amount owed plus interest. A provider would not be required to resubmit the claim to the health plan except in extraordinary circumstances. The plan would be required to reimburse the provider the cost of resubmission. This bill is unclear as to whether these provisions would be interpreted to continue the current provider complaint review process of surveying data and searching for patterns of unlawful behavior that DMHC currently conducts through its Office of Provider Oversight's Provider Complaint Unit (PCU), or if it would be read to compel DMHC to review and to take action on each individual provider complaint. AB 1059 (Huffman) Page 1 If the bill is interpreted to mean that DMHC would continues its current process of tracking, trending, and reviewing complaint data for patterns and adjudicating unjust payment patterns, then costs would likely be minor and absorbable for the PCU and may increase enforcement's workload by about $400,000 annually if enforcement had to enforce an additional 10 cases a year. If however, DMHC were to interpret that this bill would necessitate a review and action on every individual complaint, there would be PCU staff costs of about $4 million to individually review and adjudicate approximately 9,000 complaints annually. The increased number of adjudications would beget increased enforcement at a cost of approximately $1 million annually to handle about 3,000 cases related to this bill in addition to the normal caseload of 700 cases annually department-wide. This bill is similar, though not identical, to AB 1155 (Huffman, 2007). Governor Schwarzenegger vetoed AB 1155 saying, "Current law already gives broad authority to the Department of Managed Health Care (Department) to assess administrative penalties against health plans for a variety of violations, including unlawful provider payment practices of health plans...Since the creation of the Department's provider complaint unit, it has assisted providers in recovering $5.8 million in reimbursements. The Department has also collected over $4.2 million in fines as a result of plans' failure to pay claims in a timely manner and based on other related violations of law."