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
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          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.
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                            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
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          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."