BILL ANALYSIS Ó
AB 1579
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Date of Hearing: May 9, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1579 (Campos) - As Amended: April 23, 2012
Policy Committee: HealthVote:19-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill requires dental care service plans and insurers that
provide coverage for out-of-network care to pay a non-contracted
provider directly for services rendered to a patient, if the
non-contracted provider submits an "assignment of benefits"
(AOB) form to the plan or insurer for treatment.
This bill also requires a dental provider using AOB to obtain a
patient signature on a specified notice that explains AOB and
the higher cost associated with out-of-network care, to provide
a patient with an estimate of costs, and to collect from the
patient only the amount estimated.
FISCAL EFFECT
1)Minor, absorbable costs to the Department of Managed Health
Care and the Department of Insurance to ensure plans comply
with the new requirement to directly reimburse non-contracting
providers.
2)This bill could potentially lead to indirect state cost
pressure associated with the provision of dental plans to its
employees. By making it easier for a non-contracting provider
to receive payment from a dental plan, this bill is likely to
somewhat reduce incentives for dental providers to join or
maintain participation in a plan network. If these reduced
incentives led to a significant decrease in the number of
participating providers, there could be pressure to increase
fees to providers in order to entice a sufficient number of
providers to join plan networks, the cost of which could be
passed on to consumers as increased premiums. These market
effects are difficult to predict and potential state costs are
AB 1579
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indeterminate.
COMMENTS
1)Rationale . According to the author, dental providers who
choose not to contract with a plan should still be able to
receive direct reimbursement from a plan for services rendered
to a patient enrolled in that plan. For plans and policies
that allow some coverage for out-of-network care, the amount
covered by the plan for that care is often paid directly to a
patient, and the author indicates that patients sometimes do
not remit this payment to the dentist. The author argues that
many dentists are small businesses whose practices suffer when
they do not receive payments for the services they perform,
and that dentists should not be forced to join plan networks
to receive payment directly from plans.
2)Background . Preferred provider organization (PPO) style
dental plans use a preferred provider list, but also offer
more limited coverage for out-of-network providers, in order
to encourage use of in-network providers. For example, the
State of California's dental PPO plan option covers 80% of the
cost of a crown when using an in-network provider (where cost
is defined by the plan as the lesser of the usual and
customary rate, the fee actually charged, or the agreed-upon
contractual rate). The same plan covers 50% of the cost when
a patient sees an out-of-network provider (where cost is
defined by the plan as the lesser of the fee actually charged
and the fee that satisfies a majority of in-network dentists).
Patient costs are significantly higher in the latter case.
In this example, if the provider charges $1000 but in-network
providers generally accept $800, the total patient cost for
in-network care would be $160, and for out-of-network care
would be $600.
In current practice among some dental plans, the patient in
the out-of-network case would receive a check from the dental
plan for $400 (50% of the $800 fee that the plan would cover).
The patient would be expected to remit that $400, along with
the $600 patient share of cost, to the out-of-network dentist
in order to pay the total charges. This bill would allow the
out-of-network dentist to receive the $400 payment directly
from the plan, by submitting an AOB form on behalf of the
patient. The patient would still be responsible for the
estimated patient costs (in this example, $600). The bill
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would also increase enrollee awareness of the higher costs
associated with out-of-network care by requiring the
enrollee's signature on a standardized notice.
According to an article on AOB jointly produced by the
American Dental Association and the National Association of
Dental Plans, carriers who do not typically honor AOB view
direct payment as a value of network participation and a
method of reinforcing patient selection of dentists within the
established dentist network, in order to optimize the amount
of care patients can obtain under their annual maximum. On the
other hand, dentists believe payers should AOB from the plan
participant. Many dentists feel that not honoring patients'
requests to assign benefits to nonparticipating providers is
an attempt by carriers to get these providers to join their
networks.
3)Opposition . Dental plans oppose this bill because they believe
it will erode their provider networks by reducing incentives
for providers to contract with them, leading to increased
out-of-pocket costs and/or reduced access for their enrollees.
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081