BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 266
AUTHOR: Lieu
AMENDED: April 3, 2013
HEARING DATE: April 10, 2013
CONSULTANT: Trueworthy
SUBJECT : Health care coverage: out-of-network coverage.
SUMMARY : Prohibits provider groups and clinics, as defined,
from stating verbally or in writing that they are within the
patient's plan network or provider network unless all of the
individual providers providing services are within that plan
network or provider network. Requires a hospital, prior to
providing non-emergency services and care to a patient, to
provide a written notice to the patient stating that individual
providers providing services within the hospital may not be in
the patient's plan network or provider network. Further requires
a provider group, clinic, and hospital to recommend the patient
contact his or her health plan and health insurer (collectively
referred to as carriers) for information about providers who are
within the patient's network.
Existing law:
1.Provides for the regulation and licensure of health care
practitioners by specified healing arts boards within the
California Department of Consumer Affairs.
2.Provides for the licensure and regulation of health facilities
by the California Department of Public Health (CDPH), and
defines various types of health facilities for purposes of
licensure and regulation, including general acute care
hospitals, skilled nursing facilities, and intermediate care
facilities, among others.
3.Provides for regulation of health insurers by the California
Department of Insurance (CDI) under the Insurance Code, and
provides for the regulation of health plans by the Department
of Managed Health Care (DMHC) pursuant to the Knox-Keene
Health Care Service Plan Act of 1975.
4.Requires plans to reimburse non-contracting providers for
emergency services and care rendered to enrollees of the plan,
as specified.
Continued---
SB 266 | Page 2
5.Requires plans to provide a list of specified contracting
providers within the enrollee's general geographic area.
6.Requires insurers to provide group policyholders with a
current roster of institutional and professional providers
under contract to provide services at alternative rates under
their group policy.
7.Requires each hospital to make a written or electronic copy of
its charge description master available, either by posting an
electronic copy on the hospital's website, or by making a
written or electronic copy available at the hospital.
This bill:
1.Prohibits provider groups and clinics, as defined, from
stating verbally or in writing that they are within the
patient's plan network or provider network unless all of the
individual providers providing services are within that plan
network or provider network.
2.Requires a hospital, prior to providing non-emergency services
and care to a patient, to provide a written notice to the
patient stating that individual providers providing services
within the hospital may not be in the patient's plan network
or provider network.
3.Requires a provider group, clinic, and a hospital to recommend
the patient contact his or her carrier for information about
providers who are within the patient's network.
4.Defines "provider group" to be a medical group, independent
practice association, or other similar organization.
5.Defines "plan network" to be any entity, group of providers,
or individual providers contracted with a preferred provider
organization (PPO) or point-of-service plan contract. Defines
provider network to be any entity, group of providers, or
provider contracted with a PPO.
6.Exempts emergency services and care.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
SB 266| Page
3
1. Author's statement. One of the biggest complaints from
Californians is unexpected medical expenses they thought were
covered by their health insurance. This seems to occur most often
when patients inadvertently go out of their insurance-coverage
network and after the care are surprised to receive a bill. Even
for common non-emergency services such as an X-ray, patients may
receive out-of-network care and be billed for the balance without
their knowledge or consent. Understanding which physicians are in
one's insurance network is crucial for any patient to make informed
and responsible decisions about their health care. Receiving care
from an out-of-network physician can cause a patient to be "balance
billed" for the often significant difference between the full cost
of care and the negotiated rate their health insurer pays.
When receiving these unforeseen balance bills, far too many
patients find they cannot afford the unexpected medical expense
and go into collections. The Federal Reserve Board's research
concluded that most medical bills in collection actions are for
less than $250, but many are often far higher. These
unanticipated medical expenses can hurt one's credit report. An
estimated 30 million Americans have been contacted by collection
agencies for unpaid medical bills, an increase of more than 8
million since 2005, according to the Commonwealth Fund.
SB 266 will increase the transparency of which hospitals,
medical providers or doctors are out of the patient's insurance
network. This would provide patients greater awareness of the
choices they face when deciding to seek treatment.
2. PPOs and Health Maintenance Organizations. A PPO is a health
plan that has contracts with a network of "preferred" providers
from which an enrollee can choose from. In a PPO arrangement,
the health insurer contracts with a network of medical providers
who agree to accept lower fees and/or to control utilization.
PPOs allow patients to practice "self-referral" which means an
enrollee can see any provider without prior referral. PPOs
typically cover 80 percent of the cost to see an in-network
physician, and just 50 percent of the cost to see an
out-of-network provider. The cost will depend on the plan's
maximum allowable amount for the service, which is the most the
plan will pay for a service. While CDI regulates most of the PPO
plans, DMHC also regulates some PPO plans.
Health Maintenance Organizations (HMOs) have a list of providers
SB 266 | Page 4
(such as doctors, medical groups, hospitals, and labs) that an
enrollee must receive all of their health care from; this is
known as the network. In an HMO, an enrollee is required to have
a Primary Care Physician (PCP) and must receive a referral from
their PCP to see another provider. Most costs (except
co-payments and deductibles) are covered by the HMO, if services
are provided in-network. HMOs typically do not pay for the cost
of services provided out-of-network or without a referral from
the PCP.
3. Balance billing. "Balance billing" occurs when patients with
health coverage find themselves being billed by health care
providers for amounts in addition to the deductibles,
co-payments, and co-insurance provided for under their coverage.
Balance billing was prohibited by the California Supreme Court
in January of 2009 (Prospect Medical Group, Inc. v. Northridge
Emergency Medical Group) for Knox-Keene licensed plans for
emergency services only. There is not a ban on balance billing
for health insurers regulated by CDI nor is there a ban on
balance billing for non-emergency services.
4. AB 1455 and the "Gould Criteria." AB 1455 (Scott), Chapter
827, Statutes of 2000, establishes requirements for prompt
payment of provider claims by health plans, including a
prohibition on health plans engaging in an unfair payment
pattern. In regulations implementing this law, DMHC defined what
constitutes appropriate reimbursement of a claim. In the case of
providers with a written contract, the regulations require
reimbursement at the agreed-upon contract rate. For
non-contracted providers, however, the regulations adopted what
is known as the "Gould Criteria" (from Gould v. Workers'
Compensation Appeals Board, 1992), which requires the payment of
the reasonable and customary value for the health care services
rendered based upon statistically credible information that is
updated at least annually and takes into consideration:
a.the provider's training, qualifications, and length of time in
practice;
b.the nature of the services provided;
c.the fees usually charged by the provider;
d.prevailing provider rates charged in the general geographic
area in which the services were rendered
e.other aspects of the economics of the medical provider's
practice that are relevant; and,
f.any unusual circumstances in the case.
AB 1455 requires all health plans to establish a "fast, fair,
SB 266| Page
5
and cost-effective" internal dispute resolution system
accessible to non-contracted providers to resolve billing and
payment disputes.
5. Prior legislation. SB 1373 (Lieu) would have required
hospitals to provide an enrollee or insured, who seeks services
at a hospital for an elective or scheduled procedure, a notice
with specified information. Required a plan to either refer the
enrollee or subscriber to a contracting provider or authorize
the person to obtain services from a noncontracting provider.
SB 1373 failed passage in the Senate Health Committee.
AB 1761 (John A. P�rez), Chapter 876, Statutes of 2012, gives
DMHC and CDI enforcement authority over licensees who hold
themselves out as representing or providing services on behalf
of the California Health Benefit Exchange without a valid
agreement. Makes holding oneself out as representing,
constituting, or otherwise providing services on behalf of the
Exchange without a valid agreement unfair competition.
AB 1203 (Salas), Chapter 603, Statutes of 2008 establishes
uniform requirements governing communications between health
plans and non-contracting hospitals related to
post-stabilization care following an emergency, and prohibits a
non-contracting hospital from billing a patient who is a health
plan enrollee for post-stabilization services, except as
specified.
SB 981 (Perata) of 2007 would have prohibited non-contracting
hospital emergency room physicians from directly billing
enrollees of health care service plans other than allowable
co-payments and deductibles, and would have established
statutory standards and requirements for claims payment and
dispute resolution related to non-contracting emergency room
physician claims, including an Independent Dispute Resolution
Process. SB 981 was vetoed by Governor Schwarzenegger.
SB 389 (Yee) of 2007 would have prohibited a hospital-based
physician, as defined, from seeking payment from individual
enrollees for services rendered and would require such
physicians to seek reimbursement solely from the enrollee's
health care service plan or the contracting risk-bearing
organization. SB 389 failed passage in the Senate Judiciary
Committee.
SB 266 | Page 6
AB 1628 (Frommer), Chapter 583, Statutes of 2003, requires a
hospital to contact an enrollee's health plan to obtain the
enrollee's medical record information before admitting the
enrollee for post-stabilization care as an inpatient following
emergency services in a non-contracting hospital, under certain
circumstances, and prohibits a hospital from billing the
enrollee if it fails to do so.
AB 1455 (Scott), Chapter 827, Statutes of 2000, revises the
dispute resolution process for payment claims for medical
services between providers and health care service plans.
6. Support (prior version). Health Access writes in support of
SB 266 writing that even the most conscientious consumer may
inadvertently go out-of-network due to the failure of DMHC and
CDI to enforce network adequacy standards. Health Access writes
that while they would prefer the regulators to enforce network
adequacy standards, consumer notice is a good though modest step
in the right direction. The California Association of Health
Plans (CAHP) writes that they support the underlying intent of
the bill and believe it is important for consumers to know if
the provider they are seeing participates in their health plan
network. However, CAHP is concerned that some providers,
particularly health facilities, could be prevented from holding
themselves out as in-network based on a limited number of
doctors not being contracted with specific carriers. CAHP writes
that they look forward to finding a solution that ensures
consumers are adequately and accurately notified about the
contracting status of medical providers.
7. Support if amended (prior version). The California Chapter
of the American College of Emergency Physicians (CAL ACEP)
writes often the insurer reimburses a provider at a low rate and
the provider then seeks payment from the patient. CAL ACEP
supports removing the patient from this problem and seeks
amendments to SB 266. Specifically, CAL ACEP writes that SB 266
requires hospitals to have every physician working in the
hospital to contract with a specific network if the hospital
wants to hold itself as accepting insurance including that
network. CAL ACEP believes this could lead to coercive
contracting and this language should be removed from the bill.
CAL ACEP would also like to see the bill amended to ensure
out-of-network physicians are paid fairly which will resolve the
fundamental problem. CAL ACEP writes that carriers do not have
adequate networks and as a result patients are sent to
out-of-network providers without their knowledge.
SB 266| Page
7
8. Oppose unless amended (prior version). The California
Association of Physician Groups (CAPG) writes that SB 266 would
create unintended consequences in the health care system and
would hinder patient access. CAPG argues the bill should be
limited to a PPO setting. CAPG is also concerned the definition
of "provider group" is overly broad and is not a term often used
within a PPO network. The California Medical Association (CMA)
writes that SB 266 needs to be amended to better address the
core issue of network accuracy and eliminate the administrative
burdens the bill would impose on physicians. CMA argues the
better way to ensure patients do not unwillingly go
out-of-network is to enhance network adequacy standards,
monitoring and enforcement. CMA is also concerned the definition
of "provider group" is a vague definition.
SUPPORT AND OPPOSITION (prior version) :
Support: AARP
California Pan-Ethnic Health Network
Health Access California
Oppose: Association of California Healthcare Districts
California Children's Hospital Association
Hospital Corporation of America
-- END --