BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 266 (Lieu) - Health care coverage: out-of-network coverage.
          
          Amended: April 24, 2013         Policy Vote: Health 9-0
          Urgency: No                     Mandate: Yes
          Hearing Date: May 6, 2013       Consultant: Brendan McCarthy
          
          This bill meets the criteria for referral to the Suspense File.
          
          
          Bill Summary: SB 266 would prohibit a medical group or clinic  
          from stating that it is within a patient's health plan or  
          insurance policy network, unless all of the individual providers  
          affiliated with the medical group or clinic are in the network.  
          The bill would require acute care hospitals to provide notice to  
          patients that individual providers within the hospital may not  
          be in the patient's health plan or insurance policy network.

          Fiscal Impact: 
              Potential ongoing costs for investigation of consumer  
              complaints in the low hundreds of thousands per year by the  
              Department of Public Health (Licensing and Certification  
              Fund). Based on the reported number of hospital stays that  
              involve out-of-network billing and assuming that 1% of those  
              patients file a complaint with the Department regarding  
              their bill, costs would be about $300,000 per year.

              Potential ongoing costs for investigation of consumer  
              complaints up to $100,000 per year by the Department of  
              Insurance (Insurance Fund).
              
              Minor ongoing costs to respond to consumer complaints by  
              the Department of Managed Health Care (Managed Care Fund).

          Background: Under current law, health plans are regulated by the  
          Department of Managed Health Care. Insurance plans are regulated  
          by the Department of Insurance. Hospitals are licensed and  
          regulated by the Department of Public Health.

          A preferred provider organization is a health plan or health  
          insurance policy that has contracts with a network of providers,  
          from which an enrollee can receive services. Typically, the  
          enrollee's share of cost is significantly lower if he or she  








          SB 266 (Lieu)
          Page 1


          receives care from an "in-network" provider. Preferred provider  
          networks can be regulated by either the Department of Managed  
          Health Care or the Department of Insurance.

          For most outpatient medical care, it is relatively easy for an  
          enrollee to determine whether the provider is in-network.  
          However, in clinics and hospitals, it can be more difficult for  
          an enrollee to know that all of the providers who will provide  
          services are in the enrollee's network. If the enrollee  
          unwittingly receives care from an out-of-network provider, he or  
          she may pay a significantly higher share of cost.


          Proposed Law: SB 266 would prohibit a medical group or clinic  
          from stating that it is within a patient's health plan or  
          insurance policy network, unless all of the individual providers  
          affiliated with the medical group or clinic are in the network. 

          The bill would require acute care hospitals to provide notice to  
          patients that individual providers within the hospital may not  
          be in the patient's health plan or insurance policy network.  
          This notification must be provided before non-emergency care is  
          provided.

          The bill's provisions do not apply to emergency care.

          Related Legislation: SB 1373 (Lieu, 2012) would have required  
          hospitals to provide certain notices to patients regarding  
          out-of-network coverage before providing care and would have  
          placed certain requirements on health plans regarding access to  
          in-network cost sharing. That bill failed passage in the Senate  
          Health Committee.

          Staff Comments: The bill imposes notification requirements on  
          medical groups and clinics within the Business and Professions  
          Code. The Medical Board of California regulates physicians, but  
          not medical groups. The Department of Public Health does not  
          have enforcement authority over requirements of the Business and  
          Professions Code. Therefore, these provisions will not be  
          actively enforced by any state agency. However, the Department  
          of Insurance and the Department of Managed Health Care may incur  
          costs to respond to consumer complaints due to out-of-network  
          billing for care provided in clinics or by medical groups.









          SB 266 (Lieu)
          Page 2


          The Department of Public Health has regulatory oversight over  
          hospitals and can enforce the requirements of the bill on  
          hospitals. The Department indicates that general enforcement of  
          the bill's provisions can be absorbed within the existing  
          licensing program. However, to the extent that the Department  
          receives consumer complaints regarding out-of-network billing by  
          providers in a hospital, the Department will incur costs to  
          investigate those complaints.