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.