BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 780|
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THIRD READING
Bill No: SB 780
Author: Jackson (D)
Amended: 5/8/13
Vote: 21
SENATE HEALTH COMMITTEE : 7-2, 5/1/13
AYES: Hernandez, Beall, De León, DeSaulnier, Monning, Pavley,
Wolk
NOES: Anderson, Nielsen
SENATE APPROPRIATIONS COMMITTEE : 5-1, 1/23/14
AYES: De León, Hill, Lara, Padilla, Steinberg
NOES: Gaines
NO VOTE RECORDED: Walters
SUBJECT : Health care coverage
SOURCE : Department of Insurance
DIGEST : This bill establishes consumer notice requirements
for health insurance preferred provider organizations (PPOs)
regulated by the Department of Insurance (CDI) and additional
consumer notice requirements for health plans regulated by the
Department of Managed Health Care (DMHC). Requires PPOs and
DMHC-regulated health care service plans (health plans) to allow
enrollees with authorized or scheduled services from a
terminated unassigned provider group or general acute care
hospital to receive those services at in network cost-sharing
until completion of the authorized or scheduled service for at
least 60 days from date of the termination notice. Requires a
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filing with CDI prior to contract terminations between providers
groups and hospitals and insurers. Establishes additional
disclosure requirements for health insurers regulated by CDI.
ANALYSIS :
Existing law:
1. Regulates health plans by the DMHC under the Knox-Keene Act,
and health insurers by the CDI.
2. Requires DMHC-regulated health plans, at least 75 days prior
to the termination date of its contract with a provider group
or a general acute care hospital (hospital), to submit an
enrollee block transfer filing to the DMHC that includes the
written notice the plan proposes to send to affected
enrollees. Defines, through DMHC regulation, a "block
transfer" as a transfer or redirection of 2,000 or more
enrollees by a health plan from a terminated provider group
or terminated hospital to one or more contracting providers
that takes place as a result of a termination or non-renewal
of a provider contract. PPOs regulated by CDI do not have
this requirement.
3. Requires DMHC-regulated health plans, at least 60 days prior
to the termination date of a contract between a health plan
and a provider group or a hospital, to send a written notice
by United States mail to enrollees who are assigned to the
terminated provider group or hospital. Requires a plan that
is unable to comply with the timeframe because of exigent
circumstances to apply to the DMHC for a waiver. PPOs
regulated by CDI do not have this requirement.
4. Requires the DMHC-regulated health plan to send the written
notice to each enrollee who is a member of the provider group
and who resides within a 15-mile radius of the terminated
hospital if the terminated provider is a hospital and the
plan assigns enrollees to a provider group with exclusive
admitting privileges to the hospital. Requires the health
plan to send the written notice to all enrollees who reside
within a 15-mile radius of the terminated hospital, if the
plan operates as a PPO or assigns members to a provider group
with admitting privileges to hospitals in the same geographic
area as the terminated hospital. PPOs regulated by CDI do
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not have these requirements.
5. Requires DMHC-regulated health plans and CDI-regulated health
insurers, at the request of an enrollee, to provide for the
completion of covered services by a terminated provider or by
a non-participating provider (for health plans) for specified
conditions.
6. Requires, for CDI-regulated insurers, the agreement to be
construed to require a rate and method of payment to the
terminated provider, for the services rendered that are the
same as the rate and method of payment for the same services
while under contract with the insurer and at the time of
termination. Requires the provider to accept the
reimbursement as payment in full and not bill the insured for
any amount in excess of the reimbursement rate, with the
exception of copayments and deductibles.
7. Requires, for DMHC-regulated health plans, unless otherwise
agreed by the terminated provider and the plan or by the
individual provider and the provider group, the continuity of
care services as specified to be compensated at rates and
methods of payment similar to those used by the plan or the
provider group for currently contracting providers providing
similar services who are not capitated and who are practicing
in the same or a similar geographic area as the terminated
provider. States that neither the plan nor the provider
group is required to continue the services of a terminated
provider if the provider does not accept the payment rates
provided.
This bill:
1. Requires PPOs regulated by CDI and DMHC, at least 45 days
prior to the termination date of a contract with a provider
group or hospital, to submit a filing to CDI that includes
the written notice the health plan proposes to send to its
insureds. Prohibits the health plan from sending this notice
until CDI has reviewed and approved the filing. Deems the
filing approved if CDI does not respond to the insured within
seven days of the date of the filing. (The current
requirement for DMHC-regulated plans is 75 days.)
2. Requires, for purposes of a termination with a provider
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group, or assigned general acute care hospital, the
CDI-regulated PPO and a DMHC-regulated health plan to submit
a filing if 1,700 or more insureds were treated by the
provider group within the 12 months preceding the filing
date. Permits CDI, in consultation with the DMHC, to adopt a
different filing threshold from the threshold established in
this bill through regulation.
3. Requires a CDI-regulated PPO and a DMHC-regulated plan (for
unassigned enrollees who are typically in a PPO), in the
event of a contract termination between a PPO/plan and a
provider group or hospital to send the required written
notice within five business days of the contract termination
with a provider group or hospital, to all specified persons.
4. Allows all health plan enrollees and insured individuals to
continue to access services that were authorized or scheduled
at the terminated provider group or hospital prior to the
date of termination, as specified.
5. Requires a health plan to provide reimbursement for services
either at a rate agreed upon by a health plan and the
terminated provider group or hospital or the rate for those
services as provided in the terminating contract. Prohibits
the provider from billing the patient for the cost of
services beyond the copayment, deductible, or other
cost-sharing components of what the individual would have
been responsible for if the provider group or hospital was
currently contracted with a health plan.
6. Requires a health plan to obtain information from the
terminated provider group or general acute care hospital
regarding enrollees who have health care services scheduled
for after the date of termination with the terminated
provider group or general acute care hospital, including the
names of those enrollees and the dates on which their
services were scheduled. Requires, unless otherwise
prohibited by law, a terminated provider group or general
acute care hospital to comply with a health care service
plan's request for that information.
7. Requires a health plan to send the required written notices
even if a filing is not required to be submitted, and allows
a health insurer to only send insured notices that have been
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filed and approved by CDI.
8. Permits a CDI-regulated PPO to require the provider group to
send the required notices if an individual provider
terminates his/her contract or employment with a provider
group or general acute care hospital that contracts with a
health insurer.
9. Requires, if after sending the required notices, a
CDI-regulated PPO reaches an agreement with a terminated
provider group or general acute care hospital to renew or
enter into a new contract or to not terminate its contract,
the PPO to send a subsequent written notice to all insureds
that were previously notified that the provider group or
hospital remains in their provider network.
10.Requires a CDI-regulated health insurer or a provider group
to include in all written, printed, or electronic
communications sent to an insured that concern the contract
termination, the a specified disclosure statement in not less
than 12-point type regarding their ability to continue to
receive care for a designated time period.
11.Permits the Insurance Commissioner (Commissioner) to adopt
regulations in accordance with the Administrative Procedure
Act that are necessary to implement the continuity of
care-related provisions of this bill (DMHC has existing
authority to adopt regulations under the Knox-Keene Act).
12.Repeals requirement #4 described in existing law above.
13.Establishes additional disclosure requirements for health
insurers regulated by CDI.
Background
CDI-sponsored legislation from last session . Regulation and
oversight of health insurance in California is split between
DMHC and CDI. DMHC regulates health plans under the Knox-Keene
Act in the Health and Safety Code, while CDI regulates health
insurers under the Insurance Code. DMHC health plans include
HMOs, exclusive provider organizations and some PPO plans, which
have historically been licensed by DMHC.
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Existing law establishes continuity of care requirements for
health plans and health insurers for individuals with specific
conditions. However, existing law contains different notice
requirements to the regulator and the consumer depending upon
whether the plan is an HMO regulated by DMHC, a PPO regulated by
DMHC, or a PPO regulated by CDI. For example, HMO plans
regulated by DMHC are required to provide 60 days advance notice
prior to a contract termination to enrollees assigned to a
provider group and hospital, DMHC-regulated PPOs are required to
send an enrollee notice only if the terminated provider is a
hospital, while CDI-regulated PPOs are not required to provide
such a notice. In addition, HMOs and PPOs regulated by DMHC are
required under existing law to notify DMHC at least 75 days
prior to the termination date of a contract with a provider
group or a hospital, and to provide DMHC with the notice the
plan intends to provide to enrollees. No similar requirement
exists for CDI-regulated PPOs.
Last session, CDI sponsored AB 2152 (Eng, 2012), which would
have required CDI-regulated PPOs to provide notice to the
regulator and insureds of a contract termination exceeding
specified thresholds, and notice to DMHC enrollees of a PPO
contract terminations exceeding specified thresholds. The bill
was vetoed by Governor Brown. In his veto message, the Governor
stated he agreed with the need to provide adequate notice to
consumers about relevant changes to their health coverage.
However, the Governor stated AB 2152 was technically flawed in
that it provided for stronger notification procedures at CDI,
but weakened the notification procedures under existing law at
DMHC. The Governor directed DMHC to work with the Commissioner,
the Legislature and interested parties to correct these defects
and develop a workable solution the next year.
Prior legislation . AB 1286 (Frommer, Chapter 591, Statutes of
2003) and SB 2003 (Speier, Chapter 590, Statutes of 2003)
revised and expanded continuity of care laws under which a
health plan is required, under certain circumstances, to allow
an enrollee to continue to see a health care provider who is no
longer contracting with the plan, requires the notice to be
filed with DMHC at least 75 days prior to the contract
termination and specifies language that must be included in the
notice regarding an enrollee's right to continue seeing a health
care provider.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
One-time costs of $210,000 for the revision of existing
regulations by DMHC (Managed Care Fund).
Minor ongoing costs for review of plan filings by DMHC
(Managed Care Fund).
One-time costs of $100,000 for the adoption of regulations by
CDI (Insurance Fund).
Ongoing costs of $50,000 for review of filings and enforcement
(Insurance Fund).
SUPPORT : (Verified 1/27/14)
Department of Insurance (source)
American College of Emergency Physicians
California Federation of Teachers
California Professional Firefighters
California Teachers Association
Congress of California Seniors
Health Access
Laborers Local 777
Laborers Local 792
United Policyholders
OPPOSITION : (Verified 1/27/14)
Association of California Life and Health Insurance
Blue Shield of California
California Association of Health Plans
California Chamber of Commerce
California Hospital Association
ARGUMENTS IN SUPPORT : CDI, this bill's sponsor, says this
bill strengthens consumer protections in California's regulation
of health insurance by requiring disclosure to consumers and CDI
when contracts between health insurers and medical provider
groups or hospitals are scheduled to terminate. Under existing
law, DMHC-regulated plans health plans are required to notify
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specified enrollees and DMHC prior to a contract termination.
However, the Insurance Code does not provide similar protections
for policyholders of PPO products regulated by CDI. CDI states
providing notice to PPO policyholders whose medical provider
group or hospital faces contract termination with an insurer is
an important consumer protection that will help to prevent
policyholders from unknowingly seeking care from a provider
whose contract with an insurer has just terminated or will
imminently terminate, and will help prevent patients from
unexpectedly being charged much higher out-of-pocket costs.
The California Chapter of the American College of Emergency
Physicians writes in support stating this bill improves
disclosures to patients about their network benefits and
providers, and in ensures continuity of care for chronically ill
patients when a health insurer terminates a provider's contract.
The California Professional Firefighters supports this bill
stating they strongly believe these proposed consumer
protections will help prevent policyholders from unknowingly
seeking care from their provider that may no longer be in their
network, which would force consumers to pay higher,
out-of-network costs than expected.
The California Teachers Association supports this bill stating
that requiring insurers to quickly notify CDI prior to
terminating a contract with a provider group or general acute
care hospital will allow CDI to better monitor the adequacy of
insurers' provider networks. CTA claims that network inadequacy
is often a harbinger for issues to come, including insureds
facing difficulty in accessing care.
The Congress of California Seniors writes in support stating
this bill does not alter the already strong disclosure
safeguards at the DMHC, but rather applies only to CDI.
Health Access writes that they support the provisions of this
bill that improve continuity of care for consumers and protect
them from out of network charges post-termination.
United Policyholders writes in strong support that this bill
will help consumers make sound decisions about the "in-network"
health care they can receive as well as avoid unnecessary
"out-of-network" bills that cause financial hardships.
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ARGUMENTS IN OPPOSITION : The Association of California Life
and Health Insurance Companies (ACLHIC) writes in opposition to
this bill, stating it establishes a completely new
prior-approval notice requirement whereby insurers would be
prohibited from notifying insureds that a contract had been
terminated until CDI had reviewed and ultimately approved the
filing. ACLHIC states that in previous years, this issue has
been discussed in length and it was ultimately agreed that
creating a standardized form was a better use of resources.
The California Hospital Association (CHA) writes that it is
oppose unless amended to this bill, arguing this bill
establishes provisions that conflict with the existing
continuity of care provisions which establish a process for
reimbursement for continuity of care services required under
existing law.
The California Chamber of Commerce states, "The imposition of
these new and unnecessary requirements has the potential to
increase premiums for PPOs, ultimately leading to reduced
consumer choice in the health care market at a time when many
businesses and individuals are struggling and premiums are
already slated to rise significantly as a result of changes
imposed by federal health care reform."
JL:k 1/27/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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