BILL ANALYSIS Ó
SB 780
Page 1
Date of Hearing: June 24, 2014
ASSEMBLY COMMITTEE ON HEALTH
Richard Pan, Chair
SB 780 (Jackson) - As Amended: May 8, 2013
SENATE VOTE : 22-8
SUBJECT : Health care coverage.
SUMMARY : Creates new notification requirements for health
insurers regulated by the California Department of Insurance
(CDI) when a contract with a provider group or hospital is
terminated, modeled after requirements for health plans
regulated by the Department of Managed Health Care (DMHC) and
creates new continuity of care requirements for CDI-regulated
insurers and DMHC-regulated health plans when a provider group
or hospital contract is terminated. Specifically, this bill :
1)Limits the current requirement for a health plan to file with
DMHC 75 days before it terminates a contract with a hospital
or provider group, as specified, to apply only to health
maintenance organization (HMO) plans. Limits current
requirements to mail notice to enrollees 60 days in advance
only to assigned provider groups or assigned hospitals.
(Providers are only assigned in an HMO setting.)
2)Requires non-HMOs under DMHC and insurers under CDI, at least
45 days prior to the termination date of a contract with a
provider group or a general acute care hospital, to submit a
filing to DMHC or CDI, respectively, that includes the written
notice the plan proposes to send to enrollees. Prohibits
CDI-regulated insurers, but not DMHC-regulated plans, from
sending this notice until CDI has reviewed and approved the
filing, and deems the filing approved if CDI does not respond
within seven days.
3)For a termination with an assigned provider group or hospital
by an HMO, requires filing if 2,000 or more enrollees will be
transferred or redirected by the plan as a result of the
termination.
4)For a termination with an unassigned provider group or
hospital (typically in a (preferred provider organization) PPO
under DMHC; all providers are unassigned under CDI), requires
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filing if 1,700 or more enrollees were treated by the
unassigned provider group within the 12 months preceding the
filing date.
5)Allows DMHC and CDI to adopt different filing thresholds by
regulation.
6)Requires health plans and insurers to mail a notice to
consumers when contracts with unassigned provider groups and
unassigned general acute care hospitals are terminated.
Requires this notice to be mailed within five business days of
the contract termination, regardless of whether a filing is
required under 2) above, as follows:
a) For an unassigned provider group, notice must be mailed
to: i) any enrollee or insured who has received health
care services from the terminated provider group within the
12 months preceding the date of termination, and ii) any
enrollee or insured who has any health care services
authorized or scheduled for after the date of termination
with the terminated provider group.
b) For an unassigned general acute care hospital, notice
must be mailed to: i) any enrollee or insured who has
received health care services from the hospital within the
12 months preceding the date of termination, ii) any
enrollee or insured who has health care services authorized
or scheduled for after the date of termination at the
hospital, and iii) for DMHC-regulated plans, any enrollee
or insured who is assigned to a provider group with any
physicians who have exclusive admitting privileges to the
hospital, and.
7)For contracts with unassigned hospitals and unassigned
provider groups, requires plans and insurers to allow
enrollees and insureds to continue to access services that
were authorized or scheduled prior to the date of either the
notice or the termination, whichever is later, for at least 60
days from the date of either the notice or the termination,
whichever is later.
8)For services continued under 7) above, requires the amount of
cost-sharing components by an enrollee or insured to be the
same that would be paid by the enrollee for a currently
contracting provider and prohibits the provider from billing
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the patients for amounts beyond these cost-sharing components.
Requires plans and insurers to reimburse providers at a rate
agreed upon by both parties or the rate for those services as
provided in the terminating contract.
9)Requires plans and insurers to obtain information, including
names and dates, from the terminated unassigned provider group
or hospital regarding enrollees who have health care services
scheduled. Requires providers, unless otherwise prohibited by
law, to comply with a plan or insurer's request for that
information.
10)Prohibits health plans from sending enrollee notices unless a
template has been filed and approved by DMHC, as specified in
current law, or with CDI, as specified under this bill.
11)Requires a subsequent notice to be sent if an agreement is
reached after a termination notice is sent.
12)Increases the minimum font size for a specified statement
required to be included in DMHC contract termination notices
from eight point to 12 point font.
13)Requires CDI-regulated insurers' contract termination notices
to contain the following statement, modeled after the current
notice for DMHC-regulated plans:
"If you have been receiving care from a health care
provider, you may have a right to keep your provider for a
designated time period. Please contact your insurer's
customer service department, and if you have further
questions, you are encouraged to contact the Department of
Insurance, which protects insurance consumers, by telephone
at its toll-free number, 800-927-HELP (4357), or at a TDD
number for the hearing impaired at 800-482-4833, or online
at www.insurance.ca.gov."
14)Makes numerous changes to the currently required disclosure
form that includes summary information about CDI-regulated
health insurance policies, generally modeled on current
disclosures for DMHC-regulated health plans.
15)Requires, a health insurer, medical group, or participating
provider, if it uses financial bonuses or other incentives, to
provide a written summary, as specified, to any person who
requests it.
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EXISTING LAW :
1)Regulates health plans under DMHC and health insurers under
CDI.
2)Requires DMHC-regulated health plans, at least 75 days prior
to the termination date of a contract with a provider group or
a general acute care hospital, to submit an enrollee block
transfer filing to 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. Insurers
regulated by CDI do not have this requirement.
3)Requires a DMHC-regulated health plan, at least 60 days prior
to the termination date of a contract with a provider group or
a hospital, to mail a written notice 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. Insurers 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 a terminated
hospital if 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 a 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 not have these requirements.
5)Requires all CDI-regulated disability insurance policies to
contain a standard supplemental disclosure form that includes
the summary information about each disability insurance policy
offered by the insurer, as specified. Requires all
DMHC-regulated health plans to use disclosure forms or
materials containing information regarding the benefits,
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services, and terms of the plan contract, as specified,
including, for individual and small group plans, a uniform
matrix containing the plan's major provisions to facilitate
comparisons between plan contracts. Requires the standard
supplemental disclosure, for certain CDI insurers, and the
uniform matrix, for DMHC plans, to be supplanted by the
uniform summary of benefits required under the federal Patient
Protection and Affordable Care Act (ACA).
FISCAL EFFECT : According to the Senate Appropriations
Committee:
1)One-time costs of $210,000 for the revision of existing
regulation and minor ongoing costs for review of plan filings
by the DMHC (Managed Care Fund).
2)One-time costs of $100,000 for the adoption of regulations by
CDI and ongoing costs of $50,000 for review of filings and
enforcement by CDI (Insurance Fund).
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, in recent
months there has been increased stakeholder and media
attention to the issue of provider network adequacy after a
number of health insurers in California narrowed their
provider networks for some of their new 2014 health insurance
product offerings. Contract termination of even one large
provider group or hospital in certain regions need to be
examined to ensure that policyholders in that geographic area
continue to have the access to medical care required by the
state network law.
The author states that, without information from the insurer
about what contracts they terminated recently, CDI, the
sponsor of this bill, cannot quickly determine whether the
terminations would result in the insurer failing to be in
compliance with the law requiring an adequate network of
medical providers. This could leave hundreds of thousands of
Californians susceptible to out-of-pocket expenses accumulated
through no fault of their own, but rather because of a failure
on the part of insurance plans to notify CDI.
The author provides an example of a consumer who was harmed by a
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contract termination that CDI did not know about in advance.
At the end of 2011, a major health insurer terminated
contracts with UCLA Medical Center effective January 1, 2012
in the midst of a bitter contract negotiation. When CDI
learned of the imminent termination of the provider contract,
CDI requested that the insurer notify affected policyholders
prior to the termination in order to prevent them from seeking
out-of-network care without knowing the cost implications of
doing so. The insurer refused to send out notices to
policyholders in advance of the contract termination and
refused to cover the difference in the cost for those
policyholders (except those already entitled by law to
continuity of care) who went to their scheduled appointments
in early January without having been noticed by the insurer
that their provider was now out-of-network.
The author also recounts an incident when another major health
insurer notified insureds shortly after the termination of the
Los Robles Regional Medical Center and the West Hills Hospital
service area. An insured had a procedure, which had been
previously approved, performed at one of the terminated
facilities after the termination of the contract. As the
insured was not notified prior to her procedure of these
terminations, she complained that she was not able to take
advantage of the completion of coverage provisions. If this
individual had been made aware, she would have been able to
request that this procedure be completed under the continuity
of care provision or have this procedure performed at an
in-network facility.
Without this bill, the author argues, the impact on consumers
will be grave. As a result of their insurer failing to notify
the consumer of the change in their provider network and
failure to provide continuity of care, patients are subject to
much higher costs if they continue to seek care from that
terminated provider who is out of their network. The author
asserts this bill will require that CDI is notified of these
changes so that they are better able to enforce the network
adequacy law and ensure that consumers are better protected
from these out-of-network charges.
2)BACKGROUND . 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
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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; and 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.
In the 2011-12 Legislative session, CDI sponsored AB 2152
(Eng), 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.
AB 2152 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 Insurance Commissioner, the Legislature
and interested parties to correct these defects and develop a
workable solution the next year. DMHC indicates this bill's
provisions related to PPO contract terminations are based on
DMHC's current practice with PPO plans under its jurisdiction.
3)SUPPORT . The California State Firefighters' Association, in
support, writes that this bill would hold policyholders
harmless when a contract between their insurer and preferred
health care provider is terminated. The National Multiple
Sclerosis Society, California Action Network (MS-CAN), argues
this bill will be of enormous benefit to people living with
chronic diseases like Multiple Sclerosis, for whom seamless
and timely access to a range of specialized services are
essential to maintain optimal functioning and quality of life.
MS-CAN argues this bill will assure adequate provider
networks throughout the state and protect consumers' access to
their providers. The California Optometric Society argues
this bill's continuity of care provisions will protect
consumers from high out-of-network costs incurred as a result
of unknowingly seeking treatment from providers that are no
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longer contracted with their health plans.
4)OPPOSITION . The California Chamber of Commerce argues this
bill will increase premiums for employers by creating new,
burdensome record-keeping, filing, and notice requirements for
PPOs and by requiring insurers to receive approval from CDI or
DMHC prior to sending termination notices to enrollees or
insureds. This requirement, CalChamber argues, may limit
health insurers' negotiating power with provider groups and
hospitals.
The Association of California Life and Health Insurance
Companies (ACLHIC) argues that current block transfer
requirements for health plans are designed to protect
enrollees in a closed network system from being disadvantaged
if their provider group or hospital is terminated. Because
PPOs allow for out-of-network coverage, an insured whose
provider's contract is terminated has hundreds of other
providers to choose from in their area. ACLHIC further argues
that a 30-day notice requirement in the Insurance Code makes
more sense than this bill's current 45-day notice requirement
since there is no need for the type of advance planning that
would be required under an assigned provider group
termination. ACLHIC further objects to this bill's
requirement for CDI to review and approve a filing before
notice can be sent, argues that this bill creates the
potential for different thresholds for notification under CDI
vs. DMHC, and contends there is ambiguity about whether
continuity of care provisions in the bill extend beyond 60
days if services are not completed by then. Finally, ACLHIC
argues that many of this bill's disclosure requirements for
health insurers, modeled after DMHC disclosure requirements,
simply do not make sense within the PPO model and could
potentially be confusing to consumers.
5)OPPOSE UNLESS AMENDED . The California Hospital Association
(CHA) argues that serious operational issues will make the
bill difficult to implement. In particular, the bill requires
hospitals to comply with a health plan or insurer's request
for scheduled services after the date of termination. In many
cases, CHA argues, hospitals do not have this information or
it is already available to the health plan that authorized the
services. For example, a physician may schedule a block of
time in a procedure room and the hospital would have no
detailed list of scheduled patients to hand over the health
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plan. CHA requests an amendment to delete the requirement for
hospitals to share scheduling information or to codify
existing practice, whereby the health plan and provider
develop a collaborative process to share the information that
is available. In addition, CHA requests a number of
clarifying and technical amendments.
6)RELATED LEGISLATION .
a) AB 369 (Pan), Chapter 4, Statutes of 2014, requires
health plans and insurers to provide continuity of care, as
specified, to a newly covered person in the individual
market whose health plan or policy was cancelled between
December 1, 2013, and March 31, 2014.
b) SB 1100 (Ed Hernandez) creates continuity of care
protections for people who change plans or become newly
enrolled in plans in the individual market. SB 1100 is
pending in this Committee.
7)PREVIOUS LEGISLATION .
a) AB 1286 (Frommer), Chapter 591, Statutes of 2003, and SB
244 (Speier), Chapter 590, Statutes of 2003, require a
health plan and a provider to include in any written,
printed, or electronic communication to an enrollee a
specific statement concerning continuity of care rights.
These bills also create block transfer filing and notice
requirements prior to the termination of a health plan's
contract with a provider group or a hospital and create
continuity of care requirements for an insurer to provide
completion of covered services by a terminated provider and
for a plan to provide those services either by a terminated
provider or by a non-participating provider to a newly
covered enrollee.
b) SB 1832 (Bergeson), Chapter 614, Statutes of 1994,
provides for a series of changes to law governing health
plans and insurers, including creating a requirement for a
plan, when it terminates a contract with an entire medical
group or individual practice association, to notify
enrollees who have selected that medical group or
individual practice association of the termination.
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8)POLICY COMMENTS .
a) Sharing of scheduled appointments. This bill requires
plans and insurers to obtain information from the
terminated provider group or hospital regarding enrollees'
and insureds' scheduled services. However, hospitals argue
that they often do not have information about scheduled
services. Therefore, the Committee may wish to amend this
bill to clarify the mechanism that would allow the sharing
of this information or address the ability for patients to
receive continuity under this bill in the absence of this
information.
b) Filing approval. Current law prohibits health plans
under DMHC from sending the 60-day notice to enrollees
until DMHC reviews and approves its filing. This bill
creates a similar requirement for new consumer notice
requirement for CDI-regulated PPOs, but does not create
this requirement for the new consumer notice requirement
DMHC-regulated PPOs.
REGISTERED SUPPORT / OPPOSITION :
Support
California Department of Insurance (sponsor)
California Chapter of the American College of Emergency
Physicians
California Federation of Teachers
California Optometric Association
California Professional Firefighters
California State Firefighters' Association
California Teachers Association
Congress of California Seniors
Health Access California
Laborers Local 777 & 792
National Multiple Sclerosis Society
United Policyholders
Opposition
Association of California Life and Health Insurance Companies
Blue Shield of California
California Association of Health Plans
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California Chamber of Commerce
California Hospital Association (unless amended)
Analysis Prepared by : Ben Russell / HEALTH / (916) 319-2097