BILL ANALYSIS Ó
SB 780
Page 1
Date of Hearing: August 6, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 780 (Jackson) - As Amended: June 30, 2014
Policy Committee: HealthVote:13-6
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill establishes requirements health plans and insurers
must follow when terminating contracts with providers.
Specifically, this bill:
1)Requires health insurers to file notices with regulators and
notify certain enrollees before terminating a contract with
provider groups and hospitals, as specified.
2)Modifies some existing provisions related to such
notifications.
3)Establishes "continuity of care" requirements that specify
plans and insurers must honor contractual payment agreements
for health services scheduled prior to contract termination.
FISCAL EFFECT
1)One-time costs to the Department of Managed Health Care of
$450,000 over the first two years after implementation to
adopt regulations and review filings, and ongoing costs in the
range of $50,000 for enforcement and review (Managed Care
Fund).
2)One-time costs to the California Department of Insurance (CDI)
of $80,000 to adopt regulations, and ongoing costs in the
range of $50,000 for enforcement and review of filings
(Insurance Fund).
COMMENTS
1)Purpose . The author states this bill is important in order to
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notify regulators and consumers of changes to plan networks,
as well as to establish continuity of care for individuals
with health services scheduled with terminated providers. In
absence of this bill's requirements, the author contends,
regulators are unable to assess the impact of terminations on
network adequacy until after the termination. Furthermore, the
author asserts this bill will address situations where
consumers have been billed for out-of-network charges when
services were performed by a terminated provider, and there
was no consumer notification that the terminated provider was
no longer in the plan network. This bill is sponsored by CDI,
but affects health plans regulated by DMHC as well as those
regulated by CDI.
2)Background . Existing law contains different notice
requirements to the regulator and the consumer depending upon
whether the plan is a health maintenance organization (HMO)
regulated by DMHC, a preferred provider organization (PPO)
regulated by DMHC, or a PPO regulated by CDI. For example,
existing law establishes "block transfer" requirements for
DMHC-regulated plans that require plans to notify the
regulator and enrollees when 2,000 or more enrollees are
transferred or redirected from a terminated provider to a
contracting provider. These notification requirements are
particularly important for HMO plans that assign enrollees to
a particular provider group or hospital. This bill broadens
and expands on these existing requirements by applying
notification requirements to all plans and insurers, including
PPO plans, when specified provider contracts are terminated,
regardless of whether the plan is regulated by CDI or DMHC, or
whether the plan or insurer assigns enrollees to providers.
This bill also attempts to hold consumers harmless for medical
services performed by a terminated provider, by ensuring
consumers do not incur the higher costs associated with
seeking care from out-of-network providers, for services that
were scheduled prior to the termination of the provider from
the network.
3)Prior Legislation . AB 2152 (Eng) of 2012 was a CDI-sponsored
bill that 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, who cited technical flaws
and contended the bill weakened notification procedures under
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existing law for DMHC-regulated plans. The Governor indicated
he would direct the DMHC to work with the Insurance
Commissioner, the Legislature and interested parties to
correct these defects and develop a workable solution next
year.
The author and bill sponsor state they have attempted to
address issues that resulted in a veto. They indicate they
have worked with the DMHC on this measure throughout the
legislative process and accepted amendments suggested by the
Administration. For example, they state, the introduced
version of the bill provided notice to policyholders in
advance of the contract termination. With the amendments from
the Administration, policyholders are instead notified within
five days of the contract termination and have continuity of
care rights if they had a previously scheduled appointment or
received pre-authorization from their insurer prior to the
contract termination.
4)Opposition . The California Chamber of Commerce and health
plans and insurers oppose this bill, citing increased
administrative burden, workability concerns, and lack of
necessity. In particular, insurers regulated by CDI indicate
contract negotiations that result in termination often go
until a contract ends, making the advance notification
difficult. They also question the applicability of these
requirements to PPO plans that include robust networks of
providers. Finally, they cite concerns about the bill's
requirements for a new filing with CDI that must be approved
by the Commissioner prior to consumer notification, indicating
the language is vague and failure to approve in a timely way
could jeopardize their ability to appropriately manage their
provider contracts.
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081