BILL ANALYSIS Ó SENATE JUDICIARY COMMITTEE Senator Hannah-Beth Jackson, Chair 2013-2014 Regular Session SB 1256 (Mitchell) As Introduced Hearing Date: April 22, 2014 Fiscal: Yes Urgency: No NR SUBJECT Medical Services: Credit DESCRIPTION This bill would prohibit a healing arts licensee, or employee or agent of that licensee, from arranging for or establishing credit extended by a third party for a patient without first providing the patient with written notice and a treatment plan, and prohibit an extension or arrangement of such credit to any patient under the influence of anesthesia. This bill would also prohibit a healing arts licensee, or employee or agent of that licensee, from charging for treatment not yet received to an open-end credit extended by a third party unless the patient is first provided with specified information regarding the treatment and treatment plan. This bill would require healing arts licensees to provide a refund to a credit lender within 15 business days of a patient's request for any payment received for services that have not been provided or costs that have not been incurred. This bill would provide for remedies under the Consumer Legal Remedies Act for violations of its provisions. BACKGROUND Medical debt is a growing problem as consumers, particularly elderly, uninsured, and under-insured patients, turn to lines of credit to finance otherwise unaffordable procedures and devices. Medical credit cards extended by third party lenders, but presented to patients by healthcare providers, have increased in (more) SB 1256 (Mitchell) Page 2 of ? popularity over the past decade. Many of these credit cards, provided by popular finance companies like Citigroup, Chase, and Capitol One, offer high credit limits and rates as high as 28 percent. Late last year the Consumer Finance Protection Bureau ordered CreditCare, a popular medical credit card and a subsidiary of GE Capital, to pay $34.1 million to patients who were deceptively enrolled at the offices of dentists, vision care, cosmetic and other healthcare providers. In support of that action, the National Consumer Law Center wrote: For years, we've been raising concerns about the abuses of medical credit cards? The last thing that vulnerable patients need when faced with expensive medical procedures not covered by insurance is a high cost credit card. It can add hundreds or even thousands more to their medical debt. One particularly troublesome feature of the CareCredit card was its deferred interest plan. These plans are promoted as having a "no interest" or "0% interest" promotional period, but there is a big catch; the patient must pay off the entire balance by the time the promotional period ends. If the patient leaves any amount unpaid, CareCredit will charge interest retroactively back to the date when the charges for the medical procedure were first made. (National Consumer Law Center, Consumer Advocates Applaud CFPB for CareCredit Enforcement Action, Dec. 10, 2013, found at < https://www.nclc.org/images/pdf/credit_cards/pr-cfpb-ge-carecre dit_121013.pdf> as of April 10, 2014.) In 2009 the Legislature curbed predatory medical credit card practices in dental offices by enacting AB 171 (Jones, Ch. 418, Stats. 2009) which prohibited, among other things, dentists from arranging credit extended by third parties unless the patient was provided with specified information and a treatment plan. That bill also prohibited dentists from arranging credit for patients who were under the influence of anesthesia, and required refunds for payments received for services not yet rendered. This bill would enact nearly identical protections for patients receiving healthcare services from all licensed healing arts professionals in California, including physicians, psychologists, acupuncturists, and chiropractors. CHANGES TO EXISTING LAW Existing law prohibits, except as specified, a healing arts SB 1256 (Mitchell) Page 3 of ? licensee from referring a person for certain health care services if the licensee has a financial, beneficial, proprietary or ownership interest, as defined, with the person or entity that receives the referral. (Bus. & Prof. Code Sec. 650 et seq.) Existing law , the Consumer Legal Remedies Act (CLRA), generally prohibits unfair methods of competition and unfair or deceptive acts or practices in the sale or lease of goods or services to consumers. The CLRA also allows an injured consumer to bring an action for damages, as specified. (Civ. Code Sec. 1750 et seq.) Existing law prohibits a dentist, or employee or agent of a dentist, from charging for treatment not yet rendered or costs not yet incurred to an open-end credit extended by a third party without first providing the patient with specified information regarding the treatment and services to be rendered, and ensuring the patient's receipt of the treatment plan. (Bus. & Prof. Code Sec. 654.3 (a).) Existing law requires a dentist, within 15 business days of a patient's request, to refund any payment received through credit extended by a third party that is arranged for or established in a dental office, for treatment that has not been rendered or costs that have not been incurred. (Bus. & Prof. Code Sec. 654.3 (b).) Existing law requires a dentist or an employee or agent of a dentist to provide the patient with a written notice, as specified, and to obtain a signature from the patient in order to arrange for or establish credit extended by a third party. (Bus. & Prof. Code Sec. 654.3 (c).) Existing law prohibits a dentist or employee or agent of a dentist from arranging for or establishing credit extended by a third party for a patient with whom the dentist or employee or agent of the dentist communicates with in a language other than English unless the written notice information is also provided in that language. (Bus. & Prof. Code Sec. 654.3 (e).) Existing law prohibits a dentist, employee or agent of that dentist from establishing credit that is extended by a third party for a patient who has been administered or is under the influence of general anesthesia, conscious sedation or nitrous oxide. (Bus. & Prof. Code Sec. 654.3 (f).) SB 1256 (Mitchell) Page 4 of ? Existing law provides that a patient who suffers damages as a result of a person willfully violating these provisions may seek civil relief. (Bus. & Prof. Code Sec. 654.3(g).) This bill would prohibit a healing arts licensee, or an employee or agent of that licensee, from arranging for or establishing credit extended by a third party for a patient without first providing a written notice, as specified, and a written treatment plan. This bill would prohibit the arrangement or establishment of credit for a patient who is under the influence of general anesthesia, conscious sedation, or nitrous oxide. This bill would prohibit a healing arts licensee, or employee or agent of a licensee, from charging treatment not yet rendered or costs not yet incurred to an open-end credit extended by a third party that is arranged for or established in the licensee's office without first providing the patient with specified information regarding the treatment and services to be rendered and ensuring the patient's receipt of the treatment plan. This bill would prohibit a healing arts licensee or employee or agent of a healing arts licensee from arranging for or establishing credit extended by a third party for a patient with whom the licensee or employee or agent of the licensee communicates with in a language other than English unless the written notice information is also provided in that language. This bill would require a healing arts licensee to refund to the lender any payment received for treatment that has not been rendered, or costs that have not been incurred within 15 business days upon the patient's request. This bill would provide that a patient who suffers damages as a result of willful violation of these provisions may seek civil relief. This bill would define a "licensee" as an individual, firm partnership, association, corporation, limited liability company, or cooperative association, and define a "licensee's" office as an office of a licensee in solo practice or an office in which services or goods are provided by the licensee or by employees in that office, or by independent contractors in that office. This bill would define "open-end credit" as credit extended by a SB 1256 (Mitchell) Page 5 of ? creditor under a plan in which the creditor reasonably contemplates repeated transactions, where the creditor may impose a finance charge on an outstanding, unpaid balance, and the amount of credit is generally made available to the extent that any balance is repaid. COMMENT 1.Stated need for the bill According to the author: Medical credit cards, extended through third-party lenders but solicited by medical providers, pose a significant risk to consumers who may not fully understand the arrangements that are being made for them by their provider or providers office. Patients, primarily elderly, low-income or limited English-speaking, who thought they had signed a payment plan with their provider later come to realize they have signed up for credit cards or loans they cannot afford. The significant risks created by deferred interest credit cards in connection to medical services make it essential that consumers fully understand the arrangements they make with their medical providers. SB 1256 simply extends the current protections that patients receive in a dental office to other areas of the medical field. For example, recommending a medical credit card as a method of payment to a patient who is under the influence of general anesthesia is unlawful under current law, but could be allowed in other medical practices. 2.Mirrors protections which have served to protect patients in dental offices This bill would prohibit a healing arts licensee, such as a doctor, psychologist, or chiropractor, from arranging for a credit extended by a third party to pay for medical services without first providing the patient with written notice and a treatment plan, and would prohibit an arrangement of such credit to any patient under the influence of anesthesia. This bill would also prohibit a healing arts licensee from charging for treatment not yet received to an open-end credit extended by a third party unless the patient is first provided with specified SB 1256 (Mitchell) Page 6 of ? information regarding the treatment and treatment plan. The provisions of this bill mirror those of SB 171 (Jones, Ch. 418, Stats. 2009) which created standards by which dental patients could be offered credit extended by a third party, but arranged for by the dental office, to pay for dental services. In support of that bill, the Western Center on Law and Poverty stated that the bill was necessary to respond to "numerous complaints received from consumers, primarily elderly, low-income, and limited English-speaking patients, who have fallen victim to credit cards for dental care without adequate protections. Typically, these patients thought they were signing payment plans with their providers, only to realize when they started receiving credit card statements that they had signed credit applications. In addition, some consumers were charged for future services they did not receive, and other limited-English proficient consumers were given applications in English that they did not understand." The California Dental Association wrote in support that the bill reflected "the dental profession's commitment to maintaining trusting relationships between dentists and their patients, including ensuring that patients understand the treatment they receive and how the treatment costs will be covered. The provisions of AB 171 reflect standard ethical business practices that protect consumers and uphold a positive dentist-patient relationship." Since the passage of AB 171, the need for patient protections in other medical settings has become apparent. All over the country, states are responding to predatory lending practices arranged for in medical offices. Minnesota's Attorney General and New York's Attorney General have taken action against abusive and predatory lending practices to better protect patients. The Ohio Attorney General has sued several hearing aid clinics, and a recent review of customer contracts for medical cards by The New York Times, as well as of hundreds of court filings in connection with medical credit cards, shows how damaging such financial arrangements can be for patients. (Silver-Greenberg, The New York Times, Patients Mired in costly Credit from Doctors, October 2013 found at < http://www.nytimes.com/2013/10/14/business/economy/patients-mired -in-costly-credit-from-doctors.html?hp&_r=0&pagewanted=print> as of April 15, 2014.) This bill would not prohibit the arrangement of medical lines of SB 1256 (Mitchell) Page 7 of ? credit, but ensure that when confronted with third party financing, patients are informed as to what type of contract they are entering into, and are able to make informed decisions about the financing of their healthcare. The Consumer Federation of California writes in support that: Medical credit cards provide a financing option that helps patients pay for treatments or procedures that are not otherwise covered by their medical insurance?However, in some instances, patients who thought they were signing up for a payment plan directly with their provider later discover that they have signed credit applications?Patients, primarily elderly, low-income or limited English-speaking, who are offered a credit card when they are most vulnerable - such as when they are in pain or when a provider has recommended a treatment they cannot afford - may not understand that the financing option they have been recommended is actually a credit card. ? SB 1256 is not intended to prohibit medical providers from helping to arrange credit cards or loans for their patients, but aims to set forth basic standards governing these credit card arrangements and provide basic consumer protections. 3.Author's amendments Concerns were expressed to the author that this bill may unintentionally limit a patient's ability to use a properly established line of credit on subsequent medical services, specifically emergency services. The author, therefore, offers the following amendments which would clarify that once established, a patient may choose to use his or her medical credit card on subsequent medical services. 1. Page 3, line 14 strike "a" and insert "that" 2. Page 3, lines 23, strike the second "a" and insert "that" 3. Page 4, in between lines 31 and 32 insert "You may use this credit card/line of credit for payments toward subsequent medical services." 4. Page 5, line 1 strike "A" and insert "Prior to SB 1256 (Mitchell) Page 8 of ? arranging for or establishing credit extended by a third party, a" 5. Page 5, line 1 strike "prior" 6. Page 5, strike line 2 Support : California Immigrant Policy Center Opposition : None Known HISTORY Source : Consumer Federation of California Related Pending Legislation : None Known Prior Legislation : AB 171 (Jones, Chapter 418, Statutes of 2009) established procedures for dentists to follow when arranging a medical credit card, extended through a third party lender, to a patient. SB 1633 (Kuehl, 2008) was identical in many respects to AB 171 and was vetoed based on budgetary reasons. The governor's veto message referred to the 2008-2009 State Budget and that SB 1633 did not meet the governor's priority related to the budget. Prior Vote : Senate Business and Professions Committee (Ayes 8, Noes 0) **************