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  
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          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  
                                                                      



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          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).)

                                                                      



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           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  
                                                                      



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          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  
                                                                      



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          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  
                                                                      



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          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  
 
                                                                      



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                 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)

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