Amended in Senate August 25, 2016

Amended in Senate August 19, 2016

Amended in Senate August 4, 2016

Amended in Senate August 1, 2016

Amended in Senate June 15, 2016

Amended in Senate September 9, 2015

Amended in Senate September 4, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 72

Introduced by Assembly Members Bonta, Bonilla, Dahle, Gonzalez, Maienschein, Santiago, and Wood

December 18, 2014

An act to add Sections 1371.30, 1371.31, and 1371.9 to the Health and Safety Code, and to add Sections 10112.8, 10112.81, and 10112.82 to the Insurance Code, relating to health care coverage.

LEGISLATIVE COUNSEL’S DIGEST

AB 72, as amended, Bonta. Health care coverage: out-of-network coverage.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care. A willful violation of the act is a crime. Existing law requires a health care service plan to reimburse providers for emergency services and care provided to its enrollees, until the care results in stabilization of the enrollee. Existing law prohibits a health care service plan from requiring a provider to obtain authorization prior to the provision of emergency services and care necessary to stabilize the enrollee’s emergency medical care, as specified.

Existing law also provides for the regulation of health insurers by the Insurance Commissioner. Existing law requires a health insurance policy issued, amended, or renewed on or after January 1, 2014, that provides or covers benefits with respect to services in an emergency department of a hospital to cover emergency services without the need for prior authorization, regardless of whether the provider is a participating provider, and subject to the same cost sharing required if the services were provided by a participating provider, as specified.

This bill would require a health care service plan contract or health insurance policy issued, amended, or renewed on or after July 1, 2017, to provide that if an enrollee or insured receives covered services from a contracting health facility, as defined, at which, or as a result of which, the enrollee or insured receives covered services provided by a noncontracting individual health professional, as defined, the enrollee or insured would be required to pay the noncontracting individual health professional only the same cost sharing required if the services were provided by a contracting individual health professional, which would be referred to as the “in-network cost-sharing amount.” The bill would prohibit an enrollee or insured from owing the noncontracting individual health professional at the contracting health facility more than the in-network cost-sharing amount if the noncontracting individual health professional receives reimbursement for services provided to the enrollee or insured at a contracting health facility from the health care service plan or health insurer. However, the bill would make an exception from this prohibition if the enrollee or insured provides written consent that satisfies specified criteria. The bill would require a noncontracting individual health professional who collects more than the in-network cost-sharing amount from the enrollee or insured to refund any overpayment to the enrollee or insured, as specified, and would provide that interest on any amount not refunded to the enrollee or insured shall accrue at 15% per annum, as specified.

Existing law requires a contract between a health care service plan and a provider, or a contract between an insurer and a provider, to contain provisions requiring a fast, fair, and cost-effective dispute resolution mechanism under which providers may submit disputes to the plan or insurer. Existing law requires that dispute resolution mechanism also be made accessible to a noncontracting provider for the purpose of resolving billing and claims disputes.

This bill would require the department and the commissioner to each establish, by September 1, 2017, an independent dispute resolution process that would allow a noncontracting individual health professional who rendered services at a contracting health facility, or a plan or insurer, to appeal a claim payment dispute, as specified. The bill would authorize the department and the commissioner to contract with one or more independent dispute resolution organizations to conduct the independent dispute resolution process, as specified. Contracts entered into pursuant to these provisions would be exempt from specified statutory provisions and related state agency review and approval requirements. The bill would provide that the decision of the organization would be binding on the parties. The bill would require a plan or insurer to base reimbursement for covered services on the amount the individual health professional would have been reimbursed by Medicare for the same or similar services in the general geographic area in which the services were rendered pursuant to a specified methodology and would specify, among other responsibilities, the duties of health care service plans, their delegated entities, and health insurers in identifying and calculating the applicable reimbursement rates, as well as various related duties of the department and the commissioner. The bill would require the department and the commissioner to report on the data and information provided in the independent dispute resolution process to the Governor and other specified recipients by January 1, 2019. The bill would require a noncontracting individual health professional, health care service plan or delegated entity, or health insurer that disputes that claim reimbursement to utilize the independent dispute resolution process. The bill would provide that these provisions do not apply to emergency services and care, as defined.

Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

Because a willful violation of the bill’s provisions relative to a health care service plan would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

SECTION 1.  

Section 1371.30 is added to the Health and Safety
Code, immediately following Section 1371.3, to read:

1371.30.  

(a) (1)  By September 1, 2017, the department shall
establish an independent dispute resolution process for the purpose
of processing and resolving a claim dispute between a health care
service plan and a noncontracting individual health professional
for services subject to subdivision (a) of Section 1371.9.

(2) Prior to initiating the independent dispute resolution process,
the parties shall complete the plan’s internal process.

(3) If either the noncontracting individual health professional
or the plan appeals a claim to the department’s independent dispute
resolution process, the other party shall participate in the appeal
process as described in this section.

(b) (1) The department shall establish uniform written
procedures for the submission, receipt, processing, and resolution
of claim payment disputes pursuant to this section and any other
guidelines for implementing this section.

(2) The department shall establish reasonable and necessary
fees for the purpose of administering this section, to be paid by
both parties.

(3) In establishing the independent dispute resolution process,
the department shall permit the bundling of claims submitted to
the same plan or the same delegated entity for the same or similar
services by the same noncontracting individual health professional.

(4) The department shall permit a physician group, independent
practice association, or other entity authorized to act on behalf of
a noncontracting individual health professional to initiate and
participate in the independent dispute resolution process.

(5) In deciding the dispute, the independent organization shall
base its decision regarding the appropriate reimbursement on all
relevant information.

(c) (1) The department may contract with one or more
independent organizations to conduct the proceedings. The
independent organization handling a dispute shall be independent
of either party to the dispute.

(2) The department shall establish conflict-of-interest standards,
consistent with the purposes of this section, that an organization
shall meet in order to qualify to administer the independent dispute
resolution program. The conflict-of-interest standards shall be
consistent with the standards pursuant to subdivisions (c) and (d)
of Section 1374.32.

(3) The department may contract with the same independent
organization or organizations as the Department of Insurance.

(4) The department shall provide, upon the request of an
interested person, a copy of all nonproprietary information, as
determined by the director, filed with the department by an
independent organization seeking to contract with the department
to administer the independent dispute resolution process pursuant
to this section. The department may charge a nominal fee to cover
the costs of providing a copy of the information pursuant to this
paragraph.

(5) The independent organization retained to conduct
proceedings shall be deemed to be consultants for purposes of
Section 43.98 of the Civil Code.

(6) Contracts entered into pursuant to the authority in this
subdivision shall be exempt from Part 2 (commencing with Section
10100) of Division 2 of the Public Contract Code, Section 19130
of the Government Code, and Chapter 6 (commencing with Section
14825) of Part 5.5 of Division 3 of the Government Code and shall
be exempt from the review or approval of any division of the
Department of General Services.

(d) The decision obtained through the department’s independent
dispute resolution process shall be binding on both parties. The
plan shall implement the decision obtained through the independent
dispute resolution process. If dissatisfied, either party may pursue
any right, remedy, or penalty established under any other applicable
law.

(e) This section shall not apply to a Medi-Cal managed health
care service plan or any entity that enters into a contract with the
State Department of Health Care Services pursuant to Chapter 7
(commencing with Section 14000), Chapter 8 (commencing with
Section 14200), and Chapter 8.75 (commencing with Section
14591) of Part 3 of Division 9 of the Welfare and Institutions Code.

(f) If a health care service plan delegates payment functions to
a contracted entity, including, but not limited to, a medical group
or independent practice association, then the delegated entity shall
comply with this section.

(g) This section shall not apply to emergency services and care,
as defined in Section 1317.1.

(h) The definitions in subdivision (f) of Section 1371.9 shall
apply for purposes of this section.

(i) This section shall not be construed to alter a health care
service plan’s obligations pursuant to Sections 1371 and 1371.4.

(j) Notwithstanding Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code,
the department may implement, interpret, or make specific this
section by means of all-plan letters or similar instructions, without
taking regulatory action, until the time regulations are adopted.

(k) By January 1, 2019, the department shall provide a report
to the Governor, the President pro Tempore of the Senate, the
Speaker of the Assembly, and the Senate and Assembly
Committees on Health of the data and information provided in the
independent dispute resolution process in a manner and format
specified by the Legislature.

SEC. 2.  

Section 1371.31 is added to the Health and Safety
Code, to read:

1371.31.  

(a) (1) For services rendered subject to Section
1371.9, effective July 1, 2017, unless otherwise agreed to by the
noncontracting individual health professional and the plan, the
plan shall reimburse the greater of the average contracted rate or
125 percent of the amount Medicare reimburses on a fee-for-service
basis for the same or similar services in the general geographic
region in which the services were rendered. For the purposes of
this section, “average contracted rate” means the average of the
contracted commercial rates paid by the health plan or delegated
entity for the same or similar services in the geographic region.
This subdivision does not apply to subdivision (c) of Section
1371.9 or subdivision (b) of this section.

(2) (A) By July 1, 2017, each health care service plan and its
delegated entities shall provide to the department all of the
following:

(i) Data listing its average contracted rates for the plan for
services most frequently subject to Section 1371.9 in each
geographic region in which the services are rendered for the
calendar year 2015.

(ii) Its methodology for determining the average contracted rate
for the plan for services subject to Section 1371.9. The
methodology to determine an average contracted rate shall ensure
that the plan includes the highest and lowest contracted rates for
the calendar year 2015.

(iii) The policies and procedures used to determine the average
contracted rates under this subdivision.

(B) For each calendar year after the plan’s initial submission of
the average contracted rate as specified in subparagraph (A) and
until the standardized methodology under paragraph (3) is
specified, a health care service plan and the plan’s delegated entities
shall adjust the rate initially established pursuant to this subdivision
by the Consumer Price Index for Medical Care Services, as
published by the United States Bureau of Labor Statistics.

(3) (A) By January 1, 2019, the department shall specify a
methodology that plans and delegated entities shall use to
determine the average contracted rates for services most frequently
subject to Section 1371.9. This methodology shall take into
account, at a minimum, information from the independent dispute
resolution process, the specialty of the individual health
professional, and the geographic region in which the services are
rendered. The methodology to determine an average contracted
rate shall ensure that the plan includes the highest and lowest
contracted rates.

(B) Health care service plans and delegated entities shall provide
to the department the policies and procedures used to determine
the average contracted rates in compliance with subparagraph (A).

(C) If, based on the health care service plan’s model, a health
care service plan does not pay a statistically significant number or
dollar amount of claims for services covered under Section 1371.9,
the health care service plan shall demonstrate to the department
that it has access to a statistically credible database reflecting rates
paid to noncontracting individual health professionals for services
provided in a geographic region and shall use that database to
determine an average contracted rate required pursuant to paragraph
(1).

(D) The department shall review the information filed pursuant
to this subdivision as part of its examination of fiscal and
administrative affairs pursuant to Section 1382.

(E) The average contracted rate data submitted pursuant to this
section shall be confidential and not subject to disclosure under
the California Public Records Act (Chapter 3.5 (commencing with
Section 6250) of Division 7 of Title 1 of the Government Code).

(F) In developing the standardized methodology under this
subdivision, the department shall consult with interested parties
throughout the process of developing the standards, including the
Department of Insurance, representatives of health plans, insurers,
health care providers, hospitals, consumer advocates, and other
stakeholders it deems appropriate. The department shall hold the
first stakeholder meeting no later than July 1, 2017.

(4) A health care service plan shall include in its reports
submitted to the department pursuant to Section 1367.035 and
regulations adopted pursuant to that section, in a manner specified
by the department, the number of payments made to noncontracting
individual health professionals for services at a contracting health
facility and subject to Section 1371.9, as well as other data
sufficient to determine the proportion of noncontracting individual
health professionals to contracting individual health professionals
at contracting health facilities, as defined in subdivision (f) of
Section 1371.9. The department shall include a summary of this
information in its January 1, 2019, report required pursuant to
subdivision (k) of Section 1371.30 and its findings regarding the
impact of the act that added this section on health care service plan
contracting and network adequacy.

(5) A health care service plan that provides services subject to
Section 1371.9 shall meet the network adequacy requirements set
forth in begin insert this chapter, including, but not limited to, end insert subdivisions (d)
and (e) of Section 1367 of this code and in Exhibits (H) and (I) of
subdivision (d) of Section 1300.51 of, and begin delete Section 1300.67.2 end delete
begin insert Sections 1300.67.2 and 1300.67.2.1 end insert of, Title 28 of the California
Code of Regulations, including, but not limited to, inpatient
hospital services and specialist physician services, and if necessary,
the department may adopt additional regulations related to those
services. begin insert This section shall not be construed to end insert begin insert limit the director’s
authority under this chapter. end insert

(6) For purposes of this section for Medicare fee-for-service
reimbursement, geographic regions shall be the geographic regions
specified for physician reimbursement for Medicare fee-for-service
by the United States Department of Health and Human Services.

(7) A health care service plan shall authorize and permit
assignment of the enrollee’s right, if any, to any reimbursement
for health care services covered under the plan contract to a
noncontracting individual health professional who furnishes the
health care services rendered subject to Section 1371.9. Lack of
assignment pursuant to this paragraph shall not be construed to
limit the applicability of this section, Section 1371.30, or Section
1371.9.

(8) A noncontracting individual health professional, health care
service plan, or health care service plan’s delegated entity who
disputes the claim reimbursement under this section shall utilize
the independent dispute resolution process described in Section
1371.30.

(b) If nonemergency services are provided by a noncontracting
individual health professional consistent with subdivision (c) of
Section 1371.9 to an enrollee who has voluntarily chosen to use
his or her out-of-network benefit for services covered by a plan
that includes coverage for out-of-network benefits, unless otherwise
agreed to by the plan and the noncontracting individual health
professional, the amount paid by the health care service plan shall
be the amount set forth in the enrollee’s evidence of coverage.
This payment is not subject to the independent dispute resolution
process described in Section 1371.30.

(c) If a health care service plan delegates the responsibility for
payment of claims to a contracted entity, including, but not limited
to, a medical group or independent practice association, then the
entity to which that responsibility is delegated shall comply with
the requirements of this section.

(d) (1) A payment made by the health care service plan to the
noncontracting health care professional for nonemergency services
as required by Section 1371.9 and this section, in addition to the
applicable cost sharing owed by the enrollee, shall constitute
payment in full for nonemergency services rendered unless either
party uses the independent dispute resolution process or other
lawful means pursuant to Section 1371.30.

(2) Notwithstanding any other law, the amounts paid by a plan
for services under this section shall not constitute the prevailing
or customary charges, the usual fees to the general public, or other
charges for other payers for an individual health professional.

(3) This subdivision shall not preclude the use of the independent
dispute resolution process pursuant to Section 1371.30.

(e) This section shall not apply to a Medi-Cal managed health
care service plan or any other entity that enters into a contract with
the State Department of Health Care Services pursuant to Chapter
7 (commencing with Section 14000), Chapter 8 (commencing with
Section 14200), and Chapter 8.75 (commencing with Section
14591) of Part 3 of Division 9 of the Welfare and Institutions Code.

(f) This section shall not apply to emergency services and care,
as defined in Section 1317.1.

(g) The definitions in subdivision (f) of Section 1371.9 shall
apply for purposes of this section.

(h) This section shall not be construed to alter a health care
service plan’s obligations pursuant to Sections 1371 and 1371.4.

SEC. 3.  

Section 1371.9 is added to the Health and Safety Code,
to read:

1371.9.  

(a) (1) Except as provided in subdivision (c), a health
care service plan contract issued, amended, or renewed on or after
July 1, 2017, shall provide that if an enrollee receives covered
services from a contracting health facility at which, or as a result
of which, the enrollee receives services provided by a
noncontracting individual health professional, the enrollee shall
pay no more than the same cost sharing that the enrollee would
pay for the same covered services received from a contracting
individual health professional. This amount shall be referred to as
the “in-network cost-sharing amount.”

(2) An enrollee shall not owe the noncontracting individual
health professional more than the in-network cost-sharing amount
for services subject to this section. At the time of payment by the
plan to the noncontracting individual health professional, the plan
shall inform the enrollee and the noncontracting individual health
professional of the in-network cost-sharing amount owed by the
enrollee.

(3) A noncontracting individual health professional shall not
bill or collect any amount from the enrollee for services subject
to this section except for the in-network cost-sharing amount. Any
communication from the noncontracting individual health
professional to the enrollee prior to the receipt of information about
the in-network cost-sharing amount pursuant to paragraph (2) shall
include a notice in 12-point bold type stating that the
communication is not a bill and informing the enrollee that the
enrollee shall not pay until he or she is informed by his or her
health care service plan of any applicable cost sharing.

(4) (A) If the noncontracting individual health professional has
received more than the in-network cost-sharing amount from the
enrollee for services subject to this section, the noncontracting
individual health professional shall refund any overpayment to the
enrollee within 30 calendar days after receiving payment from the
enrollee.

(B) If the noncontracting individual health professional does
not refund any overpayment to the enrollee within 30 calendar
days after being informed of the enrollee’s in-network cost-sharing
amount, interest shall accrue at the rate of 15 percent per annum
beginning with the date payment was received from the enrollee.

(C) A noncontracting individual health professional shall
automatically include in his or her refund to the enrollee all interest
that has accrued pursuant to this section without requiring the
enrollee to submit a request for the interest amount.

(b) Except for services subject to subdivision (c), the following
shall apply:

(1) Any cost sharing paid by the enrollee for the services subject
to this section shall count toward the limit on annual out-of-pocket
expenses established under Section 1367.006.

(2) Cost sharing arising from services subject to this section
shall be counted toward any deductible in the same manner as cost
sharing would be attributed to a contracting individual health
professional.

(3) The cost sharing paid by the enrollee pursuant to this section
shall satisfy the enrollee’s obligation to pay cost sharing for the
health service and shall constitute “applicable cost sharing owed
by the enrollee.”

(c) For services subject to this section, if an enrollee has a health
care service plan that includes coverage for out-of-network benefits,
a noncontracting individual health professional may bill or collect
from the enrollee the out-of-network cost sharing, if applicable,
only when the enrollee consents in writing and that written consent
demonstrates satisfaction of all the following criteria:

(1) At least 24 hours in advance of care, the enrollee shall
consent in writing to receive services from the identified
noncontracting individual health professional.

(2) The consent shall be obtained by the noncontracting
individual health professional in a document that is separate from
the document used to obtain the consent for any other part of the
care or procedure. The consent shall not be obtained by the facility
or any representative of the facility. The consent shall not be
obtained at the time of admission or at any time when the enrollee
is being prepared for surgery or any other procedure.

(3) At the time consent is provided, the noncontracting
individual health professional shall give the enrollee a written
estimate of the enrollee’s total out-of-pocket cost of care. The
written estimate shall be based on the professional’s billed charges
for the service to be provided. The noncontracting individual health
professional shall not attempt to collect more than the estimated
amount without receiving separate written consent from the
enrollee or the enrollee’s authorized representative, unless
circumstances arise during delivery of services that were
unforeseeable at the time the estimate was given that would require
the provider to change the estimate.

(4) The consent shall advise the enrollee that he or she may
elect to seek care from a contracted provider or may contact the
enrollee’s health care service plan in order to arrange to receive
the health service from a contracted provider for lower
out-of-pocket costs.

(5) The consent and estimate shall be provided to the enrollee
in the language spoken by the enrollee, if the language is a
Medi-Cal threshold language, as defined in subdivision (d) of
Section 128552.

(6) The consent shall also advise the enrollee that any costs
incurred as a result of the enrollee’s use of the out-of-network
benefit shall be in addition to in-network cost-sharing amounts
and may not count toward the annual out-of-pocket maximum on
in-network benefits or a deductible, if any, for in-network benefits.

(d) A noncontracting individual health professional who fails
to comply with the requirements of subdivision (c) has not obtained
written consent for purposes of this section. Under those
circumstances, subdivisions (a) and (b) shall apply and subdivision
(c) shall not apply.

(e) (1) A noncontracting individual health professional may
advance to collections only the in-network cost-sharing amount,
as determined by the plan pursuant to subdivision (a) or the
out-of-network cost-sharing amount owed pursuant to subdivision
(c), that the enrollee has failed to pay.

(2) The noncontracting individual health professional, or any
entity acting on his or her behalf, including any assignee of the
debt, shall not report adverse information to a consumer credit
reporting agency or commence civil action against the enrollee for
a minimum of 150 days after the initial billing regarding amounts
owed by the enrollee under subdivision (a) or (c).

(3) With respect to an enrollee, the noncontracting individual
health professional, or any entity acting on his or her behalf,
including any assignee of the debt, shall not use wage garnishments
or liens on primary residences as a means of collecting unpaid bills
under this section.

(f) For purposes of this section and Sections 1371.30 and
1371.31, the following definitions shall apply:

(1) “Contracting health facility” means a health facility that is
contracted with the enrollee’s health care service plan to provide
services under the enrollee’s plan contract. A contracting health
care facility includes, but is not limited to, the following providers:

(A) A licensed hospital.

(B) An ambulatory surgery or other outpatient setting, as
described in subdivision (a), (d), (e), (g), or (h) of Section 1248.1.

(C) A laboratory.

(D) A radiology or imaging center.

(2) “Cost sharing” includes any copayment, coinsurance, or
deductible, or any other form of cost sharing paid by the enrollee
other than premium or share of premium.

(3) “Individual health professional” means a physician and
surgeon or other professional who is licensed by this state to deliver
or furnish health care services. For this purpose, an “individual
health professional” shall not include a dentist, licensed pursuant
to the Dental Practice Act (Chapter 4 (commencing with Section
1600) of Division 2 of the Business and Professions Code).

(4) “In-network cost-sharing amount” means an amount no more
than the same cost sharing the enrollee would pay for the same
covered service received from a contracting health professional.
The in-network cost-sharing amount with respect to an enrollee
with coinsurance shall be based on the amount paid by the plan
pursuant to paragraph (1) of subdivision (a) of Section 1371.31.

(5) “Noncontracting individual health professional” means a
physician and surgeon or other professional who is licensed by the
state to deliver or furnish health care services and who is not
contracted with the enrollee’s health care service product. For this
purpose, a “noncontracting individual health professional” shall
not include a dentist, licensed pursuant to the Dental Practice Act
(Chapter 4 (commencing with Section 1600) of Division 2 of the
Business and Professions Code). Application of this definition is
not precluded by a noncontracting individual health professional’s
affiliation with a group.

(g) This section shall not be construed to require a health care
service plan to cover services not required by law or by the terms
and conditions of the health care service plan contract.

(h) This section shall not be construed to exempt a plan or
provider from the requirements under Section 1371.4 or 1373.96,
nor abrogate the holding in Prospect Medical Group, Inc. v.
Northridge Emergency Medical Group (2009) 45 Cal.4th 497.

(i) If a health care service plan delegates payment functions to
a contracted entity, including, but not limited to, a medical group
or independent practice association, the delegated entity shall
comply with this section.

(j) This section shall not apply to a Medi-Cal managed health
care service plan or any other entity that enters into a contract with
the State Department of Health Care Services pursuant to Chapter
7 (commencing with Section 14000), Chapter 8 (commencing with
Section 14200), and Chapter 8.75 (commencing with Section
14591) of Part 3 of Division 9 of the Welfare and Institutions Code.

(k) This section shall not apply to emergency services and care,
as defined in Section 1317.1.

SEC. 4.  

Section 10112.8 is added to the Insurance Code, to
read:

10112.8.  

(a) (1) Except as provided in subdivision (c), a health
insurance policy issued, amended, or renewed on or after July 1,
2017, that provides benefits through contracts with providers at
alternative rates of payment pursuant to Section 10133, shall
provide that if an insured receives covered services from a
contracting health facility at which, or as a result of which, the
insured receives services provided by a noncontracting individual
health professional, the insured shall pay no more than the same
cost sharing that the insured would pay for the same covered
services received from a contracting individual health professional.
This amount shall be referred to as the “in-network cost-sharing
amount.”

(2) Except as provided in subdivision (c), an insured shall not
owe the noncontracting individual health professional more than
the in-network cost-sharing amount for services subject to this
section. At the time of payment by the insurer to the noncontracting
individual health professional, the insurer shall inform the insured
and the noncontracting individual health professional of the
in-network cost-sharing amount owed by the insured.

(3) A noncontracting individual health professional shall not
bill or collect any amount from the insured for services subject to
this section except the in-network cost-sharing amount. Any
communication from the noncontracting individual health
professional to the insured prior to the receipt of information about
the in-network cost-sharing amount pursuant to paragraph (2) shall
include a notice in 12-point bold type stating that the
communication is not a bill and informing the insured that the
insured shall not pay until he or she is informed by his or her
insurer of any applicable cost sharing.

(4) (A) If the noncontracting individual health professional has
received more than the in-network cost-sharing amount from the
insured for services subject to this section, the noncontracting
individual health professional shall refund any overpayment to the
insured within 30 calendar days after receiving payment from the
insured.

(B) If the noncontracting individual health professional does
not refund any overpayment to the insured within 30 calendar days
after being informed of the insured’s in-network cost-sharing
amount, interest shall accrue at the rate of 15 percent per annum
beginning with the date payment was received from the insured.

(C) A noncontracting individual health professional shall
automatically include in his or her refund to the insured all interest
that has accrued pursuant to this section without requiring the
insured to submit a request for the interest amount.

(b) Except for services subject to subdivision (c), the following
shall apply:

(1) Any cost sharing paid by the insured for the services subject
to this section shall count toward the limit on annual out-of-pocket
expenses established under Section 10112.28.

(2) Cost sharing arising from services subject to this section
shall be counted toward any deductible in the same manner as cost
sharing would be attributed to a contracting individual health
professional.

(3) The cost sharing paid by the insured pursuant to this section
shall satisfy the insured’s obligation to pay cost sharing for the
health service and shall constitute “applicable cost sharing owed
by the insured.”

(c) For services subject to this section, if an insured has an
insurance contract that includes coverage for out-of-network
benefits, a noncontracting individual health professional may bill
or collect from the insured the out-of-network cost sharing, if
applicable, only when the insured consents in writing and that
written consent demonstrates satisfaction of all the following
criteria:

(1) At least 24 hours in advance of care, the insured shall consent
in writing to receive services from the identified noncontracting
individual health professional.

(2) The consent shall be obtained by the noncontracting
individual health professional in a document that is separate from
the document used to obtain the consent for any other part of the
care or procedure. The consent shall not be obtained by the facility
or any representative of the facility. The consent shall not be
obtained at the time of admission or at any time when the enrollee
is being prepared for surgery or any other procedure.

(3) At the time consent is provided the noncontracting individual
health professional shall give the insured a written estimate of the
insured’s total out-of-pocket cost of care. The written estimate
shall be based on the professional’s billed charges for the service
to be provided. The noncontracting individual health professional
shall not attempt to collect more than the estimated amount without
receiving separate written consent from the insured or the insured’s
authorized representative, unless circumstances arise during
delivery of services that were unforeseeable at the time the estimate
was given that would require the provider to change the estimate.

(4) The consent shall advise the insured that he or she may elect
to seek care from a contracted provider or may contact the insured’s
insurer in order to arrange to receive the health service from a
contracted provider for lower out-of-pocket costs.

(5) The consent and estimate shall be provided to the insured
in the language spoken by the insured, if the language is a Medi-Cal
threshold language, as defined in subdivision (d) of Section 128552
of the Health and Safety Code.

(6) The consent shall also advise the insured that any costs
incurred as a result of the insured’s use of the out-of-network
benefit shall be in addition to in-network cost-sharing amounts
and may not count toward the annual out-of-pocket maximum on
in-network benefits or a deductible, if any, for in-network benefits.

(d) A noncontracting individual health professional who fails
to comply with provisions of this subdivision has not obtained
written consent for purposes of this section. Under those
circumstances, subdivisions (a) and (b) shall apply and subdivision
(c) shall not apply.

(e) (1) A noncontracting individual health professional may
advance to collections only the in-network cost-sharing amount,
as determined by the insurer pursuant to subdivision (a) or the
out-of-network cost-sharing amount owed pursuant to subdivision
(c), that the insured has failed to pay.

(2) The noncontracting individual health professional, or any
entity acting on his or her behalf, including any assignee of the
debt, shall not report adverse information to a consumer credit
reporting agency or commence civil action against the insured for
a minimum of 150 days after the initial billing regarding amounts
owed by the insured under subdivision (a) or (c).

(3) With respect to an insured, a noncontracting individual health
professional, or any entity acting on his or her behalf, including
any assignee of the debt, shall not use wage garnishments or liens
on primary residences as a means of collecting unpaid bills under
this section.

(f) For purposes of this section and Sections 10112.81 and
10112.82, the following definitions shall apply:

(1) “Contracting health facility” means a health facility that is
contracted with the insured’s health insurer to provide services
under the insured’s policy. A contracting health care facility
includes, but is not limited to, the following providers:

(A) A licensed hospital.

(B) An ambulatory surgery or other outpatient setting, as
described in subdivision (a), (d), (e), (g), or (h) of Section 1248.1
of the Health and Safety Code.

(C) A laboratory.

(D) A radiology or imaging center.

(2) “Cost sharing” includes any copayment, coinsurance, or
deductible, or any other form of cost sharing paid by the insured
other than premium or share of premium.

(3) “Individual health professional” means a physician and
surgeon or other professional who is licensed by the state to deliver
or furnish health care services. For this purpose, an “individual
health professional” shall not include a dentist, licensed pursuant
to the Dental Practice Act (Chapter 4 (commencing with Section
1600) of Division 2 of the Business and Professions Code).

(4) “In-network cost-sharing amount” means an amount no more
than the same cost sharing the insured would pay for the same
covered service received from a contracting health professional.
The in-network cost-sharing amount with respect to an insured
with coinsurance shall be based on the amount paid by the insurer
pursuant to paragraph (1) of subdivision (a) of Section 10112.82.

(5) “Noncontracting individual health professional” means a
physician and surgeon or other professional who is licensed by the
state to deliver or furnish health care services and who is not
contracted with the insured’s health insurance product. For this
purpose, a “noncontracting individual health professional” shall
not include a dentist, licensed pursuant to the Dental Practice Act
(Chapter 4 (commencing with Section 1600) of Division 2 of the
Business and Professions Code). Application of this definition is
not precluded by a noncontracting individual health professional’s
affiliation with a group.

(g) This section shall not be construed to require an insurer to
cover services not required by law or by the terms and conditions
of the health insurance policy.

(h) If a health insurer delegates payment functions to a
contracted entity, including, but not limited to, a medical group or
independent practice association, the delegated entity shall comply
with this section.

(i) This section shall not apply to emergency services and care,
as defined in Section 1317.1 of the Health and Safety Code.

SEC. 5.  

Section 10112.81 is added to the Insurance Code, to
read:

10112.81.  

(a) (1) By September 1, 2017, the commissioner
shall establish an independent dispute resolution process for the
purpose of processing and resolving a claim dispute between a
health insurer and a noncontracting individual health professional
for services subject to subdivision (a) of Section 10112.8.

(2) Prior to initiating the independent dispute resolution process,
the parties shall complete the insurer’s internal process.

(3) If either the noncontracting individual health professional
or the insurer appeals a claim to the department’s independent
dispute resolution process, the other party shall participate in the
appeal process as described in this section.

(b) (1) The commissioner shall establish uniform written
procedures for the submission, receipt, processing, and resolution
of claim payment disputes pursuant to this section and any other
guidelines for implementing this section.

(2) The commissioner shall establish reasonable and necessary
fees for the purpose of administering this section, to be paid by
both parties.

(3) In establishing the independent dispute resolution process,
the commissioner shall permit the bundling of claims submitted
to the same insurer or the same delegated entity for the same or
similar services by the same noncontracting individual health
professional.

(4) The commissioner shall permit a physician group,
independent practice association, or other entity authorized to act
on behalf of a noncontracting individual health professional to
initiate and participate in the independent dispute resolution
process.

(5) In deciding the dispute, the independent organization shall
base its decision regarding the appropriate reimbursement on all
relevant information.

(c) (1) The commissioner may contract with one or more
independent organizations to conduct the proceedings. The
independent organization handling a dispute shall be independent
of either party to the dispute.

(2) The commissioner shall establish conflict-of-interest
standards, consistent with the purposes of this section, that an
organization shall meet in order to qualify to administer the
independent dispute resolution program. The conflict-of-interest
standards shall be consistent with the standards pursuant to
subdivisions (c) and (d) of Section 10169.2.

(3) The commissioner may contract with the same independent
organization or organizations as the State Department of Managed
Health Care.

(4) The commissioner shall provide, upon the request of an
interested person, a copy of all nonproprietary information, as
determined by the commissioner, filed with the department by an
independent organization seeking to contract with the department
to administer the independent dispute resolution process pursuant
to this section. The department may charge a nominal fee to cover
the costs of providing a copy of the information pursuant to this
paragraph.

(5) Contracts entered into pursuant to the authority in this
subdivision shall be exempt from Part 2 (commencing with Section
10100) of Division 2 of the Public Contract Code, Section 19130
of the Government Code, and Chapter 6 (commencing with Section
14825) of Part 5.5 of Division 3 of the Government Code and shall
be exempt from the review or approval of any division of the
Department of General Services.

(d) The decision obtained through the commissioner’s
independent dispute resolution process shall be binding on both
parties. The insurer shall implement the decision obtained through
the independent dispute resolution process. If dissatisfied, either
party may pursue any right, remedy, or penalty established under
any other applicable law.

(e) If a health insurer delegates payment functions to a
contracted entity, including, but not limited to, a medical group or
independent practice association, then the delegated entity shall
comply with this section.

(f) This section shall not apply to emergency services and care,
as defined in Section 1317.1 of the Health and Safety Code.

(g) The definitions in subdivision (f) of Section 10112.8 shall
apply for purposes of this section.

(h) This section shall not be construed to alter a health insurer’s
obligations pursuant to Section 10123.13.

(i) Notwithstanding Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code,
the commissioner may implement, interpret, or make specific this
section by issuing guidance, without taking regulatory action, until
the time regulations are adopted.

(j) By January 1, 2019, the commissioner shall provide a report
to the Governor, the President pro Tempore of the Senate, the
Speaker of the Assembly, and the Senate and Assembly
Committees on Health of the data and information provided in the
independent dispute resolution process in a manner and format
specified by the Legislature.

SEC. 6.  

Section 10112.82 is added to the Insurance Code, to
read:

10112.82.  

(a) (1) For services rendered subject to Section
10112.8, effective July 1, 2017, unless otherwise agreed to by the
noncontracting individual health professional and the insurer, the
insurer shall reimburse the greater of the average contracted rate
or 125 percent of the amount Medicare reimburses on a
fee-for-service basis for the same or similar services in the general
geographic region in which the services were rendered. For the
purposes of this section, “average contracted rate” means the
average of the contracted commercial rates paid by the health
insurer for the same or similar services in the geographic region.
This subdivision does not apply to subdivision (c) of Section
10112.8 or subdivision (b) of this section.

(2) (A) By July 1, 2017, each health insurer shall provide to
the commissioner all of the following:

(i) Data listing its average contracted rates for the insurer for
services most frequently subject to Section 10112.8 in each
geographic region in which the services are rendered for the
calendar year 2015.

(ii) Its methodology for determining the average contracted rate
for the insurer for services subject to Section 10112.8. The
methodology to determine an average contracted rate shall ensure
that the insurer includes the highest and lowest contracted rates
for the calendar year 2015.

(iii) The policies and procedures used to determine the average
contracted rates under this subdivision.

(B) For each calendar year after the health insurer’s initial
submission of the average contracted rate as specified in
subparagraph (A) and until the standardized methodology under
paragraph (3) is specified, a health insurer shall adjust the rate
initially established pursuant to this subdivision by the Consumer
Price Index for Medical Care Services, as published by the United
States Bureau of Labor Statistics.

(3) (A) By January 1, 2019, the commissioner shall specify a
methodology that insurers shall use to determine the average
contracted rates for services most frequently subject to Section
10112.8. This methodology shall take into account, at a minimum,
information from the independent dispute resolution process, the
specialty of the individual health professional, and the geographic
region in which the services are rendered. The methodology to
determine an average contracted rate shall ensure that the insurer
includes the highest and lowest contracted rates.

(B) Insurers shall provide to the commissioner the policies and
procedures used to determine the average contracted rates in
compliance with subparagraph (A).

(C) The average contracted rate data submitted pursuant to this
section shall be confidential and not subject to disclosure under
the California Public Records Act (Chapter 3.5 (commencing with
Section 6250) of Division 7 of Title 1 of the Government Code).

(D) In developing the standardized methodology under this
subdivision, the commissioner shall consult with interested parties
throughout the process of developing the standards, including the
Department of Managed Health Care, representatives of health
plans, insurers, health care providers, hospitals, consumer
advocates, and other stakeholders it deems appropriate. The
commissioner shall hold the first stakeholder meeting no later than
July 1, 2017.

(4) A health insurer shall include in its reports submitted to the
commissioner pursuant to Section 10133.5 and regulations adopted
pursuant to that section, in a manner specified by the department,
the number of payments made to noncontracting individual health
professionals for services at a contracting health facility and subject
to Section 10112.8, as well as other data sufficient to determine
the proportion of noncontracting individual health professionals
to contracting individual health professionals at contracting health
facilities, as defined in subdivision (f) of Section 10112.8. The
commissioner shall include a summary of this information in its
January 1, 2019, report required pursuant to subdivision (j) of
Section 10112.81 and its findings regarding the impact of the act
that added this section on health insurer contracting and network
adequacy.

(5) A health insurer that provides services subject to Section
10112.8 shall meet the network adequacy requirements set forth
in begin insert this chapter, including, but not limited to, end insert Section 10133.5 of
begin delete the Insurance Code end delete begin insert this code end insert and begin delete Section 2240.1 end delete begin insert Sections 2240.1
and 2240.7 end insert of Title 10 of the California Code of Regulations,
including, but not limited to, inpatient hospital services and
specialist physician services, and if necessary, the commissioner
may adopt additional regulations related to those services. begin insert This
section shall not be construed to end insert begin insert limit the commissioner’s authority
under this chapter. end insert

(6) For the purposes of this section, for average contracted rates
for individual and small group coverage, geographic region shall
be the geographic regions listed in subparagraph (A) of paragraph
(2) of subdivision (a) of Section 10753.14. For purposes of this
section for Medicare fee-for-service reimbursement, geographic
regions shall be the geographic regions specified for physician
reimbursement for Medicare fee-for-service by the United States
Department of Health and Human Services.

(7) A health insurer shall authorize and permit assignment of
the insured’s right, if any, to any reimbursement for health care
services covered under the health insurance policy to a
noncontracting individual health professional who furnishes the
health care services rendered subject to Section 10112.8. Lack of
assignment pursuant to this paragraph shall not be construed to
limit the applicability of this section, Section 10112.8, or Section
10112.81.

(8) A noncontracting individual health professional or health
insurer who disputes the claim reimbursement under this section
shall utilize the independent dispute resolution process described
in Section 10112.81.

(b) If nonemergency services are provided by a noncontracting
individual health professional consistent with subdivision (c) of
Section 10112.8 to an insured who has voluntarily chosen to use
his or her out-of-network benefit for services covered by an insurer
that includes coverage for out-of-network benefits, unless otherwise
agreed to by the insurer and the noncontracting individual health
professional, the amount paid by the insurer shall be the amount
set forth in the insured’s policy. This payment is not subject to the
independent dispute resolution process described in Section
10112.81.

(c) If a health insurer delegates the responsibility for payment
of claims to a contracted entity, including, but not limited to, a
medical group or independent practice association, then the entity
to which that responsibility is delegated shall comply with the
requirements of this section.

(d) (1) A payment made by the health insurer to the
noncontracting health care professional for nonemergency services
as required by Section 10112.8 and this section, in addition to the
applicable cost sharing owed by the insured, shall constitute
payment in full for nonemergency services rendered unless either
party uses the dispute resolution process or other lawful means
pursuant to Section 10112.81.

(2) Notwithstanding any other law, the amounts paid by an
insurer for services under this section shall not constitute the
prevailing or customary charges, the usual fees to the general
public, or other charges for other payers for an individual health
professional.

(3) This subdivision shall not preclude the use of the independent
dispute resolution process pursuant to Section 10112.81.

(e)  This section shall not apply to emergency services and care,
as defined in Section 1317.1 of the Health and Safety Code.

(f)  The definitions in subdivision (f) of Section 10112.8 shall
apply for purposes of this section.

(g) This section shall not be construed to alter a health insurer’s
obligations pursuant to Section 10123.13.

SEC. 7.  

The Legislature finds and declares that Sections 2 and
6 of this act, which add Section 1371.31 to the Health and Safety
Code and Section 10112.82 to the Insurance Code, respectively,
impose a limitation on the public’s right of access to the meetings
of public bodies or the writings of public officials and agencies
within the meaning of Section 3 of Article I of the California
Constitution. Pursuant to that constitutional provision, the
Legislature makes the following findings to demonstrate the interest
protected by this limitation and the need for protecting that interest:

In order to protect confidential rate information used by health
care service plans and health insurers and to protect the integrity
of the competitive market, it is necessary that this act limit the
public’s right of access to that information.

SEC. 8.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.