BILL ANALYSIS                                                                                                                                                                                                    




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          |SENATE RULES COMMITTEE            |                         AB 72|
          |Office of Senate Floor Analyses   |                              |
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                                   THIRD READING 


          Bill No:  AB 72
          Author:   Bonta (D), Bonilla (D), Dahle (R), Gonzalez (D),  
                    Maienschein (R), Santiago (D), and Wood (D)
          Amended:  8/4/16 in Senate
          Vote:     21 

           PRIOR VOTES NOT RELEVANT

           SENATE HEALTH COMMITTEE:  7-1, 6/29/16 (Pursuant to Senate Rule  
            29.10)
           AYES:  Hernandez, Hall, Mitchell, Monning, Nielsen, Pan, Roth
           NOES:  Nguyen
           NO VOTE RECORDED:  Wolk

           SENATE APPROPRIATIONS COMMITTEE:  6-0, 8/17/15
           AYES:  Lara, Bates, Beall, Hill, Leyva, Mendoza
           NO VOTE RECORDED:  Nielsen

           SUBJECT:   Health care coverage:  out-of-network coverage


          SOURCE:    California Labor Federation 
                     Health Access California 



          DIGEST:  This bill establishes a payment rate, which is the  
          greater of the average of a health plan or health insurer's  
          contracted rate, as specified, or 125% of the amount Medicare  
          reimburses for the same or similar services, and a binding  
          independent dispute resolution process for claims and claim  
          disputes related to covered services provided at a contracted  
          health facility by a non-contracting health care professional.   
          Limits enrollee and insured cost sharing for these covered  
          services to no more than the cost sharing required had the  








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          services been provided by a contracting health professional.  
          Requires health plans and insurers to collect the  
          enrollee/insured cost sharing and requires the plan/insurer to  
          permit the enrollee/insured to assign payment of benefits to the  
          health care professional.


          ANALYSIS:  


          Existing law:


           1) Provides for the regulation of health plans by the  
             Department of Managed Health Care (DMHC) under the Knox-Keene  
             Act and for health insurers by California Department of  
             Insurance (CDI) under the Insurance Code.


           2) Establishes, pursuant to regulations, requirements that  
             health plans must implement in their claims settlement  
             practice, including the meaning of "reimbursement of a  
             claim," such that providers with a contract receive the  
             contract rate.  Claims for contracted providers without a  
             written contract and non-contracted providers require payment  
             of the reasonable and customary value for the health care  
             services rendered based upon "statistically credible  
             information" that is updated at least annually and takes into  
             consideration six specified criteria.


           3) Allows a non-contracted provider to dispute the  
             appropriateness of a health plan's computation of the  
             reasonable and customary value and requires the health plan  
             to respond to the dispute through the plan's mandated  
             provider dispute resolution process.


          This bill:


           1) Requires DMHC and CDI to establish an independent dispute  








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             resolution process (IDRP) for the purpose of resoling a claim  
             dispute between a health plan or insurer and a  
             non-contracting individual health professional, as specified,  
             who has provided non-emergency services or treatment for an  
             enrollee or insured at a contracted health facility, as  
             specified.  Requires both parties to participate in the IDRP  
             and the decision to be binding on both parties. 


           2) Requires the independent organization to base its decision  
             regarding the appropriate reimbursement on all relevant  
             information, including, but not limited to, the reimbursement  
             amount suggested by either party.  


           3) Requires the plan or insurer to reimburse the greater of the  
             average contracted rate or 125% 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 to a non-contracting individual health  
             professional for services, as specified, unless otherwise  
             agreed to by the parties.


           4) Defines "average contracted rate" as the average of the  
             contracted rates paid by the health plan, its delegated  
             entity, or an insurer for the same or similar services in the  
             geographic regions.


           5) Requires CDI and DMHC to specify a methodology that plans  
             and delegated entities shall use to determine the average  
             contracted rates for the services subject to this bill,  
             taking into account the specialty of the individual health  
             professional and the geographic region in which the services  
             are rendered.  Requires the methodology to include the  
             highest and lowest contracted rates.


           6) Requires for each year thereafter, the plans, delegated  
             entities and insurers to adjust the rate by the Consumer  
             Price Index (CPI) for Medical Care Services, as published by  








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             the United States Bureau of Labor Statistics.


           7) Requires health plans and insurers to report the number of  
             out-of-network payments made for services subject to this  
             bill, as well as other data sufficient to determine the  
             prevalence of out-of-network individual health professionals  
             at specific facilities, as specified.


           8) Limits enrollee or insured cost sharing to no more than the  
             same cost sharing that the enrollee or insured would pay for  
             the same covered services received from a contracting  
             individual health professional (in-network cost sharing  
             amount), if the enrollee or insured receives covered services  
             from a contracting health facility at which, or as a result  
             of which, the enrollee or insured receives services provided  
             by a non-contracting individual health professional.  Applies  
             this provision to health plan contracts and insurance  
             policies issued, amended, or renewed on or after January 1,  
             2017.


           9) Prohibits a non-contracting individual health professional  
             from billing or collecting any amount from the enrollee or  
             insured.  


           10)   Requires the amount paid when nonemergency services are  
             provided by a non-contracting individual health professional  
             to an enrollee or insured 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, the  
             amount set forth in the enrollee's or insured's evidence of  
             coverage, unless otherwise agreed to by the parties.   
             Excludes this payment from the IDRP.


           11)Permits a non-contracting individual health professional to  
             bill or collect from the enrollee or insured the  
             out-of-network cost sharing, if applicable, only when the  
             enrollee or insured consents in writing and the written  








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             consent satisfies specified requirements.


           12)Provides that a non-contracting individual health  
             professional who fails to comply with 11) above has not  
             obtained written consent and therefore 8) above applies.


           13)Establishes requirements on non-contracting individual  
             health professionals on collections from enrollees and  
             insureds and assignment of debt.


           14)Defines "contracting health facility" to include, but not be  
             limited to, a licensed hospital, an ambulatory surgery or  
             other outpatient setting, a laboratory, a radiology or  
             imaging center, or any other similar provider as DMHC or CDI  
             may define, by regulation, as specified.


           15)  Defines a "non-contracting individual health professional"  
             as 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  
             plan, but not a dentist, licensed pursuant to the Dental  
             Practice Act.




          Comments


          1)Author's statement.  According to the author, AB 72 protects  
            patients from surprise medical bills when they follow the  
            rules of their health plan by going to an in-network hospital,  
            lab, imaging center or other health care facility. Patients  
            would only be responsible for their in-network cost sharing  
            and would be prohibited from getting outrageous out-of-network  
            bills from doctors they did not choose. Surprise medical bills  
            wreak havoc on people's finances and their ability to pay for  
            basic necessities. This bill also provides certainty for  








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            doctors and insurers and keeps our health care costs under  
            control. Insurers must reimburse doctors a fair rate for their  
            services, and doctors are assured a minimum payment in  
            statute. The Affordable Care Act requires all consumers to  
            have health coverage, and it is the state's responsibility to  
            ensure patients are safeguarded from hidden costs unfairly  
            imposed upon them when they have followed their insurers'  
            rules.

          2)Out-of-network services and surprise bills.  A recent survey  
            commissioned by the Consumer Reports National Research Center  
            found that nearly one-third of privately insured Americans  
            received a surprise medical bill where their health plan paid  
            less than expected in the past two years. Among the 2,200  
            adult U.S. respondents, nearly one out of four got a bill from  
            a doctor that was unexpected. Survey findings also suggest  
            that consumers overall seem largely confused when it comes to  
            their rights to fight surprise bills.  Based on the California  
            respondents to this survey, one in four privately insured  
            Californians faced surprise medical bills.  One-quarter of  
            Californians who had hospital visits or surgery in the past  
            two years were charged an out-of-network rate when they  
            thought the provider was in-network.  Sixty-three percent  
            assume doctors at an in-network hospital are also in-network.


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   Yes


          According to the Senate Appropriations Committee:

          1)One-time costs of about $500,000 for the development of  
            regulations and review of plan filings by DMHC (Managed Care  
            Fund).


          2)Annual costs of $1.5 million to $3 million per year for IDRP  
            that DMHC would convene to settle a dispute between a provider  
            and a health plan (Managed Care Fund).










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          3)One-time costs of about $600,000 for the development of  
            regulations and review of plan filings by CDI (Insurance  
            Fund).


          4)Ongoing costs of $1 million per year for the IDRP that CDI  
            would convene to settle a dispute between a provider and a  
            health insurer (Insurance Fund).

          SUPPORT:   (Verified  8/11/16)

          California Labor Federation (co-source)
          Health Access California (co-source)
          American Cancer Society Cancer Action Network
          Americans for Democratic Action, Southern California
          Association of California State Supervisors
          California Alliance for Retired Americans
          California Association of Health Underwriters
          California Black Health Network
          California Coverage and Health Initiatives
          California Pan-Ethnic Health Network
          California Professional Firefighters
          California State Retirees
          CALPIRG
          Children Now
          Congress of California Seniors
          Consumers Union
          Hunger Action Los Angeles
          Inland Empire Immigrant Youth Coalition
          Los Angeles County Professional Peace Officers Association
          NAMI California 
          National Health Law Program
          National Multiple Sclerosis Society California Action Network
          The Children's Partnership
          United Way of California
          USW Local 675
          Western Center on Law and Poverty


          OPPOSITION:   (Verified8/11/16)










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          California Chapter of the American College of Cardiology
          California Medical Association
          California Society of Anesthesiologists 


          ARGUMENTS IN SUPPORT:     Health Access California writes that  
          patients know they have to follow their health plan or insurer's  
          rules and go to in-network providers and facilities to keep  
          their out-of-pocket costs low.  Unfortunately, many patients end  
          up getting a surprise medical bill for hundreds or thousands of  
          dollars from an anesthesiologist, radiologist, pathologist or  
          other specialist who turns out to be out-of-network, one the  
          patient never met, did not choose, and often has no control over  
          selecting.  These surprise bills do not count toward the annual  
          out-of-pocket maximum so a consumer can find themselves exposed  
          to costs well in excess of $6,600 a year.  The California Labor  
          Federation indicates patients may not even be able to rely on  
          their hospitals to tell them if they will be treated by an  
          out-of-network doctor, since doctors are not direct employees of  
          most hospitals, they are independent contractors and not all  
          necessarily in the same network as the hospital.  The Affordable  
          Care Act was supposed to reduce medical debt and bankruptcies.   
          Surprise bills threaten to undo that work by subjecting patients  
          to astronomically high bills they were not expecting.  This bill  
          takes the burden off of patients of dealing with surprise bills  
          and negotiating with the provider.  Consumers Union writes  
          health insurance coverage should provide protection against  
          overwhelming medical bills and debt.  Consumers should not pay  
          the price for the complicated relationships between doctors,  
          facilities and health plans.  This bill is a balanced solution  
          that protects patients from unfair surprises, while also  
          requiring insurers to reimburse out-of-network doctors at  
          in-network facilities fairly, at a minimum, the greater of the  
          average contracted rate or 125% of Medicare.  It also allows  
          doctors to appeal for a higher payment through a streamlined  
          IDRP.


          ARGUMENTS IN OPPOSITION:     The California Medical Association  
          (CMA) writes that this bill does provide a framework for a  
          comprehensive, fair solution to the surprise billing issue, but  
          amendments are needed to complete the legislation.  CMA believes  








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          requiring health plans to collect copays is essential in  
          providing balance between the physicians and health insurance  
          companies as well as clearly details for the consumer what  
          portion of the care they are required to pay.  Health plans and  
          insurers collect premiums and pay claims according to contracts  
          they sign with enrollees and medical providers, billing is the  
          core of their business. CMA has great concerns about the  
          methodology to determine what average contracted rates should  
          be.  CMA asks that a consistent standard be applied to all  
          health insurance plans that actually reflects the average rate  
          paid for each in-network service in a given year and have  
          provided the authors and the committee with language to that  
          effect.  CMA believes that on-call specialists who provide post  
          stabilization service should be exempted from this bill.   
          Physicians volunteer to participate in on-call panels and  
          provide care to all patients regardless of ability to pay or  
          insurance coverage similar to emergency room physicians.  One  
          unintended consequence of this bill would be to limit access to  
          on-call specialists who will become more reticent to volunteer.   
          The California Chapter of the American College of Cardiology  
          believes this bill is an improvement over AB 533 (Bonta, 2015)  
          but has a number of concerns that the bill may adversely affect  
          the ability of patients to receive quality care in a time  
          fashion.  The determination of average contract rates is  
          problematic.  The geographic regions are way too broad and may  
          not reflect the local cost of care or local reimbursement  
          levels.  Contracted rates with the largest physician groups  
          would be averaged with contract rates from solo physicians and  
          both lead to lower reimbursements rates for non-contracted  
          physicians.  This will lead to a high volume of IDRP claims, and  
          the IDRP process remains largely undefined.  No payment standard  
          is set (recommend Gould), no fees are established and both  
          parties are required to pay.  If the fees are too high it will  
          be a barrier to physician participation.  The losing party  
          should pay the fees.  The consent and estimate process is  
          problematic and they support CMA's amendments to fix language  
          spoken and updating the estimate if complications occur.

          Prepared by:Teri Boughton / HEALTH / (916) 651-4111
          8/15/16 20:01:51










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