BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 72| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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 AB 72 Page 2 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 AB 72 Page 3 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 AB 72 Page 4 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 AB 72 Page 5 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 AB 72 Page 6 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). AB 72 Page 7 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) AB 72 Page 8 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 AB 72 Page 9 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 AB 72 Page 10 **** END ****