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: 8/25/16 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: 5-0, 8/11/16 AYES: Lara, Beall, Hill, McGuire, Mendoza NO VOTE RECORDED: Bates, 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 (IDRP) 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 AB 72 Page 2 had the services been provided by a contracting health professional. Requires plans and insurers to permit enrollees or insureds to assign payment of these benefits to the health care professional. Senate Floor Amendments of 8/19/16 (1) require the IDRP to be established by September 1, 2017; (2) delete the consideration of the reimbursement amount suggested by either party in the IDRP; (3) give regulators an exemption from the public contracting code related to contracts entered into with independent organizations for purposes of the IDRP; (4) delete a provision that would have exempted post-stabilization from the bill; (5) allow regulators to implement IDRP through all plan letters without taking regulatory action; (6) require a report to Governor and Legislature by January 1, 2019, on IDRP process; (7) require plans and insurers to provide specified data to regulators by July 1, 2017, related to average contracted rates for 2015; (8) require plans and insurers to use a statistically credible database to determine their average contracted rates; (9) require plans and insurers to increase reimbursement by the Medical Care Services Consumer Price Index for each year after the plan's initial submission of the average contracted rate and until standardized methodology is developed; (10) establish an effective date of the payment rate provisions of July 1, 2017; (11) require regulators to specify methodology by January 1, 2019, and require it to take into account information from the IDRP; (12) require regulators to consult with interested parties in developing methodology, and hold first stakeholder meeting no later than July 1, 2017; (13) require plans and insurers to meet specified network adequacy requirements of existing law; (14) eliminate a requirement that a noncontracting individual health professional affirm that he or she has not attempted to collect from the enrollee prior to submitting a claim for payment from the plan; and (15) reduce the amount of time interest can be charged when a noncontracting individual health professional overcharges an enrollee. ANALYSIS: Existing law provides for the regulation of health plans by the Department of Managed Health Care (DMHC) under the Knox-Keene Act, which includes increased oversight with respect AB 72 Page 3 to network adequacy pursuant to SB 964 (Hernandez), Chapter 573, Statutes of 2014, and for health insurers by the California Department of Insurance (CDI) under the Insurance Code. This bill: 1) Requires DMHC and CDI to establish IDRP by September 1, 2017, 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. 3) Requires, effective July 1, 2017, 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 commercial rates paid by the health plan, its delegated entity, or an insurer for the same or similar services in the geographic regions. 5) Requires, by July 1, 2017, each plan, its delegated entities, or insurer to provide data listing its average contracted rates for the plan for services most frequently subject to this bill in each geographic region in which the AB 72 Page 4 service are rendered for the 2015 calendar year; its methodology for determining the average contracted rates which shall include the highest and lowest contracted rates for the 2015 calendar year; and the policies and procedures used to determine the average contracted rate rates. 6) Requires for each calendar year after the plan's initial submission of the average contracted rate and until the standardized methodology is specified, the plan, delegated entity, or insurer shall adjust rate by the Consumer Price Index (CPI) for Medical Care Services, as published by the United States Bureau of Labor Statistics. 7) 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. Requires the regulators to consult interested parties and hold the first stakeholder meeting by July 1, 2017. 8) Requires health plans and insurers to report the number of payments made for services subject to this bill, as well as other data sufficient to determine the proportion of out-of-network individual health professionals to contracting individual health professionals at specific facilities, as specified. Requires a summary of the information to be included in the January 1, 2019 report from the departments. 9) Requires a health plan or insurer to meet specified network adequacy requirements pursuant to existing law and regulation, including but not limited to, in patient hospitals services and specialist physician services and if necessary, adopt additional regulations related to those services. States that this provision shall not be construed to limit the director's or insurance commissioner's authority AB 72 Page 5 under the law. 10)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 July 1, 2017. 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 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 AB 72 Page 6 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. 3)Comparison to AB 533 (Bonta, 2015). A major difference between AB 533 and AB 72 is the payment standard. AB 533 would have set the payment standard at the Medicare payment rate. AB 72 sets it at the greater of 125% of Medicare or average contracted rates of each health plan/insurer based on a single benchmark year with an adjustment based on the consumer price index for medical care services. In addition to this higher payment standard, AB 72 allows non-contracted individual health professionals to receive assignment of benefits, which requires the health plan or insurer to make payment directly to the provider rather than issuing payment to the patient who in turn pays the provider. AB 72 allows either party to pursue legal remedies if dissatisfied with the IDRP. AB 72 allows for a 24 hour consent period prior to a patient voluntarily choosing a non-contracted individual health professional, rather than the "at least three business days" required in AB 533. AB 72 limits the reporting of adverse information to consumer credit reporting agencies and prohibits wage garnishment or liens on primary residences. AB 72 requires a health plan or insurer to meet specified network adequacy requirements, including, but not limited to, in patient hospitals services and specialist physician services and if necessary, adopt additional regulations related to those services. 4) Average Contracted Rate Methodology. For the first payment year starting on July 1, 2017, the bill requires the plans and insurers to determine the average contracted rates and AB 72 Page 7 report data to the regulators regarding its methodology for determining average contracted rates associated with services rendered for the 2015 calendar year. The bill requires the methodology to include the highest and lowest contracted rates in order to prevent the rates from being weighted in favor of large, dominant provider groups who can command higher prices. The bill also requires the plans and insurers to report data listing average contracted rates for services most frequently subject to the bill and the policies and procedures used to determine the average contracted rates. The bill requires for each calendar year after the plan's initial submission of average contracted rates and until a standardized methodology is specified, the plan to adjust the rate by the CPI for Medical Care Services. The bill requires the regulators to specify a methodology for plans to use to determine contracted rates by January 1, 2019. 5) Concerns. Health plans and insurers have raised concerns that an automatic cost inflator no longer reflects average contracted rates and distorts real market prices. The plans and insurers are concerned that the bill will increase litigation between providers and health plans and insurers and drive up cost to the system. 6) Neutral. The California Medical Association (CMA) has changed its position from opposed to neutral, acknowledging that it is necessary to protect patients from billing disputes, but CMA believes this problem is driven by increasingly narrow provider networks. CMA is pleased to see language in the bill that will allow DMHC and CDI to issue regulations regarding network adequacy if they see a problem developing within the healthcare market. CMA's fear is that health plans will drop contracts with covered services for their enrollees. DMHC and CDI must have power to act if they see abuse occurring that negatively affects California's patients. 7) DMHC Letter. The DMHC issued a letter on August 25, 2016, to indicate DMHC's understanding of how specific provisions in AB 72 Page 8 this bill would impact DMHC's authority. Specifically, DMHC interprets proposed Health and Safety Code Section 1371.31(a)(2)(B) to require health plans and their delegated entities, for the calendar year after the initial submission, to adjust their 2015 average contracted rates for the services subject to this bill, by the CPI for Medical Care Services for the 2017 calendar year. With regard to proposed Health and Safety Code Section 1371.31(a)(5), DMHC interprets the provision to reaffirm the DMHC's existing authority to require health plans to have an adequate provider network, including adequate geographic access and timely access, and that this bill neither relieves health plans of their existing obligations under the Knox-Keene Act to maintain adequate provider network nor in any way constrains DMHC's existing authority with respect to any other provision of the Knox-Keene Act and its implementing regulations. 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). 3)One-time costs of about $600,000 for the development of regulations and review of plan filings by CDI (Insurance Fund). AB 72 Page 9 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 8/23/16) 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 SEIU California The Children's Partnership United Way of California USW Local 675 Western Center on Law and Poverty OPPOSITION: (Verified8/29/16) American College of Physicians - California Chapters American College of Surgeons AB 72 Page 10 American Congress of Obstetricians and Gynecologist District IX-California American Society of Plastic Surgeons Association of American Physicians and Surgeons California Academy of Eye Physicians and Surgeons California Association of Neurological Surgeons California Chapter of the American College of Cardiology California Neurology Society California Orthopaedic Association California Otolaryngology Society California Psychiatric Association California Society of Anesthesiologists California Society of Facial Plastic Surgery California Society of Physical Medicine & Rehabilitation California Society of Plastic Surgeons California Thoracic Society California Urological Association Medical Oncology Association of Southern California 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. 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. Surprise bills threaten to undo that work by subjecting patients to astronomically high bills they were not expecting. 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. ARGUMENTS IN OPPOSITION: The California Chapter of the AB 72 Page 11 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 8/29/16 12:40:09 **** END ****