BILL ANALYSIS                                                                                                                                                                                                    




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          |SENATE RULES COMMITTEE            |                         AB 72|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |
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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:  8/25/16 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  








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          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  








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          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  








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             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  








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             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  








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            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  








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             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  








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             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).










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          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            








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          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  








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          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


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