BILL ANALYSIS Ó
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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: 8/25/16 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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