BILL ANALYSIS                                                                                                                                                                                                    

                                                                      AB 72

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          72 (Bonta, et al.)

          As Amended  August 25, 2016

          Majority vote

          |ASSEMBLY:  |78-0  |(April 23,     |SENATE: |35-1  |(August 29,      |
          |           |      |2015)          |        |      |2016)            |
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          |COMMITTEE VOTE: |     | (August 30,    |RECOMMENDATION:   |concur     |
          |                |15-0 |2016)           |                  |           |
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          Original Committee Reference:  HEALTH

          SUMMARY:  Establishes a payment rate, which is the greater of  
          the average of a health care service plan (health plan) or  


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          health insurer's contracted rate, as specified, or 125% of the  
          amount Medicare reimburses for the same or similar services; and  
          an independent dispute resolution process (IDRP) for claims and  
          claim disputes related to covered services provided at a  
          contracted health facility by a noncontracting individual health  
          care professional for health plan contracts and health policies  
          issued, amended, or renewed on or after July 1, 2017.  Limits  
          enrollee and insured cost sharing for these covered services to  
          no more than the cost sharing required had the services been  
          provided by a contracting health professional. 

          FISCAL EFFECT:  According to the Senate Appropriations  

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

          COMMENTS:  According to the authors, this bill 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  


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          doctors they did not choose.  Surprise medical bills wreak havoc  
          on people's finances and their ability to pay for basic  

          A March 2016 Kaiser Family Foundation Issue Brief (Brief)  
          defined "surprise medical bill" as a term commonly used to  
          describe charges arising when an insured individual  
          inadvertently receives care from an out-of-network provider.   
          This situation could arise in an emergency when the patient has  
          no ability to select the emergency room, treating physicians, or  
          ambulance providers.  Surprise medical bills might also arise  
          when a patient receives planned care from an in-network provider  
          (often, a hospital or ambulatory care facility), but other  
          treating providers brought in to participate in the patient's  
          care are not in the same network.  These can include  
          anesthesiologists, radiologists, pathologists, surgical  
          assistants, and others.  In some cases, entire departments  
          within an in-network facility may be operated by subcontractors  
          who don't participate in the same network.  In these  
          non-emergency situations, too, the in-network provider or  
          facility generally arranges for the other treating providers,  
          not the patient.  The Brief reported that a Kaiser Family  
          Foundation survey found that among insured, non-elderly adults  
          struggling with medical bill problems, charges from  
          out-of-network providers were a contributing factor about  
          one-third of the time.  Further, nearly seven in 10 of  
          individuals with unaffordable out-of-network medical bills did  
          not know the health care provider was not in their health plan's  
          network at the time they received care.  

          In a letter dated August 25, 2016, the DMHC provided its  
          understanding with respect to the Consumer Price Index (CPI) and  
          network adequacy provisions in this bill and how these  
          provisions would impact the Director's authority under the  
          Knox-Keene Act.  DMHC states the following:

               Proposed Health & Safety Code section 1371.31(a)(2)(B)  
                 provides the following:


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               For each calendar year after the plan's initial  
               submission of the average contracted rate as specified in  
               subparagraph (A) and until the standardized methodology  
               under paragraph (3) is specified, a health care service  
               plan and the plan's delegated entities shall adjust the  
               rate initially established pursuant to this subdivision  
               by the Consumer Price Index for Medical Care Services, as  
               published by the United States Bureau of Labor  

          DMHC interprets this proposed language 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, as published by the United States Bureau  
          of Labor Statistics for the 2017 calendar year.

               Proposed Health & Safety Code section 1371.31(a)(5)  
               provides the following:

               A health care service plan that provides services subject  
               to Section 1371.9 shall meet the network adequacy  
               requirements set forth in this chapter, including, but  
               not limited to, in subdivisions (d) and (e) of Section  
               1367 of this code and in Exhibits (H) and (I) of  
               subdivision (d) of Section 1300.51 of, and Section  
               1300.67.2 and 1300.67.2.1 of, Title 28 of the California  
               Code of Regulations, including, but not limited to,  
               inpatient hospital services and specialist physician  
               services, and if necessary, the department may adopt  
               additional regulations related to those services.  This  
               section shall not be construed to limit the director's  
               authority under this chapter.

          DMHC interprets this proposed language to reaffirm the DMHC's  
          existing authority to require health plans to have an adequate  
          provider network, including adequate geographic access and  


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          timely access, and clarify that this bill neither relieves  
          health plans of their existing obligations under the Knox-Keene  
          Act to maintain an 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  

          Health Access California writes that patients know they have to  
          follow their health plan or health 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.  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.  Anthem Blue  
          Cross (Anthem) writes that while there are provisions of this  
          bill that are still of concern, Anthem supports this bill as it  
          protects consumers from balance billing by noncontracting  

          The California Chapter of the American College of Cardiology  
          states that while they agree with this bill's intent to protect  
          patients from surprise balance billing, the average contracted  
          rate methodology is largely undefined and empowers the health  
          plans and health insurers to ratchet down existing contract  
          rates with physicians.  The American College of Surgeons writes  
          that mandating payment incentivizes health insurers to drive  
          down contracting rates, making it less likely that physicians  
          will contract with them to be participating providers in the  

          This bill was substantially amended in the Senate and the  
          Assembly-approved version of this bill was deleted.  This bill,  


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          as amended in the Senate, is inconsistent with Assembly actions  
          and the provisions of this bill, as amended by the Senate, have  
          not been heard in an Assembly policy committee.

          Analysis Prepared by:                                             
                          Kristene Mapile / HEALTH / (916) 319-2097  FN: