BILL ANALYSIS                                                                                                                                                                                                    






                                                                     AB 533


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          Date of Hearing:  April 21, 2015


                            ASSEMBLY COMMITTEE ON HEALTH


                                  Rob Bonta, Chair


          AB 533  
          (Bonta) - As Amended April 15, 2015


          SUBJECT:  Health care coverage:  out-of-network coverage.


          SUMMARY:  This bill establishes requirements for the payment of  
          non-contracting individual health professionals when a health  
          care service plan enrollee obtains services from the  
          non-contracting professional in a contracting health facility,  
          as specified. Specifically, this bill:  


             1)   Prohibits, when an enrollee or insured individual in a  
               health care service plan or health insurance policy, who  
               receives care at a contracting health facility from a  
               non-contracting individual health professional, to pay more  
               than the in-network cost sharing.


             2)   Requires a health plan or insurer to inform the  
               non-contracting individual health professional of the  
               in-network cost sharing of the enrollee or insured upon  
               time of payment.


             3)   Requires a non-contracting individual health  
               professional to refund any amount collected from the  
               enrollee or insured that is greater that the in-network  











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               cost sharing; and, requires the refundable amount to accrue  
               interest, as specified, if it is not returned to the  
               enrollee or insured within prescribed time limits.


             4)   Prohibits a health plan or insurer from paying a  
               non-contracting individual health professional if the  
               professional has advanced the amount owed by the enrollee  
               or insured to collections, prior to payment by the plan, as  
               specified.


             5)   Provides that any cost sharing paid by the enrollee or  
               insured provided by the non-contracting individual health  
               professional shall count towards the annual out-of-pocket  
               expenses limit and the enrollee's deductible.


             6)   Allows an enrollee or insured to voluntarily consent to  
               the use of a non-contracting individual health professional  
               contingent on specified consent and cost estimate  
               requirements.


          EXISTING LAW:


             1)   Establishes the Knox-Keene Health Care Service Plan Act  
               of 1975 under the administration and enforcement of the  
               Department of Managed Health Care (DMHC), and requires a  
               health care service plan to reimburse claims, as specified.


             2)   Requires a health care service plan to reimburse  
               providers for emergency services and care until the care  
               results in the stabilization of the enrollee, and does not  
               require prior authorization as a prerequisite for the  
               provision of emergency services and care to stabilize the  
               enrollee's emergency medical condition.











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             3)   Prohibits a health care service plan subscriber or  
               enrollee from being liable to the provider for any sums  
               owed by the plan under contract with health care service  
               provider.


             4)   Requires DMHC to adopt regulations that ensure a health  
               care service plan has adopted a dispute resolution  
               mechanism for non-contracting providers for purposes of  
               resolving billing and claims disputes.


             5)   Provides for the regulation of health insurers by the  
               California Department of Insurance (CDI).


             6)   Requires a group or individual insurance policy issued,  
               amended or renewed on or after January 1, 2014, that  
               provides or covers any benefit with respect to services in  
               an emergency department of a hospital to cover emergency  
               services by a nonparticipating health care provider with or  
               without prior authorization.


          FISCAL EFFECT:  This bill has not yet been analyzed by a fiscal  
          committee.


          COMMENTS:  


             1)   PURPOSE OF THIS BILL.  The author states that this bill  
               will protect patients who do the right thing by seeking  
               care in an in-network facility, only to later receive a  
               surprise bill from an out-of-network provider that had been  
               called in to provide service.  The author states that  
               surprise bills cost consumers substantial sums of money,  











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               placing an undeserved and unreasonable financial burden  
               upon them.  The author asserts that consumers should not be  
               placed in the middle of billing conflicts and disputes  
               between out-of-network providers and plans or insurers,  
               particularly when they sought in-network care but were seen  
               by an out-of-network provider through no fault of their  
               own.  The author contends that while California has been at  
               the forefront of the federal Patient Protection and  
               Affordable Care Act implementation, we need to catch up to  
               other states like New York which have taken the lead in  
               fully protecting consumers from surprise bills.  The author  
               concludes by stating that it is the state's responsibility  
               to ensure full consumer protection for all of our patients,  
               and this bill is a critical measure to ensure patients are  
               safeguarded from hidden costs unfairly imposed upon them  
               when they have followed the rules.   


             2)   BACKGROUND


               a)     Balance billing and regulations.  Balance billing is  
                 the provider practice of billing a patient for the  
                 difference between the provider's charge and the amount  
                 allowed by the patient's health plan or insurer.  Current  
                 state and federal regulations prohibit providers from  
                 balance billing qualified Medicare and Medicaid (known as  
                 Medi-Cal in California) beneficiaries.  In addition,  
                 in-network providers may not balance bill patients who  
                 receive services within the network of their health care  
                 service plan or health insurance.  Out-of-network  
                 emergency service physicians are a special case; they may  
                 balance bill if the patient is enrolled in a plan managed  
                 by CDI, however they may not balance bill managed care  
                 enrollees, which are patients enrolled in DMHC-regulated  
                 plans.  This discrepancy is based on executive action  
                 ordered by the Administration.













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                 In 2006, Governor Schwarzenegger signed Executive Order  
                 S-13-06, requiring DMHC to protect consumers from balance  
                 billing.  The DMHC regulations were established in 2008  
                 and have been heavily debated in court.  In the landmark  
                 case of Prospect Medical Group, Inc. vs. Northridge  
                 Emergency Medical Group of 2009, the Supreme Court  
                 unanimously ruled that billing disputes over emergency  
                 medical care must be resolved solely between the  
                 emergency room doctors and the managed care plan, and  
                 that emergency room doctors may not bill a patient for  
                 the disputed amount.  Since then, DMHC has fined  
                 individual providers and taken legal actions against  
                 others on the grounds they balance billed consumers  
                 illegally.


               b)     Independent Dispute Resolution Process (IDRP).   
                 Executive Order S-13-06 also required DMHC to implement a  
                 "fair, fast and, inexpensive IDRP to avoid placing  
                 enrollees in the middle of payment disputes between  
                 health plans and providers" and ensure non-contracted  
                 providers are reimbursed at the reasonable and customary  
                 level for the services they provided.  These dispute  
                 resolution processes are currently nonbinding and use a  
                 decision process that is similar to the "baseball style"  
                 model of arbitration, which does not provide a process to  
                 compromise on a rate, but rather requires one rate or  
                 another to be granted their claim by the arbitrator.  


                 During the IDRP process, an External Reviewer is required  
                 to decide whether the provider's billed amount or the  
                 payer's paid amount, is most representative of the  
                 reasonable and customary value of the emergency services  
                 that were rendered. The IDRP External Reviewer cannot  
                 split the difference between the amounts proposed by the  
                 two parties or choose an amount outside them. The IDRP  
                 does allow a hospital provider to elect to lower its  
                 billed amount in connection with the hospital's IDRP  











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                 submission.


               c)     Reasonable and customary rates.  DMHC regulations  
                 establish a six-prong test, known as the "Gould criteria"  
                 (based on Gould vs. Workers' Compensation Appeals Board,  
                 1992), for determining the reasonable and customary value  
                 for non-contracted parties in claims settlements.  These  
                 criteria include: the provider's training,  
                 qualifications, and length of time in practice; the  
                 nature of the services provided; the fees usually charged  
                 by the provider; prevailing provider rates charged in the  
                 general geographic area in which the services were  
                 rendered; other aspects of the economics of the medical  
                 provider's practice that are relevant; and any unusual  
                 circumstances in the case.  However, the regulations are  
                 silent on setting specific reimbursement rates.  


               d)     Policies in other states. A 2013 study done by the  
                 Kaiser Family Foundation identifies 13 states which have  
                 prohibited out-of-network providers from balance billing  
                 managed care enrollees<1>.  Protections vary  
                 significantly from one state to another.  For example,  
                 some states, such as Maryland and Connecticut, provide  
                 state protections for all covered benefits, whereas  
                 others provide limited protection, such as Pennsylvania  
                 and Illinois, which cover only emergency services and  
                 ambulatory services, respectively.  Delaware and Florida  
                 both have a formal dispute resolution system available to  
                 resolve billing conflicts and disputes between providers  
                 and plans.  


                 New York has the most comprehensive regulations regarding  
                 balance billing.  The state's 2014 legislation bans  
                 balance bills for out-of-network emergency care, requires  


                 ------------------------


          <1> "State Restriction Against Providers Balance Billing Managed  
          Care Enrollees," Kaiser Family Foundation, 2015.








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                 insurers to allow patients see out-of-network doctors at  
                 regular costs when the network is unable meet a patient's  
                 needs, and sets new rules for insurers and providers to  
                 disclose network status online or before a procedure.   
                 The New York law also allows for an independent  
                 arbitration on payment disputes and requests to see  
                 out-of-network providers.


             1)   SUPPORT.  Health Access California, the sponsor of the  
               bill, states surprise medical bills are contributing to the  
               growing problem of consumer medical debt, a significant  
               cause of personal bankruptcy.  The sponsor maintains that  
               surprise billing practices are a result of both inadequate  
               provider networks and a lack of disclosure regarding  
               provider status and billing to consumers prior to  
               procedures taking place.  The sponsor asserts that health  
               plans and providers should not involve consumers in  
               business disputes.


               Supporters of the introduced version of the bill state that  
               consumers who follow their plan's rules and use in-network  
               facilities should not be surprised by out-of-network  
               charges from providers who grant care at in-network  
               facilities; the patient should only be responsible for what  
               he or she would have paid for in-network care.


               The California Association of Health Plans, Aetna, and  
               Association of California Life & Health Insurance Companies  
               have a support if amended position based on an older  
               version of the bill, and state that the easiest solution  
               for balance billing is for doctors to contract with health  
               plans and carriers; at the very least, the consumer should  
               not be put in the middle when providers do not contact.   
               These entities state they will support the bill if amended  
               to include language expressly prohibiting balance billing,  
               which will strengthen consumer protection.











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             2)   OPPOSITION.  The California American College of  
               Emergency Physicians and some specialty provider groups are  
               opposed to the bill, based on the introduced language of  
               the bill, stating that patients and providers should be  
               protected from health plans and insurers who do not have  
               adequate networks, by imposing a payment standard on health  
               plans and insurers set by an independent, unbiased,  
               non-profit entity.  The opposition further states a fair  
               dispute resolution system should be established for parties  
               to appeal payment amounts.  The opposition argues the bill  
               provides health plans and insurers more opportunities to  
               collect premiums from patients, not provide the care they  
               have agreed give, and pay physicians arbitrary amounts.


               The California Medical Association and California Society  
               of Anesthesiologists have an opposed unless amended  
               position based on a previous version of the bill, and state  
               the bill undermines current law which requires insurers and  
               plans to provide adequate provider networks because the  
               provisions create disincentives for plans and insurers from  
               negotiating fair payment arrangements and creating robust  
               networks.  These opposing groups state an efficient,  
               equitable dispute resolution mechanism will guide parties  
               towards a reasonable rate of services and are opposed  
               unless the bill is amended to establish a such a process.


             3)   POLICY CONSIDERATIONS.  This bill removes the patient  
               from circumstances in which there is a disagreement between  
               the out-of-network individual health professional and the  
               plan or insurer on the fair amount for payment; however the  
               bill is silent on how the two parties should come to an  
               agreement on that amount.  In order to be more consistent  
               with current DMHC regulations on a similar issue, the  
               committee may wish to consider the establishment of a  
               binding, independent dispute resolution process that is  











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               similar to the current structure set forth by DMHC for  
               non-contracting providers for emergency services.  A  
               binding process would reduce litigation on billing  
               conflicts and disputes.  In addition, the Committee may  
               wish to establish specified criteria in statute for the  
               independent arbitrator to use that will be equal and fair  
               to the health care professional and the health care service  
               plan or insurer.


               The author and sponsor state that the goal of the  
               legislation is to keep consumers out of business disputes  
               between health plans or insurers and individual health  
               professionals.  The most recent amendments require any  
               overpayment by the provider to be refunded however the way  
               the language is written, the onus remains on the patient to  
               realize that they have been balanced bill and that the  
               individual health professional has been overpaid by the  
               health plan or insurer.  The author may wish to amend the  
               bill later in the legislative process such that the  
               responsibility lies solely between the health plan or  
               insurer and the provider.


             4)   SUGGESTED TECHNICAL AMENDMENT.  This bill allows for  
               voluntary consent to the use of a non-contracting  
               individual health professional, if the insured or enrollee  
               consents to both the use of the non-contracting individual  
               health professional and the estimated additional cost for  
               the services provided.  The language is currently vague as  
               to whether the enrollee or insured must agree to actual  
               payment of the estimated cost or simply its value.  The  
               bill should be amended to clarify.  The Committee may  
               suggest to the author the following language:


               Section 1371.9 of the Health and Safety Code:













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                 (d) An enrollee may voluntarily consent to the use of a  
                 noncontracting individual health professional. For  
                 purposes of this section, consent shall be voluntary if  
                 at least 24 hours in advance of the receipt of services,  
                 the enrollee is provided a written estimate of the cost  
                 of care by the noncontracting individual health  
                 professional and the enrollee consents in writing to both  
                 the use of a noncontracting individual health  
                 professional and  payment of  the estimated additional cost  
                 for the services to be provided by the noncontracting  
                 individual health professional. The consent shall inform  
                 the enrollee that the cost of the services of the  
                 noncontracting individual health professional will not  
                 accrue to the limit on annual out-of-pocket expenses or  
                 the enrollee's deductible, if any.


               Section 10112.8 of the Insurance Code:


                 (d) An insured may voluntarily consent to the use of a  
                 noncontracting individual health professional. For  
                 purposes of this section, consent shall be voluntary if  
                 at least 24 hours in advance of the receipt of services,  
                 the insured is provided a written estimate of the cost of  
                 care by the noncontracting individual health professional  
                 and the insured consents in writing to both the use of a  
                 noncontracting individual health professional and  payment  
                 of  the estimated additional cost for the services to be  
                 provided by the noncontracting individual health  
                 professional. The consent shall inform the insured that  
                 the cost of the services of the noncontracting individual  
                 health professional will not accrue to the limit on  
                 annual out-of-pocket expenses or the insured's  
                 deductible, if any.


          












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          REGISTERED SUPPORT / OPPOSITION:




          Support


          Health Access California (sponsor)


          AARP (prior version)


          AFSCME (prior version)


          America's Health Insurance Plans (prior version)


          Anthem Blue Cross (prior version)


          California Black Health Network (prior version)


          California Labor Federation (prior version)


          California Pan-Ethnic Health Network (prior version)













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          California Primary Care Association (prior version)


          California School Employees Association (prior version)


          California Teachers Association (prior version)


          CALPIRG (prior version)


          Consumers Union (prior version)


          LIUNA Locals 777 and 792 (prior version)


          National Health Law Program (prior version)


          SEIU California (prior version)




          Opposition

          California Academy of Emergency Physicians (prior version)


          California Radiological Society (prior version)


          California Society of Pathologists (prior version)















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          Analysis Prepared by:An-Chi Tsou / HEALTH / (916) 319-2097