BILL ANALYSIS                                                                                                                                                                                                    

                          Senator Ed Hernandez, O.D., Chair

          BILL NO:                    AB 533    
          |AUTHOR:        |Bonta                                          |
          |VERSION:       |July 7, 2015                                   |
          |HEARING DATE:  |July 15, 2015  |               |               |
          |CONSULTANT:    |Teri Boughton                                  |
           SUBJECT  :  Health care coverage: out-of-network coverage.

           SUMMARY  :  Establishes a payment rate, which is the average of a health  
          plan or health insurer's contracted rate, as specified, and a  
          binding independent dispute resolution process for claims for  
          covered services provided at contracted health facilities 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 had the services been provided by a  
          contracting health professional.
          Existing law:
          1)Provides for the regulation of health plans by the Department  
            of Managed Health Care (DMHC) under the Knox-Keene Act and for  
            health insurers by California Department of Insurance (CDI)  
            under the Insurance Code.

          2)Requires contracts between providers and health plans to be in  
            writing and prohibits, except for applicable copayments and  
            deductibles, a provider from invoicing or balance billing a  
            plan's enrollee for the difference between the provider's  
            billed charges and the reimbursement paid by the plan or the  
            plan's capitated provider for any covered benefit.

          3)Prohibits a provider, in the event that a contract has not  
            been reduced to writing, or does not contain the prohibition  
            above, from collecting or attempting to collect from the  
            subscriber or enrollee sums owed by the plan.  Prohibits a  
            contracting provider, agent, trustee or assignee from taking  
            action at law against a subscriber or enrollee to collect sums  
            owed by the plan.

          4)Establishes, pursuant to regulations, requirements that health  


          AB 533 (Bonta)                                      Page 2 of ?
            plans must implement in their claims settlement practice,  
            including the meaning of "reimbursement of a claim," such that  
            providers with a contract receive the contract rate.  Claims  
            for contracted providers without a written contract and  
            non-contracted providers require payment of the reasonable and  
            customary value for the health care services rendered based  
            upon "statistically credible information" that is updated at  
            least annually and takes into consideration:

             a)   The provider's training, qualifications, and length of  
               time in practice; 
             b)   The nature of the services provided; 
             c)   The fees usually charged by the provider; 
                  d)        Prevailing provider rates charged in the  
                    general geographic area in which the   services were  
                  e)        Other aspects of the economics of the medical  
                    provider's practice that are  relevant; and,
             f)   Any unusual circumstances in the case.

          1)Allows a non-contracted provider to dispute the  
            appropriateness of a health plan's computation of the  
            reasonable and customary value and requires the health plan to  
            respond to the dispute through the plan's mandated provider  
            dispute resolution process.

          2)Requires health plans to pay for medically necessary services  
            provided in a licensed acute care hospital, if the services  
            were related to authorized services and provided after the  
            plan's normal business hours, unless the plan has a system  
            whereby it can respond to authorization requests within 30  

          3)Prohibits a health plan from engaging in an unfair payment  
            pattern, defined as, engaging in a demonstrable and unjust  
            pattern, of reviewing or processing complete and accurate  
            claims that results in payment delays; engaging in a  
            demonstrable and unjust pattern of reducing the amount of  
            payment or denying complete and accurate claims; failing on a  
            repeated basis to pay the uncontested portions of a claim  
            within specified timeframes; and failing on a repeated basis  
            to automatically include the interest due on claims, as  


          AB 533 (Bonta)                                      Page 3 of ?
          4)Prohibits a hospital which contracts with an insurer,  
            nonprofit hospital service plan, or health plan from  
            determining or conditioning medical staff membership or  
            clinical privileges upon the basis of a physician and  
            surgeon's or podiatrist's participation or nonparticipation in  
            a contract with that insurer, hospital service plan or health  

          This bill:
          1)Requires, unless otherwise provided in this bill or otherwise  
            agreed by the non-contracting health professional and the plan  
            or insurer, the plan or insurer to base reimbursement of  
            non-contracted claims on the average rates based on the  
            statistically credible information, as specified in 8) below.   
            Requires, for nonemergency services covered by preferred  
            provider organization or a point of service plan, unless  
            otherwise agreed to between the parties, the amount paid to be  
            the amount set forth in the enrollee's evidence of coverage.

          2)Requires DMHC and CDI to establish an independent dispute  
            resolution process (IDRP) for the purpose of processing and  
            resolving a claim dispute between a health plan or insurer and  
            a non-contracting individual health professional for services  
            provided at a contracting health facility.  Makes the  
            determination obtained through IDRP binding on both parties,  
            and requires each party to bear its own costs and equally  
            share in the administrative fees.  Requires, if additional  
            payment is awarded through IDRP, the payment to be made  
            consistent with existing law relating to timely reimbursement.

          3)Permits a non-contracting health professional to appeal a  
            claim to the IDRP after completing an internal dispute  
            resolution mechanism, as defined, through the health plan or  
            insurer, or if 30 days have elapsed since initiating the  
            internal dispute resolution mechanism.

          4)Requires both parties to participate in the IDRP if initiated  
            by either party.

          5)Limits disputed claims to covered services rendered by a  
            non-contracting health professional at a contracting health  
            facility.  Permits disputed claims to be aggregated, as  


          AB 533 (Bonta)                                      Page 4 of ?
          6)Requires DMHC and CDI to jointly establish uniform written  
            procedures for the submission, receipt, processing, and  
            resolution of claim payment disputes pursuant to this bill.   
            Permits DMHC and CDI to contract with one or more independent  
            organizations for the IDRP and permits the departments to  
            establish additional requirements, including  
            conflict-of-interest standards.  Requires the independent  
            dispute resolution organization to issue a decision within 60  
            days of the receipt of required documentation.

          7)Requires a non-contracting health professional appealing to  
            the IDRP to provide DMHC or CDI with a written justification,  
            which does not exceed two pages, for the appeal.  Requires  
            DMHC or CDI to respond within 30 days of receipt of the  
            written justification.  

          8)Requires the plan or insurer to provide all documents  
            submitted to DMHC or CDI to the individual health professional  
            appealing the claim.  Makes statistically credible information  
            exempt from public disclosure.  Statistically credible  
            information is required to be maintained by the health plan or  
            insurer and updated at least annually, regarding rates paid to  
            currently contracting individual health professionals who  
            provide similar services, who are not capitated, and are  
            practicing in the same or a similar geographic area as the  
            non- contracting individual health professional.  Requires the  
            statistically credible information to take into consideration  
            the determination of the IDRP.

          9)Allows a non-contracting health professional to dispute a  
            claim that he or she believes is not the plan's average  
            contracted rate, or, if the non-contracting health  
            professional seeks to be paid more than 150% of the amount  
            that the plan otherwise would pay, as specified.

          10)Requires DMHC or CDI to determine whether the payment is the  
            plan's or insured's average contracted rate, as specified.   
            Requires, if the payment is lower than the plan's or insured's  
            average rate, the plan to correct the statistically credible  
            information and provide payment consistent with 11) below.

          11)Requires payment to be determined based upon the following:

                  a)        The provider's training, qualifications, and  
                    length of time in practice;


          AB 533 (Bonta)                                      Page 5 of ?
                  b)        The nature of the services provided;
                  c)        The fees usually charged by or paid to the  
                  d)        Prevailing provider rates charged or paid in  
                    general geographic area in which the services were  
                  e)        Other aspects of the economics of the medical  
                    provider's practice that are relevant; and,
                  f)        Any unusual circumstances in the case.

          12)Indicates the following are not eligible claim disputes for  

                  a)        A claim that has completed the plan's internal  
                    dispute resolution mechanism or a claim for which  
                    fewer than 30 days have elapsed since the individual  
                    health professional initiated the plan's internal  
                    dispute resolution mechanism;  
                  b)        A claim that is currently in arbitration or  
                    litigation in state or federal court;
                  c)        A dispute concerning a late payment;
                  d)        A dispute concerning an interest payment;
                  e)        A claim dispute that is not subject to DMHC or  
                    CDI jurisdiction;
                  f)        A claim dispute with a health plan or insurer  
                    by another entity or state;
                  g)        A dispute regarding a claim that does not  
                    involve covered benefits; or,
                  h)        A claim denied on the basis that the services  
                    were not medically necessary or were experimental or  
                    investigational in nature.

          13)Makes failure to pay a non-contracting individual health  
            professional pursuant to this bill, an "unfair payment  
            pattern."  Requires DMHC to take into consideration decisions  
            of the IDRP in determining whether a plan has engaged in an  
            unfair payment pattern.

          14)Prohibits a non-contracting health professional from  
            appealing to IDRP for one year from the first appeal if he or  
            she files multiple appeals and loses more than one third of  
            the time.  A non-contracting health professional is deemed to  
            have lost if the IDRP awards him or her less than the amount  
            he or she sought.


          AB 533 (Bonta)                                      Page 6 of ?
          15)Limits enrollee or insured cost sharing under a health plan  
            contract or health insurance policy issued, amended, or  
            renewed on or after January 1, 2016, when an enrollee or  
            insured obtains care from a contracting health facility at  
            which, or as a result of which, the enrollee or insured  
            receives services provided by a non-contracting professional,  
            to the same cost sharing that the enrollee or insured would  
            pay for the same covered benefits received from a contracting  

          16)Requires the plan or insurer to inform the non-contracting  
            health professional of the in-network cost sharing owed by the  
            enrollee or insured.  Requires the non-contracting health  
            professional to refund any overpayment within 30 working days  
            of receiving the in-network cost sharing amount.  Requires, if  
            overpayment is not refunded within 30 working days, interest  
            to accrue at the rate of 15% per annum beginning with the  
            first calendar day after the 30-working day period and the  
            health professional to automatically include the interest with  
            the refund.

          17)Prohibits payment of a non-contracting health professional if  
            any amount owed by the enrollee or insured has advanced to  
            collections.  Requires a non-contracting health professional  
            to affirm in writing that he or she has not advanced to  
            collections any payment owed by the enrollee or insured when  
            submitting a claim to the plan or insurer.  Permits any  
            in-network cost sharing to advance to collections after  
            payment by the plan or insurer if the enrollee or insured  
            fails to pay the amount owed.

          18)Requires enrollee or insured cost sharing arising from  
            services received by a non-contracting health professional at  
            a contracting facility to be counted toward any limit on  
            annual out-of-pocket expenses and any deductible in the same  
            manner as cost sharing would be attributed to a contracting  
            health professional.

          19)Defines "health facility" as a California licensed health  
            facility provider and includes the following providers:   
            hospital, skilled nursing facility, ambulatory surgery,  
            laboratory, radiology or imaging, facilities providing mental  
            health or substance abuse treatment, and any other provider as  
            the DMHC or CDI may by regulation define as a health facility  
            for purpose of this bill.


          AB 533 (Bonta)                                      Page 7 of ?

          20)Defines "individual health professional" as a California  
            licensed physician or surgeon.

          21)Permits an enrollee or insured to voluntarily consent to the  
            use of a non-contracting individual health professional if, in  
            at least 24 hours in advance of the receipt of services, the  
            enrollee or insured is provided a written estimate of the cost  
            of care and consents in writing to both the use of a  
            non-contracting individual health professional and payment of  
            the estimated additional cost.  Requires the enrollee or  
            insured to be informed that the cost of the services will not  
            accrue to the limit on annual out-of-pocket expense or the  
            enrollee's or insured's deductible.

          22)Provides that this bill does not exempt a health plan from  
            existing law related to completion of covered services by a  
            terminated or nonparticipating provider or emergency services  
            provided at non-contracting hospitals, nor abrogate the  
            holding in Prospect Medical Group v. Northridge Emergency  
            Medical Group, as specified, that an emergency room physician  
            is prohibited from billing an enrollee of a health plan  
            directly for sums that the health care service plan has failed  
            to pay for emergency room treatment.  Provides that this bill  
            does not exempt a health insurer from existing law related to  
            completion of covered services by a terminated provider or  
            emergency services provided at non-contracting hospitals.

          23)Requires a delegated entity to comply if a health plan  
            delegates payment functions to a contracted entity, such as a  
            medical group or independent practice association.

          24)Exempts Medi-Cal managed care plans, as specified and  
            emergency services and care, as defined in existing law from  
            the provisions of this bill.

          EFFECT  :  According to the Assembly Appropriations Committee  
          based on a prior version of this bill that did not include an  
          1)One-time costs, in the range of $300,000 (Managed Care Fund),  
            to the DMHC for plan review, legal services, technical  
            assistance, and regulations. 


          AB 533 (Bonta)                                      Page 8 of ?
          2)Ongoing annual costs potentially in the hundreds of thousands  
            of dollars (Managed Care Fund), to the DMHC Help Center to  
            assist consumers, and investigate and resolve complaints and  

          3)One-time costs of $300,000 (Insurance Fund), to CDI for policy  
            review and regulations. 

          4)Ongoing annual costs, in the range of $50,000 (Insurance  
            Fund), to CDI to assist consumers, and investigate and resolve  
            complaints and disputes. 

          VOTES  :  
          |Assembly Floor:                     |74 - 1                      |
          |Assembly Appropriations Committee:  |17 - 0                      |
          |Assembly Health Committee:          |17 - 0                      |
          |                                    |                            |
          COMMENTS  :
          1)Author's statement.  According to the author, 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.  Surprise bills cost consumers substantial  
            sums of money, placing an undeserved and unreasonable  
            financial burden upon them.  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.  While  
            California has been at the forefront of the federal Patient  
            Protection and Affordable Care Act (ACA) implementation, we  
            need to catch up to other states that have taken the lead in  
            fully protecting consumers from surprise bills.  It is the  
            state's responsibility to ensure full consumer protection for  
            all of our patients, and this bill is a critical measure to  


          AB 533 (Bonta)                                      Page 9 of ?
            ensure patients are safeguarded from hidden costs unfairly  
            imposed upon them when they have followed the rules.   
          2)Out-of-Network Services and Surprise bills.  According to Fair  
            Health, a plan contracts with a wide range of doctors  
            including specialist, hospitals, labs, radiology facilities,  
            and pharmacies.  These in-network providers agree to the  
            contracted rate which includes the plan payment and the  
            patient's share of cost. If a patient goes to a provider  
            outside the network, there is no contract or agreed upon rate.  
             Depending upon the type of plan, a patient may have to pay a  
            higher co-payment or coinsurance, and those costs may or may  
            not apply to the plan's deductible, if there is a deductible.   
            If the plan is an HMO, a patient may have to pay the full  
            cost, unless it's an emergency situation.  A patient may go  
            out-of-network knowingly, in order to consult with or be  
            treated by a prominent specialist, or they may accidentally  
            obtain services from an out-of-network provider.  This could  
            happen when a primary care physician refers the patient to a  
            specialist or if a patient has surgery or a procedure in a  
            hospital.  For example, while a hospital may be in the  
            network, the anesthesiologist, radiologist or surgeon who  
            provided professional services may not.  In any case, going  
            out-of-network could cost patients hundreds or thousands of  
            dollars.  The focus of this bill is the situation facing  
            consumers in a hospital or facility type setting.

          A recent survey commissioned by the Consumer Reports National  
            Research Center found that nearly one third of privately  
            insured Americans 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 they did not expect to get a bill  
            from. 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)CA Efforts to Eliminate Balance Billing.  In the past 20 or  


          AB 533 (Bonta)                                      Page 10 of ?
            more years, there have been several attempts to address  
            payment disputes between physicians and health plans aimed at  
            getting patients out of the middle of these disputes.  Some of  
            these are described in this analysis under prior legislation.  
            There have been attempts to explicitly ban the practice of  
            balance billing, which is the practice of consumer's being  
            charged the balance of a physician's bill above what the plan  
            pays.  Few have been successful.  California's current ban as  
            it relates to non-contracted providers is based upon laws and  
            litigation and is limited in its applicability to emergency  
            services covered by DMHC regulated health plans.  The same ban  
            does not currently exist on CDI regulated insurers. 

          4)Unfair Claims Practices.  AB 1455 (Scott, Chapter 1827,  
            Statutes of 2000), prohibits unfair claims practices, and the  
            resulting regulations detailed requirements health plans must  
            meet in processing and paying claims for both contracting and  
            non-contracting providers.  The AB 1455 regulations define  
            reimbursement of a claim for non-contracting providers as the  
            "reasonable and customary value," based on statistically  
            credible information that is updated at least annually, and  
            that takes into consideration the following specified  
            criteria:  a) the provider's training, qualifications, and  
            length of time in practice; b) the nature of the services  
                                                                provided; c) the fees usually charged by the provider; d)  
            prevailing provider rates charged in the general geographic  
            area in which the services were rendered; e) other aspects of  
            the economics of the medical provider's practice that are  
            relevant; and, f) any unusual circumstances in the case.   
            These regulations codified the factors for determining  
            non-contracted provider reimbursement as outlined in  Gould v.  
            Workers' Compensation Appeals Board, City of Los Angeles  ,  
            (1992) 4 Cal.App.4th 1059, 1071.  Consequently, the AB 1455  
            regulations are often referred to as requiring payments for  
            non-contracting providers according to the "Gould criteria."    
             More recently in  Children's Hospital Central California v.  
            Blue Cross of California,  (2014) 226 Cal.App4th 1260,  
            172. the appellate court determined that the Gould criteria  
            includes more than the charges billed by the provider.   
            Charges are just one data point and payments and rates  
            accepted by other payors could also be considered.  Because of  
            this decision, the criteria proposed in this bill are slightly  
            modified from the Gould criteria in that they include  
            "prevailing provider rates charged or paid in the general  
            geographic area in which the services were rendered."


          AB 533 (Bonta)                                      Page 11 of ?

          5)IDRP.  Both CDI and DMHC have IDRPs.  CDI advises providers to  
            first attempt to resolve disputes with the insurance company.   
            According to CDI the insurer is required to resolve each  
            provider dispute consistent with applicable law and issue a  
            written determination within 45 working days after the date of  
            receipt of the provider dispute.  CDI requires the following  
            information to be included with a disputed claim: 1) the  
            patient's Assignment of Benefits, if applicable, 2) claim  
            forms submitted to the insurance company, 3) all  
            correspondence between the provider and the insurance company  
            (including all related Explanation of Benefits (EOBs) and  
            Dispute Resolution Process determination letter), 4) the  
            patient's insurance identification card - both sides, and 5)  
            the provider's contract with the insurance company, if any.

          According to the DMHC, participation in IDRP is voluntary and  
            non-binding.  Parties are encouraged to comply with the  
            decision issued by the IDRP External Reviewer.  Non-contracted  
            providers who deliver EMTALA-required emergency services  
            ("Providers") working with health plans or capitated providers  
            ("Payers") are eligible to submit a IDRP concerning the  
            "reasonable and customary" value of services rendered.  A  
            provider may request review through the IDRP for an individual  
            claim or for multiple claims (up to a total of 50  
            substantially similar claims.)  Eligible claim disputes are  
            those disputes that are subject to DMHC jurisdiction and meet  
            each of the following four criteria: 1) the disputed claim is  
            limited to emergency services rendered by non-contracted  
            physicians or hospitals, 2) the services were rendered within  
            the last four years, 3) the dispute is limited to disagreement  
            concerning the reasonable and customary value of the services  
            rendered, and 4) the Provider has completed the Payer's  
            dispute resolution process.

          6)Related legislation.  SB 137 (Hernandez) would require health  
            plans and health insurers to have accurate health care  
            provider directories.  SB 137 is pending in the Assembly  
            Health Committee.
          7)Prior legislation. AB 1579 (Campos, 2012) would have required  
            issuers to pay a non-contracting dental provider directly for  
            covered services rendered to an enrollee or insured in certain  
            circumstances.  AB 1579 was set for hearing in the Senate  
            Health Committee, but not heard per the request of the author.


          AB 533 (Bonta)                                      Page 12 of ?

            SB 1373 (Lieu, 2012), would have required, when an enrollee or  
            insured seeks care from a non-contracting provider, the  
            provider to provide a specified written notice to the enrollee  
            or insured informing the enrollee or insured that the provider  
            is not in the enrollee's or insured's plan or provider  
            network, as specified.  Would have prohibited a health  
            facility or a provider group from holding itself out as being  
            within a plan network unless all of the individual providers  
            providing services at the facility or with the provider group  
            are within the plan network.  This bill failed passage by the  
            Senate Health Committee.

            SB 981 (Perata, 2008), would have prohibited non-contracting  
            hospital ER physicians from directly billing enrollees of  
            health plans licensed by DMHC under the Knox-Keene Health Care  
            Service Plan Act of 1975, other than allowable copayments and  
            deductibles, and would have established statutory standards  
            and requirements for claims payment and dispute resolution  
            related to non-contracting ER physician claims, including an  
            IDRP.  SB 981 was vetoed by Governor Schwarzenegger.  The veto  
            message is below: 

                    This bill does not solve the problem facing California  
                    patients and only serves to highlight one of the many  
                    reasons I introduced my comprehensive health care  
                    reform proposal. Californians are paying a hidden tax  
                    on their health care which subsidizes care for the  
                    uninsured and allows providers to shift costs when  
                    they are not fully reimbursed by their payers. The  
                    insured population bears the brunt of this hidden tax  
                    and the larger it gets, fewer people are able to  
                    afford coverage.

                    This bill, in essence, asks for California to embrace  
                    this cost-shift, reward non-contracting physicians by  
                    assuring their continued financial slice of the pie,  
                    and allow the status quo to continue. I cannot agree  
                    to a measure that is a piecemeal approach to our  
                    broken health care system. 

                    Our health care system relies on physicians, hospitals  
                    and health plans to work together. The patient that  
                    pays health insurance premiums should not be part of a  
                    payment dispute between these sophisticated market  


          AB 533 (Bonta)                                      Page 13 of ?
                    players. It is unfortunate that this bill takes sides  
                    in the dispute within the health care industry instead  
                    of taking the side of patients.

                    Until the Legislature can send me legislation that  
                    removes that patient from all disputes involving these  
                    parties, I direct my Department of Managed Health Care  
                    to aggressively continue in its efforts to identify  
                    unfair payment practices and keep patients from being  
                    caught in the middle.

            AB 1203 (Salas, Chapter 603, Statutes of 2008), established  
            uniform requirements governing communications between health  
            plans and non-contracting hospitals related to  
            post-stabilization care following an emergency, and prohibits  
            a non-contracting hospital from billing a patient who is a  
            health plan enrollee for post-stabilization services, except  
            as specified.

            AB 2220 (Jones, 2008), would have allowed parties to a  
            contract negotiation between ER physicians and health care  
            service plans or their contracting risk bearing organization  
            to, on a one-time basis per contract negotiation, invoke a  
            mandatory mediation process to assist in resolving any  
            remaining issues in the contract negotiations, as specified.   
            AB 2220 was vetoed by Governor Schwarzenegger.  The veto  
            message is below:

                    I applaud the author for seeking to address one of the  
                    most important consumer issues facing patients today.  
                    This bill attempts to change the market dynamic in a  
                    way that encourages contracts between health plans and  
                    providers. It is a good starting point. Unfortunately,  
                    it does not contain the comprehensive solution that  
                    patients need and deserve when it comes to addressing  
                    the disgraceful practice of balance billing.

                    I believe the author and Administration can work  
                    together to solve this issue next year. I look forward  
                    to our combined efforts that will take the patient out  
                    of the middle of these payment disputes.

            AB 2839 (Huffman, 2008), would have prohibited a health plan  
            or health insurer from requiring providers to execute unfair  


          AB 533 (Bonta)                                      Page 14 of ?
            and unreasonable contracts, as specified, as a condition of  
            entering into negotiations with the health plan or insurer.   
            AB 2839 was held on the Assembly Appropriations Committee  
            Suspense file.  

            SB 389 (Yee, 2008), would have prohibited a hospital-based  
            physician, as defined, from seeking payment from individual  
            enrollees for services rendered and would have required such  
            physicians to seek reimbursement solely from the enrollee's  
            health care service plan or the contracting risk-bearing  
            organization.  Also the bill would have required DMHC and CDI,  
            on or before March 1, 2008, to implement an independent  
            provider dispute resolution system, in consultation with  
            representatives of health plans or insurers, providers, and  
            consumer representatives.  SB 389 died in the Senate without a  
            committee hearing.

            SB 697 (Yee, Chapter 606, Statutes of 2008), prohibits a  
            health care service provider from seeking reimbursement for  
            services furnished to a person enrolled in the Healthy  
            Families Program or the Access for Infants and Mothers Program  
            from other than the participating health plan covering that  

            AB 1X 1 (Nunez, 2008), would have enacted the Health Care  
            Security and Cost Reduction Act, a comprehensive health reform  
            proposal.  Among other provisions related to health insurance  
            markets and hospital financing, AB 1X 1 would have prohibited  
            a non-contracting hospital from billing any patient, who has  
            coverage for emergency and poststabilization health care  
            services, for those services, as defined, except for  
            applicable copayments and cost sharing.  AB 1X 1 died in the  
            Senate Health Committee.

            SB 417 (Ortiz, 2005), would have prohibited a hospital-based  
            physician, as defined, from engaging in a pattern of billing a  
            patient for covered services in excess of applicable  
            co-payments, deductibles or coinsurance, unless specified  
            conditions are met, and required providers to provide specific  
            notice requirements when they send a bill or statement to a  
            patient.  SB 417 died in Assembly Health Committee.

            SB 364 (Perata, 2005), would have allowed an emergency  
            physician who has a contract with a health plan, but does not  
            have a contract with a medical group or other entity that has  


          AB 533 (Bonta)                                      Page 15 of ?
            been assigned responsibility for paying claims by the health  
            plan, to submit a claim to the plan, and requires the plan to  
            pay the claim to the terms of the contract.  SB 364 died on  
            Assembly floor.

            AB 1321 (Yee, 2005), would have prohibited hospital-based  
            anesthesiologists, radiologists, pathologists, and emergency  
            room physicians, or a group of such physicians, from seeking  
            payment for services, other than allowable copayments and  
            deductibles; from individual enrollees of a health plan.  AB  
            1321 was held on the Assembly Appropriations Suspense File.

            SB 367 (Speier, Chapter 723, Statutes of 2005), enacted the  
            Patient and Provider Protection Act in the Insurance Code and  
            revises the way complaints from health care providers about  
            health insurers are handled by CDI. 

            AB 755 (Chan, 2005), would have required provider contracts  
            entered into with contracting agents, as defined, to include  
            specific provisions and would have prohibited contracting  
            agents from selling, leasing, assigning, transferring, or  
            conveying a list of contracted providers and their discounted  
            rates to any entity that is not a payer.  AB 757 died on the  
            Assembly Appropriations Suspense file.

            AB 1686 (Pacheco, 2004), would have encouraged county medical  
            societies to establish a process to resolve billing disputes  
            between a contracting provider group and a non-contracting  
            provider group.  AB 1686 died in the Assembly.

            AB 2389 (Koretz, 2003), would have required a health plan or  
            health insurer that owns a preferred provider organization to  
            pay non-contracting physicians a reasonable and customary fee  
            for hospital-based anesthesiology, radiology, or pathology  
            services provided to the plan's enrollees.  Would have  
            prohibited those physicians from balance billing an enrollee  
            for any charge that exceeds the reasonable and customary fee.   
            AB 2389 died in the Senate.

            AB 2907 (Cohn, Chapter 925, Statutes of 2002), established the  
            Health Care Providers Bill of Rights and prohibits certain  
            provisions in contracts between a health plan or a health  
            insurer and a health care provider.

            AB 1455 (Scott, 2000), bars health plans from engaging in  


          AB 533 (Bonta)                                      Page 16 of ?
            unfair payment patterns in the reimbursement of providers.  AB  
            1455 also includes a number of other provisions regarding  
            payment practices of health plans, including requiring health  
            plans to make their dispute resolution process available to  
            non-contracting providers.

          8)Support.  According to Health Access California, even the most  
            careful consumers can end up being treated by an  
            out-of-network provider and then receiving a surprise bill for  
            the difference between the provider's charge and what the  
            health plan is willing to pay. The difference can be hundreds  
            and sometimes thousands of dollars. A consumer who goes to an  
            in-network imaging center, only to discover that a  
            non-contracting radiologist the consumer never met and did not  
            select was responsible for reviewing the consumer's imaging or  
            a consumer who selects an in-network surgeon for surgery at an  
            in-network hospital or surgery center but discovers that the  
            anesthesiologist is a non-contracting provider only when they  
            get the bill from the anesthesiologist. This bill holds  
            consumers harmless for surprise bills from out-of-network  
            charges that were outside of their control. Consumers should  
            not get stuck in the middle of business disputes between  
            health plans and providers.  Consumers Union writes that  
            consumers should not have to pay the price for the complicated  
            relationships between doctors, facilities and health plans.   
            Consumer should not be responsible for costs from in-network  
            facilities due to contracting disputes, low reimbursements, or  
            unclear network participation.  The National Multiple  
            Sclerosis Society - California Action Network supports this  
            bill because health care consumers, particularly, those who  
            are living with a chronic condition and are frequent users of  
            the health care system, should not be subjected to unexpected  
            high out of pocket costs if they have followed the rules of  
            their health plan.  The California Association of Health  
            Underwriters writes that agents and brokers act as advocates  
            for policyholders when disputes arise and supports a strict  
            prohibition on balance billing.  CalPERS believes this bill  
            provides an important consumer protection by preventing  
            CalPERS members and other insured Californians that use  
            in-network health facilities from being balance billed by  
            out-of-network health professionals. 
          9)Support if Amended.  America's Health Insurance Plans (AHIP)  
            supports the intent of this legislation and believes it is a  
            first step in protecting and empowering consumers.  AHIP  


          AB 533 (Bonta)                                      Page 17 of ?
            requests the dispute process address the problem as it occurs  
            in the capitated medical group environment, treat emergency  
            room services in the Insurance Code the same as they are  
            handled in the Knox-Keene Act, create a payment structure for  
            out-of-network claims that does not destabilize provider  
            contracts, and ensure a fast, effective, and low cost IDRP.
          10)Opposition.  The California Orthopaedic Association writes  
            that the issue of patients who unknowingly receive care which  
            will not be paid for by their health plan needs to be  
            addressed on the front end.  Insurers and plans must maintain  
            adequate networks of providers, and pay rates that are  
            adequate to sustain those networks.  This bill will penalize  
            those providers who cannot accept inadequate rates and will  
            provide no incentive for plans to negotiate fair contracts.   
            The California Radiological Society and California Society of  
            Pathologists indicate that they would prefer to contract with  
            plans and insurers but the absence of contracts may be due to  
            plans that provide contract terms on a "take it or leave it"  
            attitude.  They do not oppose protections on patient cost  
            exposure but would suggest that plans be required to create a  
            process to treat this similarly to an out-of-network referral  
            for medically necessary services.  The California Society of  
            Anesthesiologists writes that this bill undermines a  
            physician's right to negotiate a fair contract with health  
            plans and insurers by statutorily imposing payments agreed to  
            by some physicians but not others as the value of their  
            services.  Contracted rates of payment already represent  
            substantial discounts to usual and customary market rates.  To  
            statutorily impose payments that some physicians have agreed  
            to but not others will rapidly force a spiral of even lower  
            rates leading to even more restricted provider networks.  The  
            California Chapter of the American College of Emergency  
            Physicians writes that the most recent amendments do not  
            exempt emergency care and services from the Insurance Code,  
            which they assume is a drafting error.  However, even if the  
            bill is amended to exempt emergency physicians, they remain  
            opposed.  CalACEP believes it is bad policy to adopt a  
            framework that hands all the power to insurers and leaves  
            providers at their mercy for payment.
          11)Opposition Unless Amended.  The California Medical  
            Association (CMA) writes that this bill as it currently stands  
            has a high probability of causing major problems across the  
            healthcare delivery system much more significant than those it  


          AB 533 (Bonta)                                      Page 18 of ?
            aims to solve.  CMA prefers an approach focused on reducing or  
            eliminating surprise billing in the first place, as well as  
            ensuring a process for fair compensation for physician  
            services.  According to CMA, this bill will hinder PPO  
            beneficiaries' ability to use those products' out-of-network  
            benefits and change contracting dynamics, creating significant  
            uncertainty in the relationships among payors and providers.   
            CMA writes that this bill includes a convoluted and unworkable  
            IDRP that ostensibly aims to solve payment disputes between  
            out-of-network providers and health plans.
          12)Drafting Issues. 
               a)     IDRP eligible claims.  On page 3, lines 12-13 allows  
                 a claim to be appealed to the IDRP if 30 days have  
                 elapsed since the plan's internal dispute resolution  
                 process has been initiated.  This does not require that  
                 process to have been complete.   Additionally, on page 5,  
                 lines 20-24 the bill indicates that an ineligible claim  
                 is one that has completed the plan's internal dispute  
                 resolution, or a claim for which fewer than 30 days have  
                 elapsed since the internal process was initiated.    The  
                 parallel provisions in the Insurance Code, page 16, lines  
                 11-16 indicate that an ineligible claim is a dispute that  
                 has not previously been submitted to the insurer's  
                 dispute resolution process or a claim which fewer than 30  
                 days have elapsed since the  internal process was  
                 initiated.  These provisions need to be reconciled.
                 Additionally, the bill sets up two triggers for a non  
                 contracted individual health professional to appeal a  
                 claim to an IDRP. The first is if there is doubt that the  
                 paid amount is based on the average contracted rate, as  
                 specified.  The second trigger is if the non contracted  
                 health professional seeks to be paid more than 150% of  
                 the amount that the plan would otherwise pay pursuant to  
                 a section of this bill (see page 4, lines 34-36).  This  
                 cross reference is confusing and should be clarified.  It  
                 appears the intent is to allow a provider to utilize IDRP  
                 if he or she seeks to be paid more than 150% of the  
                 average contracted rate, which is required under Section  
                 1371.31.  But also required under that section is payment  
                 based on the EOC for PPOs and point of service plans.
               b)     IDRP department response.  On page 4, lines 20-22  
                 says The department shall respond to an appeal by a  


          AB 533 (Bonta)                                      Page 19 of ?
                 non-contracting individual health professional within 30  
                 days of receipt of the written document described in  
                 paragraph (1).  It is not clear what is intended by this  
                 requirement.  Is it intended to require resolution in 30  
                 days or just an acknowledgement that the request was  
                 received?  Presumably the latter is the intent because  
                 the bill also authorizes the departments to contract with  
                 an independent dispute resolution organization, which is  
                 required to issue a decision in 60 days.

               c)     Delegation.  Unlike health plans, health insurers do  
                 not delegate payment functions to medical groups and  
                 independent practice associations. On page 18, lines  
                 13-16 should be deleted.
               d)     ER physician exemption.  Page 11, lines 29-30  
                 indicate that the section of the bill ensuring patients  
                                            are limited to in-network cost sharing does not apply to  
                 emergency services and care.  It is not clear why  
                 emergency services would be exempt from this section.   
                 These provisions are consistent with existing law which  
                 bans balancing billing on emergency services.
          13)Policy Comment.  The main objective of this bill as  
            articulated in the author's statement is to protect consumers  
            from being placed in the middle of payment disputes between  
            health plans and providers.  Sections three and four, as  
            passed by the Assembly, set up explicit protections for  
            patients from cost sharing that is higher than what is  
            expected.  The remainder of this bill, as recently amended,  
            sets up payment rates and appeals processes to address payment  
            issues between plans and non-contracted providers for services  
            provided to enrollees.  The details of these provisions have  
            major significance for both plans and providers.  Finding the  
            right balance of a fair payment that does not create a  
            disincentive for providers to contract is the challenge.  It  
            is difficult to know what impact there will be on provider  
            payments if balance billing is banned as proposed in this  
            bill.  A 2014 study on California's balance billing ban for  
            California emergency providers concluded that payment rates by  
            subcontracted risk-bearing organizations for non-contracted  
            emergency department professional services declined  
            significantly following the ban, whereas payment rates by  
            health plans remained relatively stable. Based on this study,  
            it is unclear if the ban will have an impact on provider rates  


          AB 533 (Bonta)                                      Page 20 of ?
            paid by health plans, or if as in the case of emergency room  
            physicians, rates will be significantly reduced from  
            risk-bearing organizations.  
          Support:  Health Access California (sponsor)
                    American Cancer Society Cancer Action Network
                    American Federation of State, County and Municipal  
                    California Association of Health Underwriters
                    California Association of Physician Groups
                    California Black Health Network
                    California Labor Federation
                    California Pan-Ethnic Health Network
                    California Public Employees Retirement System Board of  
                    California School Employees Association
                    California State Council of the Service Employees  
                    International Union
                    California Teachers Association
                    Children Now
                    Children's Defense Fund California
                    City of Oakland
                    Community Clinic Association of Los Angeles County
                    Consumers Union
                    Leukemia & Lymphoma Society
                    LIUNA Local 777
                    LIUNA Local 792
                    NAMI California
                    National Multiple Sclerosis Society - CA Action  
                    The Children's Partnership
                    Western Center on Law and Poverty

          Oppose:   California Chapter of the American College of  
                    California Chapter of the American College of  
                    Emergency Physicians
                    California Medical Association (unless amended)
                    California Orthopaedic Association
                    California Radiological Society


          AB 533 (Bonta)                                      Page 21 of ?
                    California Society of Anesthesiologists
                    California Society of Pathologists
                    California Society of Plastic Surgeons

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