BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 533 (Bonta) - Health care coverage:  out-of-network coverage
          
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          |Version: August 18, 2015        |Policy Vote: HEALTH 6 - 2       |
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          |Urgency: No                     |Mandate: Yes                    |
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          |Hearing Date: August 24, 2015   |Consultant: Brendan McCarthy    |
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          This bill meets the criteria for referral to the Suspense File.


          Bill  
          Summary:  AB 533 would establish the cost sharing requirements  
          for patients who receive covered health care services provided  
          by a non-contracting provider at a contracting facility. The  
          bill would establish the process for establishing the rate at  
          which the non-contracting provider would be paid by a health  
          plan or insurer.


          Fiscal  
          Impact:  
           One-time costs of about $500,000 for the development of  
            regulations and review of plan filings by the Department of  
            Managed Health Care (Managed Care Fund).

           Annual costs of $1.5 million to $3 million per year for the  
            independent dispute resolution process that the Department of  
            Managed Health Care convenes to settle a dispute between a  
            provider and a health plan (Managed Care Fund).

           One-time costs of about $550,000 for the development of  







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            regulations and review of plan filings by the Department of  
            Insurance (Insurance Fund).

           Annual costs of $900,000 per year for the independent dispute  
            resolution process that the Department of Insurance convenes  
            to settle a dispute between a provider and a health plan  
            (Insurance Fund).


          Background:  Under current law, health insurers are regulated by the  
          Department of Insurance and health plans are regulated by the  
          Department of Managed Health Care. Under current practice,  
          health insurers and health plans contract with a wide range of  
          primary care and specialty care providers as well as facilities  
          such as hospitals and pharmacies. Enrollees usually have a  
          copayment or coinsurance requirement when receiving care and  
          they may also have a deductible that must be met before coverage  
          begins. Typically, if an enrollee receives care from a provider  
          that is not in his or her health insurance or health plan  
          network, the enrollee will have a higher copayment or  
          coinsurance requirement. In some cases, the enrollee may have to  
          pay the entire billed amount and the plan does not cover the  
          service. Because a non-contracted provider does not have an  
          agreement with a health insurer or health plan specifying the  
          rate the provider will be paid, disputes between providers and  
          health insurers and health plans are common.
          Generally, an enrollee would be able to find out in advance  
          whether a provider (such as a surgeon) or a facility (such as a  
          hospital) is in his or her insurance or health plan network. If  
          a provider is not in the network, the enrollee can decide  
          whether he or she is willing to accept higher cost sharing  
          required when seeing an out of network provider. However, there  
          are situations when an enrollee unknowingly receives care from  
          an out-of-network provider. A common example occurs when an  
          enrollee arranges to have a surgical procedure. In such a case,  
          the enrollee is usually able to determine whether the surgeon  
          and/or the hospital are in-network. However, an enrollee likely  
          has no way of knowing whether other specialists (such as an  
          anesthesiologist or pathologist) is in his or her network in  
          advance of the surgery. If one of those specialists provides  
          services and is not in the enrollee's network, the enrollee may  
          experience significantly higher costs than anticipated. First,  
          the patient may be subject to higher cost sharing requirements.  
          Second, because the provider is not in-network and does not have  








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          a contract with the insurer or health plan, the provider is not  
          prohibited from billing the patient for the difference between  
          the provider's charged rate and the payment made by the health  
          insurer or health plan (this is referred to as balance billing).


          Because the provider, in this case, does not have a contract  
          with the health insurer or health plan, there is no agreed upon  
          rate for the services provided. The provider can bill the  
          insurer or health plan for the amount the provider believes is a  
          reasonable fee, but the insurer or health plan is not obligated  
          to pay that rate.


          Current law prohibits hospitals from requiring admitting  
          physicians to participate in a health insurance or health plan  
          network.




          Proposed Law:  
            AB 533 would establish the cost sharing requirements for  
          patients who receive covered health care services at a  
          contracting facility provided by a non-contracting provider. The  
          bill would establish the rate at which the non-contracting  
          provider would be paid by a health plan or insurer.
          Specific provisions of the bill would:
                 Require the Department of Managed Health Care and the  
               Department of Insurance to establish an independent dispute  
               resolution process to be used when a non-contracting  
               provider and a health plan or health insurer have a dispute  
               over the payment rate made for services;
                 Specify the requirements for determining payments from  
               health plans and health insurers to non-contracting  
               providers (based on average contracted rates);
                 Require that payments made to non-contracting providers  
               as required under the bill shall constitute payment in full  
               (prohibiting balance billing of enrollees);
                 Require that enrollees receiving covered health care  
               services from a non-contracting provider at a contracting  
               facility shall be required to pay the same cost sharing as  
               would apply if the provide were in-network;
                 The requirements of the bill would generally not apply  








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               to Medi-Cal managed care plans or for emergency services.


          Related  
          Legislation:  SB 1373 (Lieu, 2012) would have required  
          non-contracting providers to provide specified information to an  
          enrollee when the enrollee sought care. The bill would have  
          prohibited a facility from indicating that it was in a health  
          insurance or health plan network unless all the individual  
          providers were in the specific network. That bill failed passage  
          in the Senate Health Committee.


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