BILL ANALYSIS Ó SENATE COMMITTEE ON HEALTH Senator Ed Hernandez, O.D., Chair BILL NO: AB 533 --------------------------------------------------------------- |AUTHOR: |Bonta | |---------------+-----------------------------------------------| |VERSION: |September 4, 2015 | --------------------------------------------------------------- --------------------------------------------------------------- |HEARING DATE: |September 9, | | | | |2015 | | | --------------------------------------------------------------- --------------------------------------------------------------- |CONSULTANT: |Teri Boughton | --------------------------------------------------------------- SUBJECT : Health care coverage: out-of-network coverage. PURSUANT TO SENATE RULE 29.10 SUMMARY : This bill requires the Department of Managed Health Care (DMHC) and the California Department of Insurance (CDI) to establish a binding independent dispute resolution process for claims for non-emergency covered services provided at contracted health facilities by a non-contracting health care professional. This bill 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 AB 533 (Bonta) Page 2 of ? owed by the plan. 4)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. 5)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 plan. This bill: 1)Requires DMHC and CDI to each 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 non-emergency services provided at a contracting health facility. Makes the determination obtained through IDRP binding on both parties. 2)Requires both parties to participate in the IDRP if initiated by either party. 3)Permits DMHC and CDI to contract with one or more independent organizations for the IDRP and requires the departments to establish additional requirements, including conflict-of-interest standards. 4)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 for covered services on the amount the individual health professional would have been reimbursed by Medicare for the same or similar services in the geographic area in which the services were rendered. 5)Requires, if non-emergency services are provided by a noncontracting individual health professional to an enrollee who has voluntarily chosen to use his or her out-of-network benefit for services covered by a preferred provider AB 533 (Bonta) Page 3 of ? organization or a point of service plan, unless otherwise agreed to by the plan and the health professional, the amount paid shall be the amount set forth in the enrollee's evidence of coverage. 6)Limits enrollee or insured cost sharing under a health plan contract or health insurance policy issued, amended, or renewed on or after July 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 health professional, to the same cost sharing that the enrollee or insured would pay for the same covered benefits received from a contracting health professional. 7)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. 8)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. 9)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. 10)Defines "contracted health facility" as a health facility that is contracted to provide services under the enrollee's AB 533 (Bonta) Page 4 of ? health plan contract or insured's health insurance policy and includes: hospital, skilled nursing facility, ambulatory services or other outpatient settings, as specified, 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. 11)Defines "individual health professional" as a California licensed physician or surgeon. 12)Permits an enrollee or insured to voluntarily consent to the use of a non-contracting individual health professional if, in at least three business days 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. 13)Defines "emergency services and care" as medical screening, examination, and evaluation by a physician and surgeon, or, to the extent permitted by applicable law, by other appropriate licensed persons under the supervision of a physician and surgeon, to determine if an emergency medical condition, active labor exists, or psychiatric emergency medical care, and, if it does, the care, treatment, and surgery, if within the scope of that person's license, necessary to relieve or eliminate the emergency medical condition, within the capability of the facility. FISCAL EFFECT : According to the Senate Appropriations Committee, as amended August 18, 2015: 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 regulations and review of plan filings by the Department of AB 533 (Bonta) Page 5 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). PRIOR 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 implementation, the state needs 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 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. 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 AB 533 (Bonta) Page 6 of ? 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)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 et.al, (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 7 of ? 4)Medicare Data. The Centers for Medicare & Medicaid Services (CMS) Physician Fee Schedule Search Tool provides Medicare payment information on more than 10,000 services, including pricing, the associated Relative Value Units (RVUs), and various payment policies. The Medicare Physician Fee Schedule (MPFS) is the primary method of payment for enrolled health care professionals. Specifically, Medicare uses this fee schedule when paying the following services: Professional services of physicians and other enrolled health care professionals in private practice; Services covered incident to physicians' services (other than certain drugs covered as incident to services); Diagnostic tests (other than clinical laboratory tests); and Radiology services. For services paid under the MPFS, there is a 5% reduction in the Medicare-approved amounts for nonparticipants, and there is a limit on what the health care professional/supplier may charge the beneficiary. This limiting charge equals 115% of the fee schedule amount and is the maximum the nonparticipant may charge a beneficiary. 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 AB 533 (Bonta) Page 8 of ? 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)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. 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 AB 533 (Bonta) Page 9 of ? 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 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. AB 533 (Bonta) Page 10 of ? 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 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 person. 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 AB 533 (Bonta) Page 11 of ? 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 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 AB 533 (Bonta) Page 12 of ? 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 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. 7)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. 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. AB 533 (Bonta) Page 13 of ? 8)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 Chapter of the American College of Emergency Physicians writes even if emergency physicians are exempt, they remain opposed because it is bad policy to adopt a framework that hands all the power to insurers and leaves providers at their mercy for payment. The California Medical Association (CMA) writes that this bill creates government rate setting for physician services in commercial plans, reduces access to care as providers will be less willing to accept out-of-network patients, the payment standard established in AB 533 is significantly below existing contract rates and will result in health plans dropping contracts or reducing contract rates, the current structure of the bill will force hundreds of thousands of claims to go through the IDRP because of a legislatively-imposed, unfair payment standard, the low rate set by the bill takes effect immediately, but the IDRP will take months or years to be established by the departments, resulting in physicians being underpaid and without any recourse, fundamentally changes PPO product by requiring three business days' advanced consent before accessing out-of-network benefits, and there are numerous substantive drafting errors in the bill which remain unaddressed and will disrupt implementation. 9)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, sets up payment rates AB 533 (Bonta) Page 14 of ? 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 paid by health plans, or if as in the case of emergency room physicians, rates will be significantly reduced from risk-bearing organizations. SUPPORT AND OPPOSITION : Support: Health Access California (sponsor) AARP America's Health Insurance Plans American Cancer Society Cancer Action Network American Federation of State, County and Municipal Employees Anthem Blue Cross Association of California Life and Health Insurance Companies California Association of Health Plans California Association of Health Underwriters California Association of Physician Groups California Black Health Network California Labor Federation California Pan-Ethnic Health Network California Primary Care Association California Public Employees Retirement System Board of Administration California School Employees Association California State Council of the Service Employees International Union California Teachers Association CALPIRG Children Now AB 533 (Bonta) Page 15 of ? Children's Defense Fund California City of Oakland Cigna Community Clinic Association of Los Angeles County Consumers Union International Alliance of Theatrical Stage Employees Local 80 Leukemia & Lymphoma Society LIUNA Local 777 LIUNA Local 792 NAMI California National Health Law Program National Multiple Sclerosis Society - California Action Network The Children's Partnership Western Center on Law and Poverty Oppose: California Chapter of the American College of Cardiology California Chapter of the American College of Emergency Physicians California Medical Association California Orthopaedic Association California Radiological Society California Society of Anesthesiologists California Society of Pathologists California Society of Plastic Surgeons Osteopathic Physicians and Surgeons of California -- END --