BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                        AB 533|
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                                   THIRD READING 


          Bill No:  AB 533
          Author:   Bonta (D)
          Amended:  9/4/15 in Senate
          Vote:     21  

           SENATE HEALTH COMMITTEE:  6-2, 7/15/15
           AYES:  Hernandez, Hall, Mitchell, Monning, Roth, Wolk
           NOES:  Nguyen, Nielsen
           NO VOTE RECORDED:  Pan

           SENATE APPROPRIATIONS COMMITTEE:  5-2, 8/27/15
           AYES:  Lara, Beall, Hill, Leyva, Mendoza
           NOES:  Bates, Nielsen

           SENATE HEALTH COMMITTEE:  7-1, 9/9/15 (pursuant to Senate Rule  
            29.10)
           AYES:  Hernandez, Hall, Mitchell, Monning, Nielsen, Roth, Wolk
           NOES:  Pan
           NO VOTE RECORDED:  Nguyen

           ASSEMBLY FLOOR:  74-1, 6/2/15 - See last page for vote

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


          SOURCE:    Health Access California

          DIGEST:   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  
          (IDRP) 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  








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          sharing for these covered services to no more than the cost  
          sharing required had the services been provided by a contracting  
          health professional.

          Senate Floor Amendments of 9/4/15 1) delete the requirement that  
          the DMHC and CDI jointly establish written procedure, 2) delete  
          the provision which would have required the plan or insurer to  
          base reimbursement of non-contracted claims, as specified, on  
          the average rates based on the statistically credible  
          information, as specified.  Instead, requires reimbursement to  
          be based on the amount the individual health professional would  
          have been reimbursed by Medicare for the same or similar  
          services in the general geographic area in which services were  
          rendered, 3) delete a requirement that plans maintain  
          statistically credible information, 4) delay until July 1, 2016,  
          the implementation of the provisions to limit an enrollee or  
          insureds cost sharing to in-network cost sharing, as specified,  
          5) revise the provision which allows an enrollee or insured to  
          voluntarily agree to charges of a noncontracting provider that  
          are more than the in-network cost sharing, specifically by  
          requiring the enrollee or insured to consent in writing at least  
          three business days in advance of care (instead of 24 hours), 6)  
          delete a disclosure 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, and 7) make other clarifying  
          changes to the bill.  

          ANALYSIS: 
          
          Existing law:

           1) Provides for the regulation of health plans by the DMHC  
             under the Knox-Keene Act and for health insurers by the 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  







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             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) 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 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.







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           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  
             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  







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             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  
             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.  

          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  







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            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  
            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,  







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            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."

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   Yes

          According to the Senate Appropriations Committee:

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

          2)Annual costs of $1.5 million to $3 million per year for the  
            IDRP that DMHC convenes to settle a dispute between a provider  
            and a health plan (Managed Care Fund).

          3)One-time costs of about $550,000 for the development of  
            regulations and review of plan filings by CDI (Insurance  
            Fund).

          4)Annual costs of $900,000 per year for the IDRP that CDI  
            convenes to settle a dispute between a provider and a health  
            plan (Insurance Fund).



          SUPPORT:   (Verified9/9/15)


          Health Access California (source)
          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







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          California Association of Physician Groups
          California Black Health Network
          California Chamber of Commerce
          California Labor Federation
          California Pan-Ethnic Health Network
          California Primary Care Association
          California Professional Firefighters
          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
          Children's Defense Fund California
          Cigna
          City of Oakland
          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
          SEIU California
          The Children's Partnership
          Western Center on Law and Poverty


          OPPOSITION:   (Verified9/4/15)


          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







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          Osteopathic Physicians and Surgeons of California


          ARGUMENTS IN 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.


          ARGUMENTS IN 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  







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          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) 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.

          ASSEMBLY FLOOR:  74-1, 6/2/15
          AYES:  Achadjian, Alejo, Baker, Bigelow, Bloom, Bonilla, Bonta,  
            Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chiu,  
            Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman,  
            Frazier, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto,  
            Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper,  
            Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim,  
            Lackey, Levine, Linder, Lopez, Low, Mathis, Mayes, McCarty,  
            Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell,  
            Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas,  
            Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond,  
            Ting, Wagner, Waldron, Weber, Wilk, Atkins
          NOES:  Travis Allen
          NO VOTE RECORDED:  Chávez, Beth Gaines, Maienschein, Williams,  
            Wood

          Prepared by:Teri Boughton / HEALTH / 
          9/9/15 15:37:38


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