BILL NUMBER: AB 1455	CHAPTERED
	BILL TEXT

	CHAPTER   827
	FILED WITH SECRETARY OF STATE   SEPTEMBER 28, 2000
	APPROVED BY GOVERNOR   SEPTEMBER 28, 2000
	PASSED THE SENATE   AUGUST 31, 2000
	PASSED THE ASSEMBLY   AUGUST 31, 2000
	AMENDED IN SENATE   AUGUST 30, 2000
	AMENDED IN SENATE   AUGUST 18, 2000
	AMENDED IN SENATE   AUGUST 7, 2000
	AMENDED IN SENATE   JULY 3, 2000
	AMENDED IN SENATE   JUNE 15, 2000
	AMENDED IN SENATE   MAY 18, 2000
	AMENDED IN SENATE   AUGUST 26, 1999
	AMENDED IN SENATE   AUGUST 18, 1999
	AMENDED IN SENATE   JUNE 9, 1999

INTRODUCED BY   Assembly Member Scott
   (Principal coauthor:  Assembly Member Knox)
   (Coauthors:  Assembly Members Bock, Davis, Gallegos, Honda,
Machado, and Washington)
   (Coauthors:  Senators Figueroa, Hughes, Perata, Schiff, and
Speier)

                        FEBRUARY 26, 1999

   An act to amend Sections 1367, 1371, and 1371.35 of, and to add
Sections 1371.36, 1371.37, 1371.38, and 1371.39 to, the Health and
Safety Code, relating to health care service plans.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1455, Scott.  Health care service plans.
   The Knox-Keene Health Care Service Plan Act of 1975 provides for
the regulation and licensure of health care service plans by the
Department of Managed Care and includes provisions pertaining to the
payment of provider claims by a health care service plan and to the
resolution of claims disputes. Under these provisions, interest at
the rate of 10% per annum accrues if an uncontested provider claim is
not reimbursed by the plan within a prescribed time period.  Under
existing law, the director of the department is required to
administer and enforce the act and is provided with certain powers in
this respect, including the power to conduct investigations
affecting the interests of plans, subscribers, enrollees, and the
public.  The willful violation of the provisions of the Knox-Keene
Health Care Service Plan Act of 1975 is a crime.
   This bill would prohibit a health care service plan from engaging
in an unfair payment pattern, as defined, in its reimbursement of a
provider and would  authorize the director to investigate a report of
this conduct, and would permit a provider to report this conduct to
the department.  This bill would authorize the director, upon a final
determination that a plan has engaged in an unfair payment pattern,
to impose sanctions on the plan.  This bill would additionally
increase the interest rate on an uncontested provider claim that is
not paid by the plan within a prescribed time period to 15% per annum
and would impose a $10 charge on a plan that fails to automatically
include this interest amount in its payment to a provider.
   This bill would require a health care service plan to ensure its
dispute resolution mechanism is available to noncontracting providers
and to submit an annual report to the Department of Managed Care
regarding this mechanism.  This bill would additionally require the
department, on or before July 1, 2001, to adopt regulations
pertaining to the dispute resolution mechanism utilized by health
care service plans.
   This bill would also provide for a plan to report to the
department instances of a provider engaging in an unfair billing
pattern.  This bill would require the department to make
recommendations to the Legislature and Governor by July 1, 2001,
regarding a system to respond to unfair billing patterns.
   Because this bill would specify additional forms of prohibited
conduct under the Knox-Keene Health Service Plan Act of 1975, the
violation of which would be punishable as a criminal offense, it
would create new crimes, and would thereby impose a state-mandated
local program.
  The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state.  Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  The Legislature finds and declares the following:
   (a) Health care services must be available to citizens without
unnecessary administrative procedures, interruptions, or delays.
   (b) The billing by providers and the handling of claims by health
care service plans are essential components of the health care
delivery process and can be made more effective and efficient.
   (c) The present system of claims submission by providers and the
processing and payment of those claims by health care service plans
are complex and are in need of reform in order to facilitate the
prompt and efficient submission, processing, and payment of claims.
Providers and health care service plans both recognize the problems
in the current system and that there is an urgent need to resolve
these matters.
   (d) To ensure that health care service plans and providers do not
engage in patterns of unacceptable practices, the Department of
Managed Health Care should be authorized to assist in the development
of a new and more efficient system of claims submission, processing,
and payment.
  SEC. 2.  Section 1367 of the Health and Safety Code is amended to
read:
   1367.  Each health care service plan and, if applicable, each
specialized health care service plan shall meet the following
requirements:
   (a) All facilities located in this state including, but not
limited to, clinics, hospitals, and skilled nursing facilities to be
utilized by the plan shall be licensed by the State Department of
Health Services, where licensure is required by law.  Facilities not
located in this state shall conform to all licensing and other
requirements of the jurisdiction in which they are located.
   (b) All personnel employed by or under contract to the plan shall
be licensed or certified by their respective board or agency, where
licensure or certification is required by law.
   (c) All equipment required to be licensed or registered by law
shall be so licensed or registered and the operating personnel for
that equipment shall be licensed or certified as required by law.
   (d) The plan shall furnish services in a manner providing
continuity of care and ready referral of patients to other providers
at times as may be appropriate consistent with good professional
practice.
   (e) (1) All services shall be readily available at reasonable
times to all enrollees.  To the extent feasible, the plan shall make
all services readily accessible to all enrollees.
   (2) To the extent that telemedicine services are appropriately
provided through telemedicine, as defined in subdivision (a) of
Section 2290.5 of the Business and Professions Code, these services
shall be considered in determining compliance with Section 1300.67.2
of Title 10 of the California Code of Regulations.
   (f) The plan shall employ and utilize allied health manpower for
the furnishing of services to the extent permitted by law and
consistent with good medical practice.
   (g) The plan shall have the organizational and administrative
capacity to provide services to subscribers and enrollees.  The plan
shall be able to demonstrate to the department that medical decisions
are rendered by qualified medical providers, unhindered by fiscal
and administrative management.
   (h) (1) All contracts with subscribers and enrollees, including
group contracts, and all contracts with providers, and other persons
furnishing services, equipment, or facilities to or in connection
with the plan, shall be fair, reasonable, and consistent with the
objectives of this chapter.  All contracts with providers shall
contain provisions requiring a fast, fair, and cost-effective dispute
resolution mechanism under which providers may submit disputes to
the plan, and requiring the plan to inform its providers upon
contracting with the plan, or upon change to these provisions, of the
procedures for processing and resolving disputes, including the
location and telephone number where information regarding disputes
may be submitted.
   (2) Each health care service plan shall ensure that a dispute
resolution mechanism is accessible to noncontracting providers for
the purpose of resolving billing and claims disputes.
   (3) On and after January 1, 2002, each health care service plan
shall annually submit a report to the department regarding its
dispute resolution mechanism.  The report shall include information
on the number of providers who utilized the dispute resolution
mechanism and a summary of the disposition of those disputes.
   (i) Each health care service plan contract shall provide to
subscribers and enrollees all of the basic health care services
included in subdivision (b) of Section 1345, except that the director
may, for good cause, by rule or order exempt a plan contract or any
class of plan contracts from that requirement.  The director shall by
rule define the scope of each basic health care service which health
care service plans shall be required to provide as a minimum for
licensure under this chapter.  Nothing in this chapter shall prohibit
a health care service plan from charging subscribers or enrollees a
copayment or a deductible for a basic health care service or from
setting forth, by contract, limitations on maximum coverage of basic
health care services, provided that the copayments, deductibles, or
limitations are reported to, and held unobjectionable by, the
director and set forth to the subscriber or enrollee pursuant to the
disclosure provisions of Section 1363.
   (j) No health care service plan shall require registration under
the Controlled Substances Act of 1970 (21 U.S.C. Sec. 801 et seq.) as
a condition for participation by an optometrist certified to use
therapeutic pharmaceutical agents pursuant to Section 3041.3 of the
Business and Professions Code.
   Nothing in this section shall be construed to permit the director
to establish the rates charged subscribers and enrollees for
contractual health care services.
   The director's enforcement of Article 3.1 (commencing with Section
1357) shall not be deemed to establish the rates charged subscribers
and enrollees for contractual health care services.
  SEC. 3.  Section 1371 of the Health and Safety Code is amended to
read:
   1371.  A health care service plan, including a specialized health
care service plan, shall reimburse claims or any portion of any
claim, whether in state or out of state, as soon as practical, but no
later than 30 working days after receipt of the claim by the health
care service plan, or if the health care service plan is a health
maintenance organization, 45 working days after receipt of the claim
by the health care service plan, unless the claim or portion thereof
is contested by the plan in which case the claimant shall be
notified, in writing, that the claim is contested or denied, within
30 working days after receipt of the claim by the health care service
plan, or if the health care service plan is a health maintenance
organization, 45 working days after receipt of the claim by the
health care service plan.  The notice that a claim is being contested
shall identify the portion of the claim that is contested and the
specific reasons for contesting the claim.
   If an uncontested claim is not reimbursed by delivery to the
claimants' address of record within the respective 30 or 45 working
days after receipt, interest shall accrue at the rate of 15 percent
per annum beginning with the first calendar day after the 30- or
45-working-day period.  A health care service plan shall
automatically include in its payment of the claim all interest that
has accrued pursuant to this section without requiring the claimant
to submit a request for the interest amount.  Any plan failing to
comply with this requirement shall pay the claimant a ten dollar
($10) fee.
   For the purposes of this section, a claim, or portion thereof, is
reasonably contested where the plan has not received the completed
claim and all information necessary to determine payer liability for
the claim, or has not been granted reasonable access to information
concerning provider services.  Information necessary to determine
payer liability for the claim includes, but is not limited to,
reports of investigations concerning fraud and misrepresentation, and
necessary consents, releases, and assignments, a claim on appeal, or
other information necessary for the plan to determine the medical
necessity for the health care services provided.
   If a claim or portion thereof is contested on the basis that the
plan has not received all information necessary to determine payer
liability for the claim or portion thereof and notice has been
provided pursuant to this section, then the plan shall have 30
working days or, if the health care service plan is a health
maintenance organization, 45 working days after receipt of this
additional information to complete reconsideration of the claim.  If
a plan has received all of the information necessary to determine
payer liability for a contested claim and has not reimbursed a claim
it has determined to be payable within 30 working days of the receipt
of that information, or if the plan is a health maintenance
organization, within 45 working days of receipt of that information,
interest shall accrue and be payable at a rate of 15 percent per
annum beginning with the first calendar day after the 30- or
45-working day period.
   The obligation of the plan to comply with this section shall not
be deemed to be waived when the plan requires its medical groups,
independent practice associations, or other contracting entities to
pay claims for covered services.
  SEC. 4.  Section 1371.35 of the Health and Safety Code is amended
to read:
   1371.35.  (a) A health care service plan, including a specialized
health care service plan, shall reimburse each complete claim, or
portion thereof, whether in state or out of state, as soon as
practical, but no later than 30 working days after receipt of the
complete claim by the health care service plan, or if the health care
service plan is a health maintenance organization, 45 working days
after receipt of the complete claim by the health care service plan.
However, a plan may contest or deny a claim, or portion thereof, by
notifying the claimant, in writing, that the claim is contested or
denied, within 30 working days after receipt of the claim by the
health care service plan, or if the health care service plan is a
health maintenance organization, 45 working days after receipt of the
claim by the health care service plan.  The notice that a claim, or
portion thereof, is contested shall identify the portion of the claim
that is contested, by revenue code, and the specific information
needed from the provider to reconsider the claim.  The notice that a
claim, or portion thereof, is denied shall identify the portion of
the claim that is denied, by revenue code, and the specific reasons
for the denial.  A plan may delay payment of an uncontested portion
of a complete claim for reconsideration of a contested portion of
that claim so long as the plan pays those charges specified in
subdivision (b).
   (b) If a complete claim, or portion thereof, that is neither
contested nor denied, is not reimbursed by delivery to the claimant's
address of record within the respective 30 or 45 working days after
receipt, the plan shall pay the greater of fifteen dollars ($15) per
year or interest at the rate of 15 percent per annum beginning with
the first calendar day after the 30- or 45-working-day period.  A
health care service plan shall automatically include the fifteen
dollars ($15) per year or interest due in the payment made to the
claimant, without requiring a request therefor.
   (c) For the purposes of this section, a claim, or portion thereof,
is reasonably contested if the plan has not received the completed
claim.  A paper claim from an institutional provider shall be deemed
complete upon submission of a legible emergency department report and
a completed UB 92 or other format adopted by the National Uniform
Billing Committee, and reasonable relevant information requested by
the plan within 30 working days of receipt of the claim.  An
electronic claim from an institutional provider shall be deemed
complete upon submission of an electronic equivalent to the UB 92 or
other format adopted by the National Uniform Billing Committee, and
reasonable relevant information requested by the plan within 30
working days of receipt of the claim.  However, if the plan requests
a copy of the emergency department report within the 30 working days
after receipt of the electronic claim from the institutional
provider, the plan may also request additional reasonable relevant
information within 30 working days of receipt of the emergency
department report, at which time the claim shall be deemed complete.
A claim from a professional provider shall be deemed complete upon
submission of a completed HCFA 1500 or its electronic equivalent or
other format adopted by the National Uniform Billing Committee, and
reasonable relevant information requested by the plan within 30
working days of receipt of the claim.  The provider shall provide the
plan reasonable relevant information within 10 working days of
receipt of a written request that is clear and specific regarding the
information sought.  If, as a result of reviewing the reasonable
relevant information, the plan requires further information, the plan
shall have an additional 15 working days after receipt of the
reasonable relevant information to request the further information,
notwithstanding any time limit to the contrary in this section, at
which time the claim shall be deemed complete.
   (d) This section shall not apply to claims about which there is
evidence of fraud and misrepresentation, to eligibility
determinations, or in instances where the plan has not been granted
reasonable access to information under the provider's control.  A
plan shall specify, in a written notice sent to the provider within
the respective 30- or 45-working days of receipt of the claim, which,
if any, of these exceptions applies to a claim.
   (e) If a claim or portion thereof is contested on the basis that
the plan has not received information reasonably necessary to
determine payer liability for the claim or portion thereof, then the
plan shall have 30 working days or, if the health care service plan
is a health maintenance organization, 45 working days after receipt
of this additional information to complete reconsideration of the
claim.  If a claim, or portion thereof, undergoing reconsideration is
not reimbursed by delivery to the claimant's address of record
within the respective 30 or 45 working days after receipt of the
additional information, the plan shall pay the greater of fifteen
dollars ($15) per year or interest at the rate of 15 percent per
annum beginning with the first calendar day after the 30- or
45-working-day period.  A health care service plan shall
automatically include the fifteen dollars ($15) per year or interest
due in the payment made to the claimant, without requiring a request
therefor.
   (f) The obligation of the plan to comply with this section shall
not be deemed to be waived when the plan requires its medical groups,
independent practice associations, or other contracting entities to
pay claims for covered services.  This section shall not be construed
to prevent a plan from assigning, by a written contract, the
responsibility to pay interest and late charges pursuant to this
section to medical groups, independent practice associations, or
other entities.
   (g) A plan shall not delay payment on a claim from a physician or
other provider to await the submission of a claim from a hospital or
other provider, without citing specific rationale as to why the delay
was necessary and providing a monthly update regarding the status of
the claim and the plan's actions to resolve the claim, to the
provider that submitted the claim.
   (h) A health care service plan shall not request or require that a
provider waive its rights pursuant to this section.
   (i) This section shall not apply to capitated payments.
   (j) This section shall apply only to claims for services rendered
to a patient who was provided emergency services and care as defined
in Section 1317.1 in the United States on or after September 1, 1999.

   (k) This section shall not be construed to affect the rights or
obligations of any person pursuant to Section 1371.
   (l) This section shall not be construed to affect a written
agreement, if any, of a provider to submit bills within a specified
time period.
  SEC. 5.  Section 1371.36 is added to the Health and Safety Code, to
read:
   1371.36.  (a) A health care service plan shall not deny payment of
a claim on the basis that the plan, medical group, independent
practice association, or other contracting entity did not provide
authorization for health care services that were provided in a
licensed acute care hospital and that were related to services that
were previously authorized, if all of the following conditions are
met:
   (1) It was medically necessary to provide the services at the
time.
   (2) The services were provided after the plan's normal business
hours.
   (3) The plan does not maintain a system that provides for the
availability of a plan representative or an alternative means of
contact through an electronic system, including voicemail or
electronic mail, whereby the plan can respond to a request for
authorization within 30 minutes of the time that a request was made.

   (b) This section shall not apply to investigational or
experimental therapies, or other noncovered services.
  SEC. 6.  Section 1371.37 is added to the Health and Safety Code, to
read:
   1371.37.  (a) A health care service plan is prohibited from
engaging in an unfair payment pattern, as defined in this section.
   (b) Consistent with subdivision (a) of Section 1371.39, the
director may investigate a health care service plan to determine
whether it has engaged in an unfair payment pattern.
   (c) An "unfair payment pattern," as used in this section, means
any of the following:
   (1) Engaging in a demonstrable and unjust pattern, as defined by
the department, of reviewing or processing complete and accurate
claims that results in payment delays.
   (2) Engaging in a demonstrable and unjust pattern, as defined by
the department, of reducing the amount of payment or denying complete
and accurate claims.
   (3) Failing on a repeated basis to pay the uncontested portions of
a claim within the timeframes specified in Section 1371, 1371.1, or
1371.35.
   (4) Failing on a repeated basis to automatically include the
interest due on claims pursuant to Section 1371.
   (d) (1) Upon a final determination by the director that a health
care service plan has engaged in an unfair payment pattern, the
director may:
   (A) Impose monetary penalties as permitted under this chapter.
   (B) Require the health care service plan for a period of three
years from the date of the director's determination, or for a shorter
period prescribed by the director, to pay complete and accurate
claims from the provider within a shorter period of time than that
required by Section 1371.  The provisions of this subparagraph shall
not become operative until January 1, 2002.
   (C) Include a claim for costs incurred by the department in any
administrative or judicial action, including investigative expenses
and the cost to monitor compliance by the plan.
   (2) For any overpayment made by a health care service plan while
subject to the provisions of paragraph (1), the provider shall remain
liable to the plan for repayment pursuant to Section 1371.1.
   (e) The enforcement remedies provided in this section are not
exclusive and shall not limit or preclude the use of any otherwise
available criminal, civil, or administrative remedy.
   (f) The penalties set forth in this section shall not preclude,
suspend, affect, or impact any other duty, right, responsibility, or
obligation under a statute or under a contract between a health care
service plan and a provider.
   (g) A health care service plan may not delegate any statutory
liability under this section.
   (h) For the purposes of this section, "complete and accurate claim"
has the same meaning as that provided in the regulations adopted by
the department pursuant to subdivision (a) of Section 1371.38.
   (i) On or before December 31, 2001, the department shall report to
the Legislature and the Governor information regarding the
development of the definition of "unjust pattern" as used in this
section.  This report shall include, but not be limited to, a
description of the process used and a list of the parties involved in
the department's development of this definition as well as
recommendations for statutory adoption.
   (j) The department shall make available upon request and on its
website, information regarding actions taken pursuant to this
section, including a description of the activities that were the
basis for the action.
  SEC. 7.  Section 1371.38 is added to the Health and Safety Code, to
read:
   1371.38.  (a) The department shall, on or before July 1, 2001,
adopt regulations that ensure that plans have adopted a dispute
resolution mechanism pursuant to subdivision (h) of Section 1367.
The regulations shall require that any dispute resolution mechanism
of a plan is fair, fast, and cost-effective for contracting and
non-contracting providers and define the term "complete and accurate
claim, including attachments and supplemental information or
documentation."
   (b) On or before December 31, 2001, the department shall report to
the Governor and the Legislature its recommendations for any
additional statutory requirements relating to plan and provider
dispute resolution mechanisms.
  SEC. 8.  Section 1371.39 is added to the Health and Safety Code, to
read:
   1371.39.  (a) Providers may report to the department's Office of
Plan and Provider Relations, either through the toll-free provider
line (877-525-1295) or e-mail address (plans-providers@dmhc.ca.gov),
instances in which the provider believes a plan is engaging in an
unfair payment pattern.
   (b) Plans may report to the department's Office of Plan and
Provider Relations, either through the toll-free provider line
(877-525-1295) or e-mail address (plans-providers@dmhc.ca.gov),
instances in which the plan believes a provider is engaging in an
unfair billing pattern.
   (1) "Unfair billing pattern" means engaging in a demonstrable and
unjust pattern of unbundling of claims, upcoding of claims, or other
demonstrable and unjustified billing patterns, as defined by the
department.
   (2) The department shall convene appropriate state agencies to
make recommendations by July 1, 2001, to the Legislature and the
Governor for the purpose of developing a system for responding to
unfair billing patterns as defined in this section.  This section
shall include a process by which information is made available to the
public regarding actions taken against providers for unfair billing
patterns and the activities that were the basis for the action.
   (c) On or before December 31, 2001, the department shall report to
the Legislature and the Governor information regarding the
development of the definition of "unfair billing pattern" as used in
this section.  This report shall include, but not be limited to, a
description of the process used and a list of the parties involved in
the department's development of this definition as well as
recommendations for statutory adoption.
  SEC. 9.  No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.