BILL ANALYSIS
AB 1600
Page 1
Date of Hearing: April 26, 2001
ASSEMBLY COMMITTEE ON HEALTH
Helen Thomson, Chair
AB 1600 (Keeley) - As Amended: April 23, 2001
POLICY QUESTIONS :
1)Should any dispute resolution process established by a health
plan/insurer provide that a health care provider may either
file a civil action, or if the provider chooses not to file a
civil action, that both parties may request that their
differences be submitted to an arbitration panel, under
certain circumstances?
2)Should an arbitration process specific for disputes between
health care providers and health plans/insurers be established
when a provider chooses not to file a civil action, that both
parties may request that their differences be submitted to an
arbitration panel?
3)Should providers, individually or jointly, be able to submit
disputes to the health plan/insurer at any time if they
contend the current or renewal provider contracts violate any
provision of law, compromise patient care, or are otherwise
unfair or unreasonable?
4)Should matters subject to the dispute resolution process
include all those matters identified by the provider as being
in dispute and which arise out of the health
plan/insurer-health care professional contract?
SUBJECT : Arbitration: health care provider disputes.
SUMMARY : Requires any dispute resolution process established by
a health care service plan (health plan) or by a disability
health insurer (health insurer) to provide that a provider may
either file a civil action or, in the event the provider chooses
not to file such an action, that both parties may request that
their differences be submitted to an arbitration panel.
Requires health plans/insurers to allow providers, individually
or jointly, to submit disputes to the health plan/insurer at any
time if they contend that the current or renewal provider
contracts violate any provision of law, compromise patient care,
or are otherwise unfair or unreasonable. Includes within
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matters subject to the dispute resolution process all those
matters identified by the provider as being in dispute and which
arise out of the health plan/insurer-health care professional
contract. Prohibits a health plan/insurer from threatening,
interfering with, restraining, or coercing providers because of
their exercise of their rights under the arbitration provisions
of this bill. Specifically, this bill :
1)States it is the policy of the State of California to ensure
that its citizens have access to health care that is both cost
effective and of high quality.
2)Requires any dispute resolution process established by a
health plan/insurer to provide that a provider may either file
a civil action or, in the event the provider chooses not to
file such an action, that both parties may request that their
differences be submitted to an arbitration panel, whenever any
of the following events occur:
a) The parties have been participating in the process for
more than 30 days;
b) The parties are unable to agree to the appointment of a
mediator; or,
c) If a mediator agreed to by the parties is unable to
effect settlement of a dispute between the parties within
30 days after his or her appointment.
3)Outlines the arbitration process created by this bill,
including the selection of the arbitration panel, the parties
right to counsel and full and comprehensive discovery, the
ability of the arbitration panel to order a party to pay the
other party's reasonable expenses as a result of bad faith
actions or frivolous tactics, prohibits the health
plan/insurer from shortening the applicable statute of
limitations provided, and requires there be no limitations on
the amount or nature of damages that may be awarded in an
arbitration other than those that would otherwise be
recoverable under a court of law.
4)Requires the arbitration panel to, within 10 days after its
establishment or any additional periods to which the parties
agree, meet with the parties or their representatives, either
jointly or separately, make inquiries and investigations, hold
hearings, and take any other action that the arbitration panel
deems appropriate.
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5)Requires the arbitration panel to direct that five days prior
to the commencement of its hearings, each of the parties
submit the last best offer of settlement as to each of the
issues that are in dispute. Requires the arbitration panel,
within 15 days after the conclusion of the hearing, or any
additional period as to which the parties agree, to separately
decide on each of the disputed issues submitted by selecting,
without modification, the last best offer of settlement that
most nearly complies with the applicable factors described in
6) below.
6)Requires the factors to be considered by the arbitrator or
arbitration panel when considering each party's last best
offer of settlement to include, but not be limited to:
a) The stipulations of the parties;
b) The interest and welfare of patients;
c) The patients' access to care;
d) The ability of providers to render quality health care
services;
e) The cost of providing the services, taking into
consideration the increasing age of the population, new
pharmaceuticals, the increasing sophistication of medical
technology, and the medical demographics of the population
of the plan's enrollees;
f) The reasonableness of the reimbursement rates,
particularly when compared to utilization levels and costs
of services to be provided under the contract, adjusted for
geographic region and the benefit plan. If capitated
payments are involved, the actuarial soundness of the rates
based on the appropriate reimbursement rates set forth
above should be compared;
g) Any supplemental information as the arbitration panel
may deem necessary or proper to enable it to reach a
determination; and
h) The ability of the provider to continue to provide
health care to patients and to avoid bankruptcy, closure,
financial insolvency, or contract termination;
1)Requires the arbitration panel to mail or otherwise deliver a
copy of the decision to the parties. However, the decision of
the arbitration panel is prohibited from being binding for a
period of five days after service to the parties. During that
five-day period, the parties may meet privately, attempt to
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resolve their differences and, by mutual agreement, amend or
modify the decision of the arbitration panel.
2)Requires, at the conclusion of the five-day period, which may
be extended by mutual agreement of the parties, the
arbitration panel's decision, as may be amended or modified by
the parties, is binding on all parties.
3)Requires each party to the arbitration to pay his or her pro
rata share of the expenses and fees of the arbitrator,
together with other expenses of the arbitration incurred or
approved by the arbitrator, not including counsel fees or
witness fees or other expenses incurred by a party for his or
her own benefit.
4)Requires, except as otherwise provided in the arbitration
provisions created by this bill, the conduct of the
arbitration to be governed under the provisions of existing
law governing the conduct of arbitration proceedings. Permits
any party to petition the court to confirm, correct, modify,
or vacate the arbitration award decision. Requires any award
to be made retroactive to the date the provider initiated the
dispute resolution process with the plan.
5)Requires the court, when considering an arbitration award, in
addition to its powers under existing law to confirm the
award, to correct the award and confirm it as corrected,
vacate the award or dismiss the proceeding, to consider
whether the award is supported by substantial evidence in
light of the factors set forth in 15) and 19) below, and to
modify the award as necessary to ensure that the award is
supported by such evidence.
6)States that nothing in the arbitration provisions of this bill
is intended to impair the ability of a health plan to
terminate a contractual relationship consistent with the
principles enunciated by the California Supreme Court in
Potvin v. Metropolitan Life Insurance Co.
7)Voids as contrary to public policy any contractual provision
that requires providers to waive any provision set forth in
any provision of law or that allows the plan to unilaterally
amend the contract.
8)Requires health plans/insurers to allow providers,
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individually or jointly, to submit disputes to the health
plan/insurer at any time if the providers contend that the
current or renewal provider contracts violate any provision of
law, compromise patient care, or are otherwise unfair or
unreasonable.
9)Includes within matters subject to the dispute resolution
process all those matters identified by the provider as being
in dispute and which arise out of the health
plan/insurer-health care professional contract, such as, but
not limited to:
a) Services covered under the contract;
b) Any matters that arise after a contract has been
executed, such as increased reimbursement for new
technology and pharmaceutical therapeutics, and new
unanticipated uses of existing technology;
c) Whether the current or proposed
reimbursement or the methodology for determining the
payment for health care services and supplies is disclosed,
reasonable, or even adequate to cover the cost of care;
and,
d) Sudden costs of absorbing patients in the midst of, or
affected by delay of, care resulting from insolvencies of
provider organizations.
1)Eliminates the requirement that the health plan inform its
providers, when changes to the dispute resolution mechanism
are made, of the procedures for processing and resolving
disputes.
2)Requires all procedures for processing and resolving disputes
to also comply with the arbitration provisions created by this
bill.
3)Requires, where providers jointly utilize the dispute
resolution process established by the health plan/insurer, the
providers to designate one person or entity to represent them.
Permits the provider to retain and utilize counsel to
represent them.
4)Prohibits a health plan/insurer from doing either of the
following:
a) Imposing or threatening to impose retaliation, such as
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contract termination, on providers, discriminating or
threatening to discriminate against providers, or otherwise
interfering with, restraining, or coercing providers
because of their exercise of their rights under the
arbitration provisions of this bill; or,
b) Dominating or interfering with the ability of providers
to jointly utilize the dispute mechanisms established under
the arbitration provisions of this bill.
20)Requires health insurers to establish a fast, fair and
cost-effective dispute resolution mechanism that parallels the
dispute resolution mechanism for health care service plans,
including the changes made by this bill.
21)Requires health insurers' contracts with providers to be
fair, reasonable, and consistent with specified objectives,
and voids as contrary to public policy any contractual
provision that requires providers to waive any provision set
forth in any provision of law or that allows the plan to
unilaterally amend the contract.
EXISTING LAW :
1)Licenses and regulates health care services plans by the
Department of Managed Health Care and health insurers through
the Department of Insurance.
2)Requires all health care service plan contracts with providers
to be fair, reasonable, and consistent with the objectives of
the body of law governing health care service plans (the
Knox-Keene Act).
3)Requires all health care service plan contracts with providers
to contain provisions requiring a fast, fair, and
cost-effective dispute resolution mechanism under which
providers may submit disputes to the plan, and requires 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.
4)Requires each health care service plan to ensure that a
dispute resolution mechanism is accessible to noncontracting
providers for the purpose of resolving billing and claims
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disputes.
5)Requires DMHC, on or before July 1, 2001, to adopt regulations
that ensure that plans have adopted a dispute resolution
mechanism. The regulations are to require that any dispute
resolution mechanism of a plan is fair, fast, and
cost-effective for contracting and non-contracting providers.
6)Defines a "provider," for purposes of the Knox-Keene Act
regulating health care service plans, as any professional
person, organization, health facility, or other person or
institution licensed by the state to deliver or furnish health
care services.
FISCAL EFFECT : Unknown
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, this bill
would provide a mechanism to resolve health care provider
disputes that are in conflict with the Knox-Keene Act,
compromise patient care, or are otherwise unfair or
unreasonable contract practices. The author states that at
present, the goal of ensuring that Californians receive
high-quality health care coverage in the most efficient and
cost-effective manner possible is not being achieved.
Physicians, particularly specialists, are leaving the state
and patients are not receiving the care they deserve. The
author states that part of the problem is market imbalance in
that several plans control over 80% of the market, and for
chiropractors, one plan controls over 90% of the market.
Another major factor is the dominance of capitated managed
care as costs have risen while capitated rates have stayed
static or declined. Contract operational disputes involve
significant administrative costs and affect the delivery of
patient care. According to the author, this bill takes the
dispute resolution mechanism in current law and expands it to
cover all disputes under a managed care contract on either an
individual or class basis.
2)SUPPORT . This bill's sponsor, the California Medical
Association (CMA), states this bill is intended to correct a
market imbalance by broadening the existing dispute resolution
process to include all disputes that arise out of the
provider/plan contract. CMA states this bill will allow
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providers to obtain contracts that are fair and reasonable and
sufficient to assure patient access, and that there is a need
for a flexible, fair, fast and effective way to resolve
disputes when dealing with a partner of superior market
strength. CMA states the process contained in this bill will
allow qualified third parties to help break the deadlock
between plans and providers. The University of California
writes in support that this bill provides an important tool to
level the playing field for health care providers who are
often forced to accept unreasonable contracts from health
plans that prescribe terms on a "take-it-or-leave-it" basis.
The California Psychological Association (CPA) and the
California Chiropractic Association (CCA) write that the
disproportionate market dominance of specialized health care
service plans has led to contracting relationships between
plans and providers which are unfair because of the
economically lopsided market, making existing contract dispute
resolution processes ineffective. CPA and CCA state this bill
will prevent a health plan from imposing contract terms that
are not in the best interest of patients.
3)OPPOSITION . The California Association of Health Plans (CAHP)
writes that this bill establishes a broad right for physicians
and other provider groups, irrespective of contractual
relationships, to file lawsuits over virtually any point of
dissatisfaction. CAHP states this bill would make contracts
meaningless, and would tilt negotiations in favor of the
financial considerations of provider groups. Blue Cross of
California writes this bill would be pre-empted by the Federal
Arbitration Act, would allow providers to opt-out of
contracts, and argues that a plan could never enforce or rely
on any provision of a signed and valid contract. PacifiCare
argues this bill could permit physicians to engage in
anti-competitive practices, resulting in increased costs for
consumers. Health Net argues this bill skirts anti-trust
prohibitions under state and federal law that prohibit
collusive bargaining by physicians.
4)STATE ACTION EXEMPTION FROM FEDERAL ANTI-TRUST LAW . Existing
federal law declares every contract, combination in the form
of trust or otherwise, or conspiracy in restraint of trade or
commerce among the several states to be illegal. To establish
anti-trust immunity under the "state action" doctrine, an
activity that would otherwise violate anti-trust law must be
clearly articulated and affirmatively expressed as state
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policy and be actively supervised by the state itself. This
bill proposes to have the court review whether an arbitration
award is supported by substantial evidence, taking into
account certain factors, and to modify the award as necessary
to ensure that the award is supported by such evidence. It is
unclear whether this would be considered to be active
supervision by the state.
5)RELATED LEGISLATION . SB 801 (Speier) requires the Director of
DMHC, or the Commissioner of the Department of Insurance
(DOI), to assist in non-binding negotiations between a health
care provider and a health plan/insurer when a provider and
the health plan/insurer are unable to reach an agreement on
the terms of a contract.
6)PREVIOUS LEGISLATION . AB 1455 (Scott), Chapter 827, Statutes
of 2000 and SB 1177 (Perata), Chapter 825, Statutes of 2000,
among other provisions, requires each health care service plan
to ensure that a dispute resolution mechanism is accessible to
noncontracting providers for the purpose of resolving billing
and claims disputes. AB 1455 and SB 1177 also require, on and
after January 1, 2002, each health care service plan to
annually submit a report to DMHC regarding its dispute
resolution mechanism, and requires the report to include
information on the number of providers who utilized the
dispute resolution mechanism and a summary of the disposition
of those disputes.
AB 1455 and SB 1177 also require DMHC, on or before July 1,
2001, to adopt regulations that ensure that plans have adopted
a dispute resolution mechanism required under existing law.
The regulations are to require that any dispute resolution
mechanism of a plan is fair, fast, and cost-effective for
contracting and non-contracting providers.
7)COMMENT . The April 23rd amendments to this bill did not
conform all of the changes made to the Health and Safety Code
to the Insurance Code. The author intends to address this
with author's amendments in committee.
The bill requires any dispute resolution process established by
a health plan/insurer to provide that a provider may either
file a civil action or, in the event the provider chooses not
to file such an action, that both parties may request that
their differences be submitted to an arbitration panel. It is
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unclear if this provision is intended to have both parties
mutually request to submit their difference to the arbitration
panel, or whether it allows either party to request that their
differences be submitted to an arbitration panel. The author
may wish to clarify the intent of this provision.
The support and opposition listed is on the introduced version
of this bill.
8)DOUBLE REFERRAL . Should this bill pass out of this committee,
it will be referred to the Assembly Committee on Judiciary.
REGISTERED SUPPORT / OPPOSITION :
Support
California Medical Association (sponsor)
American Academy of Pediatrics
American Federation of State, County and Municipal Employees
California Chiropractic Association
California Dental Association
California Podiatric Medical Association
California Psychiatric Association
California Psychological Association
California Psychological Association
Union of American Physicians & Dentists
University of California
Opposition
Association of California Life and Health Insurance Companies
Blue Cross of California
California Association of Health Plans
California Chamber of Commerce
Health Insurance Association of America
Health Net
PacifiCare
Analysis Prepared by : Scott Bain / HEALTH / (916) 319-2097