BILL ANALYSIS
AB 684
Page 1
ASSEMBLY THIRD READING
AB 684 (Ma)
As Introduced February 26, 2009
Majority vote
HEALTH 15-1 APPROPRIATIONS 15-0
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|Ayes:|Jones, Fletcher, Adams, |Ayes:|De Leon, Nielsen, |
| |Block, Carter, De La | |Ammiano, |
| |Torre, Emmerson, Hall, | |Charles Calderon, |
| |Hayashi, Hernandez, | |Krekorian, Duvall, |
| |Bonnie Lowenthal, Nava, | |Fuentes, Monning, Miller, |
| |Hill, Salas , Audra | | |
| |Strickland | |John A. Perez, Price, |
| | | |Skinner, Solorio, Audra |
| | | |Strickland, Torlakson |
|-----+--------------------------+-----+--------------------------|
|Nays:|Conway | | |
| | | | |
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SUMMARY : Increases the interest rate health plans and health
insurers covering dental services must pay for uncontested
claims that are not reimbursed within 60 working days (to 20%
per year) and 90 working days (to 25% per year). Specifically,
this bill requires:
1)Health care service plans covering dental services (health
plans), health insurers covering dental services (health
insurers) and specialized health plans and health insurers
covering dental services (dental plans) to pay interest at the
rate of 20% per year on an uncontested claim that is not
reimbursed within 60 working days after receipt. Requires
interest to begin with the first calendar day after the 60
working day period.
2)Health plans, health insurers, and dental plans to pay
interest at the rate of 25% per year on an uncontested claim
that is not reimbursed within 90 working days after receipt.
Requires interest to begin with the first calendar day after
the 90 working day period.
EXISTING LAW :
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1)Requires the regulation of health plans by the Department of
Managed Health Care (DMHC) and the regulation of health
insurers by the California Department of Insurance (CDI).
2)Requires health plans and health insurers to reimburse
uncontested claims no later than 30 days for health insurers
and non-health maintenance organization (HMO) health plans and
45 working days for HMOs, after receipt of the claim.
3)Requires, if a claim is not reimbursed within the 30 or 45
working day time period, that interest accrue at the rate of
15% per year, for health care service plans, and 10% per year
for health insurers, beginning with the first calendar day
after the 30-working day period.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Minor absorbable workload to DMHC and CDI to continue
oversight of requirements regarding prompt payment by health
plans and insurers.
2)According to data published by DMHC, which regulates a
majority of dental health coverage in California, only a
handful of specific dental payment claims of the kind
addressed in this bill have been made over the past few years.
According to the California Dental Association (CDA), the
sponsors of the bill, quantitative information from a
membership survey indicates late payments are an increasing
problem and far more common than what is reported to
regulators.
3)Any interest payments required by dental health plans and
insurers under provisions of this bill are minor, literally
pennies a day past certain accounts receivable time periods.
For example, a claim of $334 dollars not paid in a timely
manner would require interest payments of 18.5 cents per day
for a penalty for payment between 61 and 90 days and 23 cents
per day for a penalty of payment after 90 days.
COMMENTS : This bill is sponsored by CDA to establish tiered
increases in the interest penalties for non-payment of claims
beyond the current time requirements, to 20% per year for claims
not paid within 60 days of receipt, and 25% per year for claims
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not paid within 90 days of receipt. CDA believes that the
current penalty is too modest to induce payers to pay claims on
time, making the payment of penalties simply a cost of doing
business. CDA indicates it receives a significant number of
calls from its member dentists requesting assistance in dealing
with issues of late payment on non-disputed dental claims. CDA
states dental offices consistently reported that while routine
dental procedures (such as cleanings, exams, restorations) are
processed within the legally required period of time, higher
cost treatments (such as extensive crowns, bridges, and
removable prosthetics) take longer to be processed and paid.
Two dental offices in particular have been struggling with
$20,000 and $30,000 respectively in outstanding claims, which is
a significant financial burden to any small business. CDA
argues this bill is a reasonable measure that will not impact
those dental plans working within the legally required timeframe
and only penalize those companies that do not.
Prompt pay statutes require health plans and insurers to pay
claims within specified timeframes. The current interest
penalty of 10% for CDI regulated plans and 15% for DMHC
regulated plans would be increased by this bill to 20% for
claims paid between 61-90 days and to 25% for claims paid after
90 days. On an average dental claim of $150, the amount owed in
an interest penalty for CDI insurers would increase from 4.2
cents per day to 8.3 cents per day for claims reimbursed between
61-90 days (the interest penalty increase from 10% to 20%). For
claims paid after 90 days, the amount owed from the interest
penalty would increase from 4.2 cents per day to 10.4 cents per
day (the interest penalty increase from 10% to 25%). For DMHC
plans, the amount owed from the interest penalty would increase
from 6.2 cents per day to 8.3 cents per day (the interest
penalty increase from 15% to 20%) for claims paid within 61-90
days, and from 6.2 cents per day to 10.4 cents per day for
claims paid past 90 days (the interest penalty increase from 15%
to 25%).
According to the DHMC Web site, from 2002 through the present,
there have been 54 enforcement actions involving late claims
payment. Of the 54, five involved dental plans with a combined
penalty of $74,000. DMHC's Office of Provider Oversight reports
7,064 complaints received from all providers during 2008. Of
the 7,064 complaints, 48 were from dental providers. Of those
48 complaints, 16 dental provider complaints involved an issue
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of untimely payment.
This bill is opposed by the California Association of Dental
Plans (CADP), which argues current law provides substantial
specific penalties for late penalties, that the DMHC has
mechanisms in place to review provider complaints and intervene
when appropriate, that a review of some claims of slower payment
reveals that almost 30% of dental claims are handwritten and
sent by mail not using computer billing technology, that
dentists and dental plans should be able to manage their
insurance contracting relationships without state involvement,
and if dentists are unhappy with the interaction with the plan,
they can choose not to contract. CADP asks that dental plans
and the dentists settle their payment disputes amongst
themselves. Delta Dental of California (DDC) argues it pays
99.995% of clean claims in compliance with prompt payment
requirements. DDC argues late dental claims are not a problem
meriting a legislation solution, there is no reason to legislate
a specific set of penalties for dental claims, and existing law
already sufficiently discourages late payment of claims.
Analysis Prepared by : Scott Bain / HEALTH / (916) 319-2097
FN: 0000452