BILL ANALYSIS �
AB 1059
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Date of Hearing: May 4, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1059 (Huffman) - As Introduced: February 18, 2011
Policy Committee: HealthVote:11-4
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill requires the California Department of Managed Health
Care (DMHC) to use specific administrative enforcement
mechanisms when a health plan violates specified provisions of
the Knox-Keene Act. Specifically, this bill:
1)Requires the director of DMHC to do both of the following
after a determination of an unfair payment pattern by a health
plan against providers:
a) Assess an administrative penalty of not less than the
amount owed to the provider, plus interest, deposited into
a special fund created by the bill.
b) Require health plans to make payment owed to the
provider, plus interest.
2)Authorizes the director to provide an exemption to these
administrative penalty provisions if the payment of such
amounts would create risk of health plan fiscal insolvency.
3)Specifies that providers recovering reimbursement under this
bill not be required to resubmit claims except under
extraordinary circumstances.
FISCAL EFFECT
1)Potential for increased staffing costs to DMHC, estimated in
the range of $1-2 million to review and assess provider
complaints, and for increased enforcement to ensure that
penalties are assessed and providers are paid according to the
provisions of this bill.
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2)Unknown increased revenues to the Managed Care Administrative
Fines and Penalties Fund from increased penalties levied
against health plans, likely in the range of $500,000 to tens
of millions of dollars annually.
3)Staffing costs and penalty revenue estimates are highly
uncertain, due to unknown plan and provider behavior in
response to the bill's provisions. To the extent health plans
respond to this bill by adjusting their claims payment
practices to avoid provider complaints and increased
penalties, associated staffing costs and revenues would
decrease. If providers respond to this bill by increasing
complaint reports due to the increased likelihood of
reimbursement, staffing costs and revenues would increase.
Additionally, the increase in penalty revenues due to this
bill would depend on DMHC's determinations of unfair payment
patterns and on penalties levied under current law.
COMMENTS
1)Rationale . According to the author, this bill ensures that
enforcement actions by the DMHC are adequate to deter health
plans from underpaying physicians. Currently, DMHC has
discretion to assess penalties on health plans for unfair
payment practices, but the author contends that the DMHC has
consistently failed to take adequate enforcement action
against plans that violate the law.
2)Related Legislation . AB 1155 (Huffman) in 2007 was nearly
identical to this bill and was vetoed. The veto message
indicated that current law already provides DMHC with adequate
authority to assess penalties, that the department has taken a
number of actions to resolve payment disputes, and that
physicians should make use of the internal dispute resolution
process.
AB 1455 (Chapter 827, Statutes of 2000) established new
requirements for prompt payment of provider claims by health
plans, defined and prohibited unfair payment practices, and
permitted DMHC to impose monetary penalties when unfair
payment practices are identified. DMHC adopted regulations
pursuant to this chapter requiring health plans to maintain an
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internal dispute resolution process.
SB 1379 (Ducheny), Chapter 607, Statutes of 2008 created the
Managed Care Administrative Fines and Penalties Fund to
deposit revenues from fines and penalties levied against
health plans. It also redirected the first million dollars
deposited into the fund annually to the Steven M. Thompson
Physician Corps Loan Repayment Program, and any revenues
greater than $1 million to the Major Risk Medical Insurance
Program to fund health care for individuals denied coverage in
the individual market.
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081