BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1059|
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THIRD READING
Bill No: AB 1059
Author: Huffman (D)
Amended: 8/30/11 in Senate
Vote: 21
SENATE HEALTH COMMITTEE : 8-1, 07/06/11
AYES: Hernandez, Strickland, Alquist, Blakeslee, De Le�n,
DeSaulnier, Rubio, Wolk
NOES: Anderson
SENATE APPROPRIATIONS COMMITTEE : 8-0, 08/25/11
AYES: Kehoe, Alquist, Emmerson, Lieu, Pavley, Price,
Runner, Steinberg
NO VOTE RECORDED: Walters
ASSEMBLY FLOOR : 49-26, 06/02/11 - See last page for vote
SUBJECT : Health care service plans
SOURCE : American College of Emergency Physicians,
California
Chapter
DIGEST : This bill requires the director of the
Department of Managed Health Care (DMHC), upon making a
final determination that a health care service plan has
underpaid or failed to pay a provider, to compel the health
plan to pay the provider the amount owed, plus interest.
ANALYSIS : Existing law:
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1.Provides for the regulation of health plans by DMHC in
the Knox-Keene Health Care Service Plan Act of 1975
(Knox-Keene).
2.Requires a health plan to pay claims, as specified, for
health care services provided as soon as practicable, but
no later than 30 working days after receipt of the claim
by a health plan, or if the health plan is a health
maintenance organization, no later than 45 working days
after receipt of the claim.
3.Prohibits a health plan from engaging in an unfair
payment pattern, and defines an "unfair payment pattern"
to mean any of the following:
Engaging in a demonstrable and unjust pattern of
reviewing or processing complete and accurate claims
that result in payment delays;
Engaging in a demonstrable and unjust pattern of
reducing the amount of payment or denying complete and
accurate claims;
Failing on a repeated basis to pay the uncontested
portions of any claim within timeframes required under
Knox-Keene; or
Failing on a repeated basis to automatically
include the interest due on claims that are not paid
within the 30 or 45 day timelines applicable for
uncontested claims.
1.Prohibits a health plan from delegating its liability for
an unfair payment pattern to another entity, and
specifies that penalties due to an unfair payment pattern
shall not preclude, suspend, affect, or impact any other
duty, right, responsibility, or obligation under a
statute or under a contract between a health plan and a
provider.
2.Provides, in regulations, that a health plan's failure to
comply with claims settlement laws and regulations may
constitute the basis for disciplinary action, and
authorizes the Director of DMHC to impose civil,
criminal, and administrative remedies in any combination.
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3.Authorizes the Director to impose additional penalties
and remedies, including enhanced time periods for
processing claims or appointment of a claims monitor, for
a health plan the Director determines is engaged in a
demonstrable and unjust payment pattern.
4.Authorizes the Director to suspend or revoke a Knox-Keene
license or assess administrative penalties, as specified,
if the Director determines that the licensee has
committed violations of Knox-Keene. Also authorizes the
Director to assess civil penalties for any violation of
any Knox-Keene law or regulation, not to exceed $2,500
for each violation.
5.Requires the Director, pursuant to regulations, when
assessing administrative penalties against a health plan,
to set the appropriate amount of the penalty for each
violation of Knox-Keene based on specified factors,
including but not limited to the following:
The nature, scope, and gravity of the violation;
The good or bad faith of the plan;
The health plan's history of violations;
The willfulness of the violation;
The nature and extent to which the health plan
cooperated with the DMHC's investigation;
The nature and extent to which the health plan
aggravated or mitigated any injury or damage caused by
the violation;
The nature and extent to which the health plan has
taken corrective action to ensure the violation will
not recur;
The financial status of the health plan;
The financial cost of the health care service that
was denied, delayed, or modified;
Whether the violation is an isolated incident; and
The amount of the penalty necessary to deter
similar violations in the future.
1. Establishes, pursuant to regulations, requirements
that health plans must implement in their claims
settlement practice, including timeliness standards for
the adjudication of complete claims, mandatory contract
provisions, mandated acknowledgements and disclosures
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and mandatory health plan provider dispute resolution
procedures.
2. Prohibits a health plan from rescinding or modifying
an authorization for a specific type of treatment after
the provider renders the health care service in good
faith and pursuant to the health plan's authorization.
This bill:
1.Requires the Director, upon a final determination that a
health plan has underpaid or failed to pay a provider in
violation of Knox-Keene requirements related to unfair
payment practices, to require the health plan to pay the
provider an amount not less than the amount owed plus
interest.
2.Prohibits a provider from being required to resubmit a
claim to a health plan in order to receive payment,
unless the Director (a) makes a determination that an
extraordinary circumstance exists, and (b) requires the
health plan to add to the amount owed to the provider a
reasonable amount necessary to reimburse the provider for
the cost of resubmission.
3.Specifies that the remedies provided by this section are
not exclusive, and permits them to be sought and employed
in any combination with civil, criminal, and other
administrative remedies deemed warranted by the Director
to enforce health plan licensure provisions in statute.
4.Requires the calculation of the amount of the penalty
imposed to be based on the date on which the health plan
committed the violation, as specified.
5.Prohibits a health plan from being required to pay a
provider more than the amount owed plus interest on a
claim, and permits DMHC to take into account any other
payments that have been made on that same claim.
6.Prohibits a health plan from delegating its statutory
liability under this bill.
7.Clarifies that the intent of these provisions is to
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utilize DMHC's existing provider complaint resolution
process.
Background
Before the DMHC can begin a review, the provider is
required to submit the dispute to the health plan's Dispute
Resolution Mechanism, for a minimum of 45 working days or
until receipt of the health plan's written determination,
whichever period is shorter. Claims not resolved through
the plan's process may be referred to DMHC's Provider
Complaint Unit (PCU), established in September 2004.
DMHC also has a six-month pilot Independent Dispute
Resolution Process (IDRP) to adjudicate claims disputes for
non-contracted providers of emergency hospital and
physician services for HMO enrollees in what DMHC refers to
as "a fast, fair, and cost-effective way to resolve claim
payment disputes with health care service plans and their
capitated providers." The Maximus Center for Health
Dispute Resolution (CHDR) has been selected by the DMHC to
conduct an independent review and render the decisions in
provider payment disputes during the pilot program. The
CHDR, a nationally accredited health appeals organization,
serves more than 25 other states in the role of reviewer of
appeals made by health plan enrollees, as well as
performing reviews for the federal Centers for Medicare and
Medicaid Services. By submitting a claim dispute through
the IDRP, the provider agrees not to invoice, balance bill,
or otherwise seek to collect any payment from the health
plan enrollee, except for applicable co-payments and
deductibles.
In addition to recovering disputed payments for providers,
DMHC reports that through February 2011, the PCU levied
more than $650,000 in fines to health plans which it
determined had improperly paid claims in violation of state
law. DMHC reports that the fines include two fines
totaling $350,000 against Health Net in 2005 for making
incorrect payments to emergency doctors and contracted
health care facilities, $200,000 against Blue Cross for
failing to properly pay interest and penalties on late
claims, and $50,000 against Blue Shield for making payments
directly to patients instead of providers.
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According to DMHC, from January 1, 2011, to the present,
the PCU has received 2,652 provider complaints, prosecuted
10 matters involving claims payment violations, and
assessed $531,000 in penalties. In addition, DMHC has
received 31 applications to participate in the IDRP to
resolve provider grievances. According to DMHC, the PCU
generally does not review complaints related to whether a
health plan is appropriately paying usual and customary
charges for services provided by providers who are not
under contract with health plans, but DMHC is in the
process of amending the existing payment criteria to
facilitate such review.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13
2013-14 Fund
DMHC enforcement up to the low
hundreds of Special*
thousands of dollars annually
*Managed Care Fund
SUPPORT : (Verified 8/29/11)
American College of Emergency Physicians, California
Chapter
California Academy of Family Physicians
California Association of Marriage and Family Therapists
California Medical Association
California Psychiatric Association
California Psychological Association
California Society of Anesthesiologists
California Society of Dermatology and Dermatologic Surgery
ARGUMENTS IN SUPPORT : The California Chapter of the
American College of Emergency Physicians (cal/acep), writes
that AB 1059 would ensure that when a health plan is found
to have underpaid physicians, the physician is paid the
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correct amount without incurring even more costs due to
having to resubmit claims. CAL/ACEP states that, in some
instances when DMHC has taken an enforcement action against
a health plan for underpaying physicians, DMHC requires the
physician to resubmit their claim to obtain full payment.
For emergency physicians, the amount of underpayment is
often less than $100 and the cost to find the old claim and
resubmit is more than the amount of underpayment, forcing
the physician to lose even more money when seeking
restitution. CAL/ACEP argues that enforcement actions by
DMHC often allow the offending health plan to profit on
their illegal act, and cites a 2004 case in which DMHC
found that Health Net underpaid physicians between $6
million and $7 million over a 9 month period. In that
case, the penalty issued was a $250,000 fine and $750,000
in restitution to physicians, which allowed Health Net to
profit by their illegal activities by more than $5 million.
The California Psychological Association writes that,
despite previous efforts to address widespread payment
abuses by HMOs, there are still patterns of late payments,
non-payments, and consistent denials of payment after
providing prior authorization for the service. The
California Society of Anesthesiologists states that,
although anesthesiologists provide services that are
mandated by law in emergency situations, some health plans
try to underpay for essential services. The California
Academy of Family Physicians states that many primary care
offices are operating on razor thin fiscal margins and
financial gaming of those who have lawfully provided
valuable health care services is a dangerous gamble with
California's already depleted primary care workforce. The
California Medical Association writes that this bill
ensures physicians who are victims of HMOs breaking the law
are made whole, deters future violations of the law by
ensuring sufficient penalties are assessed, and protects
the health care delivery system and patient care by
ensuring physicians are financially capable of providing
service for patients. The California Psychiatric
Association states that this bill's provisions are common
sense and clarify existing law with respect to fairness in
managed care organizations dealings with physician
providers.
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ASSEMBLY FLOOR : 49-26, 06/02/11
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Buchanan,
Butler, Charles Calderon, Campos, Carter, Cedillo,
Chesbro, Davis, Dickinson, Eng, Feuer, Fong, Fuentes,
Furutani, Gatto, Gordon, Halderman, Hayashi, Roger
Hern�ndez, Hill, Hueso, Huffman, Lara, Bonnie Lowenthal,
Ma, Mendoza, Mitchell, Monning, Pan, Perea, V. Manuel
P�rez, Portantino, Skinner, Solorio, Swanson, Wieckowski,
Williams, Yamada, John A. P�rez
NOES: Achadjian, Bill Berryhill, Conway, Cook, Donnelly,
Fletcher, Beth Gaines, Garrick, Grove, Hagman, Harkey,
Huber, Jeffries, Jones, Knight, Logue, Mansoor, Miller,
Morrell, Nielsen, Norby, Olsen, Silva, Smyth, Valadao,
Wagner
NO VOTE RECORDED: Galgiani, Gorell, Hall, Nestande, Torres
CTW:nl 8/29/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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