BILL ANALYSIS �
AB 1742
Page 1
Date of Hearing: April 24, 2012
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 1742 (Pan) - As Amended: March 19, 2012
SUBJECT : Health care coverage: payment for benefits.
SUMMARY : Requires all health care service plans and individual
insurers (collectively referred to as issuers), except
specialized health plans and insurers, to permit enrollees to
assign benefits directly to health care providers for health
care services in the same way that existing law requires such
benefits for group issuers to be assigned to the Department of
Health Care Services (DHCS) on behalf of beneficiaries of the
Medi-Cal program. Specifically, this bill :
1)Amends existing law which applies to group health plans to
allow assignment of an enrollee's or subscriber's right to
reimbursement for health care services to the provider who
furnished services.
2)Requires the provider to submit to the issuer an itemized bill
for the service, the name and address of the person to be
reimbursed, and the name and contract number of the enrollee.
3)Requires on and after January 1, 2013, a disability insurer to
pay individual insurance benefits contingent upon, or for
expenses incurred on account of, hospitalization or medical or
surgical aid to the person or persons having provided the
hospitalization or medical or surgical aid to the person or
persons having provided the aid where that person has
qualified for reimbursement by submitting an itemized bill, as
specified. Limits the amount of that payment from exceeding
the amount of the benefit covered by the policy.
4)Exempts an issuer providing benefits pursuant to a specialized
health plan contract or health insurance, as defined.
EXISTING LAW :
1)Requires group contracts administered by health plans licensed
under the Knox-Keene Health Care Service Plan Act of 1975
(Knox-Keene) to authorize and permit assignment of enrollee's
or subscriber's right to reimbursement to DHCS when services
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are provided to a Medi-Cal beneficiary.
.
2)Requires health insurers to pay group insurance benefits, for
or contingent upon hospitalization or medical or surgical aid,
upon written consent of the insured, to the person or persons
having provided or having paid for the services, if the person
qualifies for reimbursement by submitting specified
information about the service and the insured person or
dependent is covered by the policy.
3)Requires a health insurer to pay group insurance benefits to
DHCS, in the case of a Medi-Cal beneficiary, where DHCS has
paid for hospital, medical, or surgical services, as
specified.
4)Requires health plans licensed under Knox-Keene to cover
emergency services as a basic health care service and to
directly reimburse providers within specified timeframes for
emergency services and care provided to plan enrollees for the
purpose of stabilizing the enrollee, unless the plan enrollee
did not require emergency services and the enrollee should
have known that an emergency did not exist, as specified.
5)Requires contracts between providers and health plans to be in
writing and prohibits, except for applicable copayments and
deductibles, a provider from invoicing or balance billing a
plan's enrollee for the difference between the provider's
billed charges and the reimbursement paid by the plan or the
plan's capitated provider for any covered benefit.
6)Requires each contract between an issuer and a provider to
contain provisions requiring a fast, fair, and cost-effective
dispute resolution mechanism under which providers may submit
disputes to the issuer and requires plans and insurers to
notify providers of the procedures for processing and
resolving disputes, including the location and telephone
number where information regarding disputes may be submitted.
7)Allows a non-contracted provider to dispute the
appropriateness of a Knox-Keene health plan's computation of
the reasonable and customary value and requires the health
plan to respond to the dispute through the health plan's
mandated provider dispute resolution process.
8)Establishes, pursuant to regulations adopted by the Department
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of Managed Health Care (DMHC) and the California Department of
Insurance (CDI), similar but not identical requirements
issuers must implement in their claims settlement practices
with providers.
9)Permits an enrollee, an insured or a health care provider to
file a written complaint with DMHC or CDI with respect to the
handling of a claim or other obligation under a health plan
contract or health insurance policy, as specified, and
requires DMHC and CDI to respond to the complaint in a
specified manner within specified timeframes.
10)Provides under the Patient Protection and Affordable Care Act
(ACA), that a qualified health plan (participating in state
exchanges) shall not be treated as covering essential health
benefits (EHBs) unless the plan provides that coverage for
emergency department services will be provided without
imposing any requirement under the plan for prior
authorization of services or any limitation on coverage where
the provider of services does not have a contractual
relationship with the plan that is more restrictive than the
requirements or limitations that apply for in network
providers; and, if such services are provided out-of-network,
the cost-sharing requirement is the same requirement that
would apply if such services were provided in-network.
11)Requires, under the ACA, beginning on September 23, 2012,
each plan to provide a summary of benefits to an applicant at
the time of application or an enrollee prior to the time of
enrollment or reenrollment, subject to a fine of $1,000 for a
willful failure to provide the following information:
coverage including cost sharing for EHBs, any exceptions,
reductions and limitations, on coverage, renewability and
continuous provisions, contact information for consumer
information, and other information.
FISCAL EFFECT : This bill has not yet been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, in 2007 Blue
Cross of California implemented a new policy known as "member
direct pay" where the health plan sends the payment directly
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to the patient rather than the provider when the patient sees
an out-of-network provider. The author states that this
policy unnecessarily puts a burden on patients to manage
billing issues between the insurance company and provider.
2)BACKGROUND . Regulation and oversight of health insurance in
California is split between two state departments. DMHC
regulates health plans under Knox-Keene. DMHC health plans
include health maintenance organizations (HMOs) and some
Preferred Provider Organization (PPO) plans. CDI regulates
disability insurers offering health insurance, which includes
PPO plans and traditional indemnity insurance. An HMO is a
managed care arrangement that provides and arranges for health
care through contracted or employed providers and generally
only covers health services provided by network providers,
except in an emergency. In a PPO arrangement, the health
insurer contracts with a network of medical providers who
agree to accept lower fees and/or to control utilization.
Enrollees in a PPO plan receive a higher level of benefits if
they go to a preferred provider than if they go to a
non-preferred or non-contracted provider.
3)HOW ASSIGMENT WORKS . Assignment of benefits refers to an
arrangement where a patient requests that his or her health
benefit payments be made directly to a designated person or
facility, such as a physician or hospital. All health plans
under Knox-Keene, HMOs and the PPOs subject to DMHC
jurisdiction are required to directly reimburse providers for
emergency care and services, providing certain statutory and
regulatory conditions are met. Otherwise, HMO model plans
would generally have no legal obligation to reimburse
non-contracted providers, except in an emergency, since the
plan contract provides that enrollees must get services from
network providers in order for the benefits to be covered.
PPO plan enrollees may seek services from non-contracted
providers. Traditional indemnity insurance and PPO coverage
plans have historically reimbursed the patients directly for
covered services but have generally allowed for assignment of
benefits to network providers, and even for out-of-network
providers. If a patient signs a written authorization, the
provider may seek, and the insurer must pay, the provider
directly. Patients would still be liable for their share of
costs, which can be substantial for a provider outside the PPO
network. For example, a PPO policy might pay 80% of the
negotiated rate for contracted providers and the patient pays
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the remaining 20% of that negotiated rate. For non-contracted
providers, the policy might only pay 60% of what the carrier
determines is the usual and customary fee and the patient is
liable for the difference between what the insurer paid and
the provider's billed charges, which might be higher than
usual and customary fees. Even where the patient assigns the
benefits to the provider, unless the provider waives the right
to payment, the patient remains liable for full payment to the
provider.
According to the DMHC Website, in a PPO, when a patient goes to
an out-of-network provider, the patient's cost usually depends
on the plan's Maximum Allowable Amount for the service, which
is the most the plan will pay for the service. DMHC provides
the following example as it relates to hospital care:
---------------------------------------------------------------
| |Network Hospital |Out-of-Network Hospital |
| |(PPO pays 80%) |(PPO pays 60%) |
|---------------+---------------------+-------------------------|
|Hospital |$22,000 |$22,000 |
|charge | | |
|---------------+---------------------+-------------------------|
|The PPO's | | |
|Maximum |$14,000 |$14,000 |
|Allowable | | |
|Amount for the | | |
|service | | |
|---------------+---------------------+-------------------------|
|PPO pays |$14,000 x 80% = |$14,000 x 60% = $8,400 |
| |$11,200 | |
|---------------+---------------------+-------------------------|
|Patient pays |$14,000 x 20% = |$14,000 x 40% = $5,600 |
| |$2,800 |plus |
| | |all of the amount over |
| | |the allowed cost: |
| | |$22,000 - $14,000 = |
| | |$8,000 for a total of |
| | |$5,600 + $8,000 = |
| | |$13,600 |
---------------------------------------------------------------
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In addition to the added cost to the patient for going to an
out-of-network provider, a PPO may exclude amounts the patient
pays to out-of-network providers for covered services from
application toward the deductible and annual maximum copayment
limits.
4) PROVIDER AND CONSUMER COMPLAINTS . Both CDI and DMHC now
respond to complaints from providers regarding inadequate,
delayed, or incomplete payments from health plans and health
insurers. According to DMHC, the Independent Dispute
Resolution Process (IDRP) is intended to afford non-contracted
providers of emergency hospital and physician services for HMO
enrollees a fast, fair, and cost effective way to resolve
claim payment disputes with health plans and their capitated
providers (collectively referred to as "payers"). IDRP is
voluntary for both non-contracted providers and payers.
According to DMHC, since 2009, 85 IDRP cases have been
completed: 46 disputes have been overturned in favor of the
provider and 39 have been overturned in favor of the plan.
None of these cases involve assignment of benefits issues.
According to CDI, in 2010 there were five complaints related to
assignment of benefits. Two of the five involved the insured
getting paid rather that the provider even though an
assignment of benefits was on file. One case was a patient
complaint that the provider was paid directly even though
there was no assignment of benefits on file and the patient
had already paid the provider. The patient was having
difficulty getting reimbursed from the provider. In 2011, CDI
received 24 complaints related to assignment of benefits: two
from consumers, 22 from providers (20 of which were from the
same provider and involved a self-funded plan outside of CDI's
jurisdiction). Of the four remaining: one involved workers
compensation insurance and another had to do with a
prescription drug plan. A third was a provider complaint that
the insured was paid instead of the provider, even though an
assignment of benefits was on file. The fourth case involved
the consumer complaining that the health insurer received
direct payment even though an assignment of benefits was not
on file. The patient had paid the provider already and was
having trouble getting reimbursement.
5)CONSUMER PROTECTIONS . As a licensed health plan and if
applicable, specialized health plan, under Knox-Keene certain
standards are required such as that services be furnished in a
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manner providing continuity of care and ready referral of
patients to other providers consistent with good professional
practice. Additionally, all services shall be readily
available at reasonable times to each enrollee consistent with
good professional practice. Further, regulations require
services to be within reasonable proximity of enrollees' homes
or workplaces, and distance may not be an unreasonable barrier
to accessibility. Plans must monitor accessibility and have a
system designed for correcting problems, if they develop.
Regulations also require each plan to ensure contracted
provider networks have adequate capacity and availability to
offer enrollees appointments for covered services according to
specified time frames: 48 hours of the time of request for
urgent appointments that don't require prior authorization and
96 hours for urgent appointments that require prior
authorization; 10 to 15 business days of the request for
non-urgent appointments depending upon the type of provider;
and preventive services and periodic follow up care may be
scheduled consistent with professionally recognized standards
of practice.
6)PROSPECT . The California Supreme Court decision in Prospect
Medical Group v. Northridge Emergency Medical Group, 45 Cal.
4th 497 (2009) concluded that billing disputes over emergency
medical care must be resolved solely between the emergency
room physician, who is entitles to a reasonable payment for
his or her services, and the health plan, which is obligated
to make the payment. The physician can't inject the patient
into the dispute by billing for the additional amount. This
is referred to as "balance billing." This case ended a long
standing practice of emergency physicians attempting to bring
collection actions against plan enrollees when they were
unhappy with the rate paid by the plan.
7)SUPPORT . According to the California Medical Association
(CMA), this bill seeks to obtain parity in the law by
proposing language that would require health plans exempt from
current law to issue payments directly to out-of-network
providers whose patients have requested and signed an
assignment of benefits agreement with their provider. The CMA
indicates that some health plans view out-of-network
physicians, who are not bound by the PPO's contracted rates,
as risks to their bottom line. According to CMA, in 2007
Anthem Blue Cross implemented a new policy that when patients
see an out-of-network physician, Blue Cross refuses to honor
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the patient's assignment of benefits and sends the payment
directly to the patient rather than the physician. CMA
contends that Blue Cross stated its reasons for implementing
this new policy in a News Flash to their brokers, which is
because out-of-network physicians are not confined by the
in-network charges for services, Blue Cross wants to
discourage members from seeking care from out-of-network
physicians and encourage out-of-network providers to join the
Blue Cross network. CMA argues that the impact of this policy
has been to strain physician-patient relationships, divert
health care dollars outside of the system when patients
mistakenly or intentionally misappropriate those funds for
personal use, placed health care consumers in untenable
financial situations and put patients at risk for
higher-out-of pocket expenses because the patient lacks the
expertise that a provider's office has to identify whether the
plan paid the appropriate amount. CMA states that the problem
is limited to a small subset of health plans offering PPO
products, specifically Blue Cross and Blue Shield, as all
others are already required to honor assignment of benefits
per existing law.
8)OPPOSITION UNLESS AMENDED . Health Access California requests
amendments to assure consumers enrolled in plans that operate
as PPOs and point of service plans the same protections that
the Supreme Court expressly provided. This bill must plainly
exempt all emergency services by any health plan or health
insurer, if not Health Access will remain opposed. Health
Access questions whether any products that provide for
assignment of benefits should exist at all, but if they are
permitted, Health Access believes substantial consumer
protections should be in place to assure that consumers have
the opportunity to make informed choices. Health Access
requests the following: a) disclosure at point of purchase
that the consumer will be exposed to out of pocket costs and
lack of carrier credentialing of providers; b) an estimate of
costs and that the credentials of the provider have not been
reviewed and approved by the carrier; c) disclosure at the
level of literacy appropriate for consumers, in multiple
languages; d) the consumer should not be required to pay in
advance for any cost sharing but should be billed after the
carrier pays the provider, in order to assure that the
consumer is not overcharged; and, e) consumers should not be
expected to pay more than the cost of care, as amended this
bill allows for unlimited exposure to charges by providers.
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9)OPPOSITION . This bill is opposed by health plans and
insurers. America's Health Insurance Plans (AHIP) writes that
this bill threatens efforts to provide consumers with
meaningful health care choices and affordable coverage
options, and it would significantly diminish the ability of
plans to enter into contracts because it eliminates incentives
for providers to contract with health plans, which results in
higher costs for covered services and eliminates quality,
safety, and accountability included in preferred provider
contracts. AHIP argues that this bill lacks transparency for
non-contracted providers to provide cost information to
patients, and will complicate the ability of health plans to
meet the data reporting criteria for being a Qualified Health
Plan under the ACA. AHIP states that small employer and
individual markets are extremely price sensitive and this bill
has the potential to increase premiums by destabilizing
provider networks and increasing costs due to higher
out-of-network charges. Finally, AHIP points out that this
type of bill works against efforts to implement quality
improvement programs through the health care system. Anthem
Blue Cross believes by inhibiting the plan's ability to
contract with providers this bill will increase the prevalence
of "balance billing," which is the largest grievance received
by a plan. Anthem Blue Cross states that members are only
protected from balance billing if they receive services from a
contracting provider or if they have a DMHC product and
receive emergency services. The California Association of
Dental Plans (CADP) contends that this bill allows a
non-contracting dentist to reap one of the primary benefits
given to a contracting dentist without submitting to any of
the contractual obligations. CADP raises concerns, even with
recent amendments exempting specialized plans, on behalf of
their multi-line medical plan members that provide dental
plans and benefits coverage that would be subject to this
bill. CADP states that under the ACA pediatric dental
benefits must be included or imbedded in the medical plan to
comply with EHBs requirements in plans participating in the
insurance market outside of the California Health Benefit
Exchange. Such coverage administered by the contracted dental
carrier for the medical plan would be swept into the
requirements of this bill.
10)RELATED LEGISLATION .
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a) AB 1579 (Campos), also pending in the Assembly Health
Committee, requires issuers to pay a non-contracting dental
provider directly for covered services rendered to an
enrollee or insured in certain circumstances. AB 1759 will
be amended to include consumer disclosures and a written
cost estimate.
b) SB 1373 (Lieu), pending in the Senate, requires, when an
enrollee or insured seeks care from a non-contracting
provider, the provider to provide a specified written
notice to the enrollee or insured informing the enrollee or
insured that the provider is not in the enrollee's or
insured's plan or provider network, as specified.
Prohibits a health facility or a provider group from
holding itself out as being within a plan network unless
all of the individual providers providing services at the
facility or with the provider group are within the plan
network.
11)PREVIOUS LEGISLATION .
a) AB 2805 (Ma) of 2008, would have required issuers to
permit enrollees to assign benefits directly to health care
providers, or pay providers directly, respectively, for
health care services in the same way that existing law
requires such benefits be assigned or paid directly to
providers of beneficiaries of the Medi-Cal program. AB
2805 failed passage on the Assembly floor.
b) AB 1455 (Scott), Chapter 827, Statutes of 2000, bars
Knox-Keene health plans from engaging in unfair payment
patterns in the reimbursement of providers. AB 1455 also
contained a number of other provisions regarding payment
practices of health plans, including requiring health plans
to make their dispute resolution process available to
non-contracting providers.
c) AB 2309 (Woodruff), Chapter 744, Statutes of 1993,
requires health plans and health insurers that cover the
expenses of health care services to permit the insured or
covered person to assign reimbursement to the provider of
services, in which case the insurer shall directly pay the
provider, custodial parent, or DHCS for Medi-Cal
beneficiaries.
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12)POLICY COMMENT . In a market based system, a party which has
more leverage will fare better in a negotiation. In this
case, this bill would require in law a business practice
(assignment of benefits) which would make it easier for
out-of-network providers to obtain payment from an issuer.
Even with an assignment of benefit requirement, unless the
provider waives some of his or her fee, he or she will still
have to collect cost-sharing obligation from the patient. If
opponents are correct in their assertion that direct payment
is one of the most significant reasons providers agree to join
a network, often at discounted rates, then California could
see an erosion of HMO and PPO managed care networks. On the
other hand, proponents argue that plans will still be able to
offer in network providers a sufficient number of patients
which should make it beneficial for providers to want to join
or remain in a plan's network.
California has a long history with managed care. Good or bad,
rates have traditionally been lower in California compared to
the rest of the country. Over the last 15 years, the
Legislature has passed many laws to strengthen consumer rights
and protections to ensure patients in managed care have access
to important benefits such as adequate networks, timely access
to care and grievance opportunities. The concept of managed
care is further embraced with the passage of federal health
reform. Under health reform the state and federal government
are moving toward more integrated and coordinated care through
accountable care organizations models and patient health
homes.
From the issuer and provider perspective there are many
legitimate business reasons to support or oppose this bill.
Policymakers may want to explore the implications of
assignment of benefits mandates for patients. On the one
hand, patients will not be burdened with passing payment
issued by the plan on to the provider. In anticipation of
health reform or other life transitions, a patient who changes
plans may have less of a burden remaining with their current
providers, who may not be in a new issuer's network, but he or
she will have to contribute more out-of-pocket to do this.
However, as the CDI complaint data suggest even with
assignment of benefits a provider may still charge the patient
the full fee, and if the issuer pays the provider directly,
the patient may have trouble getting reimbursed from the
provider.
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When a consumer chooses a PPO, he or she is usually making a
conscious choice to pick a plan type that may cost him or her
more out-of-pocket, but that gives him or her flexibility to
go to providers who are outside of the issuer's network. PPO
plans incentivize patients to go to in-network providers
largely through the offer of lower cost-sharing. If a patient
knowingly goes to an out-of-network provider, it is unlikely
that the patient will know the true cost to him or her until
the service is provided and the issuer informs the patient
through the Explanation of Benefit of the patient's financial
responsibility, which is the difference between what the
issuer will pay and the provider's billed charges. In
addition, not all of those expenses paid by the consumer will
count toward the patient's maximum out-of-pocket limitations,
or the annual deductible. Issuers inform patients of these
trade-offs through marketing material and Evidence of Coverage
documents. Further, certain consumer rights and protections
required of the issuer in law, such as continuity of coverage
requirements, timely access and provider credentialing are
difficult to enforce by the issuer on out-of-network
providers, so consumers lose access to those benefits when
they go to out-of-network providers. These trade-offs are not
always apparent to patients.
What is unknown is the extent to which the enactment of this
legislation will have a negative effect on current and future
managed care networks. What is known is that consumers
benefit by broader networks, lower cost sharing and strong
consumer protections.
Should the committee wish to amend this bill to avoid the
concerns and problems outlined above the principles identified
below should be addressed to the extent possible:
a) Disclosure in primary language of patient at the point
of service about cost to the patient for out-of-network vs.
in-network costs and plan benefits that do not apply when
the patient goes out-of-network, this would include a
written estimate of costs;
b) Assignment of benefits form in the primary language of
the patient;
c) Limitations on issuer payment from exceeding the amount
of expenses incurred;
d) Application of assignment of benefits only in PPO and
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similar models, not HMOs;
e) Clarification that prohibitions on balance billing for
emergency services and continuity of care requirements
apply; and,
f) Limit provider to collecting from the patient only the
patient's responsibility, not the total cost (which would
include the issuer obligation) when an assignment of
benefits form is signed by the patient.
Chairman Monning has drafted amendments which are consistent
with the principles above and track the consumer disclosure
framework in AB 1579, as amended on April 23, 2012. The
amendments do not include a comparison of in network vs.
out-of-network costs because at present the proprietary nature
of health care finance and the lack of transparency of cost
and payment information in the current structure of the health
care system seem to prevent this. Unfortunately, of any party
in this transaction, the patient decision maker has no access
to the information necessary to make an informed decision.
13)DRAFTING CONCERNS .
a) Section 1 of this bill could be interpreted to require
HMO's to pay out-of-network providers for care to HMO
enrollees which is contrary to the HMO model. If this is
not the intent, the author may wish to clarify this in this
bill.
b) Additionally, Section 1 does not include a limitation on
the amount the issuer must pay the out-of-network provider
as does Section 2, "The amount of that payment shall not
exceed the amount of the benefit covered by the policy."
c) Further, assignment of benefit is required, under
certain circumstances, in the Insurance Code for CDI
licensed group plans. In that law, the payment limitation
reads as follows: "?the amount of any such payment shall
not exceed the amount of benefit provided by the policy
with respect to the service or billing of the provider of
aid, and the amount of the payment pursuant to one or more
assignments shall not exceed the amount of expenses
incurred on account of the hospitalization or medical or
surgical aid." The author may want to consider
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consistency in the framework. As an alternative, existing
law could be amended to strike "group" from the statute.
REGISTERED SUPPORT / OPPOSITION :
Support
California Medical Association (sponsor)
American Federation of State, County and Municipal Employees,
AFL-CIO
Association of Northern California Oncologists
California Chapter of the American College of Emergency
Physicians
California Dental Association
California Hospital Association
California Optometric Association
District Hospital Leadership Forum
Monterey County Medical Society
Medical Oncology Association of Southern California
Osteopathic Physicians & Surgeons of California
Santa Clara County Medical Association
Opposition
America's Health Insurance Plans
Anthem Blue Cross
Association of California Life & Health Insurance Companies
Blue Shield of California
California Association of Dental Plans
California Association of Health Plans
Oppose Unless Amended
Health Access California
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097