BILL ANALYSIS �
AB 2152
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Date of Hearing: April 10, 2012
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 2152 (Eng) - As Introduced: February 23, 2012
SUBJECT : Disability insurance.
SUMMARY : Requires health insurers to submit a transition plan
to the California Department of Insurance (CDI), similar to
requirements placed on health plans licensed by the Department
of Managed Health Care (DMHC), if a termination of a contract
results in a material change to the network, as defined by CDI
by regulation. Requires health insures to disclose specified
information related to methods of payment and bonuses and other
disclosures required of DMHC licensees. Specifically, this
bill :
1)Requires every health insurer, including those insurers that
contract for alternative rates of payment, as specified, to
include within its disclosure form a statement clearly
describing the basic method of reimbursement, including the
scope and general methods of payment, made to its contracting
providers of health care services, and whether financial
bonuses or any other incentives are used.
2)Requires the disclosure form to indicate that if an insured
wishes to know more about these issues, the insured may
request additional information from the insurer, the insured's
provider, or the provider's medical group or independent
practice association, as specified.
3)Requires, if financial bonuses or any other incentives are
used or received, the insurer, medical group, independent
practice association, or health care provider to provide a
written summary in clear and simple language that enables
consumers to evaluate and compare policies, to any person who
requests it and must include both of the following:
a) A general description of the bonus and any other
incentive arrangements used in its compensation agreements,
but not the disclosure of trade secrets or commercial or
financial information that is privileged or confidential,
such as payment rates, as determined by the Insurance
Commissioner, pursuant to state law; and,
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b) A description regarding whether and in what manner, the
bonuses and any other incentives are related to a
provider's use of referral services.
4)Requires the statements and written information specified in
2) and 3) above to be communicated in clear and simple
language that enables consumers to evaluate and compare health
insurance policies.
5)Requires health insurers, at least 75 days prior to the
termination date of its contract with a professional or
institutional provider to provide services at alternative
rates of payment, as specified, to submit a transition plan to
CDI that includes the written notice the insurer proposes to
send to affected insureds if the termination of the contract
results in a material change to the insurer's provider
network, as defined by CDI regulations. Requires CDI to
review and approve the notice's content prior to the notice
being sent to insureds. Specifies that if CDI has not
responded within seven days of the date of its receipt of the
filing, the notice is deemed approved.
6)Requires the notice in 5) above to be sent at least 60 days
prior to the termination date of a contract, as described to
all insureds who have obtained services from the professional
or institutional provider within the preceding six months, if
the termination of the contract results in a material change
to the insurer's provider network, as defined by CDI
regulations. Sets up a process for waiver in exigent
circumstances. Requires, if the terminated provider is a
hospital, the health insurer to send the written notice to all
insureds who reside within a 15-mile radius of the terminated
hospital.
7)Requires the health insurer to send the written notice
regarding termination of a provider contract with a hospital
required by 6) above only if the terminated provider is a
general acute care hospital.
8)Authorizes the insurer to require a provider group to send the
notice in 6) above, if an individual provider terminates his
or her contract or employment with a provider group that
contracts with a health insurer.
9)Requires the insurer, if after sending the notice required in
6) above, and an agreement to renew or enter into a new
contract is reached, to offer each affected insured the option
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to return to that provider.
10)Requires a health insurer and a provider to include in all
written, printed, or electronic communications sent to an
insured that concern the contract termination or transition
plan, the following statement in not less than 8-point type:
"If you have been receiving care from a health care provider,
you may have a right to keep your provider for a designated
time period. Please contact your insurer's customer service
department, and if you have further questions, you are
encouraged to contact the Department of Insurance, which
protects insurance consumers, by telephone at its toll-free
number, 800-927-HELP (4357), or at a TDD number for the
hearing impaired at 800-482-4833, or online at
www.insurance.ca.gov."
11)Defines "small group health insurance policy" as a group
health insurance policy issued to a small employer, as
defined.
12)Requires all of the following disclosures for a health
insurance policy:
a) A notice on the first page of the disclosure form that
conforms with all of the following conditions:
i) States that the form discloses the terms and
conditions of coverage;
ii) States, with respect to individual health insurance
policies, small group health insurance policies, and any
group health insurance policies for which health care
services are not negotiated, that the applicant has a
right to view the disclosure form and policy prior to
beginning coverage under the policy, and, if the policy
does not accompany the disclosure form, the notice to
specify where the policy can be obtained prior to
beginning coverage;
iii) Includes a statement that the disclosure and the
policy should be read completely and carefully and that
individuals with special health care needs should read
carefully those sections that apply to them;
iv) Includes the insurer's telephone number or numbers
that may be used by an applicant to receive additional
information about the benefits of the policy or states
where those telephone number or numbers are located in
the disclosure form;
v) For individual health insurance policies and small
group health insurance policies states where a health
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policy benefits and coverage matrix is located; and,
vi) Is printed in type no smaller than that used for the
remainder of the disclosure form and is displayed
prominently on the page;
b) A statement as to when benefits shall cease in the event
of nonpayment of the prepaid or periodic charge and the
effect of nonpayment upon an insured who is hospitalized or
undergoing treatment for an ongoing condition;
c) To the extent that the policy or insurer permits a free
choice of provider to its insureds, the statement shall
disclose, as specified, the nature and extent of choice
permitted and the financial liability that is, or may be,
incurred by the insured, covered dependents, or a third
party by reason of the exercise of that choice;
d) For group health insurance policies, including small
group policies, a summary of the terms and conditions under
which insureds may remain in the policy in the event the
group ceases to exist, the group policy is terminated, or
an individual insured leaves the group, or the insureds'
eligibility status changes;
e) If the policy utilizes arbitration to settle disputes, a
statement of that fact; if the policy requires binding
arbitration, a disclosure, as specified;
f) A description of any limitations on the insured's choice
of primary care physician, specialty care physician, or
nonphysician health care practitioner, based on service
area and limitations on the insured's choice of acute care
hospital care, subacute or transitional inpatient care, or
skilled nursing facility;
g) General authorization requirements for referral by a
primary care physician to a specialty care physician or a
nonphysician health care practitioner;
h) Conditions and procedures for disenrollment;
i) A description as to how an insured may request
continuity of care, as specified, and how to request a
second opinion, as specified;
j) Information concerning the right of an insured to
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request an independent review, as specified; and,
aa) The notice of insurance information practices related to
personal information about the applicant or insured as
required in existing law.
EXISTING LAW :
1)Regulates health plans at DMHC under the Knox-Keene Health
Care Service Plan Act of 1972 (Knox-Keene) and health
insurance at CDI under the Insurance Code.
2)Requires every health plan to include within its disclosure
form and within its evidence of coverage a statement clearly
describing how participation in the plan may affect the choice
of physician, hospital, or other health care providers, the
basic method of reimbursement, including the scope and general
methods of payment made to its contracting providers of health
care services, and whether financial bonuses or any other
incentives are used.
3)Requires DMHC to require by each plan to use disclosure forms
or materials containing information regarding the benefits,
services, and terms of the plan contract as the DMHC Director
may require, so as to afford the public, subscribers, and
enrollees with a full and fair disclosure of the provisions of
the plan in readily understood language and in a clearly
organized manner. Authorizes the Director to require that the
materials be presented in a reasonably uniform manner so as to
facilitate comparisons between plan contracts of the same or
other types of plans. Establishes requirements for the
disclosure.
4)Requires, at least 75 days prior to the termination date of
its contract with a provider group or a general acute care
hospital, a health plan to submit an enrollee block transfer
filing to DMHC that includes the written notice the plan
proposes to send to affected enrollees. If DMHC does not
respond within seven days of receipt, the notice is deemed
approved.
5)Requires at least 60 days prior to the termination date of a
contract between a health plan and a provider group or general
acute care hospital, the plan to send the notice in 4)
directly above, to enrollees who are assigned to the
terminated provider group or hospital. Sets up a process for
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waiver because of exigent circumstances.
6)Requires, if the plan operates a preferred provider
organization (PPO) or assigns members to a provider group with
admitting privileges to hospitals in the same geographic area
as the terminated hospital, the plan to send the written
notice to all enrollees who reside within a 15-mile radius of
the terminated hospital. Requires a health plan to send
enrollees of a PPO the written notice required in 4) above
only if the terminated provider is a general acute care
hospital.
FISCAL EFFECT : This bill has not yet been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, In June 2011,
the California HealthCare Foundation (CHCF) issued a report
which focused on the policies and structures possibly needed
to implement the Affordable Care Act (ACA). The report
identified considerations and options for updating and
strengthening California's regulatory context in light of ACA
requirements. One of the recommendations was to align
statutes and regulations between CDI and DMHC. The author
states that the report found a number of instances in
California law where DMHC statutory requirements were
potentially more protective or beneficial to consumers than
those authorized for CDI under the Insurance Code. The ACA
enacts sweeping changes to the way health care services will
be purchased, delivered, and regulated. As one of its core
principles, the ACA seeks to make the process of buying health
insurance coverage for consumers easier and streamlined. The
alignment of Insurance Code and Knox-Keene requirements will
ensure that consumers receive equivalent, strong consumer
protections whether they purchase health insurance coverage
regulated under the Insurance Code or the Knox-Keene Act and
also provides for a level competitive environment.
2)BACKGROUND . Regulation and oversight of health insurance in
California is split between two state departments: the DMHC
and CDI. DMHC regulates health plans under the Health and
Safety Code (Knox-Keene). DMHC health plans include health
maintenance organizations (HMOs) and some PPO plans which for
historical and business reasons have remained with HMO
licensees at DMHC (the Department of Corporations (DOC) prior
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to 1999). These PPOs have an exemption from a requirement
that all services be delivered by participating providers, but
are otherwise subject to requirements to provide all basic
health care services, to establish internal quality monitoring
and accessibility standards for in-network providers.
Historically the regulator has allowed for flexibility in
copayments, deductibles, annual maximums so these products can
more closely resemble other PPO products. 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. HMOs contract with medical groups and
Independent Practice Associations and can shift risk to the
providers while the health plan retains legal responsibility.
According to a November 2001 CHCF report, the Knox-Keene Act
established the basic framework for regulation of health plans
that remains today, it was heavily influenced by the failures
and inadequacies of the Medi-Cal Prepaid Health Plan program
and paralleled many provisions of the federal HMO Act.
In 1982, the Legislature authorized in the Insurance Code
insurers to negotiate and enter into contracts with providers
at "alternative rates of payment," and permitted carriers to
limit claims payment to providers charging the alternative
rates. The resulting PPO model of indemnity insurance - where
individuals have reduced out-of-pocket costs if they use
providers on the insurer's preferred provider list - allowed
CDI licensed indemnity carriers to be more price competitive
with Knox-Keene licensed HMOs. PPOs implement utilization
review and other cost containment strategies in an effort to
compete with HMOs. CDI regulates disability insurers offering
health insurance, which includes PPO plans and traditional
indemnity insurance. 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.
3)SUPPORT . The CDI sponsors this bill to further strengthen
protections in California's regulation of health insurance by
aligning the Insurance Code and sections of the Knox-Keene
Act, specifically with regards to consumer disclosure
requirements. CDI states that this proposal would align the
Insurance Code and Knox-Keene requirements to ensure that
consumers receive equivalent strong consumer protections by
requiring improved benefit disclosure forms, disclosure of
incentive arrangements between carriers and providers, and
transition plans if provider contracts are terminated.
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According to CDI, doing so would improve the consumer
experience, and build upon the strengths of the existing
regulators. CDI adds that by aligning Insurance Code
disclosure requirements with those of Knox-Keene, this
proposal would further streamline health insurers' disclosure
requirements with regard to health coverage. As a result,
health insurers would supply the same or similar information
for CDI-regulated coverage as they would for DMHC-regulated
coverage. Streamlining these disclosure requirements would
make compliance easier and more efficient for health insurers.
Health Access California supports this bill because it adds
to the Insurance Code two important consumer protections that
exist in the Knox-Keene Act by assuring an orderly transfer of
enrollees in the event of contract disputes between an insurer
and a major provider and by including disclosure
notifications. BayBio and the California Healthcare Institute
support alignment of the Insurance and Health and Safety Codes
so that consumers can make informed decisions and have access
to the right treatment at the right time, without
interruption.
4)OPPOSITION . The Association of California Life and Health
Insurance Companies (ACLHIC) opposes this bill because many of
the requirements related to the transition plan process are
not comparable to what is currently required of PPOs or HMOs.
ACLHIC believes this bill places a higher regulatory burden on
insurance products under CDI and it is unnecessary. ACLHIC
indicates that HMOs only have to provide notice if they are
cancelling a contract with provider group or a hospital and
this bill applies to any health insurer provider or facility
contract. Further, under the block transfer process for HMOs,
notice would only need to be given if the proposed contract
termination would affect 2,000 or more lives. Under this bill
it would apply any time the Commissioner deems the termination
is "material" to be defined later through regulation. ACLHIC
is uncertain as to what would constitute a material change
defined by the Insurance Commissioner and has great concerns
about the cost implications of having to send out a notice
every time an individual provider leaves the network.
According to ACLHIC, the disclosure requirements are in
addition to requirements already placed on insurers and the
requirements in this bill do not make sense within the PPO
model. ACLHIC argues that PPOs do not require that benefits
under the contract be obtained through a primary care provider
and the hospital and providers contracted within the primary
care provider's medical group. ACLHIC suggests in order to
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ensure a smooth transition and keep administrative costs to a
minimum, it is prudent to coordinate efforts to update forms
with the pending ACA requirements.
5)PREVIOUS LEGISLATION .
a) AB 1286 (Frommer), Chapter 591, Statutes of 2003, and SB
2003 (Speier), Chapter 590, Statutes of 2003, revise and
expand existing "continuity of care" laws under which a
health plan is required, under certain circumstances, to
allow an enrollee to continue to see a health care
provider who is no longer contracting with the plan,
requires the notice to be filed with the DMHC at least 75
days prior to the contract termination and specifies
language that must be included in the notice regarding an
enrollee's right to continue seeing a health care provider.
b) AB 939 (Cohn), Chapter 817, Statutes of 2001, requires,
effective July 1, 2002, that a health plan disclosure form
include any limitations on a patient's choice of
non-physician health care practitioners, in addition to
primary care and specialty care physicians, and requires a
plan disclosure form to include authorization requirements
for referral to a non-physician health care practitioner,
in addition to a specialty care physician.
c) AB 2903 (Committee on Health), Chapter 857, Statutes of
2000, provides for technical clean-up language for the
Assembly's managed care reform bills including renaming the
Department of Managed Care (DMC) as the DMHC and clarifies
provisions relating to telephone medical advice services.
d) AB 78 (Gallegos), Chapter 525, Statutes of 1999,
establishes a new DMC and transfers the regulation of
health plans from the DOC to DMC.
e) SB 1547 (Peace), Chapter 1024, Statutes of 1996,
requires health plans and disability insurers to disclose
the process the plan or insurer uses to authorize or deny
subacute care, transitional inpatient care or skilled
nursing facility care and the basic method of
reimbursement, and whether financial bonuses or incentives
are used.
6)AUTHOR'S AMENDMENTS .
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a) On page 3, line 18
(b) Every health insurer, including those insurers that
contracts?
b) On page 8, lines 1-2
(ii) States, with respect to individual health insurance
policies, small group health insurance policies, and any
group health insurance policies for which health care
services are not negotiated , that the applicant has a right
to view the disclosure?
c) On page 8, line 21
(2) A statement as to when benefits shall cease in the event
of nonpayment of the prepaid or periodic charge premium and
the effect of?.
d) On page 9, line 7
(8) Conditions and procedures for disenrollment cancellation,
rescission, or non-renewal.
7)DRAFTING CONCERNS .
a) There are a variety of places in this bill where
terminology exists that is not relevant in a PPO context.
The author may wish to amend this bill to correct these
references.
i) On page 3, lines 27-28 and 30-31 and on page 5, line
27 delete "independent practice association"
ii) On page 9, lines 4-6, as indicated by the
opposition, PPOs do not require general authorization for
referral by a primary care physician to a specialty care
physician or a nonphysician health care practitioner.
iii) On page 5, lines 1-4 the provisions are in conflict
with other parts of this bill which require a health
insurer to send a written notice 60 days prior to
termination of a professional or institutional provider
to be sent to affected insureds who have obtained
services within the preceding six months when a material
change to the insureds provider network occurs. This
provision is in conflict with the requirement that the
health insurer send the written notice regarding
termination of a provider contract with a hospital
required by subdivision (b) only if the terminated
provider is a general acute care hospital. The author
may wish to reconcile this inconsistency.
8)POLICY CONCERNS .
a) With regard to contract termination requirements,
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contrary to the sponsor's intent to align consumer
protections in the two codes, this bill does create
additional disparities as pointed out by the opposition.
The committee may wish to request that the author limit
Section 2 of this bill to provider groups and general acute
care hospitals, as is consistent with the Health and Safety
Code.
b) Additionally, the Health and Safety Code only requires
enrollees of a PPO organization to be sent the written
notification if the terminated provider is a general acute
care hospital. Since it is the intent of the sponsor to
apply this bill's provisions only to PPOs, these provisions
should be parallel.
c) Does the committee want to establish additional
parameters on the Commissioner's authority to determine
material change to the PPO network? Regulations issued by
the DMHC define "block transfer" as a transfer or
redirection of 2,000 or more enrollees by a plan from a
terminated provider group or terminated hospital to one or
more contracting providers that takes place as a result of
the termination or non-renewal of a provider contract.
This bill does not use the term "block transfer" because
PPO subscribers are not assigned primary care providers to
which a contract change would necessitate a transfer to
another primary care provider group. However, the
committee may wish to establish as a floor, a contract
termination which affects 2,000 or more PPO subscribers for
purposes of defining material change to the network.
d) While PPOs do not require the use of primary care
providers, PPO subscribers often have established
relationships with network providers and would benefit from
notification when a provider becomes a noncontracting
provider, as coverage would be affected causing the patient
to be charged more for remaining with that provider. The
committee may wish to request amendments to this bill to
ensure a different type of notification of PPO subscribers
to be sent from terminated providers, which would be added
to both the Health and Safety and Insurance Codes, when
termination of a contract results in a change in the
provider's status to a noncontracting provider.
REGISTERED SUPPORT / OPPOSITION :
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Support
California Department of Insurance (Sponsor)
American Federation of State, County and Municipal Employees,
AFL-CIO
BayBio
California Healthcare Institute
Health Access California
Opposition
Association of California Life & Health Insurance Companies
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097