BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 1373
AUTHOR: Lieu
AMENDED: April 18, 2012
HEARING DATE: April 25, 2012
CONSULTANT: Trueworthy
SUBJECT : Health care coverage: out-of-network coverage.
SUMMARY : Requires hospitals to provide an enrollee or insured,
who seeks services at a hospital for an elective or scheduled
procedure, a notice with specified information. Requires a plan
to either refer the enrollee or subscriber to a contracting
provider or authorize the person to obtain services from a
noncontracting provider.
Existing law:
1.Provides for regulation of health insurers (insurers) by the
California Department of Insurance (CDI) under the Insurance
Code, and provides for the licensure and regulation of health
care service plans (plans) by the Department of Managed Health
Care (DMHC) pursuant to the Knox-Keene Health Care Service
Plan Act of 1975, collectively referred to as carriers.
2.Requires plans to reimburse noncontracting providers for
emergency services and care rendered to enrollees of the plan,
as specified.
3.Requires plans to provide a list of specified contracting
providers within the enrollee's general geographic area.
4.Requires insurers to provide group policyholders with a
current roster of institutional and professional providers
under contract to provide services at alternative rates under
their group policy.
5.Provides for the licensure and regulation of health
facilities, including hospitals, by the Department of Public
Health.
6.Requires each hospital to make a written or electronic copy of
its charge description master available, either by posting an
electronic copy on the hospital's website, or by making a
written or electronic copy available at the hospital. Requires
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the hospital to post a notice that informs patients that the
charge description master is available.
This bill:
1.Requires a hospital, when a patient covered through a
preferred provider organization (PPO) seeks services for an
elective or scheduled procedure, to provide the patient with a
notice that:
a. States that hospital-based providers, such as
radiologists, anesthesiologists, and pathologists may not
be within the network of the patient's plan or insurer.
b. States that services rendered by the hospital-based
providers described in (a) may not be covered by the
patient's health plan contract or health insurance policy.
c. Recommends that the patient contact his or her plan or
insurer in order to obtain a referral for services from an
in-network provider or a provider otherwise authorized by
the plan or insurer.
d. Provides a written estimate of the cost to the patient
for the services rendered by the hospital-based providers
described in paragraph (a). The estimate shall be based on
the providers' usual and customary charges.
e. Provides the toll-free telephone numbers of the DMHC
and CDI.
2.Requires that the hospital receive the signature of the
patient, or his or her legal representative, on this notice
prior to rendering services to the patient.
3.Requires a carrier that receives a request from an enrollee or
subscriber based on the notice described above, to refer the
enrollee or subscriber to a contracting provider with similar
clinical expertise providing similar services in the same
geographic region or authorize the enrollee or subscriber to
obtain the covered services from the noncontracting provider.
4.Defines "provider group" as a medical group, independent
practice association, or any other similar organization.
5.Prohibits a provider group from holding itself out as being
within a plan's network unless one of the following applies:
a. All of the individual providers providing services
with the provider group are within the plan network.
b. The provider group acknowledges that individual
providers within the provider group may be outside the
enrollee's plan network.
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6.Prohibits a hospital from holding itself out as being within a
plan's network unless one of the following applies:
a. All of the individual providers providing services
within the hospital are within the plan network.
b. The hospital acknowledges that individual providers
providing services within the hospital may be outside the
enrollee's plan network.
7.Defines "hospital" as a general acute care hospitals, acute
psychiatric hospitals, or a special hospitals.
8.Defines "noncontracting provider" as a provider who is not
employed by, under contract with, or otherwise affiliated with
a health plan to provide services to the enrollee.
9.Declares legislative intent that consumers have an adequate
opportunity to obtain medically necessary care within their
plan network.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1.Author's statement. According to the author, SB 1373 seeks to
give patients information before they make crucial decisions
about their health care. The author states that in
non-emergency situations, balance billing can occur for even
common services that a primary care physician refers for the
patient, even with the insurer's approval. For example, a
patient may need a CAT scan or MRI. Oftentimes, while the cost
associated with taking the CAT scan or MRI is covered by the
patient's insurance, the radiologist who looks at the image is
not. In addition, if a patient has a biopsy done and the
tissue is sent to a pathologist for review, the pathologist is
often not covered by the insurer. Finally, a patient may need
to have a non-emergency procedure done where an
anesthesiologist is needed; many times, their anesthesiologist
may not be covered by their insurance either.
In all these cases, the patient never speaks with these
doctors directly, and thus is not aware they are going out of
their insurance coverage. They may not even know the
physicians names, at least not until they receive a medical
bill several weeks later for the care they thought the insurer
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was covering. The author states that balance billing from
out-of-network providers can add thousands of dollars to a
patient's medical bills. Understanding which physicians are in
one's insurance network is crucial for any patient to make
informed and responsible decisions about their health care.
Receiving care from a physician who is out-of-network can
cause a patient to be "balance billed" for the potentially
significant difference between the full cost of care and the
negotiated rate their health insurer pays. It is important and
necessary that patients have the information they need in
order to make informed decisions about their health care - SB
1373 will help accomplish this goal by increasing the
transparency of medical billing from out-of-network providers.
2.Background. While CDI regulates most of the PPO plans, DMHC
also regulates some PPO plans. 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.
PPOs allow patients to practice "self-referral" which means an
enrollee can see any provider without prior referral. PPOs
typically cover 80 percent of the cost to see an in-network
physician, and just 50 percent of the cost to see an
out-of-network provider. The cost will depend on the plan's
maximum allowable amount for the service, which is the most
the plan will pay for a service. SB 1373 only applies to an
enrollee of a PPO regulated by CDI or DMHC.
3.Balance billing. "Balance billing" occurs when patients with
health coverage find themselves being billed by health care
providers for amounts in addition to the deductibles,
co-payments, and co-insurance provided for under their
coverage. Balance billing was prohibited by the California
Supreme Court in January of 2009 (Prospect Medical Group, Inc.
v. Northridge Emergency Medical Group), for Knox-Keene
licensed plans for emergency services only. There is not a ban
on balance billing for health insurers regulated by CDI nor is
there a ban on balance billing for non-emergency services.
4.AB 1455 and the "Gould Criteria." AB 1455 (Scott), Chapter
827, Statutes of 2000, established requirements for prompt
payment of provider claims by health plans, including a
prohibition on health plans engaging in an unfair payment
pattern. In regulations implementing this law, DMHC defined
what constituted appropriate reimbursement of a claim. In the
case of providers with a written contract, the regulations
require reimbursement at the agreed upon contract rate. For
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noncontracted providers, however, the regulations adopted what
is known as the "Gould Criteria" (from Gould v. Workers'
Compensation Appeals Board, 1992), which requires: the payment
of the reasonable and customary value for the health care
services rendered based upon statistically credible
information that is updated at least annually and takes into
consideration:
a. the provider's training, qualifications, and length of
time in practice;
b. the nature of the services provided;
c. the fees usually charged by the provider;
d. prevailing provider rates charged in the general
geographic area in which the services were rendered;
e. other aspects of the economics of the medical provider's
practice that are relevant; and
f. any unusual circumstances in the case.
AB 1455 required all health plans to establish a "fast, fair,
and cost-effective" internal dispute resolution system
accessible to noncontracted providers to resolve billing and
payment disputes.
1.Prior legislation. AB 1203 (Salas), Chapter 603, Statutes of
2008, established uniform requirements governing
communications between health plans and noncontracting
hospitals related to post-stabilization care following an
emergency, and prohibits a noncontracting hospital from
billing a patient who is a health plan enrollee for
post-stabilization services, except as specified.
AB 1X 1 (Nunez) of 2008 would have enacted the Health Care
Security and Cost Reduction Act, a comprehensive health reform
proposal. Among other provisions related to health insurance
markets and hospital financing, AB 1X 1 would have prohibited
a noncontracting hospital from billing any patient, who has
coverage for emergency and post-stabilization health care
services, for those services, as defined, except for
applicable co-payments and cost sharing. AB 1X 1 died in the
Senate Health Committee.
SB 981 (Perata) of 2007 would have prohibited noncontracting
hospital emergency room physicians from directly billing
enrollees of health plans other than allowable co-payments and
deductibles, and would have established statutory standards
and requirements for claims payment and dispute resolution
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related to noncontracting emergency room physician claims,
including an Independent Dispute Resolution Process. SB 981
was vetoed by Governor Schwarzenegger.
SB 389 (Yee) of 2007 would have prohibited a hospital-based
physician, as defined, from seeking payment from individual
enrollees for services rendered and would require such
physicians to seek reimbursement solely from the enrollee's
health plan or the contracting risk-bearing organization. SB
389 failed passage in the Senate Judiciary Committee.
AB 1628 (Frommer), Chapter 583, Statutes of 2003, requires a
hospital to contact an enrollee's health plan to obtain the
enrollee's medical record information before admitting the
enrollee for post stabilization care as an inpatient following
emergency services in a noncontracting hospital, under certain
circumstances, and prohibits a hospital from billing the
enrollee if it fails to do so.
AB 938 (Cohn), Chapter 817, Statutes of 2001, requires a
health plan to provide a list of specified contracting health
care providers within the enrollees or prospective enrollees
general geographic area.
AB 1455 (Scott), Chapter 827, Statutes of 2000, revises the
dispute resolution process for payment claims for medical
services between providers and health plans.
2.Support. Health Access California writes in support that SB
1373 protects consumers from unexpected balance billing when
they inadvertently go out of network. Health Access California
states that while consumers should have the right to make the
choice to go out of network; it should be a fully informed
choice.
3.Support in concept. The Association of California Life and
Health Insurance Companies (ACLHIC) supports the intent of SB
1373, however, they write that they are concerned with how the
bill is drafted. ACLHIC states that the bill creates a higher
burden on insures by establishing a referral system that is
not currently required in the PPO model.
4.Opposition. California Hospital Association (CHA) is opposed
to SB 1373 stating the notice requirements of SB 1373 will not
provide meaningful information to patients and will delay
treatment while hospitals and physicians try to comply. CHA
writes that under existing law, the corporate bar on the
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practice of medicine prohibits most hospitals from employing
physicians. Hospitals can't force doctors to enter into
contracts with health plans. Similarly, hospitals do not know
what the independent physicians will charge. Hospitals also
don't know which health plan a particular physician is
contracted with at any particular point in time. CHA writes
that based on SB 1373, once a procedure has been scheduled, a
hospital employee would be required to track down the various
specialists that may be involved in the patients care and
obtain an estimate of the expected services. This presumes a
physician knows what services will need to be provided to a
patient the physician has never met. The entire
back-and-forth in an effort to come up with a price quote
before the patient is treated will lead to significant delays
in providing care, potentially causing significant harm to
patients. CHA argues this bill's provisions are unworkable for
all hospitals and would create confusion within the context of
capitated networks in which the hospital and physicians group
are at risk for providing all medically necessary care at a
fixed capitation rate. CHA is concerned that SB 1373
establishes language access requirements that are different
than existing law. Differing standards make it more difficult
to comply with the law and serve the needs of patients.
The California Association of Health Plans (CAHP) writes in
opposition that this bill, as amended, runs contrary to the
managed-care model by requiring health plans to honor outof-
network providers seeking to provide services to enrollees in
nonemergency situations. CAHP argues that SB 1373 rearranges
the managed care delivery model by allowing enrollees to go
outside of the plan network for nonemergency health services
without a referral from the primary care provider. This could
mean higher costs and the loss of consumer protections. Not
only do inplan providers accept a negotiated rate of payment,
health plans must ensure by contract that the participating
provider is complying with the regulatory and statutory
provisions of the KnoxKeene Act. These provisions require an
assortment of important enrollee protections, including
credentialing systems that screen providers with licensing and
permit issues, quality management programs, and consumer
grievance procedures. CAHP writes that while it is important
for consumers to know if the provider they are seeing
participates in their plan or PPO network, they are opposed to
SB 1373 unless it is amended to remove the requirement that
plans pay for non-emergency outofnetwork services.
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5.Policy comments.
a. Plans. SB 1373 applies to a point-of-service health
care service plan contract, or a health plan contract or
health insurance policy that provides coverage through a
PPO. By referencing a health plan contract, SB 1373 is
not limited to PPOs and could impact HMOs as well.
b. Covered services. SB 1373 requires a notice be given
to patients stating services provided by specified
hospital-based providers may not be covered services.
However, the issue is generally not if these services are
covered by the PPO but rather if it is provided by an
in-network or out-of-network provider. Whether a provider
is in-network or out-of-network impacts the patients
out-of-pocket exposure. Does the notice required by SB
1373 provide useful information to the patient?
c. Referral for services. SB 1373 requires a carrier to
refer a patient to an in-network provider when the
enrollee contacts their plan as a result of the notice
given in the hospital. Current law requires a carrier to
provide their enrollees with a list of in-network
providers within the enrollee's geographic area. In a PPO
setting, a patient does not need a referral to see a
provider, whether that provider is in-network or
out-of-network. SB 1373 changes the structure of a PPO and
place a potentially burdensome requirement on a PPO
patient. Should a PPO enrollee be required to obtain a
referral? Further, is it appropriate for a carrier to
refer a patient to a provider rather than providing a list
of in-network providers within the enrollee's geographic
area?
d. Authorization of services. In a PPO setting, a
patient does not need authorization to see an
out-of-network provider. SB 1373 requires a carrier to
authorize services from a noncontracting provider. This
would result in changing the structure of a PPO and place
a potentially burdensome requirement on a PPO patient.
e. Hospitals. As currently drafted, SB 1373 applies to a
general acute care hospital, an acute psychiatric
hospital, and a special hospital. The provisions of this
bill are not appropriate for an acute psychiatric
hospital.
f. Appointments. SB 1373 appears to require a carrier to
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schedule appointments for patients in a PPO consistent
with current timely access standards. While carriers are
required to have appropriate networks, is it reasonable to
expect a carrier, particularly a PPO, to schedule an
appointment?
g. Providers. While the author's stated intent is to
limit this bill to radiologists, anesthesiologists and
pathologists, the bill would apply to all hospital-based
physicians, as these physicians are only cited as examples
and not specifically limited to these three hospital-based
providers.
SUPPORT AND OPPOSITION :
Support: Health Access California
Oppose: California Hospital Association
California Association of Health Plans
Prior version opposition
Association of California Healthcare Districts
California Association of Marriage and Family
Therapists
California Orthopaedic Association
California Radiological Society
California Society of Pathologists
The United Hospital Association
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