Amended in Assembly May 6, 2014

Amended in Assembly April 22, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 2400

Introduced by Assembly Member Ridley-Thomas

February 21, 2014

An act to amend Section 1375.7 of begin delete , and to add Section 1375.65 to end delete , the Health and Safety Code, and to begin delete add Section 10133.651 to end delete begin insert amend Section 10133.65 of end insert the Insurance Code, relating to health care coverage.

LEGISLATIVE COUNSEL’S DIGEST

AB 2400, as amended, Ridley-Thomas. Health care coverage: provider contracts.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes a willful violation of the act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance begin insert and authorizes health insurers to contract with providers for alternative rates of payment end insert . Existing law, known as the Health Care Providers’ Bill of Rights, prescribes restrictions on the types of contractual provisions that may be included in agreements between health care service plans begin insert or health insurers end insert and health care providers. Under existing law, if a change is made by amending a manual, policy, or procedure document referenced in the contract between a begin insert health care service end insert plan and a provider, the plan is required to provide at least 45 business days’ notice to the provider begin insert and the provider has the right to negotiate and agree to the change and terminate the contract prior to the change end insert , as specified begin insert , except that if the contract between the plan and the provider provides benefits through a preferred provider arrangement, the provider only has the right to terminate the contract prior to the change end insert begin insert . Existing law authorizes the contract between a health insurer and a provider to contain provisions permitting a material change to the contract by the insurer if the insurer provides at least 45 business days’ notice to the provider end insert .

begin delete

Existing law establishes the California Health Benefit Exchange within state government, specifies the powers and duties of the board governing the Exchange, and requires the board to facilitate the purchase of qualified health plans through the Exchange by qualified individuals and small employers. Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services, under which qualified low-income individuals receive health care services.

end delete

This bill would require a health care service plan to provide at least 90 business days’ notice to a contracting provider if a change is made by amending a manual, policy, or procedure document referenced in the contract begin insert and would require that the provider under a preferred provider arrangement have the right to negotiate and agree to the change. end insert begin insert The bill would authorize a contract between a provider and a health insurer for alternative rates of payment to contain provisions permitting a material change to the contract by the insurer if the insurer provides at least 90 business days’ notice to the provider end insert . The bill would also prohibit a contract between a plan begin insert or insurer end insert and a provider that is issued, amended, or renewed on or after January 1, 2015, from including any provision that would require a provider to accept or participate in any additional products or product networks, begin delete except as specified end delete begin insert without making specified disclosures end insert , or that would terminate the health care provider’s contract, or the provider’s eligibility to participate in other product networks, when the provider exercises the right to negotiate, accept, or refuse a material change to the contract. begin delete With respect to a physician or physician group that maintains, pursuant to a contract with a health care service plan or health insurer, an unspecified percentage of subscribers in either the Exchange or the Medi-Cal program, the bill would prohibit the contract between the physician or physician group and the plan or insurer from including any provision that requires the physician or physician group, as a condition of entering into the contract, to participate in any product that provides different rates, methods of payment, or lines of business unless that participation is negotiated and agreed to between the health care service plan or health insurer and the physician or physician group. The bill would require a contract that contains a provision attempting to obligate the physician or physician group to participate in any product that provides different rates, methods of payment, or lines of business to contain a provision for each product permitting the physician or physician group to affirmatively agree to participate in each product. end delete

By expanding the scope of a crime with respect to health care service plans, this bill would create a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

begin delete

SECTION 1.  

Section 1375.65 is added to the Health and Safety
Code, to read:

1375.65.  

(a) A contract between a physician or physician group
and a health care service plan that is issued, amended, delivered,
or renewed in this state on or after January 1, 2015, shall not
include any provision that requires the physician or physician
group, as a condition of entering into the contract, to participate
in any product that provides different rates, methods of payment,
or lines of business unless that participation is negotiated and
agreed to between the health care service plan and the physician
or physician group. Any contract that contains a provision
attempting to obligate the physician or physician group to
participate in any product that provides different rates, methods
of payment, or lines of business shall contain a provision for each
product permitting the physician or physician group to affirmatively
agree to participate in each product. The status of a physician or
physician group as a member of, or as being eligible for, other
existing or new provider panels shall not be adversely affected by
the physician’s or physician group’s exercise of his or her or its
right to not participate pursuant to this section.

(b) This section applies only to a physician or physician group
that maintains, for the duration of the agreement, ____ percent of
subscribers through either the Exchange or Medi-Cal.

(c) This section shall not apply to employee welfare benefit
plans established pursuant to Section 302(c)(5) of the Taft-Hartley
Act (29 U.S.C. Sec. 186(c)(5)).

(d) For purposes of this section, “Exchange” means the
California Health Benefit Exchange established pursuant to Section
100500 of the Government Code.

end delete

begin delete SEC. 2. end delete
begin insert SECTION 1. end insert   

Section 1375.7 of the Health and Safety Code is
amended to read:

1375.7.  

(a) This section shall be known and may be cited as
the Health Care Providers’ Bill of Rights.

(b) A contract issued, amended, or renewed on or after January
1, 2015, between a plan and a health care provider for the provision
of health care services to a plan enrollee or subscriber shall not
contain any of the following terms:

(1) (A) Authority for the plan to change a material term of the
contract, unless the change has first been negotiated and agreed
to by the provider and the plan or the change is necessary to comply
with state or federal law or regulations or any accreditation
requirements of a private sector accreditation organization. If a
change is made by amending a manual, policy, or procedure
document referenced in the contract, the plan shall provide 90
business days’ notice to the provider, and the provider has the right
to negotiate and agree to the change. If the plan and the provider
cannot agree to the change to a manual, policy, or procedure
document, the provider has the right to terminate the contract prior
to the implementation of the change. In any event, the plan shall
provide at least 90 business days’ notice of its intent to change a
material term, unless a change in state or federal law or regulations
or any accreditation requirements of a private sector accreditation
organization requires a shorter timeframe for compliance. However,
if the parties mutually agree, the 90-business day notice
requirement may be waived. Nothing in this subparagraph limits
the ability of the parties to mutually agree to the proposed change
at any time after the provider has received notice of the proposed
change.

(B) If a contract between a noninstitutional provider and a plan
provides benefits to enrollees or subscribers covered under the
Medi-Cal or Healthy Families Program and compensates the
provider on a fee-for-service basis, the contract may contain
provisions permitting a material change to the contract by the plan,
if the following requirements are met:

(i) The plan gives the provider a minimum of 90 business days’
notice of its intent to change a material term of the contract.

(ii) The plan clearly gives the provider the right to exercise his
or her intent to negotiate and agree to the change within 30 business
days of the provider’s receipt of the notice described in clause (i).

(iii) The plan clearly gives the provider the right to terminate
the contract within 90 business days from the date of the provider’s
receipt of the notice described in clause (i) if the provider does not
exercise the right to negotiate the change or no agreement is
reached, as described in clause (ii).

(iv) The material change becomes effective 90 business days
from the date of the notice described in clause (i) if the provider
does not exercise his or her right to negotiate the change, as
described in clause (ii), or to terminate the contract, as described
in clause (iii).

(2) A provision that requires a health care provider to accept
additional patients begin delete or product networks end delete beyond the contracted
number or in the absence of a number if, in the reasonable
professional judgment of the provider, accepting additional patients
begin delete or product networks end delete would endanger patients’ access to, or
continuity of, care.

(3) A requirement to comply with quality improvement or
utilization management programs or procedures of a plan, unless
the requirement is fully disclosed to the health care provider at
least 15 business days prior to the provider executing the contract.
However, the plan may make a change to the quality improvement
or utilization management programs or procedures at any time if
the change is necessary to comply with state or federal law or
regulations or any accreditation requirements of a private sector
accreditation organization. A change to the quality improvement
or utilization management programs or procedures shall be made
pursuant to paragraph (1).

(4) A provision that waives or conflicts with any provision of
this chapter. A provision in the contract that allows the plan to
provide professional liability or other coverage or to assume the
cost of defending the provider in an action relating to professional
liability or other action is not in conflict with, or in violation of,
this chapter.

(5) A requirement to permit access to patient information in
violation of federal or state laws concerning the confidentiality of
patient information.

(6) A requirement or provision that terminates the health care
provider’s contract or participation status in the contract, or the
provider’s eligibility to participate in other product networks, when
the provider exercises the right to negotiate, accept, or refuse a
material change to the contract pursuant to this section.

(7) A requirement that a health care provider agree to accept or
participate in other products or product networks, including future
products that have not yet been developed or adopted by the plan,
without disclosing the reimbursement rate, method of payment,
and any other materially different contract terms for those products
from the underlying begin delete agreement and giving the provider the right
to negotiate, accept, or refuse participation in each product or
product network. end delete begin insert agreement. end insert

(c) With respect to a health care service plan contract covering
dental services or a specialized health care service plan contract
covering dental services, all of the following shall apply:

(1) If a material change is made to the health care service plan’s
rules, guidelines, policies, or procedures concerning dental provider
contracting or coverage of or payment for dental services, the plan
shall provide at least 45 business days’ written notice to the dentists
contracting with the health care service plan to provide services
under the plan’s individual or group plan contracts, including
specialized health care service plan contracts, unless a change in
state or federal law or regulations or any accreditation requirements
of a private sector accreditation organization requires a shorter
timeframe for compliance. For purposes of this paragraph, written
notice shall include notice by electronic mail or facsimile
transmission. This paragraph shall apply in addition to the other
applicable requirements imposed under this section, except that it
shall not apply where notice of the proposed change is required to
be provided pursuant to subparagraph begin delete (C) end delete begin insert (B) end insert of paragraph (1) of
subdivision (b).

(2) For purposes of paragraph (1), a material change made to a
health care service plan’s rules, guidelines, policies, or procedures
concerning dental provider contracting or coverage of or payment
for dental services is a change to the system by which the plan
adjudicates and pays claims for treatment that would reasonably
be expected to cause delays or disruptions in processing claims or
making eligibility determinations, or a change to the general
coverage or general policies of the plan that affect rates and fees
paid to providers.

(3) A plan that automatically renews a contract with a dental
provider shall annually make available to the provider, within 60
days following a request by the provider, either online, via email,
or in paper form, a copy of its current contract and a summary of
the changes described in paragraph (1) of subdivision (b) that have
been made since the contract was issued or last renewed.

(4) This subdivision shall not apply to a health care service plan
that exclusively contracts with no more than two medical groups
in the state to provide or arrange for the provision of professional
medical services to the enrollees of the plan.

(d) (1) When a contracting agent sells, leases, or transfers a
health provider’s contract to a payor, the rights and obligations of
the provider shall be governed by the underlying contract between
the health care provider and the contracting agent.

(2) For purposes of this subdivision, the following terms shall
have the following meanings:

(A) “Contracting agent” has the meaning set forth in paragraph
(2) of subdivision (d) of Section 1395.6.

(B) “Payor” has the meaning set forth in paragraph (3) of
subdivision (d) of Section 1395.6.

(e) Any contract provision that violates subdivision (b), (c), or
(d) shall be void, unlawful, and unenforceable.

(f) The department shall compile the information submitted by
plans pursuant to subdivision (h) of Section 1367 into a report and
submit the report to the Governor and the Legislature by March
15 of each calendar year.

(g) Nothing in this section shall be construed or applied as
setting the rate of payment to be included in contracts between
plans and health care providers.

begin delete

(h) The changes made to this section by the act adding this
subdivision shall not apply to employee welfare benefit plans
established pursuant to Section 302(c)(5) of the Taft-Hartley Act
(29 U.S.C. Sec. 186(c)(5)).

end delete begin delete

(i)

end delete

begin insert (h) end insert  For purposes of this section the following definitions apply:

(1) “Health care provider” means any professional person,
medical group, independent practice association, organization,
health care facility, or other person or institution licensed or
authorized by the state to deliver or furnish health services.

(2) “Material” means a provision in a contract to which a
reasonable person would attach importance in determining the
action to be taken upon the provision.

begin delete

SEC. 3.  

Section 10133.651 is added to the Insurance Code, to
read:

10133.651.  

(a) A contract between a physician or physician
group and a health insurer that is issued, amended, delivered, or
renewed in this state on or after January 1, 2015, shall not include
any provision that requires the physician or physician group, as a
condition of entering into the contract, to participate in any product
that provides different rates, methods of payment, or lines of
business unless that participation is negotiated and agreed to
between the health insurer and the physician or physician group.
Any contract that contains a provision attempting to obligate the
physician or physician group to participate in any product that
provides different rates, methods of payment, or lines of business
shall contain a provision for each product permitting the physician
or physician group to affirmatively agree to participate in each
product. The status of a physician or physician group as a member
of, or as being eligible for, other existing or new provider panels
shall not be adversely affected by the physician’s or physician
group’s exercise of his or her or its right to not participate pursuant
to this section.

(b) This section applies only to a physician or physician group
that maintains, for the duration of the agreement, ____ percent of
subscribers through either the Exchange or Medi-Cal.

(c) This section shall not apply to employee welfare benefit
plans established pursuant to Section 302(c)(5) of the Taft-Hartley
Act (29 U.S.C. Sec. 186(c)(5)).

(d) For purposes of this section, “Exchange” means the
California Health Benefit Exchange established pursuant to Section
100500 of the Government Code.

end delete

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 10133.65 of the end insert begin insert Insurance Code end insert begin insert is amended
to read: end insert

10133.65.  

(a) This section shall be known and may be cited
as the Health Care Providers’ Bill of Rights.

(b)  begin delete No end delete begin insert A end insert contract issued, amended, or renewed on or after
January 1, begin delete 2003, end delete begin insert 2015, end insert between a health insurer and a health care
provider for the provision of covered benefits at alternative rates
of payment to an insured shall begin insert not end insert contain any of the following
terms:

(1) A provision that requires a health care provider to accept
additional patients beyond the contracted number or in the absence
of a number if, in the reasonable professional judgment of the
provider, accepting additional patients would endanger patients’
access to, or continuity of, care.

(2) A requirement to comply with quality improvement or
utilization management programs or procedures of a health insurer,
unless the requirement is fully disclosed to the health care provider
at least 15 business days prior to the provider executing the
contract. However, the health insurer may make a change to the
quality improvement or utilization management programs or
procedures at any time if the change is necessary to comply with
state or federal law or regulations or any accreditation requirements
of a private sector accreditation organization. A change to the
quality improvement or utilization management programs or
procedures shall be made pursuant to subdivision (c).

(3) A provision that waives or conflicts with any provision of
the Insurance Code.

(4) A requirement to permit access to patient information in
violation of federal or state laws concerning the confidentiality of
patient information.

begin insert

(5) A requirement or provision that terminates the health care
provider’s contract or participation status in the contract, or the
provider’s eligibility to participate in other product networks,
when the provider exercises the right to negotiate, accept, or refuse
a material change to the contract pursuant to this section.

end insert begin insert

(6) A requirement that a health care provider agree to accept
or participate in other products or product networks, including
future products that have not yet been developed or adopted by
the plan, without disclosing the reimbursement rate, method of
payment, and any other materially different contract terms for
those products from the underlying agreement.

end insert

(c) If a contract is with a health insurer that negotiates and
arranges for alternative rates of payment with the provider to
provide benefits to insureds, the contract may contain provisions
permitting a material change to the contract by the health insurer
if the health insurer provides at least begin delete 45 end delete begin insert 90 end insert business days’ notice
to the provider of the change, and the provider has the right to
terminate the contract prior to implementation of the change.

(d) With respect to a health insurance policy covering dental
services or a specialized health insurance policy covering dental
services, all of the following shall apply:

(1) If a material change is made to the health insurer’s rules,
guidelines, policies, or procedures concerning dental provider
contracting or coverage of or payment for dental services, the
insurer shall provide at least 45 business days’ written notice to
the dentists contracting with the health insurer to provide services
under the insurer’s individual or group health insurance policies,
including specialized health insurance policies. For purposes of
this paragraph, written notice shall include notice by electronic
mail or facsimile transmission. This paragraph shall apply in
addition to the other applicable requirements imposed under this
section.

(2) For purposes of paragraph (1), a material change made to a
health insurer’s rules, guidelines, policies, or procedures concerning
dental provider contracting or coverage of or payment for dental
services is a change to the system by which the insurer adjudicates
and pays claims for treatment that may cause delays or disruptions
in processing claims or making eligibility determinations, or a
change to the general coverage or general policies of the insurer
that affect rates and fees paid to providers.

(3) An insurer that automatically renews a contract with a dental
provider shall annually make available to the provider, within 60
days following a request by the provider, either online, via email,
or in paper form, a copy of its current contract and a summary of
the changes described in subdivision (c) that have been made since
the contract was issued or last renewed.

(e) Any contract provision that violates subdivision (b), (c), or
(d) shall be void, unlawful, and unenforceable.

(f) The Department of Insurance shall annually compile all
provider complaints that it receives under this section, and shall
report to the Legislature and the Governor the number and nature
of those complaints by March 15 of each calendar year.

(g) Nothing in this section shall be construed or applied as
setting the rate of payment to be included in contracts between
health insurers and health care providers.

(h) For purposes of this section, the following definitions apply:

(1) “Health care provider” means any professional person,
medical group, independent practice association, organization,
health facility, or other person or institution licensed or authorized
by the state to deliver or furnish health care services.

(2) “Health insurer” means any admitted insurer writing health
insurance, as defined in Section 106, that enters into a contract
with a provider to provide covered benefits at alternative rates of
payment.

(3) “Material” means a provision in a contract to which a
reasonable person would attach importance in determining the
action to be taken upon the provision.

begin delete SEC. 4. end delete
begin insert SEC. 3. end insert   

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.