BILL ANALYSIS �
AB 2400
Page 1
Date of Hearing: April 29, 2014
ASSEMBLY COMMITTEE ON HEALTH
Richard Pan, Chair
AB 2400 (Ridley-Thomas) - As Amended: April 22, 2014
(AS PROPOSED TO BE AMENDED)
SUBJECT : Health care coverage: physician contracts.
SUMMARY : Prohibits a provider contract issued, amended, or
renewed by a health plan or insurer on or after January 1, 2015
from containing any provision that would terminate the contract
if the provider refuses to agree to a material change, as
specified, or any provision that requires a provider to accept
or participate in any additional products or networks unless the
health plan or insurer makes specified disclosures and gives the
provider the right to negotiate, accept, or refuse participation
in each product or product network. Specifically, this bill :
1)Increases from 45 to 90 days the advance notice a health plan
or insurer must give a provider for a material change to the
provider's contract, as specified, where the changes are made
by amending a manual, policy, or procedure document referenced
in the contract (other than a change necessary to comply with
state or federal law or regulations or requirements of an
accrediting body) which, under existing law, triggers the
provider's right to negotiate and agree to the change or, if
agreement is not reached, the right to terminate the contract.
2)Extends to health plan and insurer contracts through a
preferred provider arrangement (PPO) the existing prohibition
on contract provisions allowing for material changes without
the changes first having been negotiated and agreed to by the
provider, as specified.
3)Prohibits health plan and insurer contracts issued, amended,
or renewed on or after January 1, 2015 from containing any of
the following terms:
a) Requirement for the provider to accept additional
provider networks beyond the contracted number or, in the
absence of a number, if, in the reasonable professional
judgment of the provider, accepting additional product
networks would endanger patient access to, or continuity
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of, care;
b) Termination of 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 an existing contract; and,
c) 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 health plan or insurer, unless the health
plan or insurer discloses the reimbursement rate, method of
payment, and any other materially different contract terms
for those products from the underlying agreement and gives
the provider the right to negotiate, accept, or refuse
participation in each product or product network.
4)Exempts from the provisions of this bill employee welfare
benefit plans established under the Taft-Hartley Act (29
United State Code Section 186(c)(5)).
EXISTING LAW :
1)Establishes the Department of Managed Health Care (DMHC) to
regulate health plans and the California Department of
Insurance (CDI) to regulate health insurers.
2)Establishes the California Health Benefit Exchange (Exchange,
now called Covered California) to arrange for and offer
coverage to individuals and small groups, consistent with
state and federal requirements consistent with the federal
Patient Protection and Affordable Care Act (ACA).
3)Authorizes health plans and insurers to negotiate and enter
into contracts for alternative rates of payment with
institutional and professional providers and offer the benefit
of these alternative rates to enrollees and insureds who
select those providers, generally referred to as PPO coverage.
4)Establishes the Health Care Providers' Bill of Rights, which,
among other things:
a) Requires provider contracts with health plans and
insurers to provide timely notice and disclosure regarding
material changes to the contract and prohibits specific
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provisions in such contracts including:
i) Authority for the health plan or insurer to modify a
material term of a contract unless the health plan or
insurer provides a 45 business day notice to the provider
and the parties negotiate and agree to the change, or if
the health plan and provider cannot agree to the change,
the provider has the right to terminate the contract; and
ii) Requirement for the contracted provider to accept
additional patients beyond the contracted number or, in
the absence of a number, additional patients that, in the
reasonable judgment of the provider, would endanger
patient access or continuity of care.
b) For health plans licensed under the Knox-Keene Health
Care Service Plan Act of 1975, authorizes noninstitutional
provider contracts in the Medi-Cal or Healthy Families
Program, which compensate the provider on a fee-for-service
basis, to have provisions permitting a material change
subject to the following conditions:
i) The health plan gives the provider a minimum of 90
business days' notice of its intent to change a material
term of the contract;
ii) The health 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 i) above;
iii) The health 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 i) above if the provider does not exercise
the right to negotiate the change or no agreement is
reached, as described in ii) above; and,
iv) The material change becomes effective 90 business
days from the date of the notice described in i) above if
the provider does not exercise his or her right to
negotiate the change, as described in ii) above, or to
terminate the contract, as described in iii) above.
c) Authorizes a provider contract, which provides benefits
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through a PPO arrangement to contain provisions permitting
a material change to the contract if the health plan or
insurer provides at least a 45 business day notice to the
provider and the provider has the right to terminate the
contract prior to the implementation of the change.
5)Requires health plans and insurers to meet statutory and
regulatory standards related to arranging for contracted
network provider services and imposes similar but not
identical standards on the adequacy of the networks applicable
to health plans under DMHC and health insurers under CDI,
including but not limited to:
a) Health plans under DMHC must ensure that subscribers and
enrollees receive available and accessible services in a
manner providing for continuity of care and ready referrals
to other providers consistent with good professional
practice, offer a complete network of contracting or
employed primary care and specialist physicians each of
whom has staff privileges with at least one contracting
hospital, comply with minimum standards for number of
physician providers for the number of enrollees in the
health plan (one physician for every 1,200 enrollees and
one primary care physician (PCP) for every 2,000
enrollees), ensure accessibility of providers within
prescribed geographic distances (e.g., PCPs within 30
minutes or 15 miles of an enrollee's residence or
workplace), and ensure that the contracted networks have
adequate capacity and availability of licensed providers to
offer enrollees appointments in a timely manner in
compliance with specified timeframes and appointment
waiting times, and maintain a system to monitor and report
on timely access compliance and access to care; and,
b) Health insurers offering contracted networks under CDI
must ensure accessibility of provider services in a timely
manner and ensure that providers are sufficient, in number
and size, to be capable of furnishing the health care
services covered by the insurance contract, taking into
account the characteristics and medical needs of insured
persons, ensure accessibility of providers within
prescribed geographic distances (PCPs within 30 minutes or
15 miles of each covered person's residence or workplace),
comply with minimum standards for number of physician
providers based on the number of covered persons (one
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physician for every 1,200 enrollees and one primary care
physician for every 2,000 enrollees) and monitor waiting
times for appointments as part of the overall system the
insurer must maintain to monitor access.
6)Establishes in federal law the ACA which, among other things,
establishes state health benefit exchanges, authorizes
exchanges to select and offer qualified health plan (QHP)
coverage options to consumers in the state and imposes
specific requirements on the exchanges and on QHPs offered in
the state exchanges. QHPs must, among other requirements,
ensure a sufficient choice of providers, provide information
to enrollees and prospective enrollees on the availability of
both in-network and out-of network providers, include within
plan networks essential community providers, as defined, and
ensure that the QHP network is sufficient in numbers and types
of providers to ensure that all services will be accessible
without unreasonable delay.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the sponsor, the
California Medical Association (CMA), this bill is intended to
help improve network adequacy and reduce consumer confusion by
providing physicians and physician groups with a choice to
agree to participate in each network or product. CMA states
that some health plans adhere to an "all products" policy
requiring physicians who contract with them for one of their
products, such as a PPO, to also join other current and future
products, including HMOs, workers' compensation, and Covered
California. Physicians who refuse to comply in accepting all
of the health plan's product lines may be terminated from the
PPO products.
2)BACKGROUND .
a) Health care providers' bill of rights. AB 2907 (Cohn),
Chapter 925, Statutes of 2001, was enacted, based in part,
on assertions by physicians at the time that there was an
imbalance in negotiating power between physicians, health
plans, and insurers resulting in provider contracts that
did not meet the fair and reasonable standard then in
existing law. AB 2907 made it clear that physicians could
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not be forced to sign contracts that allow health plans to
unilaterally change the contract terms, required specific
contract terms and conditions affecting provider rights and
payment processes and made any contract not meeting the new
requirements null and void.
b) Physicians in California. According to the California
Healthcare Foundation (CHCF) March 2014 report, "California
Physicians: Surplus or Scarcity?" the number of physicians
in California has grown steadily over the past 20 years,
increasing 39% from 1993 to 2011, outpacing the state's 20%
growth in the general population. CHCF noted that demand
for physician services is expected to increase with the
aging of the population and ACA implementation and that
one-third of California's physicians are near retirement
age. CHCF found that physician supply varies by region and
in some regions (Inland Empire and San Joaquin Valley) the
number of physicians is below the recommended supply of
PCPs and specialists. In addition, CHCF pointed out the
total number of active physicians (91,775 in 2011) does not
accurately reflect their availability to provide care, with
about 20% of physicians devoting less than 20 hours a week
to patient care. CHCF also found that physicians in
private practice were less likely to serve Medi-Cal,
Medicare, and uninsured patients than commercially insured
patients. In 2010, CHCF published "California Physician
Facts and Figures," based on a 2008 survey of physicians,
and reported that only 84% of PCPs were accepting new
patients and just over half (54%) were accepting new
Medi-Cal patients.
c) American Medical Association study of market
competition. In 2012, the American Medical Association
(AMA) released market analysis entitled, "Competition in
Health Insurance: A Comprehensive Study of U.S. Markets."
According to AMA, the study is the largest analysis of its
kind, reporting commercial health insurance market shares
and market concentration levels for 385 metropolitan areas
in all 50 states and the District of Columbia. AMA
evaluated health insurance markets using the 2010
Horizontal Merger Guidelines issued by the U.S. Department
of Justice and Federal Trade Commission, known as the
Herfindahl-Hirschman Index (HHI). The most competitive
markets have a lower HHI number. The less competitive
markets have a higher HHI number. An HHI above 1,800 is
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rated highly concentrated and an HHI between 1,000 and
1,800 is considered concentrated. Study findings reported
by the AMA include:
i) A significant absence of health insurer competition
is present in 70% of the metropolitan areas studied by
the AMA using the HHI measure of highly concentrated;
ii) In 67% of the metropolitan service areas (MSAs)
studied by the AMA, at least one health insurer had an
HMO market share of 50% or greater and 68% of the MSAs
had at least one health insurer with a PPO market share
of 50% or greater; and,
iii) Among the 50 states, the top 10 least competitive
commercial health insurance markets are in: 1. Alabama,
2. Hawaii, 3. Michigan, 4. Delaware 5. Alaska, 6. North
Dakota, 7. South Carolina, 8. Rhode Island, 9. Wyoming
and 10. Nebraska. In each of these states, a single
insurer accounted for a majority share of the health
insurance market. For example, in Alabama a single
insurer accounted for 88% of the state's health insurance
market.
3)SUPPORT . CMA, sponsor of this bill, writes in support that
this bill will ensure the ability of physicians and physician
groups to exercise choice, assist in maintaining patient
access to adequate physician networks, and protect patients
because physicians will be able to decide on the merits of the
product being offered and whether their participation would
further patient access to quality medical care. CMA also
contends that this bill will improve the accuracy of provider
networks by ensuring physicians listed as participating are in
fact authentic. CMA argues that all products clauses can
require physicians to participate in very different products,
such as workers' compensation, which impose numerous reporting
and other administrative burdens. Finally, CMA states that
this bill will allow doctors to stay in practice which is
crucial to maintaining access to care. According to CMA, this
bill is similar to the settlement terms of class-action
multi-district litigation brought by state and county medical
societies, including California, which expired in 2010. CMA
reports that the settlement with each insurer provided
physicians with varying protection against all product clauses
but, generally speaking, the settlements prohibited the use of
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all products clauses during the settlement period. CMA also
points to legislation in seven other states enacted in the
late 1990s and early 2000s that either restricts or prohibits
the use of all products clauses by insurers.
CMA contends that the use of all product clauses requiring a
physician to terminate the underlying contract if the
physician chooses to not accept a material change for a
different product, with different methods of payment and
contract terms combined, harms patient access to adequate
physician networks and continuous medical care. According to
CMA, this problem is exacerbated by marketplaces that are
dominated by one or two health plans or health insurers. CMA
points to the 2012 AMA market study in support of this
argument noting that, in California, the AMA found roughly
one-third of the 28 MSAs came in at more than twice the HHI
for highly concentrated (HHI of 3,600+) and almost two-thirds
came in at more than 1,000 index points above highly
concentrated (16 of 27).
Supporting physician organizations point out that the contract
provisions prohibited under this bill leave physicians in a
"take it or leave it" situation putting physicians in the
untenable position of choosing to take on new products that
may be problematic for them or being willing to disrupt and
potentially terminate relationships developed with existing
patients and families. Physicians also argue that all
products contract provisions end up with physicians being
listed in networks without their knowledge, creating confusion
and frustration for physicians and consumers. Physicians
contend that this problem recently occurred with regards to
products offered in Covered California when patients
experienced disruptions in care based on the inaccuracy of
published provider networks. Physicians point out that most
physicians are able to negotiate a fair contract but when that
fails the physician should not be compelled to contract simply
because they previously agreed to a contract with the health
plan for another line of business.
4)SUPPORT IN CONCEPT . The California Optometric Association
(COA) supports this bill in concept but seeks amendments to
make this bill provider neutral rather than limited to
physicians. COA argues that such an amendment would deal with
the problem of health plans and insurers limiting the types of
providers allowed to provide covered services.
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5)OPPOSITION . Health Access California writes in opposition
concerned that the language in this bill which requires health
plans and insurers to give a provider the right to negotiate,
accept or refuse participation in each product or product
network could allow physicians to serve their ideological and
financial interests without regard to the availability or the
affordability of coverage for consumers. Western Center on Law
and Poverty opposes this bill stating it would put Medi-Cal
and Covered California enrollees at a disadvantage if
physicians can deny acceptance of specific patient groups.
Western Center points out that both Covered California and
Medi-Cal are statutorily required under state and federal law
to ensure networks with sufficient numbers of providers.
Western Center further points out that in recent years more
than one million Medi-Cal beneficiaries have been moved into
many of the managed care plans affected by this bill and 1.2
million consumers have chosen Covered California health plans.
According to Western Center, this bill would take away a key
tool for health plans to be able to maintain adequate networks
in those programs.
Health plans and insurers write in opposition stating that this
bill will make it difficult to achieve the ACA expansions of
coverage in Medi-Cal and Covered California because this bill
allows doctors to pick and choose which patients they want to
serve. California Association of Health Plans argues that if
doctors opt out of new products, health plans will be required
to entice physicians with higher reimbursement rates,
diminishing the health plans' ability to negotiate for
affordable premiums or leading to reduced access and provider
choice for individuals who need help the most, persons on
Medi-Cal and those receiving subsidies in the Exchange.
Association of California Life and Health Insurers argues that
this bill interferes with the contractual relationship between
physicians and insurers and this bill is not needed since the
Provider Bill of Rights ensures that providers are
affirmatively notified prior to material changes in the
contract and given the opportunity to re-negotiate or
terminate the contract. Local Health Plans of California
(LHPC) representing public, not-for-profit health plans
serving predominantly Medi-Cal members, opposes this bill
because it will exacerbate the existing challenges plans have
in creating Medi-Cal networks since Medi-Cal reimbursement
rates are well-below other business lines. LHPC states this
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bill will result in de-facto financial and programmatic
discrimination against Medi-Cal by allowing physicians to
choose every product line and rate schedule.
Blue Shield of California (BSC) states that in developing its
Covered California network BSC sought out providers willing to
accept a lower reimbursement rate and the BSC Covered
California network is primarily composed of providers that
agreed. According to BSC, in a few regions it was unable to
find enough providers willing to accept a discount and in
those areas BSC included providers with PPO contracts under
the terms of existing agreements and reimbursement rates. BSC
argues that under this bill doctors could opt out of Covered
California and demand more reimbursement than the
reimbursement rates paid in other existing commercial
contracts.
Anthem Blue Cross disputes accusations that the prohibited
contract provisions are forcing providers to treat Medi-Cal
and Covered California patients at lower rates. Anthem states
that starting 14 months before the Exchange open enrollment it
began building its Exchange network, which does have lower
reimbursement rates, by notifying physicians in the existing
contracted Prudent Buyer network and giving them the
opportunity to opt out. According to Anthem, it included
providers who agreed, and those who did not respond, in the
Covered California network but did not leverage commercial
contracts or threaten to drop the provider entirely if they
chose to opt out of the Exchange network. Anthem also points
out that state and federal law, and Covered California rules,
require contracting Exchange health plans to offer Exchange
products outside of the Exchange, with the same provider
networks. If providers opt out of Covered California, they
would necessarily have to be terminated from products outside
of the Exchange.
California Chamber of Commerce (CalChamber) opposes this bill
stating employers are increasingly concerned about having
options for affordable plans with meaningful access, and
argues that this bill will ensure the opposite. Cal Chamber
is concerned that physicians with busy practices will turn
down products with lower reimbursement rates, shrinking
networks, and could even reduce the number of physicians
available so that health plans cannot develop viable networks
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at all. CalChamber states that while it is sympathetic to the
desire to protect physicians from being leveraged by health
plans, this bill does not eliminate leverage in contracting,
it just changes who has it to physicians, which can only drive
up health care costs, especially in areas with PCP shortages.
Labor organizations oppose this bill stating that it will
undermine the efforts of unions to hold down costs for union
members and their families. Labor groups point to existing
protections in the Provider Bill of Rights and other existing
statutory provisions as protection for physicians, giving them
timely notice and an opportunity to negotiate material
contract changes, such as the inclusion of a Covered
California product or different rates for existing products.
Labor groups argue that limiting the ability of union trust
funds to access the highest value network of physicians will
only drive up the cost of health care for millions of workers.
Labor points out that this bill also limits the ability of
trust funds to contract directly with health plans, lease
networks, contract with third-party administrators, or
contract for networks directly. Several labor organizations
write in opposition that any amendment to exclude Taft-Hartley
trusts is defective because many union groups purchase insured
coverage from the health plans and insurers subject to this
bill.
6)RELATED LEGISLATION . AB 2533 (Ammiano) requires health plans
and insurers unable to meet timely access standards through
contracted providers to arrange for the provision of services
by a noncontracting provider, as specified, and requires CDI
to adopt new timely access standards for health insurers in
accordance with statutory criteria similar to those applicable
to health plans under DMHC. AB 2533 is before set for hearing
in the Assembly Health Committee on April 29, 2014.
7)PREVIOUS LEGISLATION . AB 2907 establishes the Health Care
Providers Bill of Rights which prohibits certain provisions in
contracts between a health plan or insurer and a health care
provider and imposes specific notice and timelines for
material changes to contracts allowing providers the right to
negotiate and agree or terminate the contract. AB 757 (Chan)
of 2005 would have prohibited contracting agents, as defined,
from selling, leasing, assigning, transferring, or conveying a
list of contracted providers and their discounted rates to
another payor, unless certain conditions were met. AB 757 was
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held on the Assembly Appropriations suspense file.
8)POLICY COMMENT . An overarching goal of state policies
affecting health plan and provider contracts is to enable
purchasers and consumers to have meaningful coverage choices,
all of which ensure a minimum adequate threshold of providers
to deliver the care, to understand the choices and the premium
impacts for each option, and to be able to make an informed
choice. In the initial rollout of the ACA, including Covered
California, provider networks and health plan network options
were not as reliable or transparent as they needed to be to
support informed consumer choice. There continue to be
ongoing challenges to ensure transparent, adequate networks
and meaningful access for consumers to quality health care
throughout the reformed ACA health coverage market.
The Committee may wish to consider reasonable steps to enhance
transparency and accuracy of provider networks, including
ensuring that providers have full information, reasonable
opportunity to continue or terminate contracts and clear
information as to the rates and terms of contracts they
retain. One approach would be to require health plans and
insurers to maintain accurate and timely contracting
information through an Internet provider portal and allow
providers to verify the networks in which they are
participating and receive and process notices about material
contract and product changes through the portal.
REGISTERED SUPPORT / OPPOSITION :
Support
California Medical Association (sponsor)
Association of Northern California Oncologists
California Academy of Family Physicians
California Chapter of the American College of Emergency
Physicians
California Radiological Society
California Society of Pathologists
Medical Oncology Association of Southern California, Inc.
Opposition
Anthem Blue Cross
Association of California Life and Health Insurance Companies
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Blue Shield of California
California Association of Health Plans
California Chamber of Commerce
California Conference Board of Amalgamated Transit Union
California Conference of Machinists
California Labor Federation
California Nurses Association
California Teachers Association
California Teamsters Public Affairs Council
Engineers & Scientists of California, IFPTE Local 20, AFL-CIO
Health Access California
International Longshore & Warehouse Union
Local Health Plans of California
Professional & Technical Engineers, IFPTE Local 20, AFL-CIO
State Building and Construction Trades Council
UNITE-HERE, AFL-CIO
Utility Workers Union of America, Local 32, AFL-CIO
Western Center on Law and Poverty
Analysis Prepared by : Deborah Kelch / HEALTH / (916) 319-2097