BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2013-2014 Regular Session
SB 1256 (Mitchell)
As Introduced
Hearing Date: April 22, 2014
Fiscal: Yes
Urgency: No
NR
SUBJECT
Medical Services: Credit
DESCRIPTION
This bill would prohibit a healing arts licensee, or employee or
agent of that licensee, from arranging for or establishing
credit extended by a third party for a patient without first
providing the patient with written notice and a treatment plan,
and prohibit an extension or arrangement of such credit to any
patient under the influence of anesthesia.
This bill would also prohibit a healing arts licensee, or
employee or agent of that licensee, from charging for treatment
not yet received to an open-end credit extended by a third party
unless the patient is first provided with specified information
regarding the treatment and treatment plan. This bill would
require healing arts licensees to provide a refund to a credit
lender within 15 business days of a patient's request for any
payment received for services that have not been provided or
costs that have not been incurred.
This bill would provide for remedies under the Consumer Legal
Remedies Act for violations of its provisions.
BACKGROUND
Medical debt is a growing problem as consumers, particularly
elderly, uninsured, and under-insured patients, turn to lines of
credit to finance otherwise unaffordable procedures and devices.
Medical credit cards extended by third party lenders, but
presented to patients by healthcare providers, have increased in
(more)
SB 1256 (Mitchell)
Page 2 of ?
popularity over the past decade. Many of these credit cards,
provided by popular finance companies like Citigroup, Chase, and
Capitol One, offer high credit limits and rates as high as 28
percent.
Late last year the Consumer Finance Protection Bureau ordered
CreditCare, a popular medical credit card and a subsidiary of GE
Capital, to pay $34.1 million to patients who were deceptively
enrolled at the offices of dentists, vision care, cosmetic and
other healthcare providers. In support of that action, the
National Consumer Law Center wrote:
For years, we've been raising concerns about the abuses of
medical credit cards? The last thing that vulnerable patients
need when faced with expensive medical procedures not covered
by insurance is a high cost credit card. It can add hundreds
or even thousands more to their medical debt. One particularly
troublesome feature of the CareCredit card was its deferred
interest plan. These plans are promoted as having a "no
interest" or "0% interest" promotional period, but there is a
big catch; the patient must pay off the entire balance by the
time the promotional period ends. If the patient leaves any
amount unpaid, CareCredit will charge interest retroactively
back to the date when the charges for the medical procedure
were first made. (National Consumer Law Center, Consumer
Advocates Applaud CFPB for CareCredit Enforcement Action, Dec.
10, 2013, found at <
https://www.nclc.org/images/pdf/credit_cards/pr-cfpb-ge-carecre
dit_121013.pdf> as of April 10, 2014.)
In 2009 the Legislature curbed predatory medical credit card
practices in dental offices by enacting AB 171 (Jones, Ch. 418,
Stats. 2009) which prohibited, among other things, dentists from
arranging credit extended by third parties unless the patient
was provided with specified information and a treatment plan.
That bill also prohibited dentists from arranging credit for
patients who were under the influence of anesthesia, and
required refunds for payments received for services not yet
rendered. This bill would enact nearly identical protections
for patients receiving healthcare services from all licensed
healing arts professionals in California, including physicians,
psychologists, acupuncturists, and chiropractors.
CHANGES TO EXISTING LAW
Existing law prohibits, except as specified, a healing arts
SB 1256 (Mitchell)
Page 3 of ?
licensee from referring a person for certain health care
services if the licensee has a financial, beneficial,
proprietary or ownership interest, as defined, with the person
or entity that receives the referral. (Bus. & Prof. Code Sec.
650 et seq.)
Existing law , the Consumer Legal Remedies Act (CLRA), generally
prohibits unfair methods of competition and unfair or deceptive
acts or practices in the sale or lease of goods or services to
consumers. The CLRA also allows an injured consumer to bring an
action for damages, as specified. (Civ. Code Sec. 1750 et seq.)
Existing law prohibits a dentist, or employee or agent of a
dentist, from charging for treatment not yet rendered or costs
not yet incurred to an open-end credit extended by a third party
without first providing the patient with specified information
regarding the treatment and services to be rendered, and
ensuring the patient's receipt of the treatment plan. (Bus. &
Prof. Code Sec. 654.3 (a).)
Existing law requires a dentist, within 15 business days of a
patient's request, to refund any payment received through credit
extended by a third party that is arranged for or established in
a dental office, for treatment that has not been rendered or
costs that have not been incurred. (Bus. & Prof. Code Sec.
654.3 (b).)
Existing law requires a dentist or an employee or agent of a
dentist to provide the patient with a written notice, as
specified, and to obtain a signature from the patient in order
to arrange for or establish credit extended by a third party.
(Bus. & Prof. Code Sec. 654.3 (c).)
Existing law prohibits a dentist or employee or agent of a
dentist from arranging for or establishing credit extended by a
third party for a patient with whom the dentist or employee or
agent of the dentist communicates with in a language other than
English unless the written notice information is also provided
in that language. (Bus. & Prof. Code Sec. 654.3 (e).)
Existing law prohibits a dentist, employee or agent of that
dentist from establishing credit that is extended by a third
party for a patient who has been administered or is under the
influence of general anesthesia, conscious sedation or nitrous
oxide. (Bus. & Prof. Code Sec. 654.3 (f).)
SB 1256 (Mitchell)
Page 4 of ?
Existing law provides that a patient who suffers damages as a
result of a person willfully violating these provisions may seek
civil relief. (Bus. & Prof. Code Sec. 654.3(g).)
This bill would prohibit a healing arts licensee, or an employee
or agent of that licensee, from arranging for or establishing
credit extended by a third party for a patient without first
providing a written notice, as specified, and a written
treatment plan.
This bill would prohibit the arrangement or establishment of
credit for a patient who is under the influence of general
anesthesia, conscious sedation, or nitrous oxide.
This bill would prohibit a healing arts licensee, or employee or
agent of a licensee, from charging treatment not yet rendered or
costs not yet incurred to an open-end credit extended by a third
party that is arranged for or established in the licensee's
office without first providing the patient with specified
information regarding the treatment and services to be rendered
and ensuring the patient's receipt of the treatment plan.
This bill would prohibit a healing arts licensee or employee or
agent of a healing arts licensee from arranging for or
establishing credit extended by a third party for a patient with
whom the licensee or employee or agent of the licensee
communicates with in a language other than English unless the
written notice information is also provided in that language.
This bill would require a healing arts licensee to refund to the
lender any payment received for treatment that has not been
rendered, or costs that have not been incurred within 15
business days upon the patient's request.
This bill would provide that a patient who suffers damages as a
result of willful violation of these provisions may seek civil
relief.
This bill would define a "licensee" as an individual, firm
partnership, association, corporation, limited liability
company, or cooperative association, and define a "licensee's"
office as an office of a licensee in solo practice or an office
in which services or goods are provided by the licensee or by
employees in that office, or by independent contractors in that
office.
This bill would define "open-end credit" as credit extended by a
SB 1256 (Mitchell)
Page 5 of ?
creditor under a plan in which the creditor reasonably
contemplates repeated transactions, where the creditor may
impose a finance charge on an outstanding, unpaid balance, and
the amount of credit is generally made available to the extent
that any balance is repaid.
COMMENT
1.Stated need for the bill
According to the author:
Medical credit cards, extended through third-party lenders but
solicited by medical providers, pose a significant risk to
consumers who may not fully understand the arrangements that
are being made for them by their provider or providers office.
Patients, primarily elderly, low-income or limited
English-speaking, who thought they had signed a payment plan
with their provider later come to realize they have signed up
for credit cards or loans they cannot afford. The significant
risks created by deferred interest credit cards in connection
to medical services make it essential that consumers fully
understand the arrangements they make with their medical
providers.
SB 1256 simply extends the current protections that patients
receive in a dental office to other areas of the medical
field. For example, recommending a medical credit card as a
method of payment to a patient who is under the influence of
general anesthesia is unlawful under current law, but could be
allowed in other medical practices.
2.Mirrors protections which have served to protect patients in
dental offices
This bill would prohibit a healing arts licensee, such as a
doctor, psychologist, or chiropractor, from arranging for a
credit extended by a third party to pay for medical services
without first providing the patient with written notice and a
treatment plan, and would prohibit an arrangement of such credit
to any patient under the influence of anesthesia. This bill
would also prohibit a healing arts licensee from charging for
treatment not yet received to an open-end credit extended by a
third party unless the patient is first provided with specified
SB 1256 (Mitchell)
Page 6 of ?
information regarding the treatment and treatment plan.
The provisions of this bill mirror those of SB 171 (Jones, Ch.
418, Stats. 2009) which created standards by which dental
patients could be offered credit extended by a third party, but
arranged for by the dental office, to pay for dental services.
In support of that bill, the Western Center on Law and Poverty
stated that the bill was necessary to respond to "numerous
complaints received from consumers, primarily elderly,
low-income, and limited English-speaking patients, who have
fallen victim to credit cards for dental care without adequate
protections. Typically, these patients thought they were
signing payment plans with their providers, only to realize when
they started receiving credit card statements that they had
signed credit applications. In addition, some consumers were
charged for future services they did not receive, and other
limited-English proficient consumers were given applications in
English that they did not understand."
The California Dental Association wrote in support that the bill
reflected "the dental profession's commitment to maintaining
trusting relationships between dentists and their patients,
including ensuring that patients understand the treatment they
receive and how the treatment costs will be covered. The
provisions of AB 171 reflect standard ethical business practices
that protect consumers and uphold a positive dentist-patient
relationship."
Since the passage of AB 171, the need for patient protections in
other medical settings has become apparent. All over the
country, states are responding to predatory lending practices
arranged for in medical offices. Minnesota's Attorney General
and New York's Attorney General have taken action against
abusive and predatory lending practices to better protect
patients. The Ohio Attorney General has sued several hearing aid
clinics, and a recent review of customer contracts for medical
cards by The New York Times, as well as of hundreds of court
filings in connection with medical credit cards, shows how
damaging such financial arrangements can be for patients.
(Silver-Greenberg, The New York Times, Patients Mired in costly
Credit from Doctors, October 2013 found at <
http://www.nytimes.com/2013/10/14/business/economy/patients-mired
-in-costly-credit-from-doctors.html?hp&_r=0&pagewanted=print> as
of April 15, 2014.)
This bill would not prohibit the arrangement of medical lines of
SB 1256 (Mitchell)
Page 7 of ?
credit, but ensure that when confronted with third party
financing, patients are informed as to what type of contract
they are entering into, and are able to make informed decisions
about the financing of their healthcare. The Consumer
Federation of California writes in support that:
Medical credit cards provide a financing option that helps
patients pay for treatments or procedures that are not
otherwise covered by their medical insurance?However, in some
instances, patients who thought they were signing up for a
payment plan directly with their provider later discover that
they have signed credit applications?Patients, primarily
elderly, low-income or limited English-speaking, who are
offered a credit card when they are most vulnerable - such as
when they are in pain or when a provider has recommended a
treatment they cannot afford - may not understand that the
financing option they have been recommended is actually a
credit card. ? SB 1256 is not intended to prohibit medical
providers from helping to arrange credit cards or loans for
their patients, but aims to set forth basic standards
governing these credit card arrangements and provide basic
consumer protections.
3.Author's amendments
Concerns were expressed to the author that this bill may
unintentionally limit a patient's ability to use a properly
established line of credit on subsequent medical services,
specifically emergency services. The author, therefore, offers
the following amendments which would clarify that once
established, a patient may choose to use his or her medical
credit card on subsequent medical services.
1. Page 3, line 14 strike "a" and insert "that"
2. Page 3, lines 23, strike the second "a" and insert
"that"
3. Page 4, in between lines 31 and 32 insert "You may
use this credit card/line of credit for payments toward
subsequent medical services."
4. Page 5, line 1 strike "A" and insert "Prior to
SB 1256 (Mitchell)
Page 8 of ?
arranging for or establishing credit extended by a third
party, a"
5. Page 5, line 1 strike "prior"
6. Page 5, strike line 2
Support : California Immigrant Policy Center
Opposition : None Known
HISTORY
Source : Consumer Federation of California
Related Pending Legislation : None Known
Prior Legislation :
AB 171 (Jones, Chapter 418, Statutes of 2009) established
procedures for dentists to follow when arranging a medical
credit card, extended through a third party lender, to a
patient.
SB 1633 (Kuehl, 2008) was identical in many respects to AB 171
and was vetoed based on budgetary reasons. The governor's veto
message referred to the 2008-2009 State Budget and that SB 1633
did not meet the governor's priority related to the budget.
Prior Vote : Senate Business and Professions Committee (Ayes 8,
Noes 0)
**************