On September 23, 2016, California Governor Jerry Brown signed Assembly Bill 72 (Bonta, D-Oakland), which will have significant ramifications on a number of issues between health care providers and payors.
The bill applies to non-emergency services provided by out-of-network individual health care providers at in-network facilities and limits reimbursement to such providers. Delegated entities are required to comply with this bill if a health plan or health insurer delegates payment functions. The bill does not apply to Medi-Cal managed care health plans or other plans governed by contracts with the Department of Health Care Services (DHCS). Following is a summary and analysis of key sections of the bill.
Patient out of the Middle
The bill generally prohibits an enrollee or insured from owing the non-contracting individual health professional at the contracting health facility more than the in-network cost-sharing amount. This provision applies to health plan contracts and insurance policies issued, amended, or renewed on or after January 1, 2017. For patients who have out-of-network coverage, the law has an exception if the provider gets informed written consent from the patient far enough in advance of the procedure for the patient to agree to greater exposure from using an out-of-network provider. The new law sets forth several specific requirements for a provider to implement this exception.
The bill also prohibits a non-contracting individual health professional from balance billing or collecting any amount from the enrollee or insured, and requires communications to the patient about any additional amounts being pursued from the payor to inform the patient that such communications are not a bill to the patient.
The question of whether it is legal for non-contracted providers to discount co-insurance and co-payments to in-network levels has been the subject of many recent cases. Insurers and plans sometimes take the position that discounting cost sharing constitutes fraud and interference with the insurers’ contracts with their members. Providers have taken the position that discounting co-insurance or co-payment amounts is neither fraud nor interference with contract, and is no different than when plans negotiate discounts with providers. A fundamental question raised by these co-payment waiver disputes is why plans should expect a provider to extend discounts on what the plans owe but not expect the provider to extend discounts to patients on their portion.
This legislation effectively resolves the co-payment waiver issue with regard to the services provided by out-of-network physicians at in-network facilities by requiring these physicians to discount cost sharing amounts to in-network levels. This undermines the payors’ argument that non-contracted physicians are committing fraud by discounting cost sharing amounts. The bills submitted by a non-contracted physician are the same whether he or she performs the services at a contracted or non-contracted facility. HLB questions how it can be fraud if in one instance the physician is required to accept a discounted rate and in the other instance he or she is choosing to accept a discounted rate.
AB 72 is just one more in the trend of California statutes encouraging or mandating providers to relieve part of the burden that patients face for the parts of their coverage that health plans do not pay.
The legislation requires that “the plan shall reimburse the greater of the average contracted rate or 125 percent of the amount Medicare reimburses on a fee-for-service basis for the same or similar services in the general geographic region in which the services were rendered.”
The law further requires that each plan submit data to the DMHC concerning its contracted rate and how it arrived at the average contracted rate. “The average contracted rate data submitted pursuant to this section shall be confidential and not subject to disclosure under the California Public Records Act.”
By January 1, 2019, the DMHC is required to specify a methodology that plans and delegated entities shall use to determine the average contracted rates for services. This methodology shall take into account, at a minimum, information from the independent dispute resolution process, the specialty of the individual health professional, and the geographic region in which the services are rendered. The methodology to determine an average contracted rate shall ensure that the plan includes the highest and lowest contracted rates.
The bill provides that “the amounts paid by a plan for services under this section shall not constitute the prevailing or customary charges, the usual fees to the general public, or other charges for other payers for an individual health professional.”
The bill may, in effect, establish a ceiling on contract rates. Since AB 72 requires that the plan reimburse the greater of the average contracted rate or 125% of Medicare, it provides an disincentive to plans to agree to rates greater than 125% of Medicare. By refusing to contract with physicians at rates above 125% of Medicare, a plan can force all physicians (contracted and non-contracted) to accept rates at 125% of Medicare.
Given that the contract rates are confidential, it will be difficult for providers to challenge how the plans arrived at the average contracted rates. HLB has experience from prior actions of plans not accurately reporting their data to entities that calculate reimbursement amounts.
While the bill expressly states that the amounts paid by a plan for services under this legislation “shall not constitute the prevailing or customary charges, the usual fees to the general public, or other charges for other payers for an individual health professional,” providers should be concerned that payment rates in the legislation may affect courts’ determinations of usual and customary amounts.
Independent Dispute Resolution Process (IDRP)
AB 72 allows the non-contracting individual health professional or plan/insurer to appeal a claim payment dispute. The bill requires the DMHC and the California Department of Insurance (CDI) to establish an IDRP for the purpose of resolving a claim dispute between a health plan or insurer and a non-contracting individual health professional. Both parties are required to participate in the IDRP, and the parties are required to exhaust the plan's or insurer's internal process prior to initiating IDRP. The bill permits the bundling of claims for the same or similar services provided by the individual health professional.
The bill provides that the decision is binding on both parties, but also permits a dissatisfied party “to pursue any right, remedy, or penalty established under any applicable law.”
The legislation is vague as to what is to be decided in the IDRP. AB 72 provides that “[i]n deciding the dispute, the independent organization shall base its decision regarding the appropriate reimbursement on all relevant information.” It is questionable if the IDRP is only intended to determine whether the average contracted rate is accurate, or if it is intended to determine a fair compensation to the provider.
It is also unclear what effect a determination of an appropriate rate in the IDRP will have on litigation in court for reasonable and customary amounts. As noted above, the bill provides that the decision is binding on both parties, but also permits a dissatisfied party “to pursue any right, remedy, or penalty established under any applicable law.”
The requirements in AB 72 that the parties exhaust the plan's or insurer's internal process prior to initiating IDRP, and then participate in the IDRP process prior to bringing litigation over the payment rate, will pose a potential timing dilemma for individual health care providers. In a recent California Court of Appeal decision, the court held that the statute of limitations for an out-of-network medical provider’s cause of action against Blue Shield expired while the provider was still navigating the plan’s voluntary internal appeals process. Vishva Dev, M.D., Inc. v. Blue Shield of California Life & Health Insurance Company. The court ruled that the statute of limitations begins to run from the date of the EOB. Whether the same result would occur from a mandatory appeal process remains unaddressed by the courts.
Assignments of Benefits
The bill expressly requires a health plan or insurer to authorize and permit assignment of the enrollee's or insured's right to any reimbursement for health care services covered under the plan contract or insurance policy to a non-contracting individual health professional for these services. However, the law also confirms that payors also must follow the statute even if there is no assignment of benefits.
A growing number of states have passed legislation requiring payors to accept assignments of benefits. AB 72 is another example of such a law. Many self-funded payors have ignored these laws, asserting that they are preempted by ERISA. HLB is currently involved in litigation challenging the right of these payors to ignore assignments, and make payments to the patients, based on other laws already on the books in California. This latest law on the issue adds to the trend of legislation against the refusal of some plans to pay the providers directly.
Hooper, Lundy and Bookman has extensive experience representing providers in disputes concerning out-of-network payment, including situations like those covered in AB 72. For additional information on this bill, please contact Daron Tooch or Glenn Solomon in Los Angeles at 310.551.8111.