SENATE COMMITTEE ON HEALTH

Senator Dr. Richard Pan, Chair

BILL NO: AB 1611

SUBJECT: Emergency hospital services: costs.

SUMMARY:

Limits the cost-sharing required of a patient receiving covered emergency services at a hospital that does not have a contract with the patient’s health plan, insurer, or other third-party payor to no more than the same cost-sharing that the patient would pay for the same covered emergency services received from a contracting hospital. Establishes as the rate of payment for those services, the reasonable and customary value of the hospital services or the average contracted rate for the same or similar hospital services in the general geographic region in which the services where rendered.

Existing law:

1. Establishes DMHC to regulate health plans under the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act) and the California Department of Insurance (CDI) to regulate health insurance. [HSC §1340, et seq. and INS §106, et seq.]
   
2. Requires health plans to provide basic health care services, which includes emergency health care services, out-of-area coverage. [HSC §1345]
   
3. Requires health plans to reimburse claims, or any portion of any claim, as soon as practicable, but no later than 30 working days after receipt of the claim by the health plan, or if the health plan is a health maintenance organization, 45 working days after receipt of the claim by the plan, unless the claim or portion thereof is contested by the plan. [HSC §1371]
   
4. Defines, pursuant to DMHC regulations for health plans, “reimbursement of a claim” for contracted providers without a written contract and non-contracted providers, to mean 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:
   
5. The provider's training, qualifications, and length of time in practice;
6. The nature of the services provided;
7. The fees usually charged by the provider;
8. Prevailing provider rates charged in the general geographic area in which the services were rendered;
9. Other aspects of the economics of the medical provider's practice that are relevant; and,
10. Any unusual circumstances in the case. This criteria is commonly called the “Gould criteria” after a court decision. [28 CCR §1300.71]
    
11. Requires a health plan that covers hospital, medical, or surgical expenses, or its contracting medical providers, to provide 24-hour access for enrollees and providers, including, but not limited to, noncontracting hospitals, to obtain timely authorization for medically necessary care, for circumstance where the enrollee has received emergency services and care is stabilized, but the treating provider believes that the enrollee may not be discharged safely. [HSC §1371.4]
    
12. Permits payment to be denied under 5) above only if the health plan, or its contracting medical providers, reasonably determines that the emergency services and care were never performed, or in cases when the plan enrollee did not require emergency services and care and the enrollee reasonably should have known that an emergency did not exist. Permits a health plan to require prior authorization as a prerequisite for payment for necessary medical care following stabilization of an emergency medical condition. [HSC §1371.4]
    
13. Requires every insurer issuing group or individual policies of health insurance that covers hospital, medical, or surgical expenses, including telehealth services to reimburse claims or any portion of any claim, whether in state or out of state, for those expenses as soon as practical, but no later than 30 working days after receipt of the claim unless the claim is contested by the insurer, in which case the claimant shall be notified, in writing, within 30 working days after receipt of the claim by the insurer. [INS §10123.13]
    
14. Permits, under the Insurance Code, an insured or health care provider to file a written complaint with CDI with respect to the handling of a claim or other obligation under a health insurance policy by a health insurer, or with respect to the alleged misconduct by a health insurer or production agency. Requires the commissioner to make a determination on the complaint within 60 calendar days of the date of its receipt, unless the commissioner, in his or her discretion, determines that additional time is reasonably necessary to fully and fairly evaluate the complaint. [INS §10133.661]
15. Defines emergency services and care to mean medical screening, examination, and evaluation, to determine if an emergency medical condition or active labor exists and, if it does, the care, treatment, and surgery, necessary to relieve or eliminate the emergency medical condition, within the capability of the facility; and, screening, examination, and evaluation to determine if a psychiatric emergency medical condition exists, and care and treatment necessary to relieve or eliminate a psychiatric emergency medical within the capability of the facility. [HSC §1317.1]
    
16. Prohibits a person needing emergency services and care from being transferred from a hospital to another hospital for any nonmedical reason (such as the person’s inability to pay for any emergency service or care) unless specified conditions are met, such as:
    1. The person is examined and evaluated by a physician, including, if necessary, consultation, prior to transfer;
    2. The person has been provided with emergency services and care so that it can be determined, within reasonable medical probability, that the transfer or delay caused by the transfer will not create a medical hazard to the person; and,
    3. A physician at the transferring hospital has notified and has obtained the consent to the transfer by a physician at the receiving hospital and confirmation by the receiving hospital that the person meets the hospital’s admissions criteria relating to appropriate bed, personnel, and equipment necessary to treat the person. [HSC §1317.2]

This bill:

1. Prohibits a hospital that has a legal obligation, whether imposed by statute or by contract, to the extent of that contractual obligation, to any third-party payor, including, but not limited to, a health maintenance organization, health plan, nonprofit hospital service plan, insurer, or preferred hospital organization, a county or an employer to provide emergency care, as defined, for a patient from charging more than the reasonable and customary value of the hospital services or the average contracted rate for the same or similar hospital services in the general geographic region in which the services where rendered.
   
2. Defines “average contracted rate” as the average of the contracted commercial rates paid by the health plan or delegated entity for the same or similar emergency services in the geographic region.
   
3. Defines “reasonable and customary value” of the hospital services as 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 all of the following:
   1. The provider’s training, qualifications, and length of time in practice;
   2. The nature of the services provided;
   3. The fees usually charged by or paid to the provider, including rates paid by both commercial and governmental payers;
   4. Prevailing provider rates charged and paid by both commercial and governmental payers in the general geographic area in which the services were rendered;
   5. Other relevant aspects of the economics of the medical provider’s practice; and,
   6. Any unusual circumstances in the case.
      
4. Defines “third-party payor” as any third-party payor, including, but not limited to, a health maintenance organization, health plan, nonprofit hospital service plan, insurer, or preferred hospital organization, a county, or an employer that by statute or contract is required to cover emergency care.
   
5. Requires the liability of a third-party payor licensed by CDI or DMHC that has a contractual obligation to provide or indemnify emergency medical services to be determined in accordance with the terms of that contract and remain under the sole jurisdiction of the licensing agency.
   
6. Prohibits a third-party payor from being liable for payment for emergency services if the third-party payor reasonably determines that the emergency services and care were never performed, provided that a third-party payor may deny reimbursement to a hospital for a medical screening examination in cases in which the plan enrollee did not require emergency services and care and the enrollee reasonably should have known that an emergency did not exist. (This is substantially similar to a provision that applies to health plans).
   
7. Permits a dissatisfied hospital or third-party payor to pursue any right, remedy, or penalty established under any other applicable law.
   
8. Exempts services provided by a licensed physician, nurse practitioner or physician assistant from this bill.
   
9. Exempts a Medi-Cal managed care plan or any other entity that enters into a contract with DHCS, as specified, from this bill.
   
10. Limits hospital services when a patient is transferred to reasonable charges not to exceed the reasonable and customary value, as specified, or, the average contracted rate.
    
11. Limits the cost-sharing required of a patient receiving covered emergency services consistent with existing law to no more than the same cost-sharing that the patient would pay for the same covered emergency services received from a contracting hospital. Prohibits an enrollee or insured from owing a hospital more than the in-network cost-sharing amount for these emergency services. Requires the hospital to be provided information on the amount of the in-network cost sharing by the third-party payor.
    
12. Prohibits a hospital from billing or collecting any amount from the patient for services subject to this bill except for the in-network cost-sharing amount. Requires any communication from the noncontracting hospital regarding these services to include a notice in 12-point bold type stating that the communication is not a bill and informing the patient that the patient shall not pay until the patient is informed by the patient’s third party payor of applicable cost-sharing.
    
13. Establishes requirements for a hospital to refund to the patient an amount that exceeds the in-network cost-sharing amount, as specified.
    
14. States that this bill does not apply to someone participating in the hospital’s charity care or discount payment policy provisions of existing law. Requires the hospital to provide information on the hospital’s charity care and discount payment policies, as well as information on how to apply for Medi-Cal and any other applicable coverage, if a patient does not have a third-party payor.
    
15. Permits a hospital to advance to collections only the in-network cost-sharing amount, upon receipt of information from the third-party payor that the enrollee has failed to pay.
    
16. Requires a health plan contract or health insurance policy issued, amended, or renewed on or after January 1, 2020 to limit the enrollee or insured cost-sharing to no more than the same cost-sharing that the enrollee or insured would pay for the same services received from a contracting hospital, if an enrollee or insured receives covered emergency services, as specified, from a noncontracting hospital.
    
17. Requires any cost-sharing paid by the enrollee or insured to count toward the limit on annual out-of-pocket expenses, and cost-sharing to apply to any deductible in the same manner as would be attributed to a contracting hospital. Requires cost-sharing paid by the enrollee to satisfy the enrollee’s obligation to pay cost-sharing for the health service, and to constitute “applicable cost-sharing owed by the enrollee.”
    
18. States that this bill shall not be construed to exempt a plan, hospital, any other individual or any other entity from the requirements under existing law nor abrogate the holding in Prospect Medical Group, Inc. V. Northridge Emergency Medical Group (2009) 45 Cal.4^th 497.
    
19. Requires a delegated entity to comply with this bill, if a health plan delegates payment functions to a contracted entity, including, but not limited to, a medical group or independent practice association.
    
20. Requires a health plan contract or health insurance policy issued, amended, or renewed on or after January 1, 2020 to pay a noncontracting health facility the reasonable and customary value of the hospital services or the average contracted rate for the same or similar services in the general geographic region in which services were rendered. Requires the average contracted rate to be determined based on the standardized methodology required under existing law with respect to the reimbursement rate for noncontracting individual health professional services provided at an in-network facility.
    
21. Permits a noncontracting health facility providing emergency services to use the independent dispute resolution process established under existing law with respect to reimbursement rates for noncontracting individual health professional services provided at an in-network facility.
    
22. Requires health plans and health insurers to file a separate schedule documenting cost savings associated with this bill and the impact on rates.
    

FISCAL EFFECT:

According to the Assembly Appropriations Committee:

1. Costs to DMHC of 380,000 in fiscal year 2019-20, $3.4 million in 2020-21 and $2.2 million in 2021-22. Costs will be incurred to review compliance, conduct financial review, enforce the requirements, conduct associated legal workload, and to provide general administrative and information technology support.
2. Costs to CDI of about $3,000 in fiscal year 2019-20 and $110,000 in 2020-21 to issue regulations and enforce the new requirements, and $105,000 in ongoing annual costs thereafter for enforcement.
3. According to CHBRP, which reviewed this bill, this bill will decrease annual net health care expenditures by $357 million for enrollees with federal Department of Labor-regulated plans. The net decrease is comprised of decreased enrollee out-of-pocket cost for covered benefits of $484 million, offset by $96 million in additional employer premiums; $3.6 million in individual premiums; and $27 million in employee premiums.

PRIOR VOTES:

COMMENTS:

1. Author’s statement. According to the author, if an individual has health coverage, it is reasonable to assume they would be covered if they need emergency care. Unfortunately, that is not always the case. If a person ends up at the wrong hospital, they could be surprised by exorbitant balanced billing – the practice of being sent a bill for the balance between what the hospital wants to be paid and what insurance will pay. California law states that if the consumer received emergency care, a health plan is required to cover care whether it is an in-network hospital or out of network. However, seven million Californians do not benefit from this protection. What is worse, no one is protected from receiving surprise hospital bills or being sent to collections for the sticker price for emergency room care. This bill protects all patients from emergency room balance billing. Insured patients would only owe their copay or deductible, hospitals would not be allowed to send the patient an exorbitant bill or to collections. To recoup other costs, this bill standardizes negotiations between the hospital and insurer so there is predictability. After an emergency the only thing a patient should worry about is how to get better, not whether a bill may lead to financial ruin.
2. Balance billing. This bill seeks to protect individuals covered by a health plan, health insurer, or other third party payor from being liable for the cost of emergency services, except for applicable cost-sharing amounts when provided at a hospital that does not have a contract for the patient’s health care services. Balance billing can occur in emergencies when a patient seeks care at the nearest emergency room and does not have the ability to go to or determine if the hospital is in their coverage network. After the health plan, insurer or third party payor reimburses the hospital, the provider (in this case, an out-of-network hospital) seeks the “balance” of their charge from the patient.
   
3. Surprise bills. Surprise bills can arise when a patient receives planned care at an in-network facility but later finds out that an out-of-network provider (i.e., anesthesiologist, pathologist, or radiologist) provided treatment. This practice is called “surprise balance billing” when it happens at an in-network facility because most consumers cannot distinguish when an out-of-network provider is providing services at an in-network facility. To stop this practice and remove consumers from the middle of these billing disputes, AB 72 (Bonta, Chapter 492, Statutes of 2016) created a default reimbursement rate (125% of Medicare or the average contracted rate for that region, whichever is greater) for out-of-network or non-contracted providers to resolve payment disputes with health plans and not consumers. In compliance with AB 72 both CDI and DMHC launched an Independent Dispute Resolution Process (IDRP) in 2017 as a mechanism for non-contracted providers, health plans and health insurers to dispute the default reimbursement amount. According to DMHC’s annual report, in 2018, the DMHC received 39 IDRP applications. Of those, 37 were ineligible or withdrawn, and the remaining two were still pending as of December 31, 2018. CDI has not had any submissions to IDRP pursuant to AB 72.
   
4. SF General Hospital. According to a San Francisco Chronicle article titled “Insured SF General patients on the hook for pending bills despite new policy,” the San Francisco Department of Public Health and the hospital agreed to halt the practice of “balance billing,” sending patients bills if their private insurance companies do not pay the full requested amount. Last year, that practice affected 300 patients with unexpectedly big bills. This is because SF General has no contracts with private insurance companies, which means it charges all privately insured patients the full amount of rates approved each year by the mayor and the Board of Supervisors. According to SF General Hospital forms, it bills patients’ private insurance companies “as a courtesy.” Since there are no contracts with those companies, hospitals can pretty much decide to pay whatever they want and the problem is that the hospital bills the patient with the balance, which can amount to tens of thousands of dollars for everyday ailments like appendicitis, broken bones and migraines. California law inexplicably bans balance billing for patients insured through HMOs, but not for those insured through other forms of insurance, including preferred provider organizations. It is the privately insured patients who are not on HMO plans who are facing the big bills from S.F. General.
5. California Health Benefits Review Program (CHBRP) analysis. AB 1996 (Thomson, Chapter 795, Statutes of 2002) requests the University of California to assess legislation proposing a mandated benefit or service and prepare a written analysis with relevant data on the medical, economic, and public health impacts of proposed health plan and health insurance benefit mandate legislation. CHBRP was created in response to AB 1996, and reviewed this bill. Key findings include:
   1. Coverage impacts and enrollees covered. 3,570,000 enrollees/insureds have health insurance subject to this bill. Over 3,000,000 are in self-insured plans and the remaining are covered by health insurance plans regulated by CDI.
   2. Utilization. CHBRP estimates there are 18,300 cases in which only an emergency room visit occurred and 6,600 cases in which both an emergency visit and inpatient admission occurred.
   3. Impact on expenditures. The average cost for an enrollee who only visits an emergency department is $9,551 ($1,108 from the plan share, $7,183 from total member share, and $1,260 from member/hospital negotiation). The average cost for an enrollee who visits an emergency department and has inpatient admission is $82,459 ($13,474 from the plan share, $59,281 from total member share, and $9,704 from the member/hospital negotiation). CHBRP estimates that costs would decrease to $3,226 and $28,351, respectively). This bill would decrease total net annual expenditures by $357,608,000 for enrollees with self-insured plans and CDI-regulated policies. This is due to a change in total health insurance premiums paid by employers and enrollees for newly covered benefits, adjusted by a decrease in enrollee expenses for covered benefits. CHBRP projects no impact to DMHC due to unanimous State Supreme County ruling, the Court held that noncontracting ER physicians – and, by implication, certain other non-contracting emergency services providers – may not balance bill HMO beneficiaries. Prospect Medical Group, Inc. v. Northridge Emergency Medical Group, 45 Cal. 4^th 497, 502 (2009).
      
6. Hospital prices. According to a September 2018 article published in Health Affairs on California’s competition model of managed health care, beginning in 2001 hospital prices in the state began a sustained and rapid rise with revenue from commercial health plans growing from $13.2 billion to $40.2 billion despite a 10% decline in total volume of care. This resulted in a 238% increase in prices. The authors attribute this to adoption of a prudent layperson regulation in 1999 that mandated health plans to instruct their members to go to the nearest emergency room in the case of a medical emergency, even if it is not on the health plan’s contracted, preferred list, and requiring the health plan to pay for it. At the same time, hospitals responded to price competition by consolidating into hospital systems. The number of hospitals declined nearly 20% but the proportion of hospitals and beds in multihospital systems increased from 39% to almost 60%. By 2016 the average adjusted price per admission in large-system hospitals was almost $7,000 higher than that in all other California hospitals. This was not due to changes in case-mix or local wage rates and cannot be explained by payer mix, technology, or a variety of other factors.
   
7. Federal legislation. There are at least four proposals pending in the 116^th Congress intended to protect patients from balance or surprise billing. These proposals include prohibitions on balance billing when emergency services are furnished by an out-of-network provider or an out-of-network facility, elective health care services are furnished by an out-of-network provider at an in-network facility; additional non-emergency services following emergency care are furnished and the patient is unable to be transported to an in-network facility, and out-of-network laboratory or imaging services are requested by an in-network provider. Two of the proposals resolve payment disputes through arbitration and two use a median contracted rate. These bills would not preempt state laws that set the payment mechanism for fully insured plans, provided the state laws comply with the proposed cost-sharing. These bills would include self-insured plans which are not regulated by states. The Employee Retirement Income Security Act of 1974 (ERISA) preempts state regulation of employer-provided health benefit plans.
   
8. ERISA. According to an article by Peterson-Kaiser Health System Tracker on Surprise Bills, states are preempted from requiring employer plans to cover out-of-network surprise bills; they are also preempted from requiring these plans to apply in-network cost sharing to out-of-network surprise bills; and they are preempted from requiring these plans to settle payment disputes with out-of-network providers over surprise bills using state-established payment rules or procedures. ERISA allows states to regulate the group health insurance policies that some employers buy from insurance companies, 61% of covered workers (and 81% of those in large firms) are covered under self-insured group health plans that are beyond the reach of state regulation. The study indicates surprise medical bills under large group health plans largely reflect consumers whose plans would not be subject to state law.
   
9. Related legislation. AB 651 (Grayson) limits a health plan enrollee or insured’s payment for covered services provided by an air ambulance service provider that does not have a contract with the health plan or health insurer to no more than the same cost sharing that the enrollee or insured would pay for the same covered services received from a contracted air ambulance provider. Requires the Department of Health Care Services to set and maintain supplemental Medi-Cal payments for air ambulance services provided by fixed or rotary wing aircraft that are the difference between the existing fee-for-service rates and the Medicare Program’s lowest rural base rate in California in effect on January 1, 2020. AB 651 is set to be heard in this Committee on July 10, 2019.
   
10. Prior legislation. AB 72 (Bonta, Chapter 492, Statutes of 2016) establishes a payment rate, which is the greater of the average of a health plan or health insurer’s contracted rate, as specified, or 125% of the amount Medicare reimburses for the same or similar services; and an independent dispute resolution process for claims and claim disputes related to covered services provided at a contracted health facility by a noncontracting individual health care professional. Limits enrollee and insured cost sharing for these covered services to no more than the cost sharing required had the services been provided by a contracting health professional.
    
11. Support. According to Health Access California, this bill seeks to ensure hospitals get a fair reimbursement for emergency room treatment, but not allow the hospital to abuse the monopoly they have in emergency situations to inflate the cost of coverage for all consumers. Recent academic research has shed light on the role of the “reasonable person” standard for emergency room care in actually driving up health care costs. To balance this unintended consequence of protecting consumers from surprise bills for out-of-network emergency room care, this bill proposes two payment standards for out-of-network emergency room care. The payment standard is based either on a combination of sticker price charged by the hospital and rates paid by both commercial and public payers (which is referred to as “reasonable and customary”), or the “average contracted rate” for that service, for that region, for that health plan. “Average contracted rate” is similar to “median in-network rate” that is included in the three leading compromise bills on surprise medical bills currently pending in Congress, with bipartisan support from over a dozen Senators, including Senators Alexander, Grassley, and others. This is the rate the market has determined, after negotiations between the hospital and the health plans. This bill also includes the standard used for DMHC coverage which is “reasonable and customary”. This standard includes a blend of public and private rates as factors, as well as hospital “sticker prices” that virtually no one pays. This is a major compromise and accommodation to the hospitals: the inclusion of these “charges” in the calculation of “reasonable and customary” allows hospitals to drive up the cost of care. It appears to have had an inflationary effect on the cost of emergency care: while utilization of emergency care has remained flat or even declined in California, the price for emergency care has skyrocketed by over 100% for the most serious types of care. If these real-world alternatives to the hospital’s monopoly price is insufficient, the bill preserves the ability of hospitals to litigate for higher rates. The California Labor Federation writes that only consumers in DMHC covered health plans are protected from balance billing. An estimated seven million Californians are covered by federally regulated self-insured plans – most often offered by large employers and union trust funds – or by plans regulated by CDI. A recent analysis found that 250,000 CalPERS enrollees are also potentially vulnerable since they are in the PERS self-insured plan.
    
12. Opposition unless amended. Opponents, generally hospitals and some local Chambers of Commerce, indicate their support for the balance billing prohibitions in this bill but oppose the rate setting mechanism, specifically the average contracted rates requirement. For some hospitals that have few commercial contracts and mostly Medi-Cal patients, this rate may be too low. Opponents believe this bill creates a disincentive for insurance companies to contract with hospitals because absent a contract, the amount an insurance company will owe a hospital will default to a rate set by this bill, and overtime, if contracts become less common, the benchmark becomes meaningless. Additionally, this bill will materially harm California’s healthcare market by reducing a key incentive for purchasers of healthcare to enter into contract with hospitals to obtain discounts. This bill would provide a statutory right to a discount for services, without being subject to any of the other obligations of having a contract with a hospital, chief among them the obligation to steer patients to the hospital. Another concern relates to ERISA plans which are not subject to state network adequacy requirements or timely payment rules. ERISA plans will no longer need to enter into agreements with California-regulated health plans in order to be entitled to discounted rates. Across Sutter Health’s system of providers, roughly half of all non-government program, commercially insured members are members of an ERISA plan. For rural hospitals, relatively low volumes make the per-patient cost of care higher than its urban counterparts, with reimbursement often falling short to cover costs. For Plumas District Hospital, in the emergency department alone, it pays over $600,000 per year to subsidize the loss incurred to provide access to high quality, 24/7 emergency physician services to its community. Without contracts in place with insurance companies that subsidy will no doubt increase, and the money has to come from other lines, such as labor and delivery, or surgery. Enloe Medical Center writes that by virtue of its market dominance, Anthem already has considerable leverage in negotiating contracts for both hospitals and physicians. In fact, Anthem has recently admitted to underpaying Butte County area physicians by at least 35% below Anthem’s state average. Because of this gross underpayment, and the general poverty of the area, hospitals are forced to provide physicians with increasingly large subsidies to ensure that specialty physician services will be available on an emergent basis. The only leverage the hospital has in negotiations is the threat of Anthem’s enrollees being out-of-network for emergency services.
    
13. Policy comments. Californians in Knox-Keene regulated plans are already protected from balance billing as a result of emergency services. This includes hospital and physician services. The payment rate associated with the out-of-network emergency services under DMHC is based on the Gould criteria also referred to as “reasonable and customary”. This bill extends the balance billing protections associated with hospital services to products regulated under the Insurance Code by CDI and would introduce a second payment standard “average contracted rates.” As this bill is currently drafted, it is not clear which standard prevails. It should also be noted that disparities in the balance billing protections will continue because this bill is not extending balance billing protections related to emergency physician services for people in products regulated by CDI. In other words, emergency physicians could balance bill patients with CDI regulated insurance policies even after this bill is enacted.
    
    This bill also extends the hospital balance billing protections to people in self-insured ERISA plans by prohibiting the hospitals from charging patients more than the in-network cost-sharing and payors more than the Gould criteria or average contracted rates.  However, because the state has no regulatory authority over self-insured ERISA plans, none of the bill’s provisions that require the third-party payor to do certain things would apply. For example, the state cannot require the ERISA plan to tell the hospital what the in-network cost sharing is. This bill permits either the hospital or third-party payor to pursue any right, remedy, or penalty established under any other applicable law if dissatisfied with the rate. Presumably the IDRP process is one of those options but the ERISA plan would not be bound by any of the requirements that apply to health plans and insurers in that process.  Additionally, the methodology used to determine average contracted rates would not apply to ERISA plans.
14. Amendments. This bill should be amended to require plans to include in the report on cost savings the number of contracts terminated and entered into in the year prior to the effective date of this legislation and on annual basis thereafter.
    
15. Technical amendments.
    1. The definition of third-party payor contains some out dated terms and could be clarified.
    2. The Gould criteria or reasonable and customary was developed to describe physician services and not hospitals and may need to be tailored more toward hospital services.
    3. Section 3 is no longer necessary since poststabilization care was removed from this bill.

SUPPORT AND OPPOSITION:

Support: California Labor Federation (co-sponsor)

Health Access California (co-sponsor)

AARP California

ACCE Action

All Rise Alameda

Asian Americans Advancing Justice

CA Conference Board of the Amalgamated Transit Union

CA Conference of Machinists

California Alliance for Retired Americans

California Health Professional Student Alliance

California Physicians Alliance

California School Employees Association, AFL-CIO

California State Firefighters’ Association

California State Retirees

California Teachers Association

California Teamsters

Cloverdale Indivisible

Consumer Reports

Courage Campaign

Courageous Resistance of Palm Springs and Other Desert Cities

Drug Policy Alliance

El Cerrito Progressives

Engineers and Scientists of CA, IFPTE Local 20, AFL-CIO

Feminists in Action Los Angeles

Friends Committee on Legislation in California

Indivisble-37

Indivisble-39

Indivisible 41

Indivisible CA-25 Simi Valley-Porter

Indivisible CA-33

Indivisible East Bay

Indivisible Los Angeles

Indivisible Marin

Indivisible Media City Burbank

Indivisible North San Diego County

Indivisible OC 46

Indivisible OC 48

Indivisible Sacramento

Indivisible San Jose

Indivisible Santa Barbara

Indivisible Sausalito

Indivisible Sebastopol

Indivisible SF

Indivisible SF Peninsula and CA-14

Indivisible Sonoma County

Indivisible South Bay LA

Indivisible Stanislaus

Indivisible Ventura

Indivisible Yolo

Indivisible: San Diego Central

Indivisible29

Indivisible-43

Inlandboatmen’s Union of the Pacific

Latino Coalition for a Healthy California

Los Angeles LGBT Center

Mill Valley community Action Network

National Association of Social Workers, California Chapter

National Health Law Program

National Multiple Sclerosis Society

NextGen California
Professional and Technical Engineers, IFPTE Local 21, AFL-CIO

Orchard City Indivisible

Our Revolution Long Beach

Pacific Business Group on Health

SAG-AFTRA

Santa Cruz Indivisible

SEIU California

The Resistance Northridge

Together We Will Contra Costa

TWW/ Indivisible – Los Gatos

United Food and Commercial Workers (UFCW) Western States Council
UNITE-HERE, AFL, CIO

Utility Workers of America

Venice Resistance

Voices for Progress

Western Center on Law & Poverty

Women’s Alliance Los Angeles

Writers Guild of America West

Oppose: Adventist Health (unless amended)

Alhambra Hospital Medical Center (unless amended)

Alliance of Catholic Health Care (unless amended)

Avanti Hospitals (unless amended)

Bakersfield Memorial Hospital (unless amended)

Banner Lassen Medical Center (unless amended)

Bear Valley Community Healthcare District (unless amended)

California Hospital Association

California Hospital Medical Center (unless amended)

Centinela Hospital Medical Center (unless amended)

Children’s Hospital Los Angeles (unless amended)

Chinese Hospital (unless amended)

Community Hospital of San Bernardino (unless amended)

Community Medical Centers (unless amended)

Cottage Health (unless amended)

Dignity Health – Inland Empire (unless amended)

Dignity Health (unless amended)

Dominican Hospital (unless amended)

East Los Angeles Doctors Hospital (unless amended)

Emanate Health (unless amended)

Enloe Medical Center (unless amended)

French Hospital Medical Center (unless amended)

Glendale Memorial Hospital & Health Center (unless amended)

Good Samaritan Hospital (unless amended)

Govern for California (unless amended)

Greater Coachella Valley Chamber of Commerce (unless amended)

Henry Mayo Newhall Hospital (unless amended)

Hospital Corporation of America

Jerold Phelps Community Hospital (unless amended)

John Muir Health (unless amended)

Kern Medical (unless amended)

Loma Linda University Health (unless amended)

Mammoth Hospital (unless amended)

Marian Medical Center (unless amended)

Marin General Hospital (unless amended)

Mark Twain Medical Center (unless amended)

Marshall Medical Center (unless amended)

Mayers Memorial Hospital District (unless amended)

MemorialCare (unless amended)

Mercy General Hospital (unless amended)

Mercy Hospital of Folsom (unless amended)

Mercy Hospitals of Bakersfield (unless amended)

Mercy Medical Center (unless amended)

Mercy Medical Center Mt. Shasta (unless amended)

Mercy Medical Center Redding (unless amended)

Methodist Hospital of Sacramento (unless amended)

Monterey Park Hospital (unless amended)

NorthBay Healthcare (unless amended)

Northridge Hospital Medical Center (unless amended)

Olympia Medical Center (unless amended)

Palo Verde Hospital (unless amended)

PIH Health (unless amended)

Plumas District Hospital (unless amended)

Pomona Valley Hospital Medical Center (unless amended)

Redlands Community Hospital (unless amended)

Saint Francis Memorial Hospital (unless amended)

Salinas Valley Memorial Healthcare System (unless amended)

San Gabriel Valley Medical Center (unless amended)

Scripps Health (unless amended)

Seneca Healthcare District (unless amended)

Sequoia Hospital (unless amended)

Sharp Chula Vista Medical Center (unless amended)

Sharp Coronado Hospital (unless amended)

Sharp Grossmont Hospital (unless amended)

Sharp Healthcare (unless amended)

Sharp Mary Birch Hospital for Women & Newborns & Sharp Mesa Vista Hospital (unless amended)

Sharp Memorial Hospital (unless amended)

Southwest Healthcare System (unless amended)

St. Bernardine Medical Center (unless amended)

St. Elizabeth’s Community Hospital (unless amended)

St. Francis Medical Center (unless amended)

St. John’s Pleasant Valley Hospital (unless amended)

St. John’s Regional Medical Center (unless amended)

St. Joseph’s Behavioral Health Center (unless amended)

St. Joseph’s Medical Center (unless amended)

St. Mary Medical Center (unless amended)

Stanford Health Care (unless amended)

Sutter Health (unless amended)

Tenet Healthcare (unless amended)

United Hospital Association (unless amended)

Vibra Hospital of Northern California (unless amended)

West Hills Hospital & Medical Center (unless amended)

One Individual

Date of Hearing: April 23, 2019

ASSEMBLY COMMITTEE ON HEALTH

Jim Wood, Chair

ABPCA Bill Id:AB 1611 (

Author:Chiu) – As Amended Ver:April 22, 2019

SUBJECT: Emergency hospital services: costs

SUMMARY: Prohibits a hospital from charging more than the greater of the average contracted rate or 150% of the amount Medicare reimburses on a fee-for-service (FFS) basis for the same or similar hospital services in the general geographic region in which the services were rendered, as specified, for emergency care or poststabilization care. Requires a health care service plan (health plan) contract or insurance policy issued, amended, or renewed on or after January 1, 2020, to provide that if an enrollee or insured receives covered services from a noncontracting hospital, the enrollee or insured is prohibited from paying more than the same cost sharing that the enrollee or insured would pay for the same covered services received from a contracting hospital. Specifically, this bill:

Hospital Requirements

1. Prohibits a hospital that has a legal obligation, whether imposed by statute or by contract, to the extent of that contractual obligation, to any third-party payor, including, but not limited to, a health maintenance organization (HMO), health plan, nonprofit hospital service plan, insurer, or preferred hospital organization, a county, or an employer to provide emergency care or poststabilization care as defined, for a patient, from charging more than the greater of the average contracted rate or 150% of the amount Medicare reimburses on a FFS basis for the same or similar hospital services in the general geographic region in which the services were rendered.
2. Defines average contracted rate as the average of the contracted commercial rates paid by the health plan or delegated entity for the same or similar services in the geographic region.
3. Specifies that the liability of a third party payor that is licensed by the California Department of Insurance (CDI) Commissioner or the Department of Managed Health Care (DMHC) Director and has a contractual obligation to provide or indemnify emergency medical services under a contract that covers a subscriber or an enrollee or insured will be determined in accordance with the terms of that contract and will remain under the sole jurisdiction of that licensing agency.
4. Allows either the hospital or the third party payor to pursue any right, remedy, or penalty established under any other applicable law, if dissatisfied.
5. Prohibits a third-party payor from being liable for payment for emergency services if the third-party payor reasonably determines that the emergency services and care were never performed, provided that a third-party payor may deny reimbursement to a hospital for a medical screening examination in cases in which the plan enrollee did not require emergency services and care and the enrollee reasonably should have known that an emergency did not exist.
6. Specifies that a hospital that provides care, as specified, to provide that if a patient receives covered services, or poststabilization care, the patient will pay no more than the same cost sharing that the patient would pay for the same covered services received from a contracting hospital, and refers to this amount as the in-network cost-sharing amount.
7. Prohibits an enrollee from owing a hospital that provides emergency or other services or poststabilization, as specified, more than the in-network cost-sharing amount for services subject to this bill. Requires the third party payor to provide the hospital information on the amount of the in-network cost sharing.
8. Prohibits a hospital from billing or collecting any amount from the patient for services subject to this bill except for the in-network cost-sharing amount. Requires any communication from the noncontracting hospital to the patient to include a notice in 12-point bold type stating that the communication is not a bill and informing the patient not to pay until the patient is informed by the patient’s third-party payor of any applicable cost sharing.
9. Requires, if the hospital has received more than the in-network cost-sharing amount from the patient for services subject to this section, the noncontracting hospital to refund any overpayment to the patient within 30 calendar days after receiving payment from the patient.
10. Requires, if the hospital does not refund any overpayment to the patient within 30 calendar days after being informed of the patient’s in-network cost-sharing amount, interest to accrue at the rate of 15% per annum beginning with the date payment was received from the enrollee.
11. Requires a hospital to automatically include in the refund to the patient all interest that has accrued pursuant to this section without requiring the enrollee to submit a request for the interest amount.
12. Provides that, if a patient does not have a third-party payor and a hospital determines, as specified, that a patient is participating in the charity care or discount payment policy, then this bill to not apply to that patient. Specifies that, if a patient does not have a third-party payor and has not yet begun to participate in either the charity care or discount payment policy provisions, as specified, to provide information on the hospital’s charity care and discount payment policies, as well as information on how to apply for Medi-Cal and any other applicable coverage.
13. Allows a hospital to advance to collections only on the in-network cost-sharing amount, as determined by the third-party payor pursuant to 7) above, that the enrollee has failed to pay.
14. Prohibits the hospital, or any entity acting on its behalf, including any assignee of the debt, from reporting adverse information to a consumer credit reporting agency or commence civil action against the enrollee for a minimum of 150 days after the initial billing regarding amounts owed by the enrollee under 6) and 7) above.
15. Prohibits the noncontracting hospital, or any entity acting on its behalf, including any assignee of the debt, from using wage garnishments or liens on primary residences as a means of collecting unpaid bills under this bill with respect to a patient subject to 7) above.
16. Defines the following:
    1. Contracting hospital as a hospital that is contracted with the patient’s third-party payor to provide services under the patient’s contract.
    2. Cost sharing includes any copayment, coinsurance, or deductible, or any other form of cost sharing paid by the enrollee other than premium or share of premium.
    3. In-network cost-sharing amount as an amount no more than the same cost sharing the enrollee would pay for the same covered service received from a contracting hospital.
    4. Third-party payor as any third-party payor, including, but not limited to, a health maintenance organization, health care service plan, nonprofit hospital service plan, insurer, or preferred hospital organization, a county, or an employer that by statute or contract is required to cover emergency care.
17. Prohibits construing the provisions of this bill from requiring a third-party payor to cover services not required by law or by the terms and conditions of the third-party contract.
18. Prohibits this bill from being construed to exempt a plan or hospital from the requirements under existing law, nor abrogate the holding in Prospect Medical Group, Inc. v. Northridge Emergency Medical Group (2009) 45 Cal.4th 497.
19. Exempts a Medi-Cal managed health care service plan or any other entity that enters into a contract with the Department of Health Care Services (DHCS), as specified.
20. Prohibits reasonable charges from exceeding the greater of the average contracted rate or 150% of the amount Medicare reimburses on a FFS basis for the same or similar services in the general geographic region in which the services were rendered. Defines average contracted rate as the average of the contracted commercial rates paid by the health plan or delegated entity for the same or similar services in the geographic region.  Allows either the hospital or the third party payor to pursue any right, remedy, or penalty established under any other applicable law, if dissatisfied with reasonable charges as defined in this bill.

Health Plan or Insurer Requirements

1. Prohibits, a health care service plan contract or health insurance policy, issued, amended, or renewed on or after January 1, 2020, from requiring an enrollee or insured from paying no more than the same cost sharing that the enrollee or insured would pay for the same covered services received from a contracting hospital, if an enrollee receives covered services, as specified, from a noncontracting hospital. Refers to this amount as the in-network cost-sharing amount.
2. Prohibits an enrollee or insured from owing a noncontracting hospital that provides emergency or other services, as specified, more than the in-network cost-sharing amount for services. Requires, at the time of payment by the plan to the noncontracting hospital, the plan or insurer to inform the enrollee or insured and the noncontracting hospital of the in-network cost-sharing amount owed by the enrollee or insured.
3. Prohibits a noncontracting hospital from billing or collecting any amount from the enrollee or insured for services, except for the in-network cost-sharing amount. Requires any communication from the noncontracting hospital to the enrollee prior to the receipt of information about the in-network cost-sharing amount pursuant to 21) above to include a notice in 12-point bold type stating that the communication is not a bill and informing the enrollee or insured to not pay until the enrollee or insured is informed of any applicable cost sharing.
4. Requires, if the noncontracting hospital has received more than the in-network cost-sharing amount from the enrollee for services subject to this bill, the noncontracting hospital to refund any overpayment to the enrollee within 30 calendar days after receiving payment from the enrollee or insured.
5. Requires, if the noncontracting hospital does not refund any overpayment to the enrollee within 30 calendar days after being informed of the enrollee’s or insured’s in-network cost-sharing amount, interest to accrue at the rate of 15% per annum beginning with the date payment was received from the enrollee or insured.
6. Requires a noncontracting hospital to automatically include in the refund to the enrollee or insured all interest that has accrued without requiring the enrollee to submit a request for the interest amount.
7. Applies the following:
   1. Any cost sharing paid by the enrollee or insured for the services subject to this bill to count toward the limit on annual out-of-pocket expenses;
   2. Cost sharing arising from services subject to this bill to be counted toward any deductible in the same manner as cost sharing would be attributed to a contracting hospital; and,
   3. The cost sharing paid by the enrollee or insured pursuant to this bill to satisfy the enrollee’s obligation to pay cost sharing for the health service and to constitute applicable cost sharing owed by the enrollee or insured.
8. Allows a noncontracting hospital to advance to collections only the in-network cost-sharing amount, as determined by the plan pursuant to 21) above that the enrollee or insured has failed to pay.
9. Prohibits the noncontracting hospital, or any entity acting on its behalf, including any assignee of the debt, from reporting adverse information to a consumer credit reporting agency or commencing civil action against the enrollee or insured for a minimum of 150 days after the initial billing regarding amounts owed by the enrollee or insured under 21) or 22) above.
10. Prohibits the noncontracting hospital, or any entity acting on its behalf, including any assignee of the debt, from using wage garnishments or liens on primary residences as a means of collecting unpaid bills, with respect to an enrollee or insured.

1. Defines the following:
   1. Contracting hospital as a hospital that is contracted with the enrollee or insured’s health care service plan to provide services under the enrollee’s plan contract;
   2. Cost sharing includes any copayment, coinsurance, or deductible, or any other form of cost sharing paid by the enrollee or insured other than premium or share of premium; and,
   3. In-network cost-sharing amount as an amount no more than the same cost sharing the enrollee or insured would pay for the same covered service received from a contracting hospital. Specifies that the in-network cost-sharing amount with respect to an enrollee or insured with coinsurance be based on the amount paid by the plan or insurer consistent with existing law.
2. Prohibits the provisions of this bill from requiring a health plan or insurer to cover services not required by law or by the terms and conditions of the health plan contract or health insurance policy.
3. Prohibits this bill from being construed to exempt a plan, hospital, any other individual or any other entity from the requirements existing law, nor abrogate the holding in Prospect Medical Group, Inc. v. Northridge Emergency Medical Group (2009) 45 Cal.4th 497.
4. Requires, if a health plan or health insurer delegates payment functions to a contracted entity, including, but not limited to, a medical group or independent practice association, the delegated entity to comply with this bill.
5. Exempts Medi-Cal managed health care plan or any other entity that enters into a contract with DHCS.
6. Requires a health plan contract or health insurance policy issued, amended, or renewed on or after January 1, 2020, to provide that:
   1. A noncontracting health facility, as specified, be paid the greater of the average contracted rate or 150% of the amount Medicare reimburses on a FFS basis for the same or similar services in the general geographic region in which the services were rendered. Defines average contracted rate as the average of the contracted commercial rates paid by the health plan or health insurer delegated entity for the same or similar services in the geographic region; and,
   2. To determine the average contracted rate, the DMHC and CDI to use the standardized methodology as provided in existing law.
7. Allows a noncontracting health facility providing emergency services to use the independent dispute resolution process (IDRP), as specified. Requires, if the noncontracting health facility participates in the IDRP, the health plan or insurer to also participate.
8. Requires the decision obtained through the DMHC or CDI’s IDRP to be binding on both parties. Requires the plan or insurer to implement the decision obtained through the IDRP.
9. Allows, if dissatisfied, either the health plan or insurer or the hospital to pursue any right, remedy, or penalty established under any other applicable law.
10. Requires, for a plan or insurer contract subject to individual and small group rate filing, the plan or insurer to file a separate schedule documenting the cost savings associated with this bill and the impact on rates.
11. Requires, for a plan or insurer contract subject to existing large group rate filings, the plan or insurer to file a separate schedule documenting cost savings associated with this bill and the impact on rates.
12. Makes other technical and conforming changes.

EXISTING LAW:

1. Provides for the regulation of health plans by DMHC under the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act) and for health insurers by CDI under the Insurance Code.
2. Requires contracts between providers and health plans to be in writing and prohibits, except for applicable copayments and deductibles, a contracted provider from invoicing or balance billing a health plan’s enrollee for the difference between the provider’s billed charges and the reimbursement paid by the health plan or the health plan’s capitated provider for any covered benefit.
   
3. Prohibits a provider, in the event that a contract has not been reduced to writing, or does not contain the prohibition above, from collecting or attempting to collect from the subscriber or enrollee sums owed by the health plan. Prohibits a contracting provider, agent, trustee or assignee from taking action at law against a subscriber or enrollee to collect sums owed by the health plan.
4. Specifies, in DMHC regulations, that except for medical transportation services, "unfair billing pattern" includes the practice, by a provider of emergency services, including but not limited to hospitals and hospital-based physicians such as radiologists, pathologists, anesthesiologists, and on-call specialists, of billing an enrollee of a health plan for amounts owed to the provider by the health care service plan or its capitated provider for the provision of emergency services.
   
5. Establishes, pursuant to DMHC regulations, requirements that health plans must implement in their claims settlement practice, including the meaning of reimbursement of a claim, such that providers with a contract receive the contract rate. Claims for contracted providers without a written contract and non-contracted providers require 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 the following:
   1. The provider's training, qualifications, and length of time in practice;
   2. The nature of the services provided;
   3. The fees usually charged by the provider;
   4. Prevailing provider rates charged in the general geographic area in which the services were rendered;
   5. Other aspects of the economics of the medical provider's practice that are relevant; and,
   6. Any unusual circumstances in the case.
      
6. Allows a non-contracted provider to dispute the appropriateness of a health plan's computation of the reasonable and customary value and requires the health plan to respond to the dispute through the health plan’s mandated provider dispute resolution process.
   
7. Requires health plans to pay for medically necessary services provided in a licensed acute care hospital, if the services were related to authorized services and provided after the health plan's normal business hours, unless the health plan has a system whereby it can respond to authorization requests within 30 minutes.
   
8. Prohibits a health plan from engaging in an unfair payment pattern, defined as, engaging in a demonstrable and unjust pattern, of reviewing or processing complete and accurate claims that results in payment delays; engaging in a demonstrable and unjust pattern of reducing the amount of payment or denying complete and accurate claims; failing on a repeated basis to pay the uncontested portions of a claim within specified timeframes; and, failing on a repeated basis to automatically include the interest due on claims, as specified.
   
9. Prohibits a hospital which contracts with an insurer, nonprofit hospital service plan, or health plan from determining or conditioning medical staff membership or clinical privileges upon the basis of a physician and surgeon’s or podiatrist’s participation or non-participation in a contract with that insurer, hospital service plan, or health plan.
   
10. Defines emergency services and care as medical screening, examination, and evaluation by a physician and surgeon, or, to the extent permitted by applicable law, by other appropriate licensed persons under the supervision of a physician and surgeon, to determine if an emergency medical condition or active labor exists and, if it does, the care, treatment, and surgery, if within the scope of that person’s license, necessary to relieve or eliminate the emergency medical condition, within the capability of the facility; and to determine if a psychiatric emergency medical condition exists, and the care and treatment necessary to relieve or eliminate the psychiatric emergency medical condition, within the capability of the facility.
11. Requires a health plan, or its contracting medical providers, to provide 24-hour access for enrollees and providers, including, but not limited to, non-contracting hospitals, to obtain timely authorization for medically necessary care, for circumstances where the enrollee has received emergency services, and is stabilized, but the treating provider believes that the enrollee may not be discharged safely. Establishes additional requirements associated with treatment or transfer post stabilization. Defines post stabilization as medically necessary care provided after an emergency medical condition has been stabilized.
12. Requires a health plan to annually report network adequacy data, as specified, to DMHC as a part of its annual timely access compliance report, and requires DMHC to review the network adequacy data for compliance with existing requirements.
13. Requires DMHC to annually review health plan compliance with timely access standards and to post its final findings from the review, and any waivers or alternative standards approved by DMHC, on its website.
14. Authorizes DMHC to develop, and requires health plans to use, standardized methodologies for timely access reporting.
15. Establishes a payment rate, which is the greater of the average of a health plan or health insurer’s contracted rate, as specified, or 125% of the amount Medicare reimburses for the same or similar services; and, an IDRP for claims and claim disputes related to covered services provided at a contracted health facility by a non-contracting individual health care professional for health plan contracts and health policies issued, amended, or renewed on or after July 1, 2017. Limits enrollee and insured cost sharing for these covered services to no more than the cost sharing required had the services been provided by a contracting health professional. Defines average contracted rate as the average of the contracted commercial rates paid by the health plan or delegated entity for the same or similar services in the geographic region.
16. Requires a hospital which has a legal obligation, whether imposed by statute or by contract, to the extent of that contractual obligation, to any third-party payor, including, but not limited to, a HMO, health plan, nonprofit hospital service plan, insurer, or preferred provider organization, a county, or an employer to provide care for a patient under specified circumstances to receive that patient to the extent required by the applicable statute or by the terms of the contract, or, when the hospital is unable to accept a patient for whom it has a legal obligation to provide care whose transfer will not create a medical hazard as specified, requires the hospital to make appropriate arrangements for the patient’s care.
17. Requires a county hospital to accept a patient whose transfer will not create a medical hazard as specified and who is determined by the county to be eligible to receive health care services, as required, unless the hospital does not have appropriate bed capacity, medical personnel, or equipment required to provide care to the patient in accordance with accepted medical practice. Requires the receiving hospital to provide personnel and equipment reasonably required in the exercise of good medical practice for the care of the transferred patient.
18. Requires any third-party payor, including, but not limited to, a HMO, health care service plan, nonprofit hospital service plan, insurer, or preferred provider organization, or employer which has a statutory or contractual obligation to provide or indemnify emergency medical services on behalf of a patient to be liable, to the extent of the contractual obligation to the patient, for the reasonable charges of the transferring hospital and the treating physicians for the emergency services, except that the patient shall be responsible for uncovered services, or any deductible or copayment obligation. Requires the liability of a third-party payor which has contracted with health care providers for the provision of these emergency services to be set by the terms of that contract. Requires the liability of a third-party payor that is licensed by the CDI Commissioner or the DMHC Director and has a contractual obligation to provide or indemnify emergency medical services under a contract which covers a subscriber or an enrollee to be determined in accordance with the terms of that contract and to remain under the sole jurisdiction of that licensing agency.
19. Requires a hospital which has a legal obligation to provide care for a patient as specified to the extent of its legal obligation, imposed by statute or by contract to the extent of that contractual obligation, which does not accept transfers of, or make other appropriate arrangements for, medically stable patients in violation of existing law or regulations to be liable for the reasonable charges of the transferring hospital and treating physicians for providing services and care which should have been provided by the receiving hospital.
20. Prohibits any person or public agency from advertising itself as, or holding itself out as, providing medical services, by using in its name or advertising the word “emergency,” as specified, unless one of the following is satisfied:
    1. Is a general acute care hospital providing approved standby, basic, or comprehensive emergency medical services; or
    2. Meets specified minimum standards that include some of the following:
       1. Emergency services are available in the facility seven days a week, 24 hours a day;
       2. Has equipment, medication, and personnel experienced in the provision of services needed to treat life, limb, or function-threatening conditions;
       3. Diagnostic radiology and clinical laboratory services are provided by persons on duty or on call and available when needed;
       4. At least one physician who is trained and experienced in the provision of emergency medical care who is on duty or on call so as to be immediately available to the facility; and,
       5. Other specified requirements.

FISCAL EFFECT: This bill has not yet been analyzed by a fiscal committee.

COMMENTS:

1. PURPOSE OF THIS BILL. According to the author, we have a broken healthcare system. Today, if you or a loved one needs to go to the emergency room (ER) in California, you could receive a surprise bill for tens of thousands of dollars for that ER care.

If an individual has health coverage, it’s reasonable to assume they’d be covered if they need ER care. Unfortunately, that’s not always the case. If a person is transported to the wrong hospital, they could be surprised by exorbitant balanced billing – the practice of being sent a bill for the balance between what the hospital wants to be paid and what insurance will pay. If a patient is incapacitated or undergoing a life-threatening condition, they don’t have the ability or time to decide on a hospital location. When a person is already inside an ambulance, they don’t have a choice of hospitals. Yet patients continued to get billed tens of thousands of dollars for receiving life-saving care.

For most consumers, California law states that if the consumer reasonably believed they were having an emergency and got emergency care, a health plan is required to cover that care whether it is an in-network hospital or out of network. There are approximately six million Californians with federally regulated self-insured plans, and one million with plans regulated by the CDI who don’t benefit from this protection for emergent care. What’s worse, no one is protected from receiving surprise hospital bills or from being sent to collections for the sticker price for ER care.

According to the author, this bill would protect all patients in all circumstances from surprise balance billing from ER visits. Insured patients, regardless of the type of insurance, would only owe their copay or deductible when receiving emergency care, even if the hospital is out-of-network. Hospitals would not be allowed to send the patient an exorbitant bill or send them to collections for anything beyond the copay or deductible. To recoup other costs, the hospital would have to work it out with the insurance company. This bill also proposes standardizing those negotiations so there is predictability.

The author concludes that after a medical emergency, the only thing a patient should worry about is how to get better, not whether a hospital bill may lead to financial ruin.

1. BACKGROUND.
   1. California Health Benefits Review Program (CHBRP) analysis. AB 1996 (Thomson), Chapter 795, Statutes of 2002, requests the University of California to assess legislation proposing a mandated benefit or service and prepare a written analysis with relevant data on the medical, economic, and public health impacts of proposed health plan and health insurance benefit mandate legislation. CHBRP was created in response to AB 1996. SB 125 (Hernandez), Chapter 9, Statutes of 2015, added an impact assessment on essential health benefits, and legislation that impacts health insurance benefit designs, cost sharing, premiums, and other health insurance topics. CHBRP states in its analysis of this bill the following:
      
      1. Enrollees covered. According to CHBRP, currently, there are 24.5 million enrollees with health insurance subject to state-level benefit mandates. 3.6 million enrollees have health insurance subject to this bill’s provision on emergency services and post-stabilization care, and of these, 3 million enrollees have health insurance through a self-funded employer or Employee Retirement Income Security Act of 1974 (ERISA) plan.
         
      2. Impact on expenditures. The average cost for an enrollee who only visits an ER is $9,551 ($1,108 from the plan share, $7,183 from total member share, and $1,260 from member/hospital negotiation). The average cost for an enrollee who visits an ER and has inpatient admission is $82,459 ($13,474 from the plan share, $59,281 from total member share, and $9,704 from member/hospital negotiation). Postmandate, CHBRP estimates that costs would decrease to $3,226 and $28,351, respectively. This bill would decrease total net annual expenditures by $357.1 million or 0.1921% for enrollees with ERISA-regulated plans and CDI-regulated policies. This is due to a change in total health insurance premiums paid by employers and enrollees for newly covered benefits, adjusted by a decrease in enrollee expenses for covered benefits. CHBRP projects no impact to DMHC due to a unanimous State Supreme Court ruling, the Court held that non-contracting ER physicians, and, by implication, certain other non-contracting emergency services providers, may not balance bill HMO beneficiaries. Prospect Medical Group, Inc. v. Northridge Emergency Medical Group, 45 Cal. 4th 497, 502 (2009). CHBRP projects no impact to Medi-Cal; nor California Public Employees' Retirement System (CalPERS) HMO Plans. Total self-funded premium expense increase includes $1,262,000 for CalPERS self-insured enrollees. Total reduction in enrollee expenses includes a $22,472,000 decrease for CalPERS self-insured enrollees. CHBRP projects no measurable impact on the number of uninsured in California
         
      3. Benefit coverage. Currently, there are 24.5 million enrollees with health insurance subject to state-level benefit mandates. This bill, however, is expected to impact ERISA plans, as well as state-regulated plans. According to CHBRP, 3.5 million enrollees have health insurance subject to this bill’s provision on emergency services and post-stabilization care (CDI and ERISA), and of these, 3 million enrollees have health insurance through a self-funded employer or ERISA plan.
      4. Utilization. At baseline or premandate among CDI and ERISA enrollees, CHBRP estimates that there are 18,300 cases in which only an ER visit occurred and 6,600 cases in which both an ER visit and inpatient admission occurred.
      5. Public health. According to CHBRP, estimating how these long-term effects could potentially impact public health (including economic loss, increased mortality, racial and ethnic disparities, and gender disparities) is beyond the scope of this report. However, in previous reports, CHBRP has identified literature that clearly shows cost sharing and financial barriers can have the unintended impact of delaying necessary care.
      6. Long-term impacts. According to CHBRP, debt is clearly an increasingly important category of socioeconomic experience. This bill is likely to prevent potential indebtedness to a number of patients. In addition to regular medical debt, surprise billing has resulted in a number of Americans experiencing high debt. This may have public health implications. Health care providers are increasingly relying on collection agencies to recoup charges associated with medical care. Little is known about the prevalence of this practice in low‐income communities and what effect it has on health‐seeking behavior. A recent study suggests that hospitals currently use high out-of-network emergency service prices to pressure health plans in contracting efforts. Hospitals set high out-of-network prices for emergency services, knowing that they will care for (because of geography) a substantial number of a health plan’s enrollees accessing care through admission from the ER. This gives hospitals leverage with health plans to include them in a network, even if prices for their other hospital services are not as competitive as alternatives in a local market. This, along with other practices, such as requiring plans to contract with all or none of the hospitals in a chain, may undermine the ability of health plans to use selective contracting with health care facilities. CHBRP is unable to measure the impact on hospitals service offerings or contracting strategies in light of revenues being shifted away from hospitals by this bill.
   2. San Francisco (SF) General ER Balance Billing. According to a recent San Francisco Chronicle article titled “Insured SF General patients on the hook for pending bills despite new policy,” the San Francisco Department of Public Health and the hospital agreed to halt the practice of “balance billing,” sending patients bills if their private insurance companies do not pay the full requested amount. Last year, that practice affected 300 patients with unexpectedly big bills. This is because SF General has no contracts with private insurance companies, which means it charges all privately insured patients the full amount of rates approved each year by the mayor and the Board of Supervisors. According to SF General Hospital forms, it bills patients’ private insurance companies “as a courtesy.” Since there are no contracts with those companies, hospitals can pretty much decide to pay whatever they want and the problem is that the hospital bills the patient with the balance, which can amount to tens of thousands of dollars for everyday ailments like appendicitis, broken bones and migraines. California law inexplicably bans balance billing for patients insured through HMOs, but not for those insured through other forms of insurance, including preferred provider organizations. It is the privately insured patients who are not on HMO plans who are facing the big bills from S.F. General.
   3. Hospital Costs. A 2018 Health Affairs article, states that California became very successful in controlling rising health care costs by promoting price competition through market-based, managed care policies. However, recent data reveal that the state has not been able sustain its initial success in controlling growth in hospital prices. Two powerful trends emerged in California that eroded the conditions needed to sustain price competition. To ensure timely access to emergency hospital services, government regulators enacted regulations that had the unintended effect of giving hospitals tremendous leverage when contracting with health plans. Also, antitrust authorities allowed hospitals to consolidate into multihospital systems by adding members that were not direct competitors in local markets. The combined effect of these policies and consolidation trends was a substantial reduction in the competitiveness of provider markets in California, which reduced health plans’ ability to leverage competitive provider markets and negotiate lower prices and other benefits for their members. According to the article, policy makers can and should act to restore competitive conditions. Another article, currently in draft form that was provided to Committee, and entitled, “Private Insurer Payments at California Hospitals Average More Than 200% of Medicare,” states that on average, California hospitals were paid 209% as much by private insurers as they were by Medicare for similar services in 2015 and 2016. There is substantial variation across hospitals in the relationship of private insurance payments to Medicare. The 10% of California hospitals with the highest ratio of private to Medicare payments, private insurance payments average 364% of Medicare and 255% of cost; at the 10% with the lowest ratio, the average is 89% of Medicare and 89% of cost. The authors offered two perspectives on these results. First, the ability of hospitals to extract relatively high rates of payment from private insurers reflects market failures, stemming from consolidation in the hospital industry, the position of ‘must-have’ hospitals even in markets where there may appear to be competitors, and the pressure that private insurers face from employers and employees to offer broad networks. Second, the high rates of private payment are needed to offset payment shortfalls from Medicare and Medi-Cal.
2. Federal level protections. According to the Commonwealth Fund, interest has grown in federal measures, in part, because only federal legislation can protect those in self-funded insurance plans that are exempt from state regulation from balance billing. During the 115th Congress (2017-2019), proposals were released by Senator Bill Cassidy (R–La.), Senator Maggie Hassan (D–N.H.), Representative Lloyd Doggett (D–Texas), and Representative Michelle Lujan Grisham (D–N.M.). The Cassidy proposal has bipartisan support, with three Democrats and two other Republicans as cosponsors.

Federal approaches vary along some of the same lines as state laws. For example, the Hassan bill relies most heavily on a dispute-resolution approach. By contrast, the Cassidy proposal relies on a payment standard that is the greater of: a) the median in-network rate paid by the insurer; or, b) 125% of the average allowed amount across payers. Several federal proposals make protections contingent on failure of providers to notify the consumer that they could be billed by an out-of-network provider. States that have enacted protections have mostly viewed such contingent protections as an insufficient means of protecting consumers. Federal proposals also vary in the degree to which they allow a state role in implementing protections.

1. SUPPORT. The California Labor Federation (CLF), a cosponsor of this bill, writes that surprise ER bills are particularly problematic because patients do not always choose what hospital they go to in an emergency. State and federal law requires that hospitals treat anyone who comes through their doors for emergency care. California’s “reasonable layperson” standard, passed in 1994, requires health plans and insurers to cover treatment that a reasonable person would think is an emergency. These laws are critically important to ensure patients do not experience delays or denial of emergency care based on their insurance. According to CLF, some major hospital systems have used the “reasonable layperson” protections to leverage higher payments from health plans for all covered services. In an emergency, enrollees go to the nearest ER, not necessarily an in-network ER. State and federal law require the health plan to cover the ER treatment, so hospitals can charge inflated ER prices until the plan puts the hospital system in network and agrees to higher contracted rates. Consumers pay the price at both ends, in surprise ER bills and higher premiums. CLF states that as the cost of health care continues to rise, employers are passing on the cost to workers, while providers are shifting the cost through surprise medical bills.

Health Access California (HAC), a cosponsor of this bill, states that hospitals are leveraging the consumer protection that health plans must cover emergency care, in-network or out-of-network, in order to extract higher payments from health plans. As hospitals leverage their monopoly in providing ER service in a certain area in their contracts with health plans and charge higher payment amounts. According to HAC, our state’s laws that are meant to protect consumers from being denied coverage for emergency care are now being used to drive up overall prices and health care costs. Consumers are getting billed for emergency care, even if they do not owe that money, and they are also paying higher premiums, copays, and deductibles because of overall higher hospitals costs.

1. SUPPORT IF AMENDED. The California Association of Health Plans (CAHP) and the Association of California Life and Health Insurance Companies (ACLHIC) have taken a support if amended position. According to CAHP and ACLHIC, understanding that this language was modeled after similar provisions contained in AB 72 (Bonta), Chapter 942, Statutes of 2016, the construct of facility payments is much different than that of out-of-network provider payments subject to AB 72, and as such, respectfully request the opportunity to engage in an open discussion with the author to ensure that plans can fully and fairly implement this bill. 
2. OPPOSE UNLESS AMENDED. Tenet Healthcare writes that ER patients should not be responsible for amounts above their cost of share as stated in their insurance policy, however, the solution proposed in this bill punishes hospitals for the actions of state-exempt insurance plans and would, in turn, create disincentives for such plans to enter into contracts with hospitals going forward.

The California Hospital Association (CHA) writes that California has a well-established system of rate negotiation between health insurance companies and hospitals to protect patients from balance billing in many circumstances. The payment methodology proposed in this bill is not necessary. Existing law already dictates that reimbursement in out-of-network situations should be “reasonable and customary,” a well-established standard that hospitals and health insurance companies have been operating under for decades. Health insurance companies and hospitals are sophisticated entities that can continue to negotiate rates and networks, as they do now. According to CHA, California’s hospitals operate on increasingly narrow margins, 38 % operate at negative margins and nearly 60% operate below projected inflation. By tying reimbursement to a Medicare rate, as proposed in this bill, the health care system would be deprived of the resources needed to provide essential services, threatening access to health care services across the state. Medicare today reimburses hospitals well below the cost of care. CHA writes that this bill would create a payment system that is simply not able to sustain the cost of services that hospitals provide. That means fewer jobs, lower wages, service cuts, or other troubling repercussions. This bill would create a default rate for many services that is below the actual cost of care, and since this bill applies to emergency care, the sheer number of people affected is massive, leading to a significant gap between the cost of care and the resources available to pay for that care.

1. RELATED LEGISLATION.
   1. AB 651 (Grayson) requires a health plan contract or a health insurance policy issued, amended, or renewed on or after January 1, 2020, to provide that if an enrollee, insured, or subscriber, as applicable, receives covered services from a noncontracting air ambulance provider, the enrollee, insured, or subscriber shall pay no more than the same cost sharing that the enrollee, insured, or subscriber would pay for the same covered services received from a contracting air ambulance provider, referred to as the in-network cost-sharing amount. Specifies that an enrollee, subscriber, or insured would not owe the noncontracting provider more than the in-network cost-sharing amount for services subject to the bill, as specified. AB 651 is pending in Assembly Health Committee.
   2. AB 1174 (Wood) requires a health plan, its delegated entity, or a health insurer to notify the DMHC or CDI before the expiration or plan-, entity-, or insurer-initiated termination of a contract pursuant to which anesthesia services are provided. AB 1174 is pending in Assembly Appropriations Committee.
2. PREVIOUS LEGISLATION. AB 72 establishes a payment rate, which is the greater of the average of a health plan or health insurer’s contracted rate, as specified, or 125% of the amount Medicare reimburses for the same or similar services; and an independent dispute resolution process (IDRP) for claims and claim disputes related to covered services provided at a contracted health facility by a non-contracting individual health care professional for health plan contracts and health policies issued, amended, or renewed on or after July 1, 2017. Limits enrollee and insured cost sharing for these covered services to no more than the cost sharing required had the services been provided by a contracting health professional.
3. POLICY COMMENT.
   1. Consumer balance billing provisions. Existing law, except for those policies under CDI and self insured plans, are protected from balancing billing with respect to ER services. Existing law also provides that claims for contracted providers without a written contract and non-contracted providers require 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 specified information. This bill ensures that the same protections apply for those products under DMHC and CDI. Since existing law establishes a mechanism by which out of network providers and payors can determine payment of those out of network services, are the provisions of this bill that changes how this amount is determined, really necessary?
   2. Hospital out of network rate for emergency services. Currently this bill prohibits a hospital from charging more than the greater of the average contracted rate or 150% of the amount Medicare reimburses. According to recent research analysis, there is substantial variation across hospitals in the relationship of private insurance payments to Medicare. At the 10% of California hospitals with the highest ratio of private to Medicare payments, private insurance payments average 364% of Medicare and 255% of cost; at the 10% with the lowest ratio, the average is 89% of Medicare and 89% of cost. The impact of the identified rate in this bill is unknown and may have unintended consequences on the hospital costs that may ultimately impact consumers and their access to services.
   3. Rate setting. This is not the first time the Legislature imposed rate setting. For example, AB 72 established a payment rate, which is the greater of the average of a health plan or health insurer’s contracted rate, as specified, or 125% of the amount Medicare reimburses for the same or similar services, for those services received at a contracted facility by a non-contracted provider (for example, anesthesiologists). This year, in an effort to address unintended consequences raised by the anesthesiologists, AB 1174 was introduced to address claims from anesthesiologist that payors are initiating contract terminations with the sole intent of demanding significant reductions in the reimbursement rates. Similarly, this bill imposes an average contracted rate or 150% of the amount Medicare reimburses, as specified, for emergency care or poststabilization care. As such, will this bill have the same unintended consequences as AB 72 that may impact hospital contracting and potentially network adequacy concerns?

REGISTERED SUPPORT / OPPOSITION:

Support

California Labor Federation (sponsor)

Health Access California (sponsor)

Alliance of Californians For Community Empowerment Action
Arthritis Foundation
Asian Americans Advancing Justice - California
California Association of Joint Powers Authorities
California Grocers Association
California Iatse Council
California Nurses Association
California OneCare
California Pan - Ethnic Health Network
California Physicians Alliance
California Professional Firefighters
California School Employees Association
California State Council of Service Employees
California Teachers Association
California Voices for Progress
CALPIRG, California Public Interest Research Group
City And County of San Francisco, Board of Supervisors
Coalition for Humane Immigrant Rights
Congress of California Seniors
Consumer Attorneys of California
Consumer Reports
Courage Campaign
Disability Rights Legal Center
Drug Policy Alliance
Ella Baker Center for Human Rights
Entertainment Union Coalition
Friends Committee on Legislation of California
Indivisible Ca: StateStrong
Latino Coalition For a Healthy California
Maternal and Child Health Access
National Association of Social Workers, California Chapter
National Health Law Program
National Multiple Sclerosis Society, MS-CAN
San Diego Electrical Health & Welfare Trust
Small Business Majority
United Food and Commercial Workers, Western States Council
Western Center on Law & Poverty, Inc.

Opposition

None on file.

Analysis Prepared by: Kristene Mapile / HEALTH / (916) 319-2097

ASSEMBLY THIRD READING

ATR Bill Id:AB 1611

Author:(Chiu)

As Amended Ver:May 16, 2019

Majority vote

SUMMARY:

Prohibits a hospital from charging more than the reasonable and customary value of the hospital services, or the average contracted rate on a fee-for-service (FFS) basis for the same or similar hospital services in the general geographic region in which the services were rendered, as specified, for emergency care or poststabilization care, as defined. Requires a health care service plan (health plan) contract or insurance policy issued, amended, or renewed on or after January 1, 2020, to provide that if an enrollee or insured receives covered emergency services from a noncontracting hospital, the enrollee or insured is prohibited from paying more than the same cost sharing that the enrollee or insured would pay for the same covered services received from a contracting hospital.

Major Provisions

COMMENTS:

The California Health Benefits Review Program (CHBRP) analysis states the following:

1. Impact on expenditures. The average cost for an enrollee who only visits an emergency room (ER) is $9,551 ($1,108 from the plan share, $7,183 from total member share, and $1,260 from member/hospital negotiation). The average cost for an enrollee who visits an ER and has inpatient admission is $82,459 ($13,474 from the plan share, $59,281 from total member share, and $9,704 from member/hospital negotiation). Postmandate, CHBRP estimates that costs would decrease to $3,226 and $28,351, respectively.
2. Benefit coverage. Currently, there are 24.5 million enrollees with health insurance subject to state-level benefit mandates. This bill, however, is expected to impact Employee Retirement Income Security Act of 1974 (ERISA) plans, as well as state-regulated plans. According to CHBRP, 3.5 million enrollees have health insurance subject to this bill's provision on emergency services and post-stabilization care (the California Department of Insurance (CDI) and ERISA), and of these, 3 million enrollees have health insurance through a self-funded employer or ERISA plan.
3. Utilization. At baseline or premandate among CDI and ERISA enrollees, CHBRP estimates that there are 18,300 cases in which only an ER visit occurred and 6,600 cases in which both an ER visit and inpatient admission occurred.
4. Long-term impacts. According to CHBRP, debt is clearly an increasingly important category of socioeconomic experience. Health care providers are increasingly relying on collection agencies to recoup charges associated with medical care. A recent study suggests that hospitals currently use high out-of-network emergency service prices to pressure health plans in contracting efforts. Hospitals set high out-of-network prices for emergency services, knowing that they will care for (because of geography) a substantial number of a health plan's enrollees accessing care through admission from the ER. This gives hospitals leverage with health plans to include them in a network, even if prices for their other hospital services are not as competitive as alternatives in a local market. This, along with other practices, such as requiring plans to contract with all or none of the hospitals in a chain, may undermine the ability of health plans to use selective contracting with health care facilities.

According to the Author:

According to the author, this bill would protect all patients in all circumstances from surprise balance billing from ER visits. Hospitals would not be allowed to send the patient an exorbitant bill or send them to collections for anything beyond the copay or deductible. To recoup other costs, the hospital would have to work it out with the insurance company. This bill also proposes standardizing those negotiations so there is predictability.

Arguments in Support:

The California Labor Federation, a cosponsor of this bill, states that as the cost of health care continues to rise, employers are passing on the cost to workers, while providers are shifting the cost through surprise medical bills. Health Access California, a cosponsor of this bill, states that hospitals are leveraging the consumer protection that health plans must cover emergency care, in-network or out-of-network, in order to extract higher payments from health plans. The California Association of Health Plans and others are support if amended, and understanding that this language was modeled after similar provisions contained in AB 72 (Bonta), Chapter 492, Statutes of 2016, the construct of facility payments is much different than that of out-of-network provider payments subject to AB 72, and as such, respectfully request the opportunity to engage to ensure that plans can fully and fairly implement this bill. 

Arguments in Opposition Unless Amended:

The California Hospital Association and other hospitals are opposed unless amended and write that California has a well-established system of rate negotiation between health insurance companies and hospitals to protect patients from balance billing in many circumstances. The payment methodology proposed in this bill is not necessary. Health insurance companies and hospitals are sophisticated entities that can continue to negotiate rates and networks, as they do now.

FISCAL COMMENTS:

According to the Assembly Appropriations Committee:

1. Costs to the Department of Managed Health Care of 380,000 in fiscal year 2019-20, $3.4 million in 2020-21 and $2.2 million in 2021-22. Costs will be incurred to review compliance, conduct financial review, enforce the requirements, conduct associated legal workload, and to provide general administrative and information technology support.
2. Costs to CDI of about $3,000 in fiscal year 2019-20 and $110,000 in 2020-21 to issue regulations and enforce the new requirements, and $105,000 in ongoing annual costs thereafter for enforcement.
3. According to CHBRP, which reviewed this bill, this bill will decrease annual net health care expenditures by $357 million for enrollees with federal Department of Labor-regulated plans. The net decrease is comprised of decreased enrollee out-of-pocket cost for covered benefits of $484 million, offset by $96 million in additional employer premiums; $3.6 million in individual premiums; and $27 million in employee premiums.

VOTES:

ASM HEALTH: 11-0-4

YES: Wood, Aguiar-Curry, Bonta, Burke, Carrillo, Limón, McCarty, Nazarian, Ramos, Rodriguez, Santiago

ABS, ABST OR NV: Mayes, Bigelow, Flora, Waldron

ASM APPROPRIATIONS: 13-0-5

YES: Gonzalez, Bloom, Bonta, Calderon, Carrillo, Chau, Eggman, Gabriel, Eduardo Garcia, Maienschein, Petrie-Norris, Quirk, Robert Rivas

ABS, ABST OR NV: Bigelow, Brough, Diep, Fong, Obernolte

UPDATED:

VERSION: May 16, 2019

CONSULTANT: Kristene Mapile / HEALTH / (916) 319-2097 FN: 0000864

Date of Hearing: May 16, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 1611

Author:(Chiu) – As Amended Ver:April 29, 2019

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill prohibits balance billing of patients for emergency care or post-stabilization care and limits hospital charges for non-contract hospitals to the average contracted rate for the same or similar hospital services in the general geographic region in which the services were rendered.

It also limits patient cost-sharing to in-network amounts, allows for use of an independent dispute resolution process to settle disputes between a plan or an insurer and hospital, and requires plans and insurers to report cost savings as a result of this bill to regulators.

FISCAL EFFECT:

1. Costs to the Department of Managed Health Care (DMHC) of 380,000 in fiscal year 2019-20, $3.4 million in 2020-21 and $2.2 million in 2021-22. Costs will be incurred to review compliance, conduct financial review, enforce the requirements, conduct associated legal workload, and to provide general administrative and information technology support.
2. Costs to the California Department of Insurance (CDI) of about $3,000 in fiscal year 2019-20 and $110,000 in 2020-21 to issue regulations and enforce the new requirements, and $105,000 in ongoing annual costs thereafter for enforcement.
3. According to the California Health Benefits Review Program (CHBRP), which reviewed this bill, this bill will decrease annual net health care expenditures by $357 million for enrollees with federal Department of Labor-regulated plans (so called Employee Retirement Income Security Act plans, or ERISA) and CDI-regulated plans. CHBRP also reports it is likely to decrease medical indebtedness.

The net decrease is comprised of decreased enrollee out-of-pocket cost for covered benefits of $484 million, offset by $96 million in additional employer premiums; $3.6 million in individual premiums; and $27 million in employee premiums.

COMMENTS:

1. Purpose. This bill seeks to end “surprise billing” for emergency care or post-stabilization care. For most consumers, California law states that if the consumer reasonably believed they were having an emergency and got emergency care, a health plan is required to cover that care whether it is an in-network hospital or out of network. This bill ensures patients who need to seek emergency services are not caught in disputes between insurers and hospitals, nor forced to pay the sometimes large difference between hospital charges and insurer payments.
2. Application of This Bill. Enrollees in health care service plans regulated by the Department of Managed Health Care are already protected from balance billing based on case law. According to CHBRP, 3.5 million enrollees have health insurance subject to this bill’s provision on emergency services and post-stabilization care (CDI and ERISA), and of these enrollees, 3 million enrollees have health insurance through a self-funded employer or ERISA plan.
3. Balance Billing. Plans not regulated by DMHC are allowed to bill a patient bills if the patient’s private insurance company does not pay the full requested amount. In situations where the hospital is not contracted with the plan or insurer, these bills can be surprising and costly. The media has recently highlighted exorbitant bills from individuals who sought emergency services, quite reasonably expecting these services to be covered by insurance. As a result, hospitals have come under public pressure to reform these practices. For instance, the San Francisco Department of Public Health and the public hospital, which do not contract with private insurance, recently agreed to halt the practice of balance billing.
4. Related Legislation. AB 651 (Grayson), pending in this committee, raises Medi-Cal rates for and prohibits balance billing by air ambulance providers.
5. Prior Legislation. AB 72 (Bonta), Chapter 942, Statutes of 2016, established a) a payment rate that is the greater of the average of a health plan or health insurer’s contracted rate, as specified, or 125% of the amount Medicare reimburses for the same or similar services b) and an independent dispute resolution process (IDRP) for claims and claim disputes related to covered services provided at a contracted health facility by a non-contracting individual health care professional. It also limit enrollee and insured cost sharing for these covered services to no more than the cost sharing required had the services been provided by a contracting health professional.
6. Support. The California Labor Federation (CLF), a cosponsor of this bill, writes that surprise ER bills are particularly problematic because patients do not always choose what hospital they go to in an emergency. Health Access California (HAC), a cosponsor of this bill, states hospitals are leveraging the consumer protection that health plans must cover emergency care, in-network or out-of-network, in order to extract higher payments from health plans. This bill is supported by a wide array of labor and consumer advocacy groups.
7. Opposition. The California Hospital Association (CHA) opposes this bill unless amended to remove rate-setting provisions. CHA writes California has a well-established system of rate negotiation between health insurance companies and hospitals to protect patients from balance billing in many circumstances. According to CHA, California’s hospitals operate on increasingly narrow margins, with 38 % at negative margins. By tying reimbursement to a Medicare rate, as proposed in this bill, the health care system would be deprived of the resources needed to provide essential services, threatening access to health care services across the state.

Analysis Prepared by: Lisa Murawski / APPR. / (916) 319-2081