BILL ANALYSIS Ó SENATE COMMITTEE ON HEALTH Senator Ed Hernandez, O.D., Chair BILL NO: SB 780 AUTHOR: Jackson AMENDED: April 24, 2013 HEARING DATE: May 1, 2013 CONSULTANT: Bain SUBJECT : Health care coverage. SUMMARY : Establishes consumer notice requirements for health insurance preferred provider organizations (PPOs) regulated by the California Department of Insurance (CDI) and additional consumer notice requirements for health plans regulated by the Department of Managed Health Care (DMHC). Requires PPOs and DMHC-regulated health care service plans (health plans) to allow enrollees with authorized or scheduled services from a terminated unassigned provider group or hospital to receive those services at in network cost-sharing until completion of the authorized or scheduled service for at least 60 days from date of the termination notice. Requires a filing with CDI prior to contract terminations between providers groups and hospitals and insurers. Establishes additional disclosure requirements for health insurers regulated by CDI. Existing law: 1.Regulates health plans by the Department of Managed Health Care (DMHC) under the Knox-Keene Act, and health insurers by the California Department of Insurance (CDI). 2.Requires DMHC-regulated health plans, at least 75 days prior to the termination date of its contract with a provider group or a general acute care hospital (hospital), to submit an enrollee block transfer filing to the DMHC that includes the written notice the plan proposes to send to affected enrollees. Defines, through DMHC regulation, a "block transfer" as a transfer or redirection of 2,000 or more enrollees by a health plan from a terminated provider group or terminated hospital to one or more contracting providers that takes place as a result of a termination or non-renewal of a provider contract. PPOs regulated by CDI do not have this requirement. 3.Requires DMHC-regulated health plans, at least 60 days prior to the termination date of a contract between a health plan Continued--- SB 780 | Page 2 and a provider group or a hospital, to send a written notice by United States mail to enrollees who are assigned to the terminated provider group or hospital. Requires a plan that is unable to comply with the timeframe because of exigent circumstances to apply to the DMHC for a waiver. PPOs regulated by CDI do not have this requirement. 4.Requires the DMHC-regulated health plan to send the written notice to each enrollee who is a member of the provider group and who resides within a 15-mile radius of the terminated hospital if the terminated provider is a hospital and the plan assigns enrollees to a provider group with exclusive admitting privileges to the hospital. Requires the health plan to send the written notice to all enrollees who reside within a 15-mile radius of the terminated hospital, if the plan operates as a PPO or assigns members to a provider group with admitting privileges to hospitals in the same geographic area as the terminated hospital. PPOs regulated by CDI do not have these requirements. 5.Requires DMHC-regulated health plans and CDI-regulated health insurers, at the request of an enrollee, to provide for the completion of covered services by a terminated provider or by a non-participating provider (for health plans) for the following conditions: a. An acute condition; b. A serious chronic condition; c. A pregnancy; d. A terminal illness; e. The care of a newborn child between birth and 36 months; and, f. Performance of a surgery or other procedures authorized by the plan as part of a documented course of treatment that will occur within 180 days of the contract termination date. 6.Requires, for CDI-regulated insurers for the services in 5) above, unless otherwise agreed upon between the terminated provider and the insurer or between the terminated provider and the provider group, the agreement to be construed to require a rate and method of payment to the terminated provider, for the services rendered that are the same as the rate and method of payment for the same services while under contract with the insurer and at the time of termination. Requires the provider to accept the reimbursement as payment SB 780| Page 3 in full and not bill the insured for any amount in excess of the reimbursement rate, with the exception of copayments and deductibles. 7.Requires, for DMHC-regulated health plans, unless otherwise agreed by the terminated provider and the plan or by the individual provider and the provider group, the continuity of care services in 5) above to be compensated at rates and methods of payment similar to those used by the plan or the provider group for currently contracting providers providing similar services who are not capitated and who are practicing in the same or a similar geographic area as the terminated provider. States that neither the plan nor the provider group is required to continue the services of a terminated provider if the provider does not accept the payment rates provided. This bill: 1.Requires PPOs regulated by CDI, at least 75 days prior to the termination date of a contract with a provider group or hospital, to submit a filing to CDI that includes the written notice the PPO proposes to send to its insureds. Prohibits the PPO from sending this notice until CDI has reviewed and approved the filing. Deems the filing approved if CDI does not respond to the insured within seven days of the date of the filing. (This requirement currently exists for DMHC-regulated plans.) 2.Requires, for purposes of a termination with a provider group, the CDI-regulated PPO and a DMHC-regulated health plan to submit a filing if 1,700 or more insureds were treated by the provider group within the 12 months preceding the filing date. Permits CDI, in consultation with the DMHC, to adopt a different filing threshold from the threshold established in this bill through regulation. 3.Requires a CDI-regulated PPO and a DMHC-regulated plan (for unassigned enrollees who are typically in a PPO), in the event of a contract termination between a PPO/plan and a provider group or hospital, to do all of the following: a. Send the required written notice within one business day of the contract termination with a provider group, to all of the following persons: i. Any covered individual who has received health care services from the terminated SB 780 | Page 4 provider group within the 12 months preceding the date of termination; and, ii. Any covered individual who has any health care services scheduled with the terminated provider group after the date of termination. b. Send the required written notice, within one business day of the contract termination with a hospital, to all of the following persons: i. Any covered individual who has received health care services from the terminated hospital within the 12 months preceding the date of termination; ii. For health plans, any enrollee who is assigned to a provider group with any physicians who have exclusive admitting privileges to the terminated unassigned hospital; and, iii. Any covered individual who has authorized health care services scheduled at a terminating hospital after the date of termination. 4.Allows all health plan enrollees and insured individuals to continue to access services that were authorized or scheduled at the terminated provider group or hospital prior to the date of termination. Requires those services to be provided until completion of the authorized or scheduled services for at least 60 days from the date of the notice unless a longer period of time is required under the continuity of care provisions in existing law. Requires the amount of, and the requirement for payment of, copayments, deductibles, coinsurance, and other cost-sharing components by an individual during the period of completion of authorized or scheduled services with a terminated provider group or hospital to be the same that would be paid by the individual when receiving care from a provider currently contracting with the PPO/plan. 5.Requires the PPO/plan to provide reimbursement for services either at a rate agreed upon by the PPO/plan and the terminated provider group or hospital or the rate for those services as provided in the terminating contract. Prohibits the provider from billing the patient for the cost of services beyond the copayment, deductible, or other cost-sharing SB 780| Page 5 components of what the individual would have been responsible for if the provider group or hospital was currently contracted with the PPO/plan. 6.Requires a PPO to send the required written notices even if a filing is not required to be submitted, and allows a health insurer to only send insured notices that have been filed and approved by CDI. (This requirement currently exists for DMHC plans.) 7.Permits a CDI-regulated PPO to require the provider group to send the required notices if an individual provider terminates his or her contract or employment with a provider group that contracts with a health insurer. (This authority currently exists for DMHC plans.) 8.Requires, if after sending the required notices, a CDI-regulated PPO reaches an agreement with a terminated provider group or hospital to renew or enter into a new contract or to not terminate its contract, the PPO to send a subsequent written notice to all insureds that were previously notified that the provider group or hospital remains in their provider network (this requirement currently exists for DMHC plans). 9.Requires a CDI-regulated health insurer or a provider group to include in all written, printed, or electronic communications sent to an insured that concern the contract termination, the a specified disclosure statement in not less than 8-point type regarding their ability to continue to receive care for a designated time period (this requirement currently exists for DMHC plans). 10.Permits the CDI commissioner to adopt regulations in accordance with the Administrative Procedure Act that are necessary to implement the continuity of care-related provisions of this bill (DMHC has existing authority to adopt regulations under the Knox-Keene Act). 11.Repeals the requirement in 4) described in existing law above. 12.Establishes additional disclosure requirements for health insurers regulated by CDI. SB 780 | Page 6 FISCAL EFFECT : This bill has not been analyzed by a fiscal committee. COMMENTS : 1.Author's statement. SB 780 would strengthen consumer protections in California's regulation of health insurance by requiring disclosure to consumers and CDI when contracts between health insurers and medical provider groups or acute care hospitals are set to terminate and that would result in a material change to the insurer's provider network. 2.Background and CDI-sponsored legislation from last session. Regulation and oversight of health insurance in California is split between DMHC and CDI. DMHC regulates health plans under the Knox-Keene Act in the Health and Safety Code, while CDI regulates health insurers under the Insurance Code. DMHC health plans include health maintenance organizations (HMOs), exclusive provider organizations (EPOs) and some PPO plans, which have historically been licensed by DMHC. Existing law establishes continuity of care requirements for health plans and health insurers for individuals with specific conditions. However, existing law contains different notice requirements to the regulator and the consumer depending upon whether the plan is an HMO regulated by DMHC, a PPO regulated by DMHC, or a PPO regulated by CDI. For example, HMO plans regulated by DMHC are required to provide 60 days advance notice prior to a contract termination to enrollees assigned to a provider group and hospital, DMHC-regulated PPOs are required to send an enrollee notice only if the terminated provider is a hospital, while CDI-regulated PPOs are not required to provide such a notice. In addition, HMOs and PPOs regulated by DMHC are required under existing law to notify DMHC at least 75 days prior to the termination date of a contract with a provider group or a hospital, and to provide DMHC with the notice the plan intends to provide to enrollees. No similar requirement exists for CDI-regulated PPOs. Last session, CDI sponsored AB 2152 (Eng), which would have required CDI-regulated PPOs to provide notice to the regulator and insureds of a contract termination exceeding specified thresholds, and notice to DMHC enrollees of a PPO contract terminations exceeding specified thresholds. AB 2152 was vetoed by Governor Brown. In his veto message, the Governor stated he agreed with the need to provide adequate notice to consumers about relevant changes to their health coverage. SB 780| Page 7 However, the Governor stated AB 2152 was technically flawed in that it provided for stronger notification procedures at CDI, but weakened the notification procedures under existing law at DMHC. The Governor directed DMHC to work with the Insurance Commissioner, the Legislature and interested parties to correct these defects and develop a workable solution the next year. 3.Bill process and DMHC language. In response to the Governor's veto message, DMHC provided bill language to CDI and legislative staff on April 11, 2013, the language was modified following that discussion, and this bill was amended on April 25, 2013, so many affected stakeholders are still reviewing the language. These amendments contain provisions not included in AB 2152 that require a notice immediately following a contract termination involving a PPO enrollee and unassigned enrollees of a DMHC-regulated plan (an assigned provider group is one in which the plan directs its enrollees to receive specialty care or assigns its members for primary care, while an unassigned provider group is one where a covered individual can select their choice of provider or hospital). In addition, this bill would allow enrollees of a CDI-regulated PPO and enrollees of a DMHC-regulated plan to continue to access services that were authorized or scheduled at the terminated provider group or hospital prior to the date of termination until completion of the authorized or scheduled services for at least 60 days from the date of the notice at in-network cost-sharing. DMHC indicates its changes are intended to protect consumers from higher out-of-pocket costs, to ensure timely filings so DMHC can monitor network adequacy, and to provide the termination notice to unassigned enrollees at the right time. CDI indicates its intent with this change is to ensure patients, who are likely unaware of a pending contract termination, have the same cost-sharing 60 days post-termination that they would have when they made an appointment with the then-in network health care provider or hospital that accepted the appointment. In addition, the DMHC amendments modify the health plan filing and enrollee notification requirements for certain DMHC plans. For enrollee notification, this bill repeals the existing requirement that, if a PPO plan assigns members to a provider group with admitting privileges to hospitals in the same SB 780 | Page 8 geographic area as the terminated hospital, the PPO send the written notice to all enrollees who reside within a 15-mile radius of the terminated hospital. Instead, this bill targets the notice at individuals who previously received services from a provider group or hospital or who have scheduled services. Notices to enrollees assigned to provider groups and hospitals would continue to be provided 60 days in advance, as under current law. For health plan filings regarding an assigned provider group, filing to DMHC is required if 2,000 or more enrollees will be transferred or redirected by the plan from the contracted provider. For a termination with an unassigned provider group (such as in a DMHC-regulated PPO, which do not assign members), the plan must submit a filing if 1,700 or more enrollees were treated by the unassigned provider group within 12 months preceding the filing date. DMHC indicates the policy rationale for the 1,700 threshold for unassigned provider group terminations is based on anticipated utilization derived from the current 2,000 threshold. Specifically, DMHC states that the Centers for Disease Control and Prevention states approximately 85 percent of individuals under age 65 visit the doctor once per year, and using the existing filing standard for "assigned enrollees" (2,000 or more affected enrollees) as a baseline, 85 percent of 2,000 would mean that 1,700 enrollees would see a physician at least once per year. In this respect, unassigned provider groups that treat 1,700 or more enrollees affect a significant portion of the consumers in the plan's network, making it an accurate measure for triggering block transfer filings. DMHC indicates the rationale for these changes are because existing law does not ensure that all affected enrollees will be notified of a termination, and the current standard is being replaced with a better standard that will capture all affected enrollees. For example, DMHC states existing law does not notify all affected enrollees of an unassigned hospital termination, such as individuals who frequently use the terminated hospital or who have a surgery scheduled post-termination, but who live outside of the 15-mile radius. 4.Additional disclosure provisions required by this bill. This bill requires health insurance policies to include additional disclosure provisions generally modeled on those in Knox-Keene. These additional disclosure requirements include: SB 780| Page 9 (a) the basic method of reimbursement, including the scope and general methods of payment, made to its contracting providers of health care services; (b) whether financial bonuses or any other incentives are used; (c) a general description of the bonus and any other incentive arrangements used in its compensation agreement; (d) a description regarding whether, and in what manner, the bonuses and any other incentives are related to a provider's use of referral services; (e) the terms and conditions of coverage; (f) the right to view the disclosure form and policy prior to beginning coverage; (g) that the disclosure and the policy should be read completely and carefully; (h) that it include the insurer's telephone number; (i) where a health policy benefits and coverage matrix is located; (j) when benefits cease in the event of non-payment of premium; (k) the nature and extent of provider choice permitted; (l) a summary of the terms and conditions under which insureds may remain in the policy in the event the group ceases to exist, the group policy is terminated, an individual insured leaves the group, or the insureds' eligibility status changes; (m) the insurer's use of arbitration to settle disputes; (n) a description of any limitations on the insured's choice of primary care and specialty care physicians, non-physician health care practitioners, based on service area and limitations on the insured's choice of acute care hospital care, subacute or transitional inpatient care, or skilled nursing facility; (o) conditions and procedures for cancellation, rescission, or non-renewal; (p) how to request continuity of care and a second opinion; (r) the right to independent medical review; (s) and a notice on information practices. 5.Prior legislation. AB 1286 (Frommer), Chapter 591, Statutes of 2003, and SB 2003 (Speier), Chapter 590, Statutes of 2003, revised and expanded continuity of care laws under which a health plan is required, under certain circumstances, to allow an enrollee to continue to see a health care provider who is no longer contracting with the plan, requires the notice to be filed with the DMHC at least 75 days prior to the contract termination and specifies language that must be included in the notice regarding an enrollee's right to continue seeing a health care provider. 6.Support. This bill is sponsored by CDI to strengthen consumer protections in California's regulation of health insurance by requiring disclosure to consumers and CDI when contracts SB 780 | Page 10 between health insurers and medical provider groups or hospitals are scheduled to terminate. Under current law, DMHC-regulated plans health plans are required to notify specified enrollees and DMHC prior to a contract termination. However, the Insurance Code does not provide similar protections for policyholders of PPO products regulated by CDI. CDI states providing notice to PPO policyholders whose medical provider group or hospital faces contract termination with an insurer is an important consumer protection that will help to prevent policyholders from unknowingly seeking care from a provider whose contract with an insurer has just terminated or will imminently terminate, and will help prevent patients from unexpectedly being charged much higher out-of-pocket costs. CDI states several recent events highlight the needs for this bill. At the end of 2011, a major health insurer terminated contracts with UCLA Medical Center effective January 1, 2012 in the midst of contract negotiation. CDI states that, when it learned of the imminent termination of the provider contract, CDI requested that the insurer notify affected policyholders prior to the termination in order to prevent them from seeking out-of-network care without knowing the cost implications of doing so. CDI states the insurer refused to send out notices to policyholders in advance of the contract termination and refused to cover the difference in the cost for those policyholders except those already entitled by law to continuity of care. In March 8, 2012, another major health insurer notified insureds about the March 3, 2012 termination of the Los Robles Regional Medical Center and the West Hills Hospital service area. On March 5, 2012, an insured had a procedure performed at one of the, terminated facilities, which had been previously approved. She was not aware that she would be charged an out-of-network price for services from this hospital that was in network when she made her appointment. In August 2012, CDI learned through media coverage that a health insurer had terminated a number of provider contracts as of September 1, 2012. The insurer did not notify CDI of the provider contract terminations or provide information about the specific contracts terminated in each region in which the insurer has policyholders. Without information from the insurer about what contracts they terminated recently, CDI could not determine whether the terminations would result in the insurer failing to be in compliance with the law requiring an adequate network of medical providers. SB 780| Page 11 CDI concludes that providing notice to PPO policyholders whose medical provider group or hospital faces contract termination is an important consumer protection that will help to prevent policyholders from unknowingly seeking services with higher out-of-network costs, and requiring insurers to notify CDI at least 75 days prior to terminating a contract with a provider group or hospital will allow CDI to better monitor provider network adequacy. 7.Opposition. The Association of California Life and Health Insurance Companies (ACLHIC) writes in opposition to the prior version of this bill, stating it will impose several new reporting and disclosure requirements on health insurers regulated under CDI. Many of these disclosure requirements simply do not make sense within the PPO model and could potentially be confusing to consumers. In addition, ACLHIC states that it appreciates the author and sponsor's desire to protect consumers, it fundamentally questions the need for this bill given that the CDI Commissioner currently has the authority to ensure that a health insurer's provider network is adequate. ACLHIC states that if termination of a provider group or facility contract would impact the adequacy of the network, the Commissioner has the authority to take regulatory action through existing continuity-of-care protections that apply to consumers when a provider contract is terminated. ACLHIC concludes that it is critical, at this juncture, to put all of its resources toward implementing the federal Affordable Care Act in a meaningful way that creates a smooth and seamless transition rather than implementing costly, unnecessary and time-consuming new requirements on insurers that ultimately do not provide any commensurate benefit to consumers. 8.Oppose unless amended. The California Hospital Association (CHA) writes that it is oppose unless amended to this bill, arguing this bill establishes provisions that conflict with the existing continuity of care provisions which establish a process for reimbursement for continuity of care services required under existing law. 9.Policy issues: SB 780 | Page 12 a. Plan and PPO ability to meet requirement of bill. The language affecting DMHC regulated plans makes no changes in notice requirements for enrollees assigned to a medical group or hospitals because when enrollees are assigned, it is possible to identify and give prior notice to all enrollees that will be affected by the contract termination. For terminating provider groups and hospitals where enrollees are not assigned (in a CDI or DMHC-regulated PPO or EPO), the language for unassigned provider groups and hospitals requires plans to notify any enrollee who received treatment within 12 months prior to the termination and any enrollee that, as of the termination date, has a service scheduled after the termination date. However, it is unclear how plans and PPOs would be able to meet this requirement as they may not know if an enrollee is scheduled to receive services from an unassigned provider unless the service requires prior authorization. Staff recommends the author clarify how a plan/PPO would meet this requirement in the bill. b. Time frame for notice. This bill requires a written notice to be sent to PPO insured individuals and health plan enrollees of an unassigned provider group or unassigned hospital who have received services from those providers within the 12 months preceding the date of termination and those, as of the termination date, who have scheduled services after the termination date. The PPO/plan must provide the notice under this bill within one business day of a contract termination. The rationale for the change to the existing DMHC notification provisions is to target the notice at individuals who had previously received care from that provider, and to avoid alarming enrollees about pending contract terminations that will ultimately not occur. DMHC indicates approximately 95 percent of block transfer cases end up with the parties agreeing to contract. The goal of the immediate notification requirement is to ensure individuals with services scheduled immediately following the contract termination are informed and provided in-network cost-sharing. However, the author may consider a longer time frame for the notice to be provided, or to require the notice be provided earlier prior to a contract termination as a one-day notice requirement will be difficult to meet. c. Payment to providers post-termination. This bill SB 780| Page 13 requires plans and PPOs to provide reimbursement for services either at a rate agreed upon by the plan/PPO and the terminated provider group/hospital, or at the rate for those services provided in the terminating contract. This requirement is similar to the current continuity of care requirements for CDI-regulated PPOs, which requires a rate and method of payment for terminated providers for continuity of care services that is the same as the rate and method of payment for the same services while under contract with the terminated provider, unless otherwise agreed upon between the terminated provider and the PPO. In addition, current law for CDI-regulated PPOs requires the provider to accept the reimbursement as payment in full, which is not a requirement in this bill. By contrast, DMHC-regulated plans are required to reimburse for continuity of care services at rates and methods of payment similar to those used by the plan or the provider group for currently contracting providers providing similar services who are not capitated and who are practicing in the same or a similar geographic area as the terminated provider, unless otherwise agreed to by the parties. However, neither the plan nor the provider group is required to continue the services of a terminated provider if the provider does not accept the payment rates. This bill contains within its reimbursement-related provisions a cross reference to the current continuity of care reimbursement requirements, which appear to conflict with the existing law reimbursement provisions. Staff recommends the author clarify whether the reimbursement requirement for continuity of care services in this bill is intended to replace the current reimbursement requirements for continuity of care in existing law. d. Duration of advance notice to CDI for hospital and provider group terminations. This bill requires 75 day advance notice to CDI for hospital and provider group terminations, which parallels the 75 day advance notice for health plans regulated by DHMC. The introduced version of this bill and AB 2152 had a 30 day advance notice requirement. What is the appropriate duration of advance notice for these types of terminations? SB 780 | Page 14 e. Delayed implementation. Last session, implementation of AB 2152 was amended to provide a six month delay in implementation in order to allow for information technology system changes and the development of the termination notices. In light of the many changes required under federal health care reform effective January 1, 2014, should implementation of the changes made by this bill be delayed by six months consistent with the Committee's actions last year? f. Definition. This bill defines, for DMHC licensed plans, the phrase assigned provider group, assigned hospital and unassigned provider group and unassigned hospital. This bill uses the phrase "unassigned enrollee" which is not defined. The author may wish to define this phrase as these individuals are required to immediately receive a notice. g. Technical amendment. On page 10, line 38 the word "insured" should be instead "insurer" because CDI would notify the insurer know when it approves the filing, not the insured. SUPPORT AND OPPOSITION : Support: California Department of Insurance (sponsor) Congress of California Seniors (prior version) California Teachers Association (prior version) California Federation of Teachers (prior version) Health Access California Laborers' Local 777 (prior version) Laborers' Local 792 (prior version) United Policyholders (prior version) Oppose: Association of California Life and Health Insurance Companies (prior version) Blue Shield of California (prior version) California Chamber of Commerce (prior version) California Hospital Association (unless amended) -- END - SB 780| Page 15