BILL ANALYSIS
SENATE COMMITTEE ON INSURANCE
Senator Jackie Speier, Chair
AB 1455 (Scott) Hearing Date: August 30,
As Amended: As amended by RN 0019495
Fiscal: Yes
Urgency: No
VOTES: Senate Insurance (6/21/00): 7-2
Senate Judiciary (8/8/00): 8-0
Senate Appropriations (8/29/00): 12-0
SUMMARY
SB 1455 would provide for a clearer dispute resolution process of
claims for medical services between providers and health care
service plans (plans) as to unfair and unjust payment and billing
patterns.
DIGEST
Existing law
1. Provides for the regulation and licensing of plans by the DMC.
2. Authorizes the DMC director to suspend or revoke a license
issued under the provisions governing plans or to assess
administrative penalties, as specified.
3. Provides the director with certain powers including the power
to conduct investigations affecting the interests of plans,
subscribers, enrollees, and the
public; to audit the books and records of plans; to hold public
hearings, to issue subpoenas, to take testimony, and to compel the
production of books, papers, documents, and other evidence.
This bill
1. Would require plan contracts with providers to have a fast,
fair, and cost-effective dispute resolution mechanism, that it be
accessible to noncontracting providers for billing disputes, and
that plans must annually submit a report to DMHC on this mechanism.
2. Would increase the interest penalty for unpaid uncontested
claims from 10% to 15%, would require that interest to
automatically be included in the claim payment, would require the
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same penalty on contested claims which are determined to be
payable, and assess a $10 fee for non-compliance.
3. Would prohibit a plan from denying a claim for lack of
authorization when there was previously authorized inpatient
services, the service was medically necessary, and the service was
provided when the plan has no after-hours authorization process.
4. Would prohibit a plan from engaging in an unfair payment
pattern as defined as a demonstrable and unjust pattern of
reviewing or processing complete and accurate claims, as defined by
the director, that results in payment delays, reduced payments,
denials of complete and accurate claims, and failure to pay
interest due.
5. Would then allow the director to impose monetary penalties,
three years of accelerated payments of claims, and cost recovery
from the plan for DMHC investigatory expenses.
6. Would require the DMHC to define in regulations a "complete
and accurate claim"; and to report to the Legislature its
definitions of "unjust patterns," the process used to investigate
parties, and provide public disclosure of actions against and the
unjust activities of plans and providers.
7. Would require the DMHC to adopt regulations that ensure that
plans have adopted the dispute resolution process described, and
report to the Legislature its recommendations for additional
statutory requirements.
8. Would allow providers and plans to report possible unfair
patterns to DMHC by toll-free phone or e-mail, and require the DMHC
to report to the Legislature the process of responding to these
patterns.
COMMENTS
1. Purpose of the bill . The author believes it is increasingly
difficult for providers to obtain full and timely reimbursement
from plan payors for services rendered to enrollees, and although
existing law provides remedies such as civil action or arbitration,
these are not viable alternatives due to the time, cost and
likelihood of retaliation against a provider by a plan.
2. Support . California Healthcare Association (CHA-sponsor) says
more than 60% of California hospitals lose money from operations,
that plans routinely take 100 days or more to pay hospitals for
authorized, covered health care services, and that plans owed 85
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California hospitals $936.5 million for nearly 648,000 overdue
claims in 1999. CHA believes plans are increasingly engaging in
business practices that are unfair and illegal which are
jeopardizing patient care and the financial stability of hospitals
and physicians throughout the state. CHA says the bill is an
innovative and proactive treatment for California's ailing health
care system.
3. Opposition . California Association of Health Plans (CAHP) was
in opposition to prior versions of the bill, but has been involved
with the providers and the DMHC in drafting this version of the
bill.
4. Related Legislation . SB 260 (Speier), signed into law last
year, directs the director to investigate and take enforcement
action against a plan that fails to comply with contractual
requirements. In addition, SB 260 prohibits a contract between a
risk-bearing organization and a plan from including any provision
that requires a provider to accept rates or methods of payment
specified in contracts with plan affiliates unless the provision
has been first negotiated and agreed to between the plan and the
risk-bearing organization. SB 2007 (Speier), held in Senate
Appropriations, would allow the director to establish and maintain
a system of receiving, reviewing, and acting on provider
complaints. SB 2094 (Senate Committee on Insurance) would specify
timeframes for payment of disputed services after independent
medical review. SB 59 (Perata) signed into law last year
establishes timelines for health insurer decisions to approve,
modify or deny treatment requests.
5. Committee comments . The bill passed out of Senate Insurance
committee last year on 6/16/99 to Senate Appropriations where it
was held in committee. However, prior votes and analyses are not
applicable as the bill was completely redrafted this year on
5/18/00, and substantially amended on 6/15/00.
The bill was again heard in Senate Insurance Committee on
6/21/00, when extensive amendments were discussed. The committee
amended the bill to address the concerns of the plans that the
dispute process needed to be balanced so that both providers and
plans would be subject to the bill in a parallel manner. However,
the committee requested and the author agreed to another Senate
Insurance hearing to re-examine the subsequent amended version.
The bill was then re-amended both before and after Senate
Judiciary Committee, and on 8/29/00 was re-amended in Senate
Appropriations Committee. This current analysis reflects the
version of the bill as proposed to be amended in Senate
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Appropriations Committee.
Section 6 of the current version is similar to the version
passed out of Senate Insurance Committee on 6/21/00, and that
section retains the intent of the Insurance Committee amendments
although this section has been extensively rewritten.
However, the other 7 sections of the bill are new to the bill.
These new sections attempt to refine the dispute resolution
process in the earlier stages before it is necessary to resort to
the severe penalty process of "unfair patterns."
POSITIONS
Support
California Healthcare Association (sponsor)
California Nurses Association
California Psychiatric Association
Humbolt County St. Joseph Health System
Glendale Adventist Medical Center
Mercy Hospital of Health Services
Personal Insurance Federation of California
Oppose none reported to committee to current version
Consultant: Michael Ashcraft, MD