Surprise medical billing law passes State Legislature

​A bill to protect patients from surprise bills after a hospital visit was passed by the California state legislature and now awaits action by Governor Jerry Brown.

The measure, AB 72, sponsored by 5 Democrats and 2 Republicans, has garnered the support of Consumers Union (the policy branch of Consumer Reports), retiree and youth advocacy groups, and health insurance companies.

​Medical groups in California are divided on the issue. The California Medical Association, initially opposed, now remains neutral on the measure, which they would like to see amended. The Association of American Physicians and Surgeons, however, is solidly opposed to the cost-shifting law.

​In a letter to Governor Brown, the AAPS argued that AB 72 will not only create a shortage of medical care, but will be shot down in court as in violation of both state and federal constitutions. "The California Supreme Court has established clear rules with respect to price controls, and AB 72 violates these rules," writes the physician group.

​The proposed legislation is designed to protect patients who are at in-network facilities from high bills arising from treatment they receive from doctors and laboratories at those facilities who are out-of-network. Insurance plans commonly give their customers a list of in-network doctors and facilities.

These providers have a contract with the insurance company and have agreed to accept payment that is usually lower than that demanded by out-of-network health care providers. Many hospital patients do not realize that even though they have chosen to have their care at an in-network hospital, they may receive treatment by doctors who are not part of their health insurance network. The health insurance company is then not responsible for the bill and the entire burden of paying it - with no help from the insurance - falls on the unsuspecting patient.

​AB 72, in its official summary, states that it 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 a binding independent dispute resolution process for claims and claim disputes related to covered services provided at a contracted health facility by a non-contracting 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. Requires health plans and insurers to collect the enrollee/insured cost sharing and requires the plan/insurer to permit the enrollee/insured to assign payment of benefits to the health care professional.

​On its face, the proposed law would allow patients to get the care they need without having to worry about whether or not their doctor is in or out of their insurance company's network.

However, groups like the AAPS, predict that patients may actually not be able to obtain any care at all if doctors are forced out of practice by rates that are unreasonable. In the group's letter to Brown, they argue, "This legislation prevents a physician from obtaining adjustments in the rates that may be necessary for the physician to stay in practice, or to obtain a reasonable fee for the services he provides.... The victims of these price controls have no procedure for challenging the rates, other than a one-by-one piecemeal arbitration process that 0 low prices on the entire market and not just providers who choose to contract with them.

"And they do still better if they don't have to pay at all when patients receive no care because no one can afford to provide it to them," says Dr. Jane Orient, executive director of AAPS.

​The California Medical Association, in a letter to the bill's authors, cautions that "we believe this problem is primarily driven by increasingly narrow provider networks available to enrollees of certain health plans which forces patients to in-network facilities that do not have nearly enough in-network providers available to provide covered services. In these instances, health insurers are sending patients to in-network facilities where they are all but guaranteed to receive care from an out of network physician because of the narrowness of the plan's network.

Given that out-of-network payments are set at a statutory rate, we do not see a current enforcement mechanism that will penalize health plans for carrying inadequate networks after the passage of AB 72."

​In other words, if health insurance companies are allowed to pay any doctor, in or out of network, the fee decided by statute as opposed to the free market rate, they will have no incentive to work out fair contracts with doctors to be a part of their network. Networks will shrink and patients will have fewer choices of in-network doctors to take care of their health care needs. Anyone who has health insurance is probably aware of the difficulty of finding certain specialists who are in-network. Many individuals with specialized health needs find themselves paying very high rates that insurance companies do not have to reimburse, except by a very small amount.

​With this argument, the AAPS fully concurs.

"Increasingly, insurers and managed care plans offer inadequate out-of-network coverage for their enrollees. AB 72 does nothing to address this problem long-term and instead offers the wrong solution: regulating doctors.... Properly addressing this situation begins with rolling back failed policies that push patients into unaffordable plans that offer little actual coverage, not in passing an unconstitutional bill that attempts to shift the burden to independent physicians and their patients."

​On the other side of the argument, Consumers Union writes that "health insurance coverage should provide protection against overwhelming medical bills and debt. Consumers should not pay the price for the complicated relationships between doctors, facilities and health plans." Doctors are not usually employees of the hospital and therefore not necessarily in the same health insurance network. Hospitals do not even know if a doctor is in or out of a patient's network and so cannot even inform the patient he is about to be treated by an expensive, out-of-network anesthesiologist or pathologist. "This bill is a balanced solution that protects patients from unfair surprises, while also requiring insurers to reimburse out-of-network doctors at in-network facilities fairly, at a minimum, the greater of the average contracted rate or 125% of Medicare. It also allows doctors to appeal for a higher payment through a streamlined IDRP (dispute resolution plan).

​For more information on the bill and an analysis of its place among current legislation, see http://www.leginfo.ca.gov/pub/15-16/bill/asm/ab_0051-0100/ab_72_cfa_20160628_142049_sen_comm.html