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California’s answer to surprise, out-of-network medical bills

AB-72, Health care coverage: out-of-network coverage

California State Assembly
California Legislative Information, Sept. 1, 2016

Summary (as amended):

Establishes a payment rate, which is the greater of the average of a health care service plan (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 noncontracting 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.

Votes:

8/29/16 - Senate: Passed 35 to 1

8/31/16 - Assembly: Passed 79 to 0

To Gov. Jerry Brown

https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201520160AB72

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Comment:

By Don McCanne, M.D.

Under private insurance, a person who is admitted to an in-network hospital may unavoidably or inadvertently receive care from a professional, such as an anesthetist, who is not in the insurer’s network, and thus the patient may be responsible for the entire bill rather than the insurer’s normal contracted amount. This legislation corrects that injustice by making the patient responsible only for cost sharing that is no greater than it would have been had the provider been in the network.

So what are the other implications of this legislation?

The out-of-network provider is no longer able to demand payment for the full fee but has to accept either the same payment that in-network providers receive or 125% of the Medicare rate, whichever is higher. If the out-of-network provider demands more, a dispute resolution process with the insurer is established, but in no circumstances does the patient pay more than the contracted in-network cost sharing.

Think about that. One of the ways that insurers are attempting to control spending is through the use of provider networks, the narrower, the better. If the insurer has a contract with the hospital, then why bother with contracting with the specialists who might be called in since they will have to accept the contracted rate even though no contract has been established with these providers, just as Medicare can establish rates for those who have not signed Medicare contracts. Also, since the insurers do not need as many physicians in their ultra-narrow networks, they can hold out for even lower contracted rates with those who do agree to sign contracts - rates which will also apply to the physicians who remain out-of-network.

Think some more about that. This places the private insurer in the position of being able to dictate price controls within the private health care delivery system. It has long been acknowledged that the government can establish rates through programs such as Medicare and Medicaid. Even though Medicare rates do tend to be fairly low, most physicians continue to see Medicare patients, even if they prefer the higher rates often paid by private insurers. However, the private Medicare Advantage plans are now paying less than traditional Medicare rates. It does not take much to imagine that the private insurers will now try to push the rates for their commercial plans below the traditional Medicare rates as well.

This legislation is important because it recognizes that we must take care of patients first. Also this legislation recognizes that the providers must be paid, but not at extravagant fees that they might set themselves. But what about the private insurers? Why do we need them at all?

Under a single payer Medicare-for-all system, the fees would be set, but at a level that would ensure adequacy of the health care delivery system. The waste of the private insurers and the burden they place on the delivery system would be recovered so that it could be spent on patient care instead. The patients would certainly benefit, and the hospitals, physicians and other professionals would do just fine as well under a public financing system.