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California - AB72: Health Care Coverage - Out-of-Network Coverage

The California Department of Insurance (DOI) AB 72, requires a health care service plan or health insurance policy issued, amended or renewed on or after July 1, 2017 to provide that if an insured received covered services from a contracting health facility, and in the process received covered services provided by a non-contracting individual health professional, then those services must be paid at the “in network cost-sharing amount”.

The bill was signed by the Governor and filed with the Secretary of State on September 23, 2016, announcing that it added Sections 10112.8, 10112.81 and 10112.82 to the Insurance Code. All health insurance policies and certificates must be revised to reflect the requirements of AB 72 prior to the July 1, 2017 effective date of the requirements. Amendments must be filed no later than February 1, 2017.

The Assembly Bill addresses several key components:

  1. Health insurance policies issued, amended, or renewed on or after July 1, 2017 must provide that if an insured receives non-emergency covered services from a contracting health facility at which, or as a result of which, the insured received services provided by a non-contracting individual health professional without informed written consent as specified, the insured shall pay no more than the “in-network cost-sharing amount,” which is the same cost sharing that the insured would pay for the same covered services received from a contracting individual health professional.

    "Non-contracting individual health professional" is defined to mean a physician and surgeon or other professional who is licensed by the state to deliver or furnish health care services and who is not contracted with the insured's health insurance product. For this purpose, a "non-contracting individual health professional" shall not include a dentist.

    This requirement protects insureds from surprise medical bills when they follow the rules of their health plan by going to an in-network hospital, lab, imaging center, or other health care facility. It protects insureds from receiving out-of-network bills from providers they did not choose, for example, emergency room treating physicians, ambulance providers, anesthesiologists, radiologists, pathologists, etc.

    At the time of payment by the insurer to the non-contracting individual health professional, the insurer shall inform the insured and the non-contracting individual health professional of the in-network cost-sharing amount owed by the insured. If the non-contracting individual health professional has received more than the in-networking cost sharing amount they must refund any overpayment to the insured within 30 days or interest will accrue at 15% per annum. See Insurance Code section 10112.8(a)(1)-(4)(A)-(C) for requirements on refunds for overpayments.

  2. Per CA Ins Code 10112.8 (b) for those services stated above, cost sharing paid by the insured must count toward the limit on annual out-of-pocket expenses under section 10112.28 (the in-network annual limit on costs sharing), and must be counted toward any deductible in the same manner as cost sharing is applied towards any deductible for services from a contracted provider.

    There is an exception addressed in 10112.8 (c) for insureds that have coverage for out-of-network benefits. The law allows a non-contracting provider to bill or collect the out-of-network cost sharing , if applicable, only when:
    a. the insured consents in writing 24 hours in advance to receive services from the non-contracting individual health professional;
    b. The consent is in a separate document apart from the consent used for any other part of the care; and
    c. the non-contracting health professional gives the insured a written estimate of the insureds total out-of-pocket cost of care.

    If non-emergency services are provided by a non-contracting individual health professional consistent with the criteria set out in 10112.8 ( c) (above) to an insured who has voluntarily chosen to use his or her out-of-network benefit for services covered by an insurer that includes coverage for out-of-network benefits, then unless otherwise agreed to by the insurer and the non-contracting individual health professional, the amount paid by the insurer shall be the amount set forth in the insured’s policy. This payment is not subject to the independent dispute resolution process described in Section 10112.81.

    See Insurance Code section 10112.8(c)(1)-(6) regarding full consent requirements and requirements that the non-contracting individual health professional is permitted to follow when the insured has failed to pay either the in-network cost sharing amount or the out-of–network cost sharing amount as may be applicable.

  3. Per 10112.81 the bill requires the department and the commissioner to each establish, by September 1, 2017, an independent dispute resolution process that would allow a non-contracting individual health professional who rendered services at a contracting health facility, or a plan or insurer, to appeal a claim payment dispute, as specified. The bill would authorize the department and the commissioner to contract with one or more independent dispute resolution organizations to conduct the independent dispute resolution process, as specified. Parties must first complete the insurer’s internal process before initiating the independent dispute resolution process. The decision reached through the independent dispute resolution process will be binding on both parties. The dispute resolution process will not apply to emergency services. See Insurance code section 10112.81 for full text regarding independent dispute resolution.

  4.  Section 10112.82 requires that the insurer report data on its average contracted rate for services subject to section 10112.8. Unless the non-contracting individual health professional and the insurer have agreed otherwise, California established the average contracting rate to be 125% of Medicare reimbursement fee.

    The first data report from each insurer is due by July 1, 2017. The report shall identify the average contracted rate, including the methodology for determining such rate, for the services rendered in the calendar year 2015 that would most frequently be subject to the non-contracting services described in 10112.8. Insurers must provide the commissioner with the policies and procedures used to determine said average contracted rates. Subsequent calendar year reports are due with guidelines on adjusting the rate based on the Consumer Price Index for Medical Care Services.

    By January 1, 2019 the commissioner shall specify a methodology that insurers shall use to determine the average contracted rate for the services most frequently subject to these non-contracting services described in 10112.8. At a minimum, the methodology will take into account, information from the independent dispute resolution process, the specialty of the individual health professional, and the geographic region where services are rendered.

    In their reports to the commissioner, required by section 10133.5, health insurers will include the number of payments made to non-contracting individual health professionals for services at a contracting health facility, as well as other data sufficient to determine the proportion of non-contracting individual health professionals to contracting individual health professionals at contract health facilities, as specified in section 10112.8. See Insurance code section 10112.82 for full text regarding reporting on average contracted rates.

Health insurance policies and certificates must be revised to reflect the requirements of AB 72 prior to the July 1, 2017 effective date of the requirements. Amendments must be filed no later than February 1, 2017. To that end, MCR suggests that all amendatory filings are made as soon as possible in order to safeguard your product availability.

MCR stands ready to assist you. We can help ensure that your forms are compliant and manage the filing process via SERFF so that your compliance unit can continue to work on other sales and market driven directives.

 

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