Balanced Billing in California: Update Regarding 2016’s A.B. 72 and an Overview of Newly Introduced Bill A.B. 1611

Balanced billing or “surprise billing” has been getting increased attention at both the federal and state level. Balance bills arise when a payor covers out-of-network care, but the provider bills the patient for amounts beyond what the payor covers and beyond cost-sharing amounts. This article provides an update regarding two pieces of California legislation – A.B. 72, effective in 2017 and A.B. 1611, newly proposed – which concern balance billing.

A.B. 72 requires HMOs to reimburse an out-of-network individual health professional (typically hospital-based specialists such as pathologists, radiologists and anesthesiologists) at an “average contracted rate” or 125% of the amount that Medicare reimburses on a fee-for-service basis for the same or similar services in the geographic region in which the services were rendered. A.B. 72 required that by September 1, 2017, the California Department of Managed Health Care (Department) establish an independent dispute resolution process for the purpose of processing and resolving a claim dispute between an HMO and a noncontracting individual health professional.

A.B. 72 also required that by January 1, 2019, the Department specify a methodology that HMOs and their delegated entities use to determine the average contracted rates for services based upon, at minimum, (1) information from the independent dispute resolution process, (2) the specialty of the individual health professional, and (3) the geographic region in which the services are rendered. New Section 1300.71.31 of Title 28 of the California Code of Regulations sets forth the methodology for determining the average contracted rate, which utilizes a claims volume-based mean adjusted at the time of reimbursement by applicable payment modifiers. Payors must include the highest and lowest contracted rates for a health care service, even if the payor paid zero claims at those rates. Payors are also required to take into consideration several factors, at minimum, including: (1) the health care service code, (2) geographic region, (3) provider type and specialty, and (4) facility type. Several claims are excluded from this calculation, including, but not limited to, case rates, bundled payments, claims paid pursuant to capitation and risk-sharing arrangements. HMOs are now required to file their policies and procedures used to determine the average contracted rates by August 15, 2019, and thereafter when the policies and procedures are modified.



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