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Major Action on Rate Setting in California

September 9, 2016

California’s Assembly recently went one step further in the out-of-network balance billing debate and dictated rates for hospital-based providers for health plans that are not self insured.  (Federal ERISA laws prevent the states from regulating self-insured employer plans.)  The California Medical Association (CMA) was neutral. CMA viewed the bill as a “compromise” and a rate of 125-percent of Medicare as an “okay” deal for physicians.

However, the California Orthopaedic Association (COA) opposed the bill out of concern that it sets a precedent for the government to set the rate for non-contracted services.

The American Academy of Orthopaedic Surgeons (AAOS) weighed in with its opposition. Click here to read the AAOS response.

TOA is engaged in the out-of-network balance billing debate in Texas.  We’ll provide more updates on the Texas situation in the near future.

The following is a summary of the California issue that was produced by Manthan Bhatt of AAOS:

AB72 passed the California state legislature last week and will allow non-self-insured health plans to effectively dictate rates for hospital based providers. AB72 says that when patients are unknowingly treated by out-of-network providers at an in-network facility, the patient would only pay what they would for doctors within their insurance network. The private health insurance company is only required to reimburse at 125-percent of Medicare or the average of contracted rates to the physician.

Under AB72, if the insurer has a contract with the hospital, then any on-call provider must accept the contracted rate, making it pointless for insurance companies to contract with individual providers. Reaction from the health policy community has been diverse.

Austin Frakt, New York Times Health Economist, called AB72 “sneaking up on all-payer rate setting.” The Association of American Physicians and Surgeons says that AB 72 was promoted misleadingly as a means to end surprise medical bills. They also said AB72 would have a devastating effect on the availability of life-saving medical care to the people of California and urged California Governor Jerry Brown to veto the flawed measure. Physicians for A National Health Program says that AB72 places the private insurer in the position of being able to dictate price controls within the private health care delivery system. Many groups have threatened to sue, claiming it is unconstitutional for private companies to be lawfully authorized by the legislature to impose price controls on workers who have no contract with them.