Insurance Commissioner Dave Jones Announces Bill to Protect Consumers When Medical Provider Contracts Terminate Goes to the Governor
News: 2012 Press Release
Insurance Commissioner Dave Jones announced that AB 2152, authored by Assembly Member Mike Eng (D-Alhambra), has reached the Governor's desk after the Legislature passed it during the final week of the 2011-2012 Legislative session. Sponsored by Commissioner Jones and the California Department of Insurance, AB 2152 would strengthen consumer protections in California's regulation of health insurance by requiring notice to PPO policyholders if the contract between their medical provider group or hospital and their insurer is set to terminate. The bill also requires that the Department of Insurance be notified prior to the contract termination, so that the Department can verify if the health insurer will continue to have an adequate network of medical providers in that geographic region to serve their insureds.
"These important consumer protections will help prevent policyholders from unknowingly seeking medical care from a provider who may no longer be in their network. This information is important because patients should know whether they will be subject to higher, out-of-network costs before receiving medical treatment," said Commissioner Jones. "Consumers deserve to know when their provider is no longer in their health insurer's network and this legislation will help ensure that consumers are notified by their health insurer if their costs for seeking care from a particular provider will rise significantly," continued Jones.
In December 2011, the contract between Blue Shield and UCLA Medical Center was set to terminate. When the Department of Insurance learned of the imminent termination of the provider contract, the Department requested that Blue Shield notify affected policyholders prior to the termination, so that none of them would seek out-of-network care without knowing the cost implications of doing so. Blue Shield refused to send out notices to policyholders in advance of the contract termination and refused to cover the difference in the cost for those policyholders who went to their appointments in early January without having been noticed by the insurer that their provider was now out-of-network, except for those policyholders that were covered by the "continuity of care" law.
Late last month, the Department of Insurance learned through media coverage that Aetna had terminated a number of provider contracts as of September 1st. Aetna did not notify the Department of the provider contract terminations and without information about the specific contracts terminated in each region in which Aetna has policyholders, the Department cannot determine whether Aetna has as adequate network of medical providers as required by law.
"This legislation erases a double standard in regulation and ensures that consumers are not blindsided by unexpectedly high medical bills because they were not notified of changes in their health insurance policies," said Assembly Member Mike Eng.
The Insurance Code authorizes health insurers to contract with providers to offer services at alternative rates of payment. These contracts are the basis of provider networks in Preferred Provider Organizations (PPOs). AB 2152 requires health insurers to notify the Department of Insurance at least 30 days prior to terminating a provider group or hospital contract. The bill also requires health insurers to send a written notice to policyholders at least 10 days prior to the termination of certain provider group and hospital contracts.
Under existing law, HMO enrollees are notified before a contract termination with a provider group or hospital occurs, as is the Department of Managed Health Care that regulates HMOs. However, those policyholders with PPO policies regulated under the state Insurance Code are not afforded these same protections and the Department of Insurance that regulates those insurance policies is not notified of provider contract terminations.
Many individuals intentionally choose a provider that is in their insurer's PPO network because their out-of-pocket costs will be kept to a minimum. Some consumers will choose to go out-of-network even if the costs are higher or will exercise the "continuity of care" protections in the law if they are notified in advance that their provider is no longer in their insurer's network. These are important decisions for which the policyholder needs advance notice of a provider contract termination. Continuity of care with the existing provider may be available at in-network costs even after the provider contract has terminated if the policyholder knows to ask for it when they have an acute or serious chronic condition, pregnancy, terminal illness or a surgery that has already been recommended by the provider.
The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $259 billion in premiums annually in California. In 2014 the California Department of Insurance received more than 175,000 calls from consumers and helped recover over $63 million in claims and premiums. Please visit the Department of Insurance web site at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.HELP or 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.