by Anthony Wright, Executive Director, Health Access California

Three years ago, on September 26th, 2016, California Governor Jerry Brown signed into law AB 72, a measure to prevent “surprise medical bills” when a patient goes to an in-network hospital or other facility and is seen by an out-of-network physician and charged the out-of-network price.

AB 72 took effect on July 1, 2017, and now, over two years later, the data is clear: The law is working as intended by consumer advocates, protecting patients from physician balance billing, while ensuring a fair payment to providers (a key focus of negotiations) where the compromise benchmark payment is based on the average contracted rate. California’s health system protects patients while continuing to provide access to needed care without any empirical evidence of negative impacts from AB 72. Highlighting the most recent data from state regulators, this paper shows:

  • Patients are being protected from surprise medical bills from out-of-network physicians.
  • All but a handful of physicians are accepting the “average contracted rate” benchmark as payment in full, rather than appealing and making their case for higher payment.
  • According to state regulators and health plans, insurers have broadened their networks, and contracting continues to be widespread such that 80%-100% of their hospitals and other facilities have no out-of-network billing from the physicians practicing within.

Key lessons can be learned from California to inform federal action. California’s experience also highlights the need for federal action to fully hold consumers harmless, protecting them from surprise bills and medical debt, regardless of their insurance plan.

Three Years of Experience Shows Success for Patients and Providers

After three years, the data shows that most patients in California are protected from physician surprise bills, and California’s health system continues to provide access to care with adequate networks without any empirical evidence that suggests negative impacts. Despite some anecdotes by self-interested providers, including statements rated as “false” by Kaiser Health News and Politifact Healthcheck, the data actually point toward widespread acceptance of the benchmark rate and more provider contracting.

The Law is Working, Protecting Patients: Consumer groups, after years of hearing from patients about surprise medical bills, report that balance billing from out-of-network physicians has largely been quelled, at least for those in plans covered by AB 72, a sentiment echoed by California regulators. A RAND survey of stakeholder interviews of both supporters and opponents of the law was predictable in presenting conflicting views on payment issues (which are all anecdotal without actual data), but the consensus opinion even with opponents was that “AB 72 is effectively protecting patients from surprise medical bills.”

Insurers Continue Widespread Contracting with Physicians: One argument raised against AB 72 by physicians was that a benchmark rate would cause insurers to drop their contracts, under the theory that insurers would dump their networks and pay all their providers the out-of-network benchmark rate.Anticipating this, AB 72 required that state insurance regulators report on the status of networks in California after the law’s implementation, in addition to the annual review of network adequacy and timely access to care standards that state law imposes on insurers.We now have the data to analyze the outcomes of the law.

  • In March 2019, California’s Department of Managed Health Care (DMHC) reported that since passage of AB 72, insurers contracting with physicians is still so widespread that over 80% of the hospitals reported *zero* claims from out-of-network physicians practicing at their facilities.
  • To put it another way, the health plans report that the percentage of in-network facilities where there was even just *one* claim by an out-of-network doctor ranged from 0% to 20%, depending on the health plan. For the big four health plans in California, the percent of contracted hospitals and facilities that had at least one health plan payment to an out-of-network provider was 4% for HealthNet; 11%-12% for Blue Cross and Kaiser Permanente; and 16% for Blue Shield of California.
  • Of the four health plans, which account for almost 90% of the commercial, state-regulated insurance market in California, around 85-95% of their contracted facilities yielded no billing by out-of-network doctors. While we do not have data prior to AB 72, this clearly shows that the law does not seem to have led health plans to stop contracting with doctors. Insurers did not dump their networks in favor of relying on the benchmark.

Insurer Data Indicates Networks Have Expanded Since AB 72: This DMHC data aligns with reports from insurers, which indicate contracting actually increased during the two years since AB 72 has been in effect. A study by America’s Health Insurance Plans (AHIP) indicates that in July 2019, the networks of major health plans in California actually increased to 116% of the size of networks two years earlier, in July 2017.

  • These increases are reported for the specialties most likely to engage in surprise medical billing, including:
    • general surgery (110%)
    • emergency medicine (110%)
    • anesthesiology (118%)
    • diagnostic radiology (126%)

Most Providers Accept Benchmark Rate, With Very Few Appeals: California’s law allows providers or insurers to appeal if the average contracted rate is unacceptable. In two years, in the entire state of California, nearly all providers accepted the payment based on the benchmark rate, and a very small number of providers appealed the rate.

Between September 2017 and July 2019, the DMHC received not thousands or even hundreds of appeals, but just 68 applications for the independent dispute resolution process (IDRP).

  • The appeals were mostly from one specialty, with 49 of those appeals coming from anesthesiologists.
  • Of the 68 appeals, 44 were withdrawn, non-jurisdictional, incomplete or ineligible (often because the provider was in fact contracted, in Medi-Cal or another plan not covered by AB 72).
  • Just 23 are pending appeals, with just one decided by mid-2019, in favor of the health plan.The California Medical Association contracted with a consultant to help physicians with appeals, yet only 24 relevant claims were appealed out of the hundreds of thousands of claims in California a year.

Read the full report here.