August 3, 2020

Volume X, Number 216

July 31, 2020

Subscribe to Latest Legal News and Analysis

California Targets Surprise Medical Bills, Follows on the Heels of New York and Florida

Governor Brown approved a new law last Friday that limits patient exposure to so-called surprise medical bills.  AB 72 caps the cost-sharing obligations of patients who unexpectedly receive care from non-contracted providers during or because of a stay at an in-network facility.  The law limits cost sharing for covered services to in-network amounts unless the patient consents in writing to receive care from a noncontracting provider.  The law passed the California legislature with broad bipartisan support.

The law defines how much health plans and insurers must pay noncontracting providers for covered services.  Under its formula, noncontracting providers are entitled to the greater of the average contracted rate or 125% of the Medicare fee-for-service rate for similar services in a similar geographic area.  The law also requires State insurance and managed care regulators to establish an independent process to facilitate resolution of payment disputes between payers and providers.

AB 72 applies to health plans or health insurance policies issued, amended, or renewed on or after July 1, 2017.  It does not apply to Medi-Cal managed care plans, whose beneficiaries already enjoy legal protections from balance billing.  It also does not apply to self-insured employer health plans, which are exempt from state regulation under the federal Employee Retirement Income Security Act (“ERISA”).

California law currently includes limited patient protections against balance billing for emergency medical services.  In the 2009 Prospect Medical Group decision, the State Supreme Court held that the State’s managed-care law prohibits out-of-network providers from balance billing health plan enrollees for covered emergency medical services.  State Department of Managed Health Care regulations extend a similar protection by making it an “unfair billing pattern” for an emergency-services provider to bill a health plan enrollee for the cost of emergency medical services, other than applicable cost-sharing obligations.  The new law supplements these existing protections by establishing rules that apply to nonemergency services.

AB 72 is the latest example of a state legislature taking action to curb surprise medical billing.  New York passed a law that went into effect in 2015 to protect patients from owing more than their in-network cost sharing obligations when receiving emergency care from out-of-network providers.  The New York law also allows patients who receive surprise medical bills to assign their benefits to their providers, and requires the providers to work out payment disputes directly with the payer after such an assignment, and not to bill the patient for more than in-network cost-sharing amounts.

Similarly, Florida passed a law in April that protects patients who receive care at an in-network health facility from paying more than in-network cost-sharing amounts when they inadvertently receive services from providers who are not part of their network.  The National Association of Insurance Commissioners has also amended its model network adequacy law to address some of the same issues.  The recent successes in New York, Florida, and California for advocates of patient billing protections will likely spur legislative action in more states in the near future.

© 2020 Foley & Lardner LLPNational Law Review, Volume VI, Number 271


About this Author

Adam Hepworth,  Health Care Attorney, Foley Law Firm

Adam J. Hepworth is an associate and health care business lawyer with Foley & Lardner LLP. He is a member of the firm’s Health Care Industry Team.

Prior to joining Foley, Mr. Hepworth was a law clerk for Judge Harris L. Hartz on the United States Court of Appeals for the Tenth Circuit. He also interned in the San Francisco City Attorney’s health group and externed in the Civil Division of the United States Attorney’s Office in San Jose. Before he attended law school he was a policy intern for Sierra Health Foundation, where he worked on...

Judith Waltz, False Claims Act Attorney, Foley Lardner Law Firm

Judith A. Waltz is a partner and business lawyer with Foley & Lardner LLP. Her practice focuses on government investigations, false claims act, corporate integrity agreements (CIAs), bankruptcy, and Medicare and Medicaid counseling. Ms. Waltz works with clients in various areas of the health care industry. She is former co-chair of the firm’s Life Sciences Industry Team, and former vice chair of the Health Care Industry Team. Ms. Waltz is also a member of the Government Enforcement, Compliance & White Collar Defense and Bankruptcy & Business Reorganizations Practices.