New California Law Limits Surprise Medical Bills

Effective July 1, 2017, Assembly Bill 72 will limit the surprise medical bills that patients in California receive when treated by an out-of-network provider at an in-network healthcare facility. These surprise bills, also referred to as the practice of balance-billing, affect patients nationwide. While California previously passed similar legislation aimed at limiting surprise bills in the context of emergency care, this newest law is the State’s biggest step towards further minimizing a patient’s exposure to unexpected medical costs.

Details of the New Law

Since 2008, California prohibits the practice of balance-billing individuals who are covered under an HMO and seek emergency care at an out-of-network facility. This new law expands the prohibition on balance-billing to include non-emergency care and applies to both health care service plans (generally HMOs) and insurance policies written in the State. In sum, the new law has four essential components:

  • An individual covered by a health care service plan or an insurance policy, excluding Medi-Cal;
  • Seeks non-emergency care at an in-network healthcare facility;
  • Is treated by an out-of-network (or non-contracted) healthcare provider, including anesthesiologists; and
  • Receives services that are covered under the health care service plan or insurance policy.

If these four conditions are satisfied, the patient will be required to pay the in-network cost for the services rather than the out-of-network cost. A non-contracted physician who wishes to receive an amount beyond the in-network cost must make his/her case directly to the insurance carrier; the physician or facility cannot balance-bill the patient for the excess cost.

What Employers Need to Know

Employers that sponsor a fully-insured health plan, whether through an insurance policy or a health care service plan, will be indirectly affected by this law. The law doesn’t require anything of employers, but individuals covered under the employer-sponsored plan will no longer receive surprise medical bills for covered care received at an in-network facility.

The new law does not apply to self-funded plans or arrangements, which means that individuals covered under an employer’s self-funded group health plan remain exposed to the practice of balance-billing.

Finally, it’s important to keep in mind that the new law applies to non-emergency services only. Individuals covered under an insurance policy could still receive a surprise medical bill for emergency care provided by an out-of-network facility.