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Legislative Focus on Pricing Continues

Intended to end “surprise medical bills” for consumers, Health and Safety Code Section 1371.30 became effective on July 1, 2017, following Governor Brown’s signature on AB 72 in the 2016 session. The new law has imposed additional balance-billing prohibitions on “non-contracted” physicians beyond the longstanding balance-billing prohibition for emergency services. An additional section of the code, Section 1371.9, requires health plans and insurance companies to inform non-contracted physicians of the “in-network cost sharing amount” for which patients are responsible and establishes an independent dispute resolution process to determine the amount health plans and insurance companies must pay non-contracted physicians.

Substantial opposition to the bill, carried by Assembly Member Rob Bonta (D-Alameda), came from both national and state specialty societies and associations, including the Association of American Physicians and Surgeons, Inc. (AAPS), which strongly encouraged the Governor to veto the bill. AAPS argued that AB 72 was flawed because of its threat to access to healthcare and in a letter pointed out that it “would essentially allow private insurance companies to fix the reimbursement rates for all physicians, even including physicians who are not in-network or under contract with the insurance companies.” The association added that “this legislation prevents a physician from obtaining adjustments in the rates that may be necessary for the physician to stay in practice, or to obtain a reasonable fee for the services provided . . . The victims of these price controls have no procedure for challenging the rates, other than a one-by-one piecemeal arbitration process that has proven to be unfair. . . .”

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The comments on AB 72 in 2016 sound familiar as price-setting for medical services and procedures was again on the Legislature’s mind with AB 3087, a bill introduced this past March by Assembly Member Ash Karla (D-San Jose). AB 3087 was a far more encompassing bill intended to set pricing for healthcare services and procedures via the establishment of a commission. AB 3087 received intense opposition from the healthcare and business communities and failed to proceed out of committee.

After implementation of AB 72 in July 2017, the California Medical Association began receiving calls from physician offices with questions over payments by several major health insurance providers. Section 1371.30 requires fully insured commercial plans and insurers to make “interim payments” to non-contracted physicians for covered, non-emergent services performed at in-network health facilities. The interim rate is defined as the greater of the average contracted rate or 125 percent of the amount that Medicare reimburses on a fee-for-service basis for the same or similar services in the geographic region in which the services were rendered.

CMA says it worked with Blue Shield to ensure affected claims through October of 2017 were automatically reprocessed and that the provider has committed to conducting weekly audits to catch any additional claims that were incorrectly processed. While Blue Shield continues to process claims manually, it expects to implement an automated system fix by mid-year, according to CMA. Anthem, another major provider, has reported to the Department of Managed Health Care that it implemented a system fix to allow claims subject to Section 1371.30 to be processed automatically rather than manually, according to the CMA.

Physicians who receive incorrect payments or denied claims related to new Section 1371.30 may contact CMA’s AB 72 advocate, Juli Reavis, at 888-401-5911 or


Gabriela Villanueva is CAP’s Public Affairs Analyst. Questions or comments related to this article should be directed to