SACRAMENTO – Today the Assembly will vote on concurrence on AB 1155 (Huffman), a bill which requires the Department of Managed Health Care to issue minimum fines against health insurance companies who are found to have a pattern and practice of unlawful underpayment, and which requires insurers to make providers whole for underpayment.  

“Time and time again, health insurance companies have unlawfully denied treatment, rescinded policies, and underpaid providers to make more money,” said Assembly Member Jared Huffman, author of the bill.  “Insurers will continue these practices until there is no longer an economic incentive to do so.  AB 1155 removes some of these incentives, holding the insurance industry accountable for its unlawful actions through mandatory minimum fines for unlawful payment practices.”

Recently, the DMHC admitted that it failed to pursue a $1 million fine it publicly announced in 2007 against Blue Cross for unlawful rescission practices, saying that Blue Cross was too powerful to pursue enforcement of the fine.  

“The Department has proved itself unable or unwilling to vigorously pursue enforcement of fines against the health insurance companies it is supposed to oversee,” said Dr. Richard Frankenstein, M.D., president of the California Medical Association.  “Public statements by the DMHC admitting that legal threats and delay tactics by the industry are effective only serve to remove any possibility of accountability and embolden the insurance companies to engage in further unlawful practices.  AB 1155 provides the DMHC with the necessary backbone to oversee and hold accountable the industry it is supposed to regulate.”

A review of the one DMHC action against an HMO for underpayment for emergency care further demonstrates the current inadequacy of enforcement actions.  In that case, HealthNet acknowledged it had failed to pay correctly on some 65,000 claims for emergency care for a total underpayment of $6-7 million.  The DMHC issued a token fine of $250,000, and required physicians to resubmit all their claims against Health Net, a costly administrative burden that assured that many physicians would not submit claims.  The result: after paying the fine and claims, HealthNet walked away with more than $5 million for its unlawful behavior.

“When health insurance companies unlawfully underpay providers, consumers ultimately end up paying the price through increased administrative costs and less time with their doctors,” said Dr.   William K. Mallon, M.D., president of Cal-ACEP.  “By requiring insurance companies to make providers whole, AB 1155 ensures that physicians can spend less of their time pursuing insurance companies and more of their time taking care of their patients.” 

AB 1155 is authored by Assembly Member Jared Huffman, and is sponsored by the California Medical Association and the California Chapter of the American College of Emergency Physicians.