Despite a California law passed in 2000 to address widespread payment abuses by health care service plans, many payors continue to flout the law. A recent survey by the California Medical Association (CMA) confirms that health plans regularly engage in unfair payment practices, with two-thirds of physician practices reporting routine payment abuses in violation of state law.

The Department of Managed Health Care (DMHC) has been slow to address provider complaints and has taken few enforcement actions against health plans that unlawfully underpay providers. When DMHC has acted, the penalty amounts have been small in relation to the economic injury to consumers and providers. Because of this, some health care service plans make economic decisions to violate the law, knowing that any penalty amount that may be imposed will be outweighed by the extra revenue the health plans will generate by, for example, underpaying medical care.

Last month, CMA, along with its county medical societies and several specialty societies, surveyed physicians to obtain feedback on the health plans that are routinely engaging in unfair payment patterns, the types of violations and the results of physician efforts to resolve the issues both through internal plan processes as well as through DMHC. In a period of nine days, 741 physician practices representing thousands of physicians responded to the survey.

Key survey results include:

• Two-thirds of physician practice respondents report routine problems with plans engaging in various unfair payment patterns, defined as a practice, policy or procedure that results in repeated delays in the adjudication and correct reimbursement of provider claims, as outlined in 28 C.C.R. §1300.71.

• More than half of practices report that health plans attempt to rescind or modify authorizations after the physician renders the service in good faith.

• Sixty-two percent report that Anthem Blue Cross is the most problematic when it comes to unfair payment practices; Blue Shield of California was second most problematic (52 percent).

• The health plan provider dispute resolution processes are largely ineffective, with 32 percent of practices indicating disputes are resolved only half of the time, and 29 percent indicating disputes are rarely resolved through the plans’ internal processes.

• Though most practices do utilize the health plans’ internal processes to attempt to resolve issues, 63 percent report that plans routinely fail to respond to their appeals within 45 business days of receipt, as required by California law. Anthem Blue Cross is identified as the most problematic (66 percent), with Blue Shield the second most problematic (61 percent).

• When health plans do respond to physician appeals, 74 percent of practices state the health plan responses do not include a clear explanation for the plans’ determination.

These survey results confirm that health plans overwhelmingly continue to engage in unfair payment practices, despite the legislation that passed 18 years ago attempting to stop these abuses. It further demonstrates that, although plans are required to maintain fast, fair and cost-effective provider dispute processes, their processes are largely ineffective.

To address this issue, CMA is sponsoring AB 2674 (Aguiar-Curry), which would require DMHC to investigate provider complaints that a health care service plan has underpaid or failed to pay the provider in violation of the Knox-Keene Act. If DMHC finds that a health plan has unlawfully underpaid a provider, AB 2674 would require the penalty amount to, at a minimum, equal the amount of the underpayment plus interest. Furthermore, AB 2674 would protect the health care delivery system by ensuring providers are made whole when health care service plans violate the law. The bill would also deter future violations of the law, thereby saving providers and the state vital resources that should be invested in patient care.