California Assembly Approves Bill That Would Give State More Authority to Penalize Insurers Who Do Not Pay Bills

The California Assembly on Monday voted 45-24 to approve a bill (AB 1155) that would increase the state's power to fine health insurers who do not pay or underpay medical bills, the Los Angeles Times reports. Bill sponsor Assembly member Jared Huffman (D) said, "Time and time again, health insurance companies have unlawfully denied treatment, rescinded policies and underpaid providers to make more money," adding, "Insurers will continue these practices until there is no longer an economic incentive to do so."

California Medical Association President Richard Frankenstein said that the bill could force HMOs to pay more than symbolic fines if the state Department of Managed Health Care determines that they have failed to reimburse claims submitted by physicians. He added that under the current penalty system, regulators often appear fearful of challenging large insurers.

Sherrie Lowenstein, an attorney for the department, said that the bill would lessen the ability of DMHC to focus on the most serious cases of alleged HMO violations and could turn the agency into "a bill collector for providers, who already have the ability to pursue claims against a health plan under the terms of their contracts." Department spokesperson Lynne Randolph said the department "has been extremely effective in representing the interests of health care providers, recovering more than $5 million to date in additional payments."

HMOs also have said the bill is unnecessary because state laws and regulations already in place give the department the tools it needs to ensure medical bills are paid. In addition, Michael Paiva, a director of governmental relations for Anthem Blue Cross, said some bills submitted by some providers who are not part of an HMO's network "can be extremely high."

The state Senate voted 24-11 to approve the bill last year. The measure now goes to Gov. Arnold Schwarzenegger (R), "who is coming under pressure from HMOs and his own regulators to issue a veto," the Times reports. According to Schwarzenegger spokesperson Rachel Cameron, the governor has not taken a stance on the legislation (Lifsher, Los Angeles Times, 7/15).