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Calif. Bill Targets Profiteering In Addiction Treatment, Dialysis Industries

One of the main sponsors of the bill has been sharply critical of the dialysis industry, singling out what it says are outsized profits. (Mark Boster/Los Angeles Times via Getty Images)

A California lawmaker is seeking to rein in addiction treatment centers and dialysis providers accused of profiteering off vulnerable patients by collecting millions of dollars in inflated medical claims.

Supporters of the proposed legislation, scheduled for a key Senate hearing next month, say some providers, industry middlemen and charities with ties to providers are signing patients up for health insurance and paying the premiums only to line their own pockets. They say these arrangements drive up insurance costs industrywide.

“Providers have a right to make a profit, but certainly not when those profit motives can compromise the health and well-being of patients and raise premiums for other Californians,” state Sen. Connie Leyva (D-Chino), the chief sponsor of the bill, said in a statement.

A major insurer, Blue Shield of California, and a powerful labor group, the Service Employees International Union-United Healthcare Workers West (SEIU-UHW), are also supporting the measure, Senate Bill 1156.

Premium assistance programs, in which providers and other outsiders step in to cover premiums for patients who cannot afford them, have drawn the ire of health insurers since the Affordable Care Act rolled out in 2014.

The health law made it easier for outside parties to quickly enroll patients who need lengthy or expensive treatment, because the law prevented insurers from denying applicants with preexisting conditions. Insurers say it opened the door to more fraudulent or unjustified billing, which has mostly occurred on individual policies purchased in the state insurance marketplaces set up under the ACA.

The opioid crisis has further inflamed the problem. There are widespread reports of patient brokers and unscrupulous treatment centers enrolling patients in private plans and even entering phony information to make sure they are deemed eligible. The patient might actually be eligible for government-funded programs such as Medicaid or Medicare, but commercial plans typically pay more. Within weeks, the insurer is billed tens of thousands of dollars, which may be shared among the parties in the scheme.

Meanwhile, critics say, an addicted patient may receive subpar care and relapse, causing the insurer to pay still more.

Treatment providers and other opponents of the California bill accuse insurers of exaggerating the problem. They also warn against impeding consumers’ ability to receive help from charities and other legitimate groups when so many households struggle to pay medical bills.

Representatives of the addiction treatment industry acknowledge that cases of fraud and abuse exist in patient referrals, billing and payment of premiums. But they don’t think that this state proposal would be as effective as stronger enforcement of federal anti-kickback laws that target patient-steering and conflicts of interest.

Stampp Corbin, president of the Addiction Treatment Advocacy Coalition, a nonprofit group in Los Angeles that represents California’s for-profit treatment centers, said the bigger problem is that insurers improperly withhold payments for drug treatment or vastly underpay for services. He said that makes rehab centers less likely to accept new patients at a time when demand is skyrocketing.

“This bill is just a band-aid,” Corbin said. “It’s not addressing any of the issues created by health plan underpayments or lack of payment.”

The American Kidney Fund, which has come under fire for its premium assistance program, has said anecdotal reports of patients being steered into private coverage are overblown.

Last year, the nonprofit group, which receives funding from drugmakers and dialysis providers, said it helped more than 3,800 dialysis patients in California pay their health insurance premiums. Roughly 35 percent of those patients had employer plans and 15 percent were on individual policies, but about half were on Medicare or supplemental Medigap plans, which also can require premiums.

In a statement, the kidney group blasted the California bill, saying it “seeks to limit those patients’ access to lifesaving financial assistance and is nothing more than a thinly-veiled attempt by large health insurance companies to kick kidney patients off their insurance plans.”

Under the legislation, third-party groups would have to certify that patients are not eligible for Medicare, Medicaid or federal subsidies on an individual policy. They also would have to disclose to state insurance regulators in advance that they intend to pay a patient’s premiums.

The bill would require third parties to pay premiums for the full plan year and not stop after treatment has been rendered. If the outside party fails to fulfill the law’s provisions, the health plan could pay for services at the prevailing Medicare rate, which would presumably be lower than the commercial reimbursement.

The Senate Health committee is scheduled to take up the bill at an April 18 hearing.

The insurance industry’s main lobbying group, America’s Health Insurance Plans, said there’s a role for legitimate charities to assist consumers. But the trade group said stricter rules are needed to address conflicts of interest.

Blue Shield of California, based in San Francisco, estimated that it paid out $64 million in claims from January 2014 to June 2016 on policies involving third-party premium payments.

In 2016, the Obama administration issued rules barring dialysis facilities from making premium payments for health plans in the individual market without disclosure to the insurer and confirmation from the health plan that third-party payments would be accepted. But a federal judge in Texas blocked the regulations from going into effect.

It’s unclear whether the Trump administration will issue new rules, leaving state leaders to grapple with the issue for now.

One of the main supporters of the California bill, SEIU-UHW, has been sharply critical of the dialysis industry, singling out what it says are outsized profits.

Next week, SEIU said it plans to file more than 600,000 petition signatures with state officials in hopes of putting a measure on the November ballot to limit the revenue collected by dialysis companies to 15 percent above the cost of patient care.

This story was produced by KFF Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.

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California Cost and Quality Health Industry Insurance