When you share a list of in-network hospitals in a health plan’s network with your client, the assumption is that the member will be treated by doctors who are in-network and also accept their insurance. It is logical to assume that a plan’s in-network hospital contracts with the doctors that work inside them. Unfortunately, many times that is not the case. Consequently, the member receives a surprise bill (a.k.a balance bill) from a doctor they believed to be part of their plan’s network.

In September 2016, Governor Brown signed AB-72 into law. AB-72 recognizes that not all providers “non-participating health care professionals” that work in “contracted health facilities” are in-network. When a member is admitted to an in-network hospital, they may unknowingly receive treatment from an out-of-network provider. Effective Jul. 1, 2017, plan members will only be responsible for their
plan’s co-pay or co-insurance amounts when they receive treatment from an out-of-network provider that works in a plan’s contracted health facility. Here are a few of the key provisions to highlight and share with your clients.

  •  AB-72 covers Californians with private health insurance plans that are regulated by DMHC and DOI.
  • Members are only responsible for their plan’s copay or coinsurance amount whether they receive treatment from an in-network or out-of-network provider in a contracted health facility.
  • “Health facility” refers to a hospital, ambulatory surgery, outpatient setting, lab, radiology, imaging
  • Out-of-network providers are required to refund members within 30 days for monies paid beyond  the plan’s cost sharing amount.
  • If a PPO member knowingly decides to seek treatment from an out-of-network provider, the out-of-network provider can bill the member for out-of-network cost sharing amounts. A written consent is a prerequisite to care:
    • The member must acknowledge in writing that he/she is aware that he/she is receiving treatment from an out-of-network provider at least 24 hours before the appointment.
    • The consent must include the provider’s written estimate for care. The provider cannot charge more than the written estimate.
    • The consent must make clear that the out-of-network charges are in addition to the member’s plan coinsurance or copayment and may or may not apply to the member’s deductible or out-of-pocket maximum.
    • The consent must state that the member can obtain same services from an in-network provider.
  • If a member fails to pay his or her plan’s cost sharing amount to the out-of-network provider, the provider is not allowed to report to credit reporting agencies or take civil actions against the member until 150 days after the initial bill. Further, collection attempts that go after wage garnishment and liens of primary residence are not allowed.
  • AB-72 does not apply to emergency services, Medi-Cal, Medicare, and self-insured plans
  • Member plan copays or coinsurance applied to out-of-network services will apply to the member’s
    deductible and out-of-pocket maximum.
  • Effective Sep. 1, 2017, the State will establish an Independent Dispute Resolution Process
    (IDRP) to address escalated claims issues. Final decisions are binding.

Although California is one of 20 other states to enact this type of legislation, California is one of only 5 states where the legislation is considered comprehensive by consumer advocates. According to Consumer Reports National Research Center, nearly 1 out of 4 Californians received a ‘surprise bill’ after they had emergency department visits, hospitalization or operations in the previous two years. This new law will make a significant impact on the cost of health care. Keep an eye out for physicians to make changes as the law affects the amount that the physicians will be paid for their services at certain health facilities and puts them in a difficult position. If the out-of-network doctor treats a patient at an in-network health facility and does not get the patient’s permission to be treated by them, then they will not be paid the full amount for services he/she performs. Both doctors and health facilities will need to develop new policies and procedures that address these new restrictions and notification requirements brought on by AB-72. Should you want to read more, we provide the direct link to Assembly Bill No. 72  along with a fact sheet from the Bill’s sponsor, Health Access. We also provide a client-friendly explanation by DMHC.


While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting or other professional advice or services. Readers should always seek professional advice before entering into any commitments.

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