State proposes ban on HMO billing practice

June 1, 2008 | By LORA HINES | The Press-Enterprise

State officials, hospitals and doctors are locked in a dispute over whether some patients can be charged if they are taken to an emergency room outside of their health care network. For some, that bill can be a couple of hundred dollars, but for others it can reach into the thousands.

The ban proposed by the California Department of Managed Health Care would affect members of HMOs, such as Kaiser Permanente, not members of other kinds of insurance plans. The department only regulates HMOs. Administrators and hospital-based doctors say the state should be targeting insurance companies.

Statewide, thousands of people get pressed for payment by doctors and hospitals, typically after they are taken to an emergency room outside their insurance plan. Doctors and hospitals that think health care plans and insurance companies have shortchanged them on payment for treatment then try to make up the difference by going after patients who already paid their share. It's called balance billing.

Karla and William Gledhill, of Chino Hills, understand the practice well.

The couple got hit with a $53,000 bill from Arrowhead Regional Medical Center in Colton after their insurance company, Anthem Blue Cross, paid about $25,000. Their 16-year-old son, Ryan, was flown to the hospital after a serious dirt bike crash in Lucerne Valley.

Karla Gledhill said she racked up late-payment fees and bill-collection threats as she repeatedly wrote letters and made telephone calls to the hospital and insurance company. Last week, the insurance company agreed to pay the bill.

Gledhill said she thought she would have to hire an attorney, which sometimes is a patient's only recourse, hospital officials say.

The hospital and insurance company said privacy laws prevented them from commenting on the family's claim.

"You don't know anything about balance billing until you're stuck in the middle, trying to hammer out what's right," Gledhill said.

Balance Billing

More than 1.75 million insured Californians who visited emergency rooms in the past two years were asked to pay more, even after their co-payments and deductibles, according to the California Association of Health Plans. The professional organization represents 40 health care plans that cover an estimated 21 million Californians.

The average balance bill was $300, which added up to about $528 million that patients spent in addition to their co-payments and deductibles, the association said. More than half of the patients who were balance billed paid.

"The practice needs to be banned, period," said association spokeswoman Nicole Kasabian Evans. "The patient shouldn't be placed in the middle. That's what the insurance companies and health care providers are doing."

In July 2006, Gov. Schwarzenegger ordered an end to balance billing after he realized many residents were being charged for medical expenses they didn't owe, said Cindy Ehnes, director of the state Managed Health Care Department. But the department couldn't come up with a suitable solution to HMOs and providers, she said. So, the department decided to merely ban the practice.

"We have tried many other approaches to solve this problem," Ehnes said. "We have decided to go back to our first job, which is to protect consumers."

Ehnes said she had hoped lawmakers would have passed legislation regulating balance billing. At least seven states have balance billing laws, including Colorado and Florida. Meanwhile, state Sens. Don Perata, D-Oakland, and Leland Yee, D-San Francisco, have introduced balance billing legislation.

HMO Vs. Hospital

The ban comes as Kaiser, the state's largest HMO, got a temporary restraining order earlier this month from Los Angeles County Superior Court against Prime Healthcare Services Inc., of Victorville, to stop it from collecting money from thousands of Kaiser patients or reporting them to credit agencies. A hearing is set for Thursday.

"This has been an ongoing dispute for a year or year and a half," said Dr. Ben Chu, president of Kaiser's Southern California region. "... They threatened to trash their credit ratings if they didn't pay."

Earlier this year, Prime Healthcare sued Kaiser, claiming that Kaiser owes $25 million for its patients who were treated at eight of Prime Healthcare's hospitals, including Desert Valley Hospital in Victorville, Chino Valley Medical Center and Montclair Medical Center.

Prime Healthcare attorney Michael Sarrao couldn't be reached for comment.

Prime Healthcare has accused Kaiser of delaying payments by repeatedly demanding patient medical records, claiming that care provided was unnecessary and requiring transfer of members to Kaiser hospitals.

Chu disputed the claims.

"It's not about delaying payment," he said. "It's about substantiating claims."

Calculating Health Cost

Dr. Richard Frankenstein, president of the California Medical Association, said the organization, which represents 35,000 doctors, will fight the state Managed Health Care Department's ban.

"They ought to be regulating the insurance companies, not the doctors, which it does not have the authority to do," he said. "We see this as a $500 million transfer from patients to insurance companies, and the insurance companies aren't paying the bill."

On average, Frankenstein said, insurance companies pay all but about $30 of a doctor's bill.

"If that doctor sees 50 to 60 patients, that $30 does add up," he said.

Some specialists may not work on-call emergencies if insurance companies refuse to pay and they can't bill patients, Frankenstein said.

Frank Arambula, Arrowhead Regional Medical Center's chief financial officer, said the hospital compares its costs to those of other facilities, which are reported to the California Office of Statewide Health Planning and Development. The data are posted on the agency's Web site.

"We set our rates based on market-driven prices," he said. "We think it's a fair assignment and the payer is going to pay those charges."

Conversely, insurance companies rarely show patients and health care providers how they determine what to pay for service, Arambula said.

In a written statement, Anthem Blue Cross spokeswoman Peggy Hinz said the company reimburses out-of-network hospitals for what it considers reasonable and customary costs. It is changing its reimbursement policy to protect members who require emergency care, she wrote.

"It was not the intent of our reimbursement policy to increase out of pocket expenses for our members, who do not have a choice in selecting the place where health care services are performed, such as in the case of an emergency," Hinz wrote.

Anthem Blue Cross bases its reimbursement rates on factors including submitted charges for payment, comparisons of charges for services offered at other hospitals, and service costs that are reported to the state, Hinz wrote.

Fighting the Bill

The Gledhills didn't care whether Arrowhead Regional Medical Center was in their Anthem Blue Cross preferred provider organization network. Their son needed surgery on his pancreas.

"Worst case, we thought we would owe $6,000," said Karla Gledhill, whose husband owns a small Anaheim business.

Anthem Blue Cross first determined the Gledhills owed the hospital $53,273.17 after it paid $25,121.28, according to a claim recap. It paid another $12,606.15 after Karla Gledhill complained to the California Department of Insurance.

The Gledhills still faced a $40,667.12 bill and no explanation of how Anthem Blue Cross determined what it would pay.

"How could I fight a fair fight if I didn't have all the information?" Karla Gledhill asked. "I didn't think Arrowhead's charges were exorbitant for the care my son received."

On May 21, Anthem agreed to pay the rest of Ryan Gledhill's hospital bill after the company "made a one time administrative decision to remit payment," according to the letter the Gledhills received.

The letter did not include further explanation, and Hinz said privacy laws prevented her from offering one.

Reach Lora Hines at 951-368-9444 or lhines@PE.com

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Online Help

California Office of Statewide Health Planning and Development: www.oshpd.ca.gov

California Department for Managed Health Care: www.hmohelp.ca.gov

California Department of Insurance: www.insurance.ca.gov

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1,200 people to have canceled healthcare coverage restored

The action comes after Kaiser Permanente and Health Net reach an agreement with a state agency.

By Lisa Girion
Los Angeles Times Staff Writer

May 16, 2008

Two of the state's largest health plans agreed Thursday to reinstate coverage to nearly 1,200 patients whose policies were dropped after they incurred high medical expenses.

Under the deal, patients whose insurance was rescinded by Kaiser Permanente or Health Net since 2004 will be allowed to purchase new insurance regardless of preexisting medical conditions.

The settlement, brokered by the California Department of Managed Health Care, comes three months after a Gardena hair salon owner won an unprecedented $9-million judgment against Health Net for canceling her coverage while she was undergoing chemotherapy, halting her treatment.

Gov. Arnold Schwarzenegger called the settlement groundbreaking.

"This important settlement should pave the way to similar agreements with other health plans to reinstate health coverage," he said. "Patients should not live in fear of losing their healthcare coverage when they need it most."

The state is trying to reach similar deals with Anthem Blue Cross, Blue Shield and PacifiCare involving about 4,000 rescissions.

Insurance rescissions affect people with individual coverage, which is sold and priced based on an applicant's medical history. Insurers say some enrollees lie on applications in order to gain coverage and that rescinding policies from those who hide preexisting conditions prevents premiums from going up for everyone.

But regulators and law enforcement officials allege that insurers do little to verify applications before issuing coverage and then wait to see what happens. When patients incur substantial medical claims, insurers go back and scour applications for omissions, even innocent ones, in order to rescind their coverage, critics say.

About 2.6 million of the 28 million Californians with health coverage have individual plans.

Kaiser spokesman Mike Lassiter said the insurer proposed the deal to reinstate up to 1,092 former enrollees -- all those whose coverage the health maintenance organization dropped between the time it began the controversial practice in April 2004 and when it halted rescissions in October 2006.

Kaiser agreed to pay a $300,000 fine to the state without admitting wrongdoing. It also agreed to make a number of procedural changes, including developing simpler coverage applications to avoid applicant mistakes that often form the basis for rescissions.

"We want to clear up past issues so we can move forward toward a longer-term solution addressing the larger issues of affordable healthcare coverage," said Jerry Fleming, senior vice president of Kaiser Permanente.

In a similar deal, Health Net agreed to reinstate 85 former enrollees.

In a statement, the insurer said, "Health Net today announced that it will offer coverage to all 85 HMO customers who have been rescinded since 2004 and will work as expeditiously as possible with these individuals to resolve their eligible out-of-pocket costs."

Jane Macauley, a Sacramento mother of five who was rescinded by Kaiser two years ago on the eve of a scheduled hernia operation, said she was surprised by the deal.

"I didn't get the surgery," she said Thursday. "I wrote two letters expressing my belief that it was very unfair that I was canceled. But they basically just said, 'You are out of luck.' "

These "enrollees are clearly getting a win today," said Cindy Ehnes, director of the Department of Managed Health Care. The settlement creates a process through which former enrollees can seek repayment of medical expenses of up to $15,000. Larger and disputed medical bills and other types of claims would be submitted to an arbiter selected by the department and the health plans.

Former enrollees may choose to buy insurance but also opt out of the settlement process, preferring instead to take their claims to court.

"We believe our voluntary 'Kaiser Permanente Fresh Start Program' for previously rescinded members is the quickest way to give people what they really need -- health insurance," said Fleming of Kaiser. "The issue of whether people either intentionally or unintentionally gave inaccurate information on their coverage application is set aside for the purposes of getting a fresh start on their coverage."

The deal comes a month after Ehnes threatened to order the state's top five health plans to reinstate more than two dozen enrollees and to reopen every rescission carried out over the past four years in California for review.

Reinstatement "means someone will not have to delay a necessary surgery due to the lack of insurance," she said. "It means that someone will no longer have to contemplate bankruptcy because of an outstanding medical bill."

In addition to the state's regulatory scrutiny, Los Angeles City Atty. Rocky Delgadillo has sued Health Net and Blue Cross over allegedly illegal rescission practices.

Health Net also is the target of a criminal investigation by the city attorney related to rescissions. Chief Assistant City Atty. Jeffrey Isaacs said Health Net's latest deal with the department would not affect its suit or criminal investigation.

The city attorney's office issued subpoenas to the department Wednesday seeking information related to rescissions.

DMHC spokeswoman Lynne Randolph said the department would "cooperate to the extent that we are able."

Some consumer advocates were disappointed with the deal, saying portions of it appeared designed to help insurers contain their legal liability.

William Shernoff, a Claremont lawyer who represents hundreds of people whose policies have been rescinded, said he would tell clients to "accept the reinstatements because that's wonderful to get the medical care -- that is important."

But, he added, "as far as damages for past harm, there's no doubt in my mind that the best place for them to get their full damages will be in court rather than in an arbitration process."

Jerry Flanagan, a spokesman for Consumer Watchdog in Santa Monica, said the deal was no substitute for regulations promised 18 months ago that the department put on hold pending legislation.

"Punting this issue to the Legislature where insurers have immense lobbying power risks regulation that is more loophole than protection," he said.

Anthony Wright, executive director of Health Access California, a statewide healthcare consumer advocacy coalition, said the department needed to enforce the settlement and adopt a " 'zero-tolerance' policy for further bad behavior."

"It's sad that after all the attention on this reprehensible practice, we don't have the entire industry in agreement yet," he said.

lisa.girion@latimes.com

Balanced Billing Destroys Capitalist Economy - Opinion

By: Alex Wawro

Posted: 4/9/08

If you have health insurance you ought to know what "balance billing" is. Balance billing and the ongoing attempts to outlaw it directly determine how much you pay for medical services.

Typically, if you have medical insurance (say, Kaiser Permanente), your provider will pay any medical fees above your standard co-payment. If Kaiser, however, only pays a standard allotment of $500 for a service a physician would normally charge $750 for (say, an emergency cardiac bypass), the doctor or hospital might send the patient a bill for the missing $250.

What this means for the average consumer is that not only do they have to pay their co-payment, they may receive a second bill for the remaining amount the insurance chose not to pay. Governor Arnold Schwarzenegger supports a bill that would outlaw balance billing.

The less money you have to pay the better, right?

Wrong. The legislation is blatantly unjust; worse, it undermines the foundation of free enterprise that our economy is built upon.

Think about it - when you sign up with an HMO like Kaiser, you agree to pay a standard fee monthly in exchange for a guarantee of financial aid if you need serious medical care.

In return, Kaiser receives monthly income and negotiates flat rates for services with a pool of physicians; those physicians give up the right to charge their own price in exchange for guaranteed business from Kaiser customers.

But if you, as a Kaiser customer, are brought to the ER for emergency surgery, there are no guarantees that the surgeon working is a Kaiser-approved doctor. If that surgeon saves your life, should he or she be forced to accept whatever percentage of the standard rate Kaiser chooses to pay him or her for the service? He does not receive the benefits of being a member of the Kaiser family; why should he be forced to abide by their restrictions?

Essentially, passing this bill destroys the basis of our capitalist economy in favor of a more socialist system in which the government regulates our freedom to spend and charge what we think is fair. By eliminating the practice of balance billing, Schwarzenegger forces all doctors to accept whatever healthcare providers think is fair payment.

Even worse, it makes the entire system of licensed physicians meaningless. A doctor who agrees to accept Kaiser's rates does so in exchange for receiving more business from the company. In essence, what he loses in individual sales he more than makes up for in volume.

If all physicians are limited to collecting only what Kaiser chooses to pay, why bother contracting with doctors in the first place?

Kaiser can pay a doctor whatever they believe they can get away with, and the physician has no choice but to take what he is given.

By removing a practitioner's ability to charge what he thinks is adequate for his services the government is sullying the principles on which this country was founded.

Though this legislation seems to benefit the consumer, in the end only the corporation wins.

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