Bill puts bite on deadbeat insurers

California doctors won a victory against health insurers in Sacramento on Monday when the Assembly approved a bill to toughen the state’s power to fine insurers for failing to pay medical bills.

But the measure now goes to Gov. Arnold Schwarzenegger, who is coming under pressure from HMOs and his own regulators to issue a veto.

At issue is whether the state needs extra legal powers to penalize health maintenance organizations and their kin, preferred provider organizations, that are found to regularly underpay their bills to doctors, radiologists, anesthesiologists and other specialists.

Physician underpayment is widespread nationally, the American Medical Assn. contended in a study released last month. Doctors’ costs for collecting money from insurers adds an estimated $200 million to the nation’s annual healthcare tab.

Assemblyman Jared Huffman (D-San Rafael) said his bill was needed to put “teeth into our state’s healthcare watchdog,” the Department of Managed Health Care. “We have a wimpy watchdog,” he said.

“Time and time again, health insurance companies have unlawfully denied treatment, rescinded policies and underpaid providers to make more money,” Huffman said. “Insurers will continue these practices until there is no longer an economic incentive to do so.”

Huffman’s proposal, AB 1155, passed the state Assembly on Monday on a 45-24 vote and cleared the Senate late last year on a 24-11 tally.

California Medical Assn. President Dr. Richard Frankenstein said the bill, if signed into law, could force HMOs to pay more than symbolic fines if they are found to have failed to reimburse doctors for tens of thousands of claims.

Under the current penalty scheme, regulators often appear fearful of taking on large insurers such as Blue Cross, he said.

HMOs call Huffman’s bill unnecessary and potentially expensive. Laws and regulations already on the books provide the California Department of Managed Health Care with plenty of tools for making sure that medical bills get paid, they contend. What’s more, they say, doctors and hospitals are free to sue for their money.

Some bills submitted by doctors who are not part of a particular HMO’s network, “can be extremely high,” said Michael Paiva, a director of governmental relations for Anthem Blue Cross.

The company, formerly known as Blue Cross of California, is a unit of Indianapolis-based Anthem.

Prompt and full payment of the costs of medical treatment already is required under state law, said Sherrie Lowenstein, an attorney for the Department of Managed Health Care, in a letter of opposition to the Huffman bill.

The measure would remove some of the department’s discretion to concentrate investigative and management resources on the most serious alleged HMO violations and could threaten to 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,” she said.

Under its current authority, the Department of Managed Health Care “has been extremely effective in representing the interests of healthcare providers, recovering more than $5 million to date in additional payments,” spokeswoman Lynne Randolph said.

Huffman concedes that his bill, which has been under discussion at the Legislature for almost two years, faces uncertainty in the governor’s office because of opposition from Schwarzenegger’s own regulators and the powerful HMO industry.

Efforts to “start a dialogue with the administration” have not been successful, he said. “My calls are not returned.”

The governor, for now, has not made up his mind on the bill, Schwarzenegger spokeswoman Rachel Cameron said.

--

marc.lifsher@latimes.com