Today's Law As Amended


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SB-538 Hospital contracts.(2017-2018)



As Amends the Law Today


SECTION 1.
 This act shall be known, and may be cited, as the Health Care Market Fairness Act of 2018.
SEC. 2.
 The Legislature finds and declares all of the following:
(a) There has been a surge in hospital consolidations in California, fueling the formation of ever larger multihospital systems. Almost one-half of all hospitals in California are in multihospital systems, with the two largest systems controlling almost 60 hospitals. According to recent studies, hospital prices in California grew between the years 2004 and 2013 across all hospitals, but prices at hospitals that are part of multihospital systems grew substantially more. The evidence indicates that higher prices are consistent with the use of contract provisions of the type addressed in this act.
(b) Concentration of hospitals also has had an impact on premium rates in California’s 19 health insurance rating areas. Researchers found that reducing hospital concentration to levels that would exist in moderately competitive markets could reduce overall premiums by more than 2 percent and in three regions by more than 10 percent.
(c) Because they tend to lessen competition, increase prices, and reduce the affordability and availability of insurance coverage, and for the protection of other important state interests, the hospital contract provisions described in this act are deemed to be unfair, and against public policy, both of which are grounds for the revocation of any contract under the laws of this state.
(d) This act regulates the business of insurance, as that term is defined for purposes of the federal McCarran-Ferguson Act (15 U.S.C. Sec. 1012). Nothing in this act shall be construed to impose the regulatory requirements of the Insurance Code on health care service plans regulated by the Health and Safety Code, or on network vendors regulated by the Business and Professions Code.

SEC. 3.

 Section 513 is added to the Business and Professions Code, to read:

513.
 (a) A contract between a hospital or any affiliate of a hospital and a contracting agent shall not, directly or indirectly, do any of the following:
(1) Set payment rates or other terms for nonparticipating affiliates of the hospital.
(2) Require the contracting agent to contract with any one or more of the hospital’s affiliates. This section does not prohibit a contract from requiring that the contracting agent contract with the medical group with which the hospital’s medical staff is affiliated, or a contracting agent from voluntarily agreeing to contract with other affiliates of the hospital.
(3) Require payors to certify, attest, or otherwise confirm in writing that the payor is bound by the terms of the contract between the hospital and the contracting agent. A contracting agent shall be responsible for including and disclosing relevant terms of the provider contract in its contract with a payor.
(4) Require the contracting agent to impose the same cost-sharing obligations on beneficiaries when the hospital is in-network but at a different cost-sharing tier than any other in-network hospital. For purposes of this section, “cost sharing” includes copayment, coinsurance, deductible, or any other cost-sharing provision for covered benefits other than share of premium.
(5) Require the contracting agent to keep the contract’s payment rates confidential from any existing or potential payor that is or may become financially responsible for the payments. This paragraph does not prohibit a requirement that any communication of the contract’s payment rates to an existing or potential payor be subject to a reasonable nondisclosure agreement.
(b) Any contract provision that violates subdivision (a) is void and unenforceable.
(c) For the purposes of this section, the following terms have the following meanings:
(1) “Affiliate” means, with respect to any person, any other person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, that person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through ownership of voting securities, membership rights, by contract or otherwise, and the terms “controlled” and “controlling” have meanings correlative thereto.
(2) “Contracting agent” has the same meaning as set forth in Section 511.1.
(3) “Hospital” means any general acute care hospital, acute psychiatric hospital, or special hospital, as those terms are defined in Section 1250 of the Health and Safety Code. This section does not apply to a small and rural hospital, as defined in Section 124840 of the Health and Safety Code, unless that hospital is affiliated with a nongovernmental hospital.
(4) “Nonparticipating” means that with respect to the services rendered, the hospital or its affiliate is out of network according to the applicable health care service plan contract or health care welfare benefit plan.
(5) “Payor” means a person who is financially responsible, in whole or in part, for paying or reimbursing the cost of health care services received by beneficiaries of a health care welfare benefit plan sponsored or arranged by that person. This definition includes, but is not limited to, the health care welfare benefit plan itself.

SEC. 4.

 Section 1268.9 is added to the Health and Safety Code, to read:

1268.9.
 (a) A contract between a hospital or any affiliate of a hospital and a contracting agent shall not, directly or indirectly, do any of the following:
(1) Set payment rates or other terms for nonparticipating affiliates of the hospital.
(2) Require the contracting agent to contract with any one or more of the hospital’s affiliates. This section does not prohibit a contract from requiring that the contracting agent contract with the medical group with which the hospital’s medical staff is affiliated, or a contracting agent from voluntarily agreeing to contract with other affiliates of the hospital.
(3) Require payors to certify, attest, or otherwise confirm in writing that the payor is bound by the terms of the contract between the hospital and the contracting agent. A contracting agent shall be responsible for including and disclosing relevant terms of the provider contract in its contract with a payor.
(4) Require the contracting agent to impose the same cost-sharing obligations on beneficiaries when the hospital is in-network but at a different cost-sharing tier than any other in-network hospital. For purposes of this section, “cost sharing” includes copayment, coinsurance, deductible, or any other cost-sharing provision for covered benefits other than share of premium.
(5) Require the contracting agent to keep the contract’s payment rates confidential from any existing or potential payor that is or may become financially responsible for the payments. This paragraph does not prohibit a requirement that any communication of the contract’s payment rates to an existing or potential payor be subject to a reasonable nondisclosure agreement.
(b) Any contract provision that violates subdivision (a) is void and unenforceable.
(c) For the purposes of this section, the following terms have the following meanings:
(1) “Affiliate” means, with respect to any person, any other person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, that person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through ownership of voting securities, membership rights, by contract or otherwise, and the terms “controlled” and “controlling” have meanings correlative thereto.
(2) “Contracting agent” has the same meaning as set forth in Section 511.1 of the Business and Professions Code.
(3) “Hospital” means any general acute care hospital, acute psychiatric hospital, or special hospital, as those terms are defined in Section 1250. This section does not apply to a small and rural hospital, as defined in Section 124840, unless that hospital is affiliated with a nongovernmental hospital.
(4) “Nonparticipating” means that, with respect to the services rendered, the hospital or its affiliate is out of network according to the applicable health care service plan contract or health care welfare benefit plan.
(5) “Payor” means a person who is financially responsible, in whole or in part, for paying or reimbursing the cost of health care services received by beneficiaries of a health care welfare benefit plan sponsored or arranged by that person. This definition includes, but is not limited to, the health care welfare benefit plan itself.
(d) The inspection requirements in Section 1279 do not apply to contracts made pursuant to this section.

SEC. 5.

 Section 1367.32 is added to the Health and Safety Code, to read:

1367.32.
 (a) A contract between a hospital or any affiliate of a hospital and a health care service plan shall not, directly or indirectly, do any of the following:
(1) Set payment rates or other terms for nonparticipating affiliates of the hospital.
(2) Require the health care service plan to contract with any one or more of the hospital’s affiliates. This section does not prohibit a contract from requiring that the health care service plan contract with the medical group with which the hospital’s medical staff is affiliated, or a health care service plan from voluntarily agreeing to contract with other affiliates of the hospital.
(3) Require payors to certify, attest, or otherwise confirm in writing that the payor is bound by the terms of the contract between the hospital and the health care service plan. A health care service plan shall be responsible for including and disclosing relevant terms of the provider contract in its contract with a payor.
(4) Require the health care service plan to impose the same cost-sharing obligations on beneficiaries when the hospital is in-network but at a different cost-sharing tier than any other in-network hospital. For purposes of this section, “cost sharing” includes copayment, coinsurance, deductible, or any other cost-sharing provision for covered benefits other than share of premium.
(5) Require the health care service plan to keep the contract’s payment rates confidential from any existing or potential payor that is or may become financially responsible for the payments. This paragraph does not prohibit a requirement that any communication of the contract’s payment rates to an existing or potential payor be subject to a reasonable nondisclosure agreement.
(b) Any contract provision that violates subdivision (a) is void and unenforceable.
(c) For the purposes of this section, the following terms have the following meanings:
(1) “Affiliate” means, with respect to any person, any other person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, that person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through ownership of voting securities, membership rights, by contract or otherwise, and the terms “controlled” and “controlling” have meanings correlative thereto.
(2) “Hospital” means any general acute care hospital, acute psychiatric hospital, or special hospital, as those terms are defined in Section 1250. This section does not apply to a small and rural hospital, as defined in Section 124840, unless that hospital is affiliated with a nongovernmental hospital.
(3) “Nonparticipating” means that with respect to the services rendered, the hospital or affiliate is out of network according to the applicable health care service plan contract or health care welfare benefit plan.
(4) “Payor” means a person that is financially responsible, in whole or in part, for paying or reimbursing the cost of health care services received by beneficiaries of a health care welfare benefit plan sponsored or arranged by that person. This definition includes, but is not limited to, the health care welfare benefit plan itself.

SEC. 6.

 Section 10133.57 is added to the Insurance Code, immediately following Section 10133.56, to read:

10133.57.
 (a) A contract between a hospital or any affiliate of a hospital and a health insurer shall not, directly or indirectly, do any of the following:
(1) Set payment rates or other terms for nonparticipating affiliates of the hospital.
(2) Require the health insurer to contract with any one or more of the hospital’s affiliates. This section does not prohibit a contract from requiring that the health insurer contract with the medical group with which the hospital’s medical staff is affiliated, or a health insurer from voluntarily agreeing to contract with other affiliates of the hospital.
(3) Require payors to certify, attest, or otherwise confirm in writing that the payor is bound by the terms of the contract between the hospital and the health insurer. A health insurer shall be responsible for including and disclosing relevant terms of the provider contract in its contract with a payor.
(4) Require the health insurer to impose the same cost-sharing obligations on beneficiaries when the hospital is in-network but at a different cost-sharing tier than any other in-network hospital. For purposes of this section, “cost sharing” includes copayment, coinsurance, deductible, or any other cost-sharing provision for covered benefits other than share of premium.
(5) Require the health insurer to keep the contract’s payment rates confidential from any existing or potential payor that is or may become financially responsible for the payments. This paragraph does not prohibit a requirement that any communication of the contract’s payment rates to an existing or potential payor be subject to a reasonable nondisclosure agreement.
(b) Any contract provision that violates subdivision (a) is void and unenforceable.
(c) For the purposes of this section, the following terms have the following meanings:
(1) “Affiliate” means, with respect to any person, any other person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, that person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through ownership of voting securities, membership rights, by contract or otherwise, and the terms “controlled” and “controlling” have meanings correlative thereto.
(2) “Hospital” means any general acute care hospital, acute psychiatric hospital, or special hospital, as those terms are defined in Section 1250 of the Health and Safety Code. This section does not apply to a small and rural hospital, as defined in Section 124840 of the Health and Safety Code, unless that hospital is affiliated with a nongovernmental hospital.
(3) “Nonparticipating” means that with respect to the services rendered, the hospital or affiliate is out of network according to the applicable health insurance policy or health care welfare benefit.
(4) “Payor” means a person that is financially responsible, in whole or in part, for paying or reimbursing the cost of health care services received by beneficiaries of a health care welfare benefit plan sponsored or arranged by that person. This definition includes, but is not limited to, the health care welfare benefit plan itself.
SEC. 7.
 The provisions of this act are severable. If any provision of this act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.
SEC. 8.
 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.