California Model Benefits Insurers, at Physicians’ and Patients’ Expense, Physicians Tell Congress
By Steve Levine


“As California goes, so goes the nation,” according to an American proverb, and California physicians say they desperately hope that old saying doesn’t predict how U.S. insurance companies soon may be paying the rest of the nation’s doctors.

Texas Medical Association physician leaders, along with their colleagues from California and the rest of the country, are on Capitol Hill this week, lobbying Congress to toss out a California-inspired provision from a rapidly moving health insurance bill.

“If the insurance companies get their way and can pay out-of-network physicians based on a ‘median in-network rate,’ I guarantee your in-network rate will drop and narrow networks will get even skimpier,” TMA President David C. Fleeger warned Texas physicians. Dr. Fleeger is part of the Texas delegation to Washington, D.C.

The “median in-network rate” for paying out-of-network physicians is a phrase that is included in four versions of a bill currently circulating at the Capitol. The purpose of the bill is to protect patients from surprise medical bills. But the California Medical Association (CMA) says that phrase in a 2016 state law has “destabilized health care” in the Golden State.

“Median contract payment rates are inadequate and incentivized California insurers to cancel contracts or reduce rates to the median, jeopardizing access to in-network and emergency care,” CMA says in a memo to Congress released this week.

The California law, AB 72, established an interim payment rate at the greater of 125% of Medicare or the median in-network rate for out-of-network care provided by non-emergency-department, hospital-based physicians. CMA says AB 72 has protected patients from surprise bills from those physicians. But the law, and the “median in-network rate” provision, has “given powerful insurers even greater market leverage” over physicians.

After AB 72 passed, according to the CMA memo:

  • Insurers suddenly cancelled 20-year-old contracts with hundreds of physicians that care for thousands of patients;
  • Insurers imposed unprecedented 40% payment cuts that left physicians questioning whether they can maintain the same level of quality and access to care;
  • Rural and underserved community emergency departments, hospitals, and physicians that depend on reasonable private insurance rates to balance the preponderance of low government health care payments will be forced to reduce services;
  • Physicians have lost every single arbitration case filed to resolve payment disputes under the law;
  • State regulators report a 48% increase in patient access complaints;
  • RAND reported in the Journal of Managed Care that AB 72 is accelerating consolidation in health care markets; and
  • 94% of physicians responding to a CMA survey say they have experienced new contracting difficulties.

Two key House committees – the Ways & Means Committee and the Education & Labor Committee – are holding hearings this week on their versions of the surprise billing legislation. Physicians on Capitol Hill are urging committee members and staff to scrap the “median in-network rate” provision and adopt language that allows the dispute resolution process to consider all contracted payment rates, physician training, complexity of the case, prior contracted rates, and other economic factors.

Last Updated On

February 11, 2020

Originally Published On

February 11, 2020

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Steve Levine

VP, Communication

(512) 370-1380
Steve Levine

A former statehouse reporter, political press secretary, and state agency spokesman, Steve Levine has directed the Communication Division at TMA since 1997. He oversees Texas Medicine, Texas Medicine Today, TMA's media and public relations activities, and the TMA Knowledge Center, website, and social media activities.

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