AB 72: What the new “out-of-network” law means

  • Goldberg, Phillip, CSA Attorney
| Oct 10, 2016

Editor’s Note:  CSA has received many inquiries from concerned members about the potential impact of AB 72 on their practices. We’ve asked our attorney, Phillip Goldberg, to enlighten us on the highlights of the law and how to cope with them. CSA will continue to update you promptly on any news concerning the implementation of the new law and new regulations pertaining to it.

--- Karen Sibert, MD

Assembly Bill 72 was signed into law by Governor Brown on September 23, 2016.  As of July 1, 2017, this new law will impose additional balance-billing prohibitions on “non-contracted” physicians beyond the current balance-billing prohibition for emergency services to patients covered by health care service plans. 

Gov-Brown-Signing-BillCSA members should understand the basic balance-billing prohibition imposed by the new law, and take steps to ensure compliance. The law requires health plans and insurance companies to inform non-contracted physicians of the “in-network cost sharing amount” for which patients are responsible. The law establishes an independent dispute resolution process to determine the amount health plans and insurance companies must pay non-contracted physicians.

All the implementation details of the new law will be clarified in regulations. CSA will be actively involved in developing those regulations. In the meantime, members should understand the scope and details of the balance billing prohibition.

There are four essential elements for the application of the new law:

  • A covered patient
  • A contracted facility
  • A non-contracted physician
  • Covered services

If any one of these essential elements is missing, then the new balance-billing prohibition does not apply. 

First, the patient must be covered by a health care service plan or an insurance policy.  This could include Medicare managed care plans, but the new law expressly excludes MediCal managed care. The law does not apply to self-funded “ERISA” plans. This can make things difficult, because it is not uncommon for payers such as Aetna or Anthem Blue Cross to administer self-funded plans as well, typically for the employees of larger employers. The fact that “Aetna” or “Anthem Blue Cross” is on the patient’s card does not definitively establish this first element.


The facility in which the services are provided must be contracted with the patient’s health plan or insurer. Facilities are generally limited to hospitals, surgery centers, primary care clinics, accredited outpatient settings where general anesthesia or deep sedation is administered, laboratories, and imaging centers. 

The term “non-contracted individual health professional” includes anesthesiologists who are not contracted with the patient’s “health care service product.”  The use of the word “product” suggests that IF you are not part of a payer’s narrow network, and IF the patient has chosen a narrow network product, then you will be deemed “non-contracted” under the new law. 

Although the statute uses the term “individual”, if you are providing services for your anesthesiology group and if the group is contracted, then you would be considered contracted as well. You would be considered to be contracted though you have not signed any contract on an individual basis. (Of course, in the group contract context, group members are constrained by the contract’s restrictions on balance billing.)

The services rendered to the patient must be covered by the patient’s health care service product. If, for example, the patient’s health care service product does not cover general anesthesia for endoscopic procedures, then the covered service element would not apply for your services during the endoscopic procedure.

Finally, the services rendered to the patient must not be “emergency services and care.” If the procedure is an emergency, then the new balance-billing prohibition would not apply. Keep in mind, however, that the current balance-billing prohibition can still apply for emergency services rendered to a patient covered by a health care service plan regardless of the setting.

When all four essential elements are present, the patient need pay no more than the “in-network cost sharing amount”. The patient should not be billed for this amount until the plan has informed the “non-contracting individual health professional of the in-network cost sharing amount owed” by the patient. This is the essence of the new balance-billing prohibition. 

The new law contains a special provision that allows the non-contracting physician to bill and collect a greater amount from PPO patients who have an out-of-network benefit under their health plan or insurance policy. The additional payment from the patient is only recoverable when, among other things, the patient “consents in writing . . . at least 24 hours in advance of care.” Although this might make sense for non-contracted surgeons, meeting all of the conditions may be a practical impossibility for anesthesiologists. 

Calendar-July-1To prepare for the July 1, 2017, effective date of the new balance-billing prohibition, anesthesiologists should find out about the contracted health plans and insurance companies for each facility where they deliver anesthesia care. Remember, if the facility is not contracted, the new law does not apply. 

You should also get more detailed information on each patient’s health care service product coverage to help identify those covered under self-funded plans. Patients covered under self-funded plans are outside the scope of the new law, even if the plans are administered by Aetna, Anthem Blue Cross or other health plans or insurers. 

For services rendered on or after July 1, 2017, when all four essential elements are present, patients should not be billed until the responsible payer has notified you of the in-network cost sharing amount. 

The health care service plan or insurer is not the final authority on the total amount to which you are entitled for your services. Further guidance on how the in-network cost sharing amount will be determined, and how and when to pursue the independent dispute resolution process, will be forthcoming as the regulations clarifying these details are developed.

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  1. Joshua Ellenhorn M.D. | Feb 19, 2017
    There has been a legal challenge to the bill  so I'm not sure the bill would really come into affect in July. However, your description focuses on balance billing the patient  and that was the focus of the legislature's initial intent. However, the insurance companies got involved and what is worse for out of network physicians is that  billing the insurance company, it's also capped.  For many practices, this is far more deleterious then the balance patient billing portion.

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