This week, the California Department of Insurance (CDI) announced the formal adoption of network adequacy regulations that Commissioner Dave Jones first issued and implemented, on an emergency basis, in January 2015.

Background and overview

Commissioner Jones first announced network adequacy regulations at his inauguration ceremony, January 5, 2015. The purported goal of the regulations is to ensure that consumers have access to sufficient numbers and types of health care providers and to reduce the "surprise bill" effect (from out-of-network providers) by setting minimum standards for health insurers' provider networks. The regulations also address the accuracy of provider directories, again aimed at reducing the number of so-called surprise bills.

Applicability

In California, health coverage is subject to regulation by either the CDI or the California Department of Managed Health Care (DMHC). The new network adequacy regulations apply to insurers regulated by the CDI with respect to all health care services covered in "health insurance" policies (subject to limited exceptions such as certain dental and vision plans, for example). Plans regulated by the DMHC, typically health care plans such as HMOs and some PPOs, are subject to different network adequacy laws and regulations.

Key changes for insurers

  • Include sufficient numbers and types of providers in the network to deliver covered services (with option for CDI to require additional specialty care by geography on a case-by-case basis); 
  • Include adequate full-time equivalents of primary care providers in the network accepting new patients to accommodate anticipated enrollment growth; 
  • Adequately provide for the treatment of mental health and substance use disorders; 
  • Include an adequate number of primary care providers and specialists with admitting and practice privileges at network hospitals; 
  • File provider selection and tiering criteria with the CDI; 
  • Monitor and adhere to new appointment wait time standards (differ by type of service and urgency); 
  • Regularly report information about the networks and changes to the networks to the Department of Insurance for review; 
  • Maintain accurate provider network directories available to the public and update them weekly; and 
  • Arrange out-of-network care at in-network prices when there are insufficient in-network care providers.

Citations

The regulations amend and add to Title 10, Chapter 5, Subchapter 2, Article 6 of the California Code of Regulations by amending sections 2240, 2240.1, 2240.2, 2240.3, 2240.4, 2240.5 and adding new sections 2240.15, 2240.16. 2240.6, and 2240.7.

Looking forward

Going forward, we anticipate that other jurisdictions will pass similar surprise bill laws and regulations. New York passed one of the most stringent laws in the nation last year. Its surprise bill and emergency services law went into effect March 31, 2015, with the goal of protecting consumers from out-of-network emergency bills and from surprise bills when services are performed by an out-of-network physician at an in-network facility and when an in-network provider refers an insured to an out-of-network provider. However, while regulators are increasingly regulating network adequacy, some carriers are moving towards offering adequate but nonetheless narrower networks, with fewer provider choices, as a means of offering lower premiums. We will continue to watch this space closely as network and cost models evolve.