California's exchange adopts model contract

May 20, 2013

The Board of Directors for Covered California, the state’s health benefit exchange, recently approved its model contract for health plans.

The contract was the result of several rounds of stakeholder engagement following adoption of the exchange board’s plan policy and strategy recommendations last August, said Peter Lee, executive director of Covered California. While exchange staff has approved the final draft of the contract, minor changes will be allowed moving forward on an “as needed basis,” Lee added.

“We don’t think this contract is perfect,” he said. “We think it’s very good and we will improve upon it in time.”

Multiple stakeholders took time to comment on the final adopted document at the Covered California board meeting last week, with most noting that, while they still had concerns regarding the final contract, it had come a long way since the contract outline was released in January. The process, however, moved at a frenetic pace, stakeholders receiving six versions of the nearly 150-page contract, rarely getting more than five business days to review and comment on each successive draft.

From the standpoint of the California Medical Association (CMA), one area of concern that received attention in the final draft was the presence of the 90-day grace period allowed for under the Affordable Care Act (ACA).

Under the law, subsidized patients would be given a total of 90 days of nonpayment of health insurance premiums before coverage was terminated. Once the patient entered the second month of the grace period, a health plan could begin pending any claims submitted by providers on that patient. In the event that suspension occurred, plans would be able to deny payment for all claims submitted in the last 60 days of the grace period. This provision, CMA repeatedly said, would leave physicians, and ultimately patients, on the hook for roughly two months of claims with no notice that they were exposing themselves to such financial risk.

In the final contract, a provision was included that would require a physician to receive a 15 calendar day notice prior to a subsidized patient entering the 60-day pend and deny period. However, only physicians who had submitted claims on the patient within the previous two months or who were the patient’s assigned primary care provider would get the notice.

CMA was also successful in getting the exchange to delete terms harmful to patients and physicians. For instance, prior drafts of the model contract defined “medical necessity” as primarily a health plan determination and stated that a service could only be “medically appropriate” if it was more cost-effective than alternatives.

With the contract now adopted, the exchange is expected to release the names of plans selected to offer contracts on Covered California’s new online marketplace during its May 23 meeting. Those plans will also be submitting proposed rates for review by state regulators on that date.

Under California’s “active purchaser” model, only plans selected by Covered California’s Board of Directors as “qualified health plans” can offer products on the new marketplace.

Pre-enrollment for the state’s exchange is still expected to begin on Oct. 1, 2013, while the marketplace and coverage will go live on Jan. 1, 2014.


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