Laws on Balance Billing in California

In the absence of a federal law regulating medical billing procedures for non-Medicare providers, many states have passed laws prohibiting the use of balance billing by medical providers. The California Supreme Court has issued a unanimous decision upholding a state law barring medical providers from using balance billing practices in an emergency room setting.

Balance billing refers to a practice in which a health care provider charges a patient more than the amount covered by the patient’s health insurance. When the insurer pays less than the billed amount, the medical provider bills the patient for the difference. Worried about hurting their credit ratings, consumers often pay these bills without being aware of their insurance rights to fair billing. Often, balance billing occurs in HMO situations, when doctors believe insurers have not reimbursed them sufficiently or are taking too long to pay their bills.

Balance billing is barred by federal law for Medicare patients, and doctors cannot bill Medicare patients separately. Meanwhile, most states have laws limiting some or all doctors and other health care providers from using balance billing procedures. California's prohibition is part of the Knox-Keene Health Care Service Plan Act of 1975. A 2009 ruling by the California Supreme Court upheld the law's prohibition on balance billing for emergency room physicians.

In upholding the ban on balance billing for emergency room visits, the California Supreme Court noted that ER patients are the ones most vulnerable to the practice. The court reasoned that emergency room patients generally have no control over which doctors treat them and which hospitals they are taken to by paramedics. Often, insurance companies act as “gatekeepers” to protect their customers against balance billing practices by incorporating limitation language in their contracts with participating doctors or “in-network” providers. Typical limiting language includes provisions that state providers will accept their payments as full payment for their billed charges and cannot balance bill their patients.

California law does not prohibit doctors from charging their patients for out-of-pocket charges or copayments, and it does not cover elective procedures that are not covered by insurance providers. Additionally, balance billing laws do not apply to out-of-network medical visits as defined by an HMO's rules.