California Governor Signs New Telehealth Insurance Law

Foley & Lardner LLP

Foley & Lardner LLPOn October 11, 2019, California Governor Gavin Newsom signed a new law requiring commercial health insurance coverage and payment parity for telehealth services. The law will benefit patients by increasing access and availability to healthcare services, and catalyze the growth of telehealth technologies throughout California. California is representative of a growing national trend of states across the country either enacting new telehealth insurance coverage and payment parity laws, or revisiting their older laws to revise and improve them to better account for the current state of telehealth.

Changes to California’s Telehealth Insurance Coverage Law

California’s prior telehealth coverage law did not include a payment parity provision requiring health plans to pay providers at the same or equivalent rate providers are paid for identical in-person services. The new bill makes some technical modifications to current law, but most notably creates two new statutes – Health & Safety Code section 1374.14 and Insurance Code section 10123.855.  The key changes in the new law are:

  • Under health plan participation agreements, the plan “shall reimburse the treating or consulting health care provider for the diagnosis, consultation, or treatment of an enrollee or subscriber appropriately delivered through telehealth services on the same basis and to the same extent that the health care service plan is responsible for reimbursement for the same service through in-person diagnosis, consultation, or treatment.”
  • Health plans and providers can continue to negotiate reimbursement rates under their participation agreements. However, services that the same, as determined by the provider’s description of the service on the claim, must be reimbursed at the same rate whether provided in-person or through telehealth.
  • The law does not require telehealth reimbursement to be unbundled from other capitated or bundled, risk-based payments.
  • Traditional providers using telehealth, including facilities and health systems, pushed to ensure the law prohibited narrow networking for telehealth services, i.e. no exclusive contracts for telehealth companies (“coverage shall not be limited only to services delivered by select third-party corporate telehealth providers”).While exclusive arrangements are not allowed, the law does not require a health plan to cover telehealth services if provided by an out-of-network provider, unless coverage is required under other provisions of law.
  • A health plan may charge a deductible, copayment or coinsurance for a health care service delivered via telemedicine if it does not exceed the deductible, copayment or coinsurance applicable to a service delivered via in-person consultation or contact.
  • The law applies to contracts starting or renewed on or after January 1, 2021.

These changes were intended to fix statutory shortcomings that confused practitioners and ultimately prevented patients from enjoying meaningful insurance coverage of services delivered via telehealth. A number of other state legislatures are considering similar amendments to their current telehealth coverage laws in order to close these perceived loopholes and give patients and healthcare providers clarity on what medical services are (and are not) covered when delivered via telehealth.

With the enactment of the new California law, approximately 36 states plus D.C. have laws requiring commercial health insurance plans to cover telehealth services, and approximately eleven of those states have payment parity language

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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