AB 744: Insurers must reimburse telehealth services at same rate as in-person

California joins over 35 states that regulate private payer coverage for telehealth and 16 states, which require payment parity by private payers for telehealth services with the enactment of Assembly Bill 744, which was signed by Gov. Gavin Newsom on Oct. 13, 2019. As of Jan. 1, health care service plans and health insurers are required to reimburse healthcare providers for telehealth services on the same basis and to the same extent as if those same services had been delivered in-person. Under the bill, covered telehealth services will be subject to the same deductible or annual or lifetime dollar maximum as identical in-person services. Determining what rate of reimbursement will apply for the diagnosis, treatment or consultation delivered through telehealth based on the same face-to-face service will be based on the provider's description of the service on the claim. Negotiations between a health care service plan and a provider for the rate of reimbursement for telehealth services, where no equivalent in-person service exists, must ensure the terms are fair, reasonable, and consistent with the Knox-Keene Health Care Service Plan Act of 1975, which was designed to promote the delivery and quality of health and medical care to enrollees and subscribers of a health care service plan.

The bill does not otherwise limit the ability of health care service plans and health insurers to negotiate the rate of reimbursement for covered services or dictate the types of services that are covered to begin with. The bill does not require telehealth reimbursement to be unbundled from other capitated or bundled, risk-based payments. Additionally, payers may offer cost-sharing requirements for healthcare services delivered through telehealth. The bill does not require cost-sharing for telehealth services.

Health plans have the potential to partner with, and leverage, telehealth companies to address concerns with network adequacy and provider shortages to ensure insureds have timely access to a robust selection of in-network providers, including primary care and specialty physicians, and specialty and behavioral health services. After all, the bill does not alter the existing obligations health plans and insurers have to ensure their enrollees and insureds have access to covered services through an adequate network of contracted providers.

Telehealth applications are likely to rise as demand grows for increased access to quality of care that is convenient and cost-effective, especially for underserved and rural communities. By requiring telehealth payment parity, the bill incentivizes healthcare providers to offer telehealth services and Californians to use these services.

Farah Tabibkhoei and Lavinia Osilesi are attorneys at Reed Smith LLP. Ms. Tabibkhoei is a senior-level associate in the Global Commercial Disputes Group and her practice focuses primarily on managed care and product liability. Ms. Osilesi is a junior associate and her practice focuses on insurance recovery and managed care.