California Code of Regulations
Title 10 - Investment
Chapter 5 - Insurance Commissioner
Subchapter 2 - Policy Forms and Other Documents
Article 5.5 - Average Contracted Rate Methodology
Section 2238.11 - Methodology for Calculation of Average Contracted Rate

Universal Citation: 10 CA Code of Regs 2238.11

Current through Register 2024 Notice Reg. No. 38, September 20, 2024

The reimbursement rate for services subject to Insurance Code section 10112.8 is the average contracted rate or 125 percent of the Medicare fee-for-service rate, whichever is greater, unless otherwise agreed to by the noncontracting individual health professional and the insurer or as determined through the independent dispute resolution process pursuant to Insurance Code section 10112.81.

(a) The average contracted rate for services most frequently subject to Section 10112.8, other than anesthesia services, shall be calculated by dividing the total payment for a service code by the total number of paid service units for that service code in each geographic region across all commercial policies regulated by the Commissioner during the baseline year, then adjusted to the date the service was rendered using the inflation adjustment method described in Insurance Code section 10112.82(a)(2)(B).

(b) The average contracted rate for anesthesia services most frequently subject to Section 10112.8 shall be calculated by first determining the average anesthesia conversion factor. The average anesthesia conversion factor shall be calculated by dividing the total payment for anesthesia services by the sum of all base units, time units, and physical status modifier units paid for those services, in each geographic region across all commercial policies regulated by the Commissioner during the baseline year, then adjusted to the date the service was rendered using the inflation adjustment method described in Insurance Code section 10112.82(a)(2)(B). This inflation-adjusted average anesthesia conversion factor shall then be multiplied by the sum of the base unit, time unit, and physical status modifier units of the patient to determine the reimbursement fate for the covered health care service as of the date the service was rendered.

(1) The base units for an anesthesia service code are the American Society of Anesthesiologists Relative Value Guide base units for that service code.

(2) The time unit is measured in 15 minute increments or a fraction thereof.

(3) The physical status modifier in a claim is a standard modifier describing the physical status of the patient and is used to distinguish between various levels of complexity of the anesthesia services provided, and is expressed as a unit with a value between zero (0) and three (3).

(4) The anesthesia conversion factor is expressed in dollars per unit and is a contracted rate negotiated with the health insurer.

(c) In calculating the average contracted rate, a health insurer shall:

(1) Calculate the average contracted rate using the full contracted rate applicable to the service code, without adjustments for cost sharing by the covered person, modifiers (except physical status modifiers in claims for anesthesia services as set forth in subdivision (b)), or payment rules, except that the health insurer shall calculate separate average contracted rates, pursuant to this subdivision, for CPT code modifiers "26" (professional component) and "TC" (technical component).

(2) Include the highest and lowest reimbursed payment rates paid by the health insurer in the calculation.

(3) Limit the calculation to services provided in the baseline year under the health insurer's commercial health coverage in all market segments in the same geographic area.

(4) Exclude the following:
(A) Denied service units;

(B) Service units not in their final dispositions;

(C) Secondary payments from a coordination of benefit clause;

(D) Bundled payments;

(E) Risk sharing, capitation, or other incentive based payments;

(F) Rate information for programs or products not regulated by the Commissioner, including Medicare, Medi-Cal services, out of state products, self-insured products, other products governed by federal law, and products regulated by the Department of Managed Health Care; and

(G) Contracted rates for which no claims were received during the baseline year.

(5) Modifiers may be applied to the reimbursement of a service, but shall be excluded from the average contracted rate calculation except to separate professional services from the technical component when calculating the average contracted rate pursuant to paragraph (1) of this subdivision.

(d)

(1) If a health insurer's contracted rates differ based on the provider type or specialty for a service code, the average contracted rate shall be calculated separately for each provider type or specialty, as applicable. If, instead, payment for provider services is calculated by applying a modifier code, which varies based on provider type or specialty, to a single contracted rate for a service code, only one average contracted rate, without use of modifiers, shall be calculated.

(2) If a health insurer uses different contracted rates for a service code based on facility type, the average contracted rate shall be calculated separately for each such facility type.

(e) Health insurers may use the average contracted rate methodology described in this section, or another reasonable method, for services not described in subdivision (b) of Section 2238.10 of this article otherwise subject to Insurance Code section 10112.8. The reimbursement rate for these services is the greater of the average contracted rate as determined by this subdivision or 125 percent of the amount Medicare reimburses on a fee-for-service basis for the same or similar services in the geographic region in which the services were rendered unless otherwise agreed to by the noncontracting individual health professional and the insurer.

(f) For the purpose of subdivision (a)(1) of Insurance Code section 10112.82, the Medicare fee-for-service rate shall be the Medicare rate for the service code for the same calendar year in which the services were rendered and shall be determined using the participating provider rate excluding any value-based payment modifier and adjusted for the geographic area.

1. New section filed 12-26-2018; operative 1-1-2019 pursuant to Government Code section 11343.4(b)(3) (Register 2018, No. 52).

Note: Authority cited: Sections 10112.8 and 10112.82, Insurance Code. Reference: Sections 10112.8 and 10112.82, Insurance Code.

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