California Senate Bill 363, also known as the Health Insurance Accountability Act, was introduced on February 13, 2025, by Senator Scott Wiener (D-San Francisco). The bill aims to address insurance denials by fining insurance companies for excessive rates of coverage denials overturned on appeal.
Here’s a look at the bill:
What is California Senate Bill 363?
The rationale for introducing Senate Bill 363 (SB 363), also known as the Health Insurance Accountability Act, stems from several concerns regarding the current practices of health insurance companies in California. One of the primary drivers for the bill is the increasing rate of healthcare denials. Healthcare providers have reported a rise in denied claims in recent years. Commercial care denials increased by an average of 20.2% between 2022 and 2023. In 2024, nearly three out of four providers indicated that denials had risen in the past two years.
The bill’s sponsor believes there is a lack of transparency regarding how insurance companies make their denial decisions. Health plans and insurers do not publicly disclose much information about their treatment denial or modification processes. As a result, it’s difficult to ensure patients receive the care they are entitled to.
Insurance companies currently face few consequences for issuing wrongful denials. For example, California’s Department of Managed Healthcare (DMHC) overturns 72% of health plan denials that reach the DMHC. As Senator Wiener noted in his press release announcing the Senate Bill, there are no significant penalties to deter such practices.
SB 363 is a legislative response to concerns that health insurance companies increasingly deny necessary care without adequate transparency or accountability. The bill seeks to address these issues by mandating the reporting of denial data. It also imposes financial penalties for high rates of overturned denials.
What impact will Senate Bill 363 have on insurers?
Here’s a breakdown of what SB 363 would do:
- The bill requires health plans and insurers to annually report treatment denials and modifications to the Department of Managed Health Care (DMHC) and the California Department of Insurance (CDI). This reporting would begin on or before June 1, 2026.
- The reporting must be separated by type of care: surgical, medical, and behavioral.
- It must also be disaggregated by age.
- The report will include the number of denials and modifications, the reasons, and the type of modifications made.
- The bill mandates the DMHC and CDI to compare the number of denials and modifications to the number of successful Independent Medical Review (IMR) overturns and the number of denials or modifications reversed by the plan or insurer after an IMR is requested.
- It also establishes administrative penalties for health plans and insurers with excessive rates of coverage denials overturned on appeal.
- If over half (more than 50%) of IMRs in any of the three categories of care (medical, behavioral, surgical) result in an overturning or reversal of a denial or modification, the plan or insurer will be liable for fines. Failure to report the required data would also incur a fine. The fines are structured as follows:
- First violation: at least $50,000.
- Second violation: between $100,000 and $400,000.
- Each subsequent violation: no less than $1,000,000.
- The state will adjust these penalty amounts every five years starting January 1, 2031, based on changes in premium rates.
- The bill requires the DMHC and CDI to publish information about denials and modifications in annual reports.
- Requires the Center for Data Insights and Innovation to include data relating to IMR overturns and reversals in its annual report to the Legislature. That reporting commences with the 2026 report. The bill also requires the DMHC to provide related information to the center.
- Specifies that these provisions do not apply to Medi-Cal managed care plan contracts.
- The bill stipulates that the state will reinvest the funds raised from fines to provide healthcare services to Californians. The bill intends the state to use the funds for child healthcare services.
What’s the response to the bill?
Many healthcare trade organizations support the bill, including the California Physicians Alliance, the California Pharmacists Association, and the California Health Collaborative. Supporters believe the bill will compel insurers to make their review processes more efficient and allow patients to access timely and necessary care. At the same time, they feel it incentivizes health plans to not deny care for services likely to be overturned.
While the bill aims to protect patients, insurers may respond by reconsidering their claim review procedures, potentially spending more on training and oversight. That may increase premiums to cover additional training. Mandatory disclosure of denial information likely will face opposition from insurers, as the California Association of Health Plans has indicated it opposes the bill.
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