A federal court in California has granted a preliminary injunction to prevent Assembly Bill (AB) 290 (2019) from taking effect. The law is targeted at dialysis providers that donate money to nonprofit organizations that, in turn, pay for private health insurance coverage for low-income patients — even though the patients qualify for coverage under Medicare or Medi-Cal.
The dialysis providers donate money to cover the insurance premiums because the providers receive higher reimbursement from the insurance companies than from Medicare or Medi-Cal. AB 290 limits insurance reimbursement for dialysis in these cases to the Medicare amount — which does not cover the costs of providing the service. The law also prohibits dialysis providers from steering patients toward certain health plans, and adds significant administrative burdens for the nonprofit organizations.
AB 290 was strongly lobbied in the state Legislature. Insurance companies and labor unions supported it, while dialysis patients and providers opposed it. CHA opposed the reimbursement rate-setting provision and administrative burdens.
The plaintiffs in the case, Jane Doe v. Becerra et al., included both dialysis patients and dialysis providers. The court agreed with them that AB 290 unconstitutionally infringes upon the free speech rights of dialysis providers that wish to steer patients toward certain health plans. The court also considered whether the reimbursement cap violates the constitutional right to freedom of association and/or free speech, noting that the law penalizes dialysis providers when they choose to associate with nonprofit organizations that provide health insurance to low-income individuals.
The court did not decide whether donations from dialysis providers are within the category of protected First Amendment activity or whether they merely constitute nonexpressive commercial conduct. The law will not take effect at this time while the litigation continues and a record is developed so the court can decide this question.