CDA-sponsored bill protects California dentists from predatory virtual credit cards

Dental plan payments with processing fees could no longer be the default method under the bill
February 20, 2024
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Worker is on the phone at the front desk of a dental or medical clinic. A dental assistant or hygienist wearing scrubs approaches in the background.
QUICK SUMMARY: CDA’s newest legislation, SB 1369, addresses a top concern for member dentists across the state: dental plans’ coercive collection of fees associated with virtual credit card payments. Chiefly, the new bill seeks to reduce the predatory practices of dental plans and virtual credit card companies, requiring that the plans and the VCC companies provide a clear and easy process for opting in and out of VCC payments to ensure dentists receive the full payment for dental services they provide.

CDA this week made the next move in its broad-reaching, long-term campaign for dental benefit plan reform with the introduction of sponsored legislation for 2024.

Following last year’s two successful CDA-sponsored bills that provide increased consumer protections, require review of premiums charged by plans in certain cases and require plans to disclose whether they are state or federally regulated, CDA’s newest legislation, SB 1369 by Senator Monique Limón (D-Santa Barbara), addresses another top concern for member dentists across the state: dental plans’ coercive collection of fees associated with virtual credit card payments.

Chiefly, the new bill seeks to reduce the predatory practices of dental plans and virtual credit card companies, requiring that the plans and the VCC companies provide a clear and easy process for opting in and out of VCC payments to ensure dentists receive the full payment for dental services they provide.

Dentists pay up to 10% per transaction with no guaranteed opt-out

Dental practices that accept virtual credit card payments, which are issued by third-party companies in contract with dental benefit plans, commonly pay service fees of up to 10% per transaction on every payment the dental plan owes them. Dentists are paying not only the standard merchant transaction fee imposed for processing the payment through the practice’s credit card terminal but also additional processing fees of 2% to 5% charged by the virtual credit card companies.

While dental practices can opt out of VCC services, the opt-out process is not often easy — and not always permanent. VCC companies have been known to reinstitute the payment method with its excessive fees after the provider opts out — even as soon as the next owed payment. VCC payments in many cases become the default payment method.

Yet, requesting an alternative payment method can delay receipt of that payment, waste administrative staff time and create challenges for office accounting.

These predatory practices ultimately increase the dental office’s overhead costs by requiring staff to spend more hours repeatedly opting out of VCC payments or often making the choice to accept the VCC payment with the high fees to keep the practice running most efficiently.

Dental offices’ increased overhead can in turn delay or affect patients’ access to care due to reduced office hours and limited scheduling.

Dentists shouldn’t be ‘defaulted into payment methods that nickel and dime them’

“Providers and dental plans agree to contracts that set the fees the plans will pay and the providers will accept for different procedures,” said CDA President Carliza Marcos, DDS. “Dentists are entitled to fully understand and opt in to a payment method that includes these types of fees rather than being defaulted into payment methods that nickel and dime them.”

CDA’s sponsored bill would solve the problem by:

  • Mandating that any payment to a provider that includes a process fee cannot be the default payment method.
  • Mandating that providers must opt in to the payment method via signature before the payment is sent.
  • Requiring plans to provide notice of any fees associated with a particular payment method.
  • Requiring plans to advise dentists of alternative methods of payment with clear instructions on how to select an alternative method.
  • Requiring plans to notify dentists if its VCC vendor is sharing any part of the profit, fee arrangement or board composition with the plan.

“Coercive or sneaky tactics that lower the amounts paid to dentists while lining the pockets of third-party entities hurt providers and pull important dollars out of the health care system,” Dr. Marcos said. “Our bill includes key mandates to prevent the use of these tactics and ensure dental practices know what fees they’re paying, opt out of accepting a payment method with excessive fees and continue operating efficiently.”

Dental plan reform: CDA’s long-term strategy

SB 1369 follows CDA-sponsored AB 1048 and AB 952 signed into law last October by Gov. Gavin Newsom as part of CDA’s multi-year, multi-pronged dental plan reform strategy that also includes legal action.

Over 15 years, CDA-sponsored bills have successfully required dental plans to be more transparent in their network leasing, required a uniform disclosure of dental benefits, prohibited plans from capping fees for noncovered procedures, required plans to notify contracted dentists of changes to coverage and fees and more. Read CDA’s recap of dental plan reform legislation.

CDA will keep members updated on the latest bill’s progress as it moves through the Legislature. Watch the newsroom and weekly member newsletter, Inside California Dentistry.

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