State-regulated dental plans in California will soon have to comply with new dentist payment rules.
California Gov. Gavin Newsom last week signed a dental plan payment rule bill.
The law created by the bill will require a dental plan to make the default payment system a system that imposes no service fees on the dentists.
A dental plan can also use a payment network that imposes service fees, such as a virtual credit card network. But, before connecting a dentist to a system that charges services, the plan will have to tell the dentist about the fees and get the dentist’s permission to switch the dentist to the fee-based network.
The rules will apply to dental coverage that starts or charges on or after April 1, 2026.
The bill does not mention employer-sponsored dental plans or group dental plans directly, but existing state laws apply the rules in the new law to fully insured group dental plans in the state.
The new law does not apply to self-insured dental plans, because the Employee Retirement Income Security Act preempts state efforts to set rules for employers’ self-insured benefit plans.
Payment systems: Health care providers usually get paid with paper checks; by accepting electronic fund transfers through the old, slow, low-cost Automated Clearing House network, or ACH network; or accepting electronic transfers through a newer, faster, more flexible, more expensive virtual credit card network.
The Centers for Medicare and Medicaid Services once prohibited carriers working with federal health programs from imposing electronic fund transfer fees on providers but reversed that position in 2018.
Some health care providers who hate paying service fees want to stick with paper checks or use the ACH payment network.
Advocates for virtual credit card payments argue that sending and accepting payments through a virtual credit card network is so much quicker, simpler and more flexible than sending and accepting payments through the ACH network that most providers will gladly pay extra to use a virtual credit card network.
The California Dental Association, a group for dentists, has been lobbying for a state ban on dental plan moves to make a virtual credit card network a plan’s default payment method, in part because of reports that dental office processing fees could be as high as 5% of the total payment amount at some plans, on top of the standard merchant transaction fees.
Newsom, a Democrat, vetoed a dental plan payment bill backed by dentists in September 2024. He did not say what he liked better about the new version of the bill.
The California Association of Dental Plans opposed the bill that Newsom vetoed in 2024 but expressed no opinion about the bill that was signed last week.
One difference is that the earlier bill appeared to require dentists to agree to use of fee-based payment networks in writing, on paper. The bill Newsom signed lets dentists agree to use of fee-based payment networks via email.
Newsom vetoed a similar bill in 2024 but, at press time, had not expressed an opinion about the new PBM bill.
Newsom’s decision to sign the new version of the dentist payment rule bill appeared to be a sign that he could be open to signing the new PBM bill.