Friday, 7 August 2026, 5:20
The California Medical Association is challenging a state enforcement proposal that could penalize physician practices for health care cost increases they do not control, while also celebrating a major insurer policy reversal. In separate announcements on August 6, 2026, CMA detailed its formal objections to the Office of Health Care Affordability plan and confirmed Blue Shield of California has rescinded two psychotherapy billing policies.
The California Office of Health Care Affordability is developing an enforcement framework for entities that exceed the state's annual health care spending targets. The proposal includes performance improvement plans and financial penalties for failure to meet a 3.5% annual spending growth target, which drops to 3% by 2029.
CMA supports affordability but argues the current proposal could hold physician organizations accountable for costs they do not negotiate or control. These include hospital emergency department services, specialty care from other organizations, and pharmacy benefit manager drug claims. CMA notes that California law requires OHCA to consider the extent of control, but the proposal does not clearly incorporate that requirement.
Proposed penalties could reach up to 125% of the amount by which an entity exceeds the target. CMA warns this compounds existing pressures from Medicare payment cuts, workforce shortages, and rising practice costs, potentially reducing patient access to care.
Following advocacy from CMA and the American Psychiatric Association, Blue Shield of California agreed to rescind two reimbursement policies affecting psychotherapy add-on services billed with evaluation and management services. The insurer will no longer require modifier 25 on E/M services billed with psychotherapy add-on codes 90833, 90836 and 90838. Blue Shield Promise Health Plan will also discontinue claims editing that automatically denied payment for those add-on codes when billed with E/M codes 99204, 99205, 99214 and 99215.
Physicians must still follow CPT coding guidance and document that psychotherapy and E/M services are distinct, separately identifiable and medically necessary. Claims that do not meet billing and documentation requirements may still be denied on review.
OHCA is accepting public comments through August 21, 2026, before its August 26 board meeting. CMA has submitted formal comments and is urging a more reasonable, phased approach to enforcement. CMA is also seeking clarification from Blue Shield on payment for previously denied claims.
OHCA was created by California law in 2022 to set statewide health care spending growth targets. The enforcement proposal applies to health care entities across California. Blue Shield of California is one of the state's largest health plans, and the rescinded policies affected behavioral health care access statewide.
CMA has a history of advocating for physicians on reimbursement and regulatory issues. The Blue Shield reversal follows similar conflicts over coding standards and administrative burdens.
California physicians face significant regulatory and payer changes. CMA encourages practices to review OHCA's proposal, submit comments before August 21, and stay informed on Blue Shield's revised policies. The outcome will shape health care affordability and behavioral health care access statewide.
