81R3755 TJS-F
By: Smith of Tarrant H.B. No. 1748
A BILL TO BE ENTITLED
AN ACT
relating to the cancellation of a health benefit plan on the basis
of misrepresentation or a preexisting condition; providing
penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter B, Chapter 541, Insurance Code, is
amended by adding Section 541.062 to read as follows:
Sec. 541.062. BAD FAITH CANCELLATION. It is an unfair
method of competition or an unfair or deceptive act or practice for
a health benefit plan issuer to:
(1) set cancellation goals, quotas, or targets;
(2) pay compensation of any kind, including a bonus or
award, that varies according to the number of cancellations;
(3) set, as a condition of employment, a number or
volume of cancellations to be achieved; or
(4) set a performance standard, for employees or by
contract with another entity, based on the number or volume of
cancellations.
SECTION 2. Chapter 1202, Insurance Code, is amended by
adding Subchapter C to read as follows:
SUBCHAPTER C. INDEPENDENT REVIEW OF CERTAIN CANCELLATION DECISIONS
Sec. 1202.101. DEFINITIONS. In this subchapter:
(1) "Affected individual" means an individual who is
otherwise entitled to benefits under a health benefit plan that is
subject to a decision to cancel.
(2) "Independent review organization" means an
organization certified under Chapter 4202.
(3) "Screening criteria" means the elements or factors
used in a determination of whether to subject an issued health
benefit plan to additional review for possible cancellation,
including any applicable dollar amount or number of claims
submitted.
Sec. 1202.102. APPLICABILITY. (a) This subchapter applies
only to a health benefit plan, including a small or large employer
health benefit plan written under Chapter 1501, that provides
benefits for medical or surgical expenses incurred as a result of a
health condition, accident, or sickness, including an individual,
group, blanket, or franchise insurance policy or insurance
agreement, a group hospital service contract, or an individual or
group evidence of coverage or similar coverage document that is
offered by:
(1) an insurance company;
(2) a group hospital service corporation operating
under Chapter 842;
(3) a fraternal benefit society operating under
Chapter 885;
(4) a stipulated premium company operating under
Chapter 884;
(5) a reciprocal exchange operating under Chapter 942;
(6) a Lloyd's plan operating under Chapter 941;
(7) a health maintenance organization operating under
Chapter 843;
(8) a multiple employer welfare arrangement that holds
a certificate of authority under Chapter 846; or
(9) an approved nonprofit health corporation that
holds a certificate of authority under Chapter 844.
(b) This subchapter does not apply to:
(1) a health benefit plan that provides coverage:
(A) only for a specified disease or for another
limited benefit other than an accident policy;
(B) only for accidental death or dismemberment;
(C) for wages or payments in lieu of wages for a
period during which an employee is absent from work because of
sickness or injury;
(D) as a supplement to a liability insurance
policy;
(E) for credit insurance;
(F) only for dental or vision care;
(G) only for hospital expenses; or
(H) only for indemnity for hospital confinement;
(2) a Medicare supplemental policy as defined by
Section 1882(g)(1), Social Security Act (42 U.S.C. Section 1395ss),
as amended;
(3) a workers' compensation insurance policy;
(4) medical payment insurance coverage provided under
a motor vehicle insurance policy; or
(5) a long-term care insurance policy, including a
nursing home fixed indemnity policy, unless the commissioner
determines that the policy provides benefit coverage so
comprehensive that the policy is a health benefit plan described by
Subsection (a).
Sec. 1202.103. CANCELLATION FOR MISREPRESENTATION OR
PREEXISTING CONDITION. Notwithstanding any other law, a health
benefit plan issuer may not cancel a health benefit plan on the
basis of a misrepresentation or a preexisting condition except as
provided by this subchapter.
Sec. 1202.104. NOTICE OF INTENT TO CANCEL. (a) A health
benefit plan issuer may not cancel a health benefit plan on the
basis of a misrepresentation or a preexisting condition without
first notifying an affected individual in writing of the issuer's
intent to cancel the health benefit plan and the individual's
entitlement to an independent review.
(b) The notice required under Subsection (a) must include,
as applicable:
(1) the principal reasons for the decision to cancel
the health benefit plan;
(2) the clinical basis for a determination that a
preexisting condition exists;
(3) a description of any general screening criteria
used to evaluate issued health benefit plans and determine
eligibility for a decision to cancel;
(4) a statement that the individual is entitled to
appeal a cancellation decision to an independent review
organization;
(5) a statement that the individual has at least 45
days in which to appeal the cancellation decision to an independent
review organization, and a description of the consequences of
failure to appeal within that time limit;
(6) a statement that there is no cost to the individual
to appeal the cancellation decision to an independent review
organization; and
(7) a description of the independent review process
under Chapters 4201 and 4202.
Sec. 1202.105. INDEPENDENT REVIEW PROCESS; PAYMENT OF
CLAIMS. (a) An affected individual may appeal a health benefit
plan issuer's cancellation decision to an independent review
organization not later than the 45th day after the date the
individual receives notice under Section 1202.104.
(b) A health benefit plan issuer shall comply with all
requests for information made by the independent review
organization and with the independent review organization's
determination regarding the appropriateness of the issuer's
decision to cancel.
(c) A health benefit plan issuer shall pay all otherwise
valid medical claims under an individual's plan until the later of:
(1) the date on which an independent review
organization determines that the decision to cancel is appropriate;
or
(2) the time to appeal to an independent review
organization has expired without an affected individual initiating
an appeal.
Sec. 1202.106. CANCELLATION AUTHORIZED; RECOVERY OF CLAIMS
PAID. (a) A health benefit plan issuer may cancel a health benefit
plan covering an affected individual on the later of:
(1) the date an independent review organization
determines that cancellation is appropriate; or
(2) the 45th day after the date an affected individual
receives notice under Section 1202.104, if the individual has not
initiated an appeal.
(b) An issuer that cancels a health benefit plan under this
section may seek to recover from an affected individual amounts
paid for the individual's medical claims under the cancelled health
benefit plan.
(c) An issuer that cancels a health benefit plan under this
section may not offset against or recoup or recover from a physician
or health care provider amounts paid for medical claims under a
cancelled health benefit plan. This subsection may not be waived,
voided, or modified by contract.
Sec. 1202.107. CANCELLATION RELATED TO A PREEXISTING
CONDITION; STANDARDS. (a) For purposes of this subchapter, a
cancellation for a preexisting condition is appropriate if, within
the 18-month period immediately preceding the date on which an
application for coverage under a health benefit plan is made, an
affected individual received or was advised by a physician or
health care provider to seek medical advice, diagnosis, care, or
treatment for a physical or mental condition, regardless of the
cause, and the individual's failure to disclose the condition:
(1) affects the risks assumed under the health benefit
plan; and
(2) is undertaken with the intent to deceive the
health benefit plan issuer.
(b) A health benefit plan issuer may not cancel a health
benefit plan based on a preexisting condition of a newborn
delivered after the application for coverage is made or as may
otherwise be prohibited by law.
Sec. 1202.108. CANCELLATION FOR MISREPRESENTATION;
STANDARDS. For purposes of this subchapter, a cancellation for a
misrepresentation not related to a preexisting condition is
inappropriate unless the misrepresentation:
(1) is of a material fact;
(2) affects the risks assumed under the health benefit
plan; and
(3) is made with the intent to deceive the health
benefit plan issuer.
Sec. 1202.109. REMEDIES NOT EXCLUSIVE. The remedies
provided by this subchapter are not exclusive and are in addition to
any other remedy or procedure provided by law or at common law.
Sec. 1202.110. RULES. The commissioner shall adopt rules
necessary to implement and administer this subchapter.
Sec. 1202.111. SANCTIONS AND PENALTIES. A health benefit
plan issuer that violates this subchapter commits an unfair
practice in violation of Chapter 541 and is subject to sanctions and
penalties under Chapter 82.
Sec. 1202.112. CONFIDENTIALITY. (a) A record, report, or
other information received or maintained by a health benefit plan
issuer, including any material received or developed during a
review of a cancellation decision under this subchapter, is
confidential.
(b) A health benefit plan issuer may not disclose the
identity of an individual or a decision to cancel an individual's
health benefit plan unless:
(1) an independent review organization determines the
decision to cancel is appropriate; or
(2) the time to appeal has expired without an affected
individual initiating an appeal.
SECTION 3. Section 4202.002, Insurance Code, is amended to
read as follows:
Sec. 4202.002. ADOPTION OF STANDARDS FOR INDEPENDENT REVIEW
ORGANIZATIONS. (a) The commissioner shall adopt standards and
rules for:
(1) the certification, selection, and operation of
independent review organizations to perform independent review
described by Subchapter C, Chapter 1202, or Subchapter I, Chapter
4201; and
(2) the suspension and revocation of the
certification.
(b) The standards adopted under this section must ensure:
(1) the timely response of an independent review
organization selected under this chapter;
(2) the confidentiality of medical records
transmitted to an independent review organization for use in
conducting an independent review;
(3) the qualifications and independence of each
physician or other health care provider making a review
determination for an independent review organization;
(4) the fairness of the procedures used by an
independent review organization in making review determinations;
[and]
(5) the timely notice to an enrollee of the results of
an independent review, including the clinical basis for the review
determination; and
(6) that review of a cancellation decision based on a
preexisting condition be conducted under the direction of a
physician.
SECTION 4. Sections 4202.003, 4202.004, and 4202.006,
Insurance Code, are amended to read as follows:
Sec. 4202.003. REQUIREMENTS REGARDING TIMELINESS OF
DETERMINATION. The standards adopted under Section 4202.002 must
require each independent review organization to make the
organization's determination:
(1) for a life-threatening condition as defined by
Section 4201.002, not later than the earlier of:
(A) the fifth day after the date the organization
receives the information necessary to make the determination; or
(B) the eighth day after the date the
organization receives the request that the determination be made;
and
(2) for a condition other than a life-threatening
condition or of the appropriateness of a cancellation under
Subchapter C, Chapter 1202, not later than the earlier of:
(A) the 15th day after the date the organization
receives the information necessary to make the determination; or
(B) the 20th day after the date the organization
receives the request that the determination be made.
Sec. 4202.004. CERTIFICATION. To be certified as an
independent review organization under this chapter, an
organization must submit to the commissioner an application in the
form required by the commissioner. The application must include:
(1) for an applicant that is publicly held, the name of
each shareholder or owner of more than five percent of any of the
applicant's stock or options;
(2) the name of any holder of the applicant's bonds or
notes that exceed $100,000;
(3) the name and type of business of each corporation
or other organization that the applicant controls or is affiliated
with and the nature and extent of the control or affiliation;
(4) the name and a biographical sketch of each
director, officer, and executive of the applicant and of any entity
listed under Subdivision (3) and a description of any relationship
the named individual has with:
(A) a health benefit plan;
(B) a health maintenance organization;
(C) an insurer;
(D) a utilization review agent;
(E) a nonprofit health corporation;
(F) a payor;
(G) a health care provider; or
(H) a group representing any of the entities
described by Paragraphs (A) through (G);
(5) the percentage of the applicant's revenues that
are anticipated to be derived from independent reviews conducted
under Subchapter I, Chapter 4201;
(6) a description of the areas of expertise of the
physicians or other health care providers making review
determinations for the applicant; and
(7) the procedures to be used by the applicant in
making independent review determinations under Subchapter C,
Chapter 1202, or Subchapter I, Chapter 4201.
Sec. 4202.006. PAYORS FEES. (a) The commissioner shall
charge payors fees in accordance with this chapter as necessary to
fund the operations of independent review organizations.
(b) A health benefit plan issuer shall pay for an
independent review of a cancellation decision under Subchapter C,
Chapter 1202.
SECTION 5. Section 4202.009, Insurance Code, is amended to
read as follows:
Sec. 4202.009. CONFIDENTIAL INFORMATION. (a)
Information that reveals the identity of a physician or other
individual health care provider who makes a review determination
for an independent review organization is confidential.
(b) A record, report, or other information received or
maintained by an independent review organization, including any
material received or developed during a review of a cancellation
decision under Subchapter C, Chapter 1202, is confidential.
(c) An independent review organization may not disclose the
identity of an affected individual or an issuer's decision to
cancel a health benefit plan under Subchapter C, Chapter 1202,
unless:
(1) an independent review organization determines the
decision to cancel is appropriate; or
(2) the time to appeal a cancellation under that
subchapter has expired without an affected individual initiating an
appeal.
SECTION 6. Section 4202.010(a), Insurance Code, is amended
to read as follows:
(a) An independent review organization conducting an
independent review under Subchapter C, Chapter 1202, or Subchapter
I, Chapter 4201, is not liable for damages arising from the review
determination made by the organization.
SECTION 7. The change in law made by this Act applies only
to an insurance policy that is delivered, issued for delivery, or
renewed on or after the effective date of this Act. An insurance
policy that is delivered, issued for delivery, or renewed before
the effective date of this Act is governed by the law as it existed
before the effective date of this Act, and that law is continued in
effect for that purpose.
SECTION 8. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2009.