89R10265 SCF-F
By: Hancock S.B. No. 2579
A BILL TO BE ENTITLED
AN ACT
relating to health care and insurance fraud; creating a criminal
offense; authorizing a civil penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 544.0103(e), Government Code, as
effective April 1, 2025, is amended to read as follows:
(e) The office of inspector general may:
(1) assess administrative penalties otherwise
authorized by law on behalf of the commission or a health and human
services agency;
(2) request that the attorney general obtain an
injunction to prevent a person from disposing of an asset the office
of inspector general identifies as potentially subject to recovery
by the office of inspector general due to the person's fraud or
abuse;
(3) provide for coordination between the office of
inspector general and special investigative units formed by managed
care organizations under Subchapter H or entities with which
managed care organizations contract under that subchapter;
(3-a) provide for coordination between the office of
inspector general and the Texas Department of Insurance, as
provided by Section 701.110, Insurance Code, to coordinate health
care fraud detection and prevention in the state;
(4) audit the use and effectiveness of state or
federal funds, including contract and grant funds, administered by
a person or state agency receiving the funds from a health and human
services agency;
(5) conduct investigations relating to the funds
described by Subdivision (4); and
(6) recommend policies to:
(A) promote the economical and efficient
administration of the funds described by Subdivision (4); and
(B) prevent and detect fraud and abuse in the
administration of those funds.
SECTION 2. The heading to Subchapter B, Chapter 701,
Insurance Code, is amended to read as follows:
SUBCHAPTER B. REPORTING FRAUDULENT INSURANCE ACTS; CIVIL REMEDIES
SECTION 3. Subchapter B, Chapter 701, Insurance Code, is
amended by adding Section 701.053 to read as follows:
Sec. 701.053. CIVIL REMEDIES. (a) Except as provided by
Subsection (c), a person who violates Section 35A.02(a-1), Penal
Code, is liable to the state for:
(1) the amount of a payment made by or the value of a
benefit provided by a health benefit plan issuer, directly or
indirectly, as a result of the violation, including any payment
made to a third party;
(2) interest on the amount of the payment or the value
of the benefit described by Subdivision (1) at the prejudgment
interest rate in effect on the day the payment or benefit was
received or paid, for the period from the date the benefit was
received or paid to the date that the state recovers the amount of
the payment or value of the benefit;
(3) a civil penalty of:
(A) not less than $5,500 and not more than
$15,000 for each violation committed by the person that results in
injury to an elderly person, as defined by Section 48.002(a)(1),
Human Resources Code, a person with a disability, as defined by
Section 48.002(a)(8)(A), Human Resources Code, or a person younger
than 18 years of age; or
(B) not less than $5,500 and not more than
$11,000 for each violation committed by the person that does not
result in injury to a person described by Paragraph (A); and
(4) two times the amount of the payment or the value of
the benefit described by Subdivision (1).
(b) In determining the amount of the civil penalty described
by Subsection (a)(3), the trier of fact shall consider:
(1) whether the person has previously violated Section
35A.02(a-1), Penal Code;
(2) the seriousness of the violation committed by the
person, including the nature, circumstances, extent, and gravity of
the violation;
(3) whether the health and safety of the public or an
individual was threatened by the violation;
(4) whether the person acted in bad faith when the
person engaged in the conduct that formed the basis of the
violation; and
(5) the amount necessary to deter future violations.
(c) The trier of fact may assess a total of not more than two
times the amount of a payment or the value of a benefit described by
Subsection (a)(1) if the trier of fact finds that:
(1) the person reported to the insurance fraud unit of
the department all information known to the person about the
violation not later than the 30th day after the date on which the
person first obtained the information; and
(2) at the time the person furnished all the
information to the insurance fraud unit of the department, the
insurance fraud unit of the department had not yet begun an
investigation under this chapter.
SECTION 4. Section 701.102, Insurance Code, is amended to
read as follows:
Sec. 701.102. INVESTIGATION OF CERTAIN ACTS OF FRAUD. (a)
If the commissioner has reason to believe a person has engaged in,
is engaging in, has committed, or is about to commit a fraudulent
insurance act, the commissioner may conduct any investigation
necessary inside or outside this state to:
(1) determine whether the act occurred; or
(2) aid in enforcing laws relating to fraudulent
insurance acts, including by providing technical or litigation
assistance to other governmental agencies.
(b) In exercising the commissioner's authority under
Subsection (a), the commissioner shall prioritize investigating
alleged violations of Section 35A.02(a-1), Penal Code.
(c) Except as provided by Section 701.214, the department
may retain up to 50 percent of any money recovered as a result of an
investigation conducted under Subsection (b). The department shall
remit the remaining amount of money to the person or persons harmed
by the offense.
SECTION 5. Subchapter C, Chapter 701, Insurance Code, is
amended by adding Section 701.110 to read as follows:
Sec. 701.110. FRAUD PREVENTION PARTNERSHIP. (a) The
department shall, in coordination with the Health and Human
Services Commission office of inspector general, establish the
fraud prevention partnership to detect and prevent health care
fraud in this state across the private and public markets.
(b) The partnership shall include:
(1) a representative of one or more Medicaid managed
care organizations;
(2) a representative of one or more health benefit
plan issuers, as defined by Section 1222.0001; and
(3) any other appropriate person as determined by the
commissioner and inspector general.
SECTION 6. Chapter 701, Insurance Code, is amended by
adding Subchapter E to read as follows:
SUBCHAPTER E. ACTION BY PRIVATE PERSON
Sec. 701.201. ACTION BY PRIVATE PERSON AUTHORIZED. (a) A
person may bring a civil action for a violation of Section
35A.02(a-1), Penal Code, on behalf of the person and the state. The
action must be brought in the name of the person and of the state.
(b) In an action brought under this subchapter, a person who
violates Section 35A.02(a-1), Penal Code, is liable as provided by
Section 701.053.
Sec. 701.202. INITIATION OF ACTION. (a) A person bringing
an action under this subchapter shall serve a copy of the petition
and a written disclosure of substantially all material evidence and
information the person possesses on the attorney general in
compliance with the Texas Rules of Civil Procedure.
(b) A person shall file a petition for an action under this
subchapter in camera and, except as provided by Section 701.203(b)
or (c), the petition must remain under seal until the earlier of:
(1) the 180th day after the date the petition is served
on the attorney general; or
(2) the date on which the state elects to intervene.
(c) A person bringing an action under this subchapter may
not serve process on a defendant until the court orders service of
process.
Sec. 701.203. STATE INTERVENTION. (a) The state may elect
to intervene and proceed with an action under this subchapter not
later than the 180th day after the date the attorney general
receives the petition and the material evidence and information
under Section 701.202(a).
(b) At the time the state intervenes in an action under this
subchapter, the attorney general may file a motion with the court
requesting that the petition remain under seal for an extended
period.
(c) In an action under this subchapter, the state may, for
good cause shown, move the court to extend the 180-day periods
prescribed by Subsection (a) or Section 701.202(b). A motion under
this subsection may be supported by affidavits or other submissions
in camera.
Sec. 701.204. CONSENT REQUIRED FOR DISMISSAL. An action
under this subchapter may be dismissed only if the court and the
attorney general consent in writing to the dismissal and state
their reasons for consenting.
Sec. 701.205. ANSWER BY DEFENDANT. A defendant is not
required to file in accordance with the Texas Rules of Civil
Procedure an answer to a petition filed under this subchapter until
the petition is unsealed and served on the defendant.
Sec. 701.206. STATE DECISION; CONTINUATION OF ACTION. (a)
Not later than the last day of the period prescribed by Section
701.203(a) or an extension of that period as provided by Section
701.203(c), the state shall:
(1) proceed with the action; or
(2) notify the court that the state declines to take
over the action.
(b) If the state declines to take over an action under this
subchapter, the person bringing the action may proceed without the
state's participation. A person proceeding under this subsection
may recover for a violation for a period of up to six years before
the date the action was filed, or for a period beginning when the
violation occurred until up to three years from the date the state
knows or reasonably should have known facts material to the
violation, whichever of these two periods is longer, regardless of
whether the violation occurred more than six years before the date
the action was filed. Notwithstanding this subsection, a person
proceeding under this subsection may not recover for a violation
that occurred more than 10 years before the date the action was
filed.
(c) On request by the state, the state is entitled to be
served with copies of all pleadings filed in an action under this
subchapter and be provided at the state's expense with copies of all
deposition transcripts. If the person bringing the action proceeds
without the state's participation, the court, without limiting the
status and right of that person, may permit the state to intervene
at a later date on a showing of good cause.
Sec. 701.207. REPRESENTATION OF STATE BY PRIVATE ATTORNEY.
The attorney general may contract with a private attorney to
represent the state in an action under this subchapter with which
the state elects to proceed.
Sec. 701.208. INTERVENTION BY OTHER PARTIES PROHIBITED. A
person other than the state may not intervene or bring a related
action based on the facts underlying a pending action under this
subchapter.
Sec. 701.209. RIGHTS OF PARTIES IF STATE CONTINUES ACTION.
(a) If the state proceeds with an action under this subchapter, the
state has the primary responsibility for prosecuting the action and
is not bound by an act of the person bringing the action. The person
bringing the action has the right to continue as a party to the
action, subject to the limitations set forth by this section.
(b) The state may dismiss an action under this subchapter
notwithstanding the objections of the person bringing the action
if:
(1) the attorney general notifies the person that the
state has filed a motion to dismiss; and
(2) the court provides the person with an opportunity
for a hearing on the motion.
(c) The state may settle an action under this subchapter
with the defendant notwithstanding the objections of the person
bringing the action if the court determines, after a hearing, that
the proposed settlement is fair, adequate, and reasonable under all
the circumstances. On a showing of good cause, the hearing may be
held in camera.
(d) On a showing by the state that unrestricted
participation during the course of the litigation by the person
bringing an action under this subchapter would interfere with or
unduly delay the state's prosecution of the action, or would be
repetitious, irrelevant, or for purposes of harassment, the court
may impose limitations on the person's participation, including:
(1) limiting the number of witnesses the person may
call;
(2) limiting the length of the testimony of witnesses
called by the person;
(3) limiting the person's cross-examination of
witnesses; or
(4) otherwise limiting the participation by the person
in the litigation.
(e) On a showing by a defendant in an action under this
subchapter that unrestricted participation during the course of the
litigation by the person bringing the action would be for purposes
of harassment or would cause the defendant undue burden or
unnecessary expense, the court may limit the participation by the
person in the litigation.
Sec. 701.210. STAY OF CERTAIN DISCOVERY. (a) On a showing
by the state that certain actions of discovery by the person
bringing an action under this subchapter would interfere with the
state's investigation or prosecution of a criminal or civil matter
arising out of the same facts, the court may stay the discovery for
a period not to exceed 60 days.
(b) The court shall hear a motion to stay discovery under
this section in camera.
(c) The court may extend the period prescribed by Subsection
(a) on a further showing in camera that the state has pursued the
criminal or civil investigation or proceedings with reasonable
diligence and that any proposed discovery in the civil action will
interfere with the ongoing criminal or civil investigation or
proceedings.
Sec. 701.211. PURSUIT OF ALTERNATE REMEDY BY STATE. (a)
Notwithstanding Section 701.201, the state may elect to pursue the
state's claim through any alternate remedy available to the state,
including any administrative proceeding to determine an
administrative penalty. If an alternate remedy is pursued in
another proceeding, the person bringing an action under this
subchapter has the same rights in the other proceeding as the person
would have had if the action had continued under this subchapter.
(b) A finding of fact or conclusion of law made in the other
proceeding that has become final is conclusive on all parties to an
action under this subchapter. For purposes of this subsection, a
finding or conclusion is final if:
(1) the finding or conclusion has been finally
determined on appeal to the appropriate court;
(2) no appeal has been filed with respect to the
finding or conclusion and all time for filing an appeal has expired;
or
(3) the finding or conclusion is not subject to
judicial review.
Sec. 701.212. AWARD TO PRIVATE CLAIMANT. (a) If the state
proceeds with an action under this subchapter, the person bringing
the action is entitled, except as provided by Subsection (c), to
receive at least 15 percent but not more than 25 percent of the
proceeds of the action, depending on the extent to which the person
substantially contributed to the prosecution of the action.
(b) If the state does not proceed with an action under this
subchapter, the person bringing the action is entitled, except as
provided by Subsection (c), to receive at least 25 percent but not
more than 30 percent of the proceeds of the action. The entitlement
of a person under this subsection is not affected by any subsequent
intervention in the action by the state in accordance with Section
701.206(c).
(c) If the court finds that an action under this subchapter
is based primarily on disclosures of specific information, other
than information provided by the person bringing the action,
relating to allegations or transactions in a Texas or federal
criminal or civil hearing, in a Texas or federal legislative or
administrative report, hearing, audit, or investigation, or from
the news media, the court may award the amount the court considers
appropriate but not more than 10 percent of the proceeds of the
action. The court shall consider the significance of the
information and the role of the person bringing the action in
advancing the case to litigation.
(d) A payment to a person under this section shall be made
from the proceeds of the action. A person receiving a payment under
this section is also entitled to receive from the defendant an
amount for reasonable expenses, reasonable attorney's fees, and
costs that the court finds to have been necessarily incurred. The
court's determination of expenses, fees, and costs to be awarded
under this subsection shall be made only after the defendant has
been found liable in the action or the claim is settled.
(e) In this section, "proceeds of the action" includes
proceeds of a settlement of the action.
Sec. 701.213. REDUCTION OF AWARD. (a) If the court finds
that an action under this subchapter was brought by a person who
planned and initiated the violation on which the action was
brought, the court may, to the extent the court considers
appropriate, reduce the share of the proceeds of the action the
person would otherwise receive under Section 701.212, taking into
account the person's role in advancing the case to litigation and
any relevant circumstances pertaining to the violation.
(b) If the person bringing an action under this subchapter
is convicted of criminal conduct arising from the person's role in
the violation, the court shall dismiss the person from the civil
action and the person may not receive any share of the proceeds of
the action. A dismissal under this subsection does not prejudice
the right of the state to continue the action.
Sec. 701.214. AWARD TO DEPARTMENT. (a) If the state
proceeds with an action under this subchapter, the department is
entitled to receive at least 15 percent but not more than 25 percent
of the proceeds of the action, depending on the extent to which the
department substantially contributed to the prosecution of the
action.
(b) In this section, "proceeds of the action" includes
proceeds of a settlement of the action.
Sec. 701.215. AWARD TO INJURED INSURER. If the person
bringing an action under this subchapter is not an insurer harmed by
the violation that is the subject of the action, the insurer is
entitled to any money remaining after all awards and costs are
distributed as provided by this subchapter, including, in an action
where the state proceeds, reasonable expenses, reasonable
attorney's fees, and costs to the state that the court finds to have
been necessarily incurred.
Sec. 701.216. AWARD TO DEFENDANT FOR FRIVOLOUS ACTION.
Chapter 105, Civil Practice and Remedies Code, applies to an action
under this subchapter with which the state proceeds.
Sec. 701.217. CERTAIN ACTIONS BARRED. (a) A person may not
bring an action under this subchapter that is based on allegations
or transactions that are the subject of a civil action or an
administrative penalty proceeding in which the state is already a
party.
(b) The court shall dismiss an action or claim under this
subchapter, unless opposed by the attorney general, if
substantially the same allegations or transactions as alleged in
the action or claim were publicly disclosed in a Texas or federal
criminal or civil hearing in which the state or an agent of the
state is a party, in a legislative or administrative report of this
state, or other hearing, audit, or investigation in this state, or
from the news media, unless the person bringing the action is an
original source of the information. In this subsection, "original
source" means an individual who:
(1) before a public disclosure described by this
subsection, has voluntarily disclosed to the state the information
on which allegations or transactions in a claim are based; or
(2) has knowledge that is independent of and
materially adds to the publicly disclosed allegations or
transactions and who has voluntarily provided the information to
the state before filing an action under this subchapter.
Sec. 701.218. STATE NOT LIABLE FOR CERTAIN EXPENSES. The
state is not liable for expenses that a person incurs in bringing an
action under this subchapter.
Sec. 701.219. RETALIATION AGAINST PERSON PROHIBITED. (a)
A person, including an employee, contractor, or agent, who is
discharged, demoted, suspended, threatened, harassed, or in any
other manner discriminated against in the terms or conditions of
employment because of a lawful act taken by the person or associated
others in furtherance of an action under this subchapter, including
investigation for, initiation of, testimony for, or assistance in
an action filed or to be filed under this subchapter, or other
efforts taken by the person to stop one or more violations is
entitled to:
(1) reinstatement with the same seniority status the
person would have had but for the discrimination; and
(2) not less than two times the amount of back pay,
interest on the back pay, and compensation for any special damages
sustained as a result of the discrimination, including litigation
costs and reasonable attorney's fees.
(b) A person may bring an action under this section in the
appropriate district court not later than the third anniversary of
the date on which the cause of action accrues. For purposes of this
subsection, the cause of action accrues on the date the retaliation
occurs.
Sec. 701.220. SOVEREIGN IMMUNITY NOT WAIVED. Except as
provided by Section 701.216, this subchapter does not waive
sovereign immunity.
Sec. 701.221. ATTORNEY GENERAL COMPENSATION. The attorney
general may retain a reasonable portion of the amount recovered
under this subchapter, not to exceed amounts specified in the
General Appropriations Act, for the administration of this
subchapter.
SECTION 7. Section 35A.01, Penal Code, is amended by adding
Subdivisions (2-a), (2-b), and (2-c) and amending Subdivision (9)
to read as follows:
(2-a) "Health benefit claim" means a written or
electronically submitted request or demand that:
(A) is submitted by a person who provides or
purports to provide a service or product to an individual covered
under a health benefit plan or by that person's agent and identifies
a service or product provided or purported to have been provided to
the covered individual as reimbursable under the health benefit
plan, without regard to whether the money that is requested or
demanded is paid and without regard to whether the individual was
eligible for benefits under the health benefit plan; or
(B) states the income earned or expense incurred
by a person in providing a service or product to an individual
covered by a health benefit plan and is used to determine a rate of
payment under the plan.
(2-b) "Health benefit plan" means a health insurance
policy, a health care plan, as defined by Section 843.002,
Insurance Code, or another agreement, contract, or evidence of
coverage under which a person undertakes to provide, arrange for,
pay for, or reimburse any part of the cost of health care services.
(2-c) "Health benefit plan issuer" means a person who
is authorized or otherwise permitted by law to issue a health
insurance policy, to arrange for or provide a health care plan, as
defined by Section 843.002, Insurance Code, or to otherwise provide
health benefit plan coverage.
(9) "Service" includes care or treatment of a health
care recipient or an individual covered under a health benefit
plan.
SECTION 8. Section 35A.02, Penal Code, is amended by adding
Subsection (a-1) and amending Subsections (b) and (d) to read as
follows:
(a-1) A person commits an offense if the person:
(1) knowingly makes or causes to be made a false
statement or misrepresentation of a material fact to permit a
person to receive from a health benefit plan issuer a benefit or
payment that is not authorized or that is greater than the benefit
or payment that is authorized;
(2) knowingly conceals or fails to disclose
information that permits a person to receive from a health benefit
plan issuer a benefit or payment that is not authorized or that is
greater than the benefit or payment that is authorized;
(3) knowingly makes or causes to be made a health
benefit claim to a health benefit plan issuer for:
(A) a service or product that has not been
approved or acquiesced in by a treating physician or health care
practitioner;
(B) a service or product that is substantially
inadequate or inappropriate when compared to generally recognized
standards within the particular discipline or within the health
care industry; or
(C) a product that has been adulterated, debased,
or mislabeled or that is otherwise inappropriate; or
(4) knowingly enters into an agreement, combination,
or conspiracy to defraud a health benefit plan issuer by obtaining
or aiding another person in obtaining an unauthorized payment or
benefit from a health benefit plan issuer.
(b) An offense under this section is:
(1) a Class C misdemeanor if the amount of any payment
or the value of any monetary or in-kind benefit provided or claim
for payment made under a health care program, or the amount of a
payment made by or the value of a benefit provided by or claim for
payment made to a health benefit plan issuer, directly or
indirectly, as a result of the conduct is less than $100;
(2) a Class B misdemeanor if the amount of any payment
or the value of any monetary or in-kind benefit provided or claim
for payment made under a health care program, or the amount of a
payment made by or the value of a benefit provided by or claim for
payment made to a health benefit plan issuer, directly or
indirectly, as a result of the conduct is $100 or more but less than
$750;
(3) a Class A misdemeanor if the amount of any payment
or the value of any monetary or in-kind benefit provided or claim
for payment made under a health care program, or the amount of a
payment made by or the value of a benefit provided by or claim for
payment made to a health benefit plan issuer, directly or
indirectly, as a result of the conduct is $750 or more but less than
$2,500;
(4) a state jail felony if:
(A) the amount of any payment or the value of any
monetary or in-kind benefit provided or claim for payment made
under a health care program, or the amount of a payment made by or
the value of a benefit provided by or claim for payment made to a
health benefit plan issuer, directly or indirectly, as a result of
the conduct is $2,500 or more but less than $30,000;
(B) the offense is committed under Subsection
(a)(11); or
(C) it is shown on the trial of the offense that
the amount of the payment or value of the benefit described by this
subsection cannot be reasonably ascertained;
(5) a felony of the third degree if:
(A) the amount of any payment or the value of any
monetary or in-kind benefit provided or claim for payment made
under a health care program, or the amount of a payment made by or
the value of a benefit provided by or claim for payment made to a
health benefit plan issuer, directly or indirectly, as a result of
the conduct is $30,000 or more but less than $150,000; or
(B) it is shown on the trial of the offense that
the defendant submitted more than 25 but fewer than 50 fraudulent
claims under a health care program or to a health benefit plan
issuer, as applicable, and the submission of each claim constitutes
conduct prohibited by Subsection (a) or (a-1), as applicable;
(6) a felony of the second degree if:
(A) the amount of any payment or the value of any
monetary or in-kind benefit provided or claim for payment made
under a health care program, or the amount of a payment made by or
the value of a benefit provided by or claim for payment made to a
health benefit plan issuer, directly or indirectly, as a result of
the conduct is $150,000 or more but less than $300,000; or
(B) it is shown on the trial of the offense that
the defendant submitted 50 or more fraudulent claims under a health
care program or to a health benefit plan issuer, as applicable, and
the submission of each claim constitutes conduct prohibited by
Subsection (a) or (a-1), as applicable; or
(7) a felony of the first degree if the amount of any
payment or the value of any monetary or in-kind benefit provided or
claim for payment made under a health care program, or the amount of
a payment made by or the value of a benefit provided by or claim for
payment made to a health benefit plan issuer, directly or
indirectly, as a result of the conduct is $300,000 or more.
(d) When multiple payments or monetary or in-kind benefits
are provided under one or more health care programs or by one or
more health benefit plan issuers as a result of one scheme or
continuing course of conduct, the conduct may be considered as one
offense and the amounts of the payments or monetary or in-kind
benefits aggregated in determining the grade of the offense.
SECTION 9. Section 3(a)(3), Article 37.07, Code of Criminal
Procedure, is amended to read as follows:
(3) Regardless of the plea and whether the punishment
is assessed by the judge or the jury, during the punishment phase of
the trial of an offense under Section 35A.02, Penal Code, subject to
the applicable rules of evidence, the state and the defendant may
offer evidence not offered during the guilt or innocence phase of
the trial concerning the total pecuniary loss to the affected
health care program or health benefit plan issuer, as applicable,
caused by the defendant's conduct or, if applicable, the scheme or
continuing course of conduct of which the defendant's conduct is
part. Evidence may be offered in summary form concerning the total
pecuniary loss to the affected health care program or health
benefit plan issuer, as applicable. Testimony regarding the total
pecuniary loss to the affected health care program or health
benefit plan issuer, as applicable, is subject to
cross-examination. Evidence offered under this subdivision may be
considered by the judge or jury in ordering or recommending the
amount of any restitution to be made to the affected health care
program or health benefit plan issuer, as applicable, or the
appropriate punishment for the defendant.
SECTION 10. The change in law made by this Act applies only
to an offense committed on or after the effective date of this Act.
An offense committed before the effective date of this Act is
governed by the law in effect at the time the offense was committed,
and the former law is continued in effect for that purpose. For
purposes of this section, an offense was committed before the
effective date of this Act if any element of the offense occurred
before that date.
SECTION 11. This Act takes effect September 1, 2025.