75R10929 E
By Sibley, et al. S.B. No. 386
Substitute the following for S.B. No. 386:
By Smithee C.S.S.B. No. 386
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to review of and liability for certain health care
1-3 treatment decisions.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Title 4, Civil Practice and Remedies Code, is
1-6 amended by adding Chapter 88 to read as follows:
1-7 CHAPTER 88. HEALTH CARE LIABILITY
1-8 Sec. 88.001. DEFINITIONS. In this chapter:
1-9 (1) "Appropriate and medically necessary" means the
1-10 standard for health care services as determined by physicians and
1-11 health care providers in accordance with the prevailing practices
1-12 and standards of the medical profession and community.
1-13 (2) "Enrollee" means an individual who is enrolled in
1-14 a health care plan, including covered dependents.
1-15 (3) "Health care plan" means any plan whereby any
1-16 person undertakes to provide, arrange for, pay for, or reimburse
1-17 any part of the cost of any health care services.
1-18 (4) "Health care provider" means a person or entity as
1-19 defined in Section 1.03(a)(3), Medical Liability and Insurance
1-20 Improvement Act of Texas (Article 4590i, Vernon's Texas Civil
1-21 Statutes).
1-22 (5) "Health care treatment decision" means a
1-23 determination made when medical services are actually provided by
1-24 the health care plan and a decision which affects the quality of
2-1 the diagnosis, care, or treatment provided to the plan's insureds
2-2 or enrollees.
2-3 (6) "Health insurance carrier" means a company that is
2-4 authorized to issue a policy of accident and sickness insurance
2-5 under Section 1, Chapter 397, Acts of the 54th Legislature, 1955
2-6 (Article 3.70-1, Vernon's Texas Insurance Code).
2-7 (7) "Health maintenance organization" means an
2-8 organization licensed under the Texas Health Maintenance
2-9 Organization Act (Chapter 20A, Vernon's Texas Insurance Code).
2-10 (8) "Managed care entity" means any entity which
2-11 delivers, administers, or assumes risk for health care services
2-12 with systems or techniques to control or influence the quality,
2-13 accessibility, utilization, or costs and prices of such services
2-14 to a defined enrollee population, but does not include an employer
2-15 acting on behalf of its employees or the employees of one or more
2-16 subsidiaries or affiliated corporations of the employer or a
2-17 pharmacy licensed by the Texas State Board of Pharmacy.
2-18 (9) "Physician" means:
2-19 (A) an individual licensed to practice medicine
2-20 in this state;
2-21 (B) a professional association organized under
2-22 the Texas Professional Association Act (Article 1528f, Vernon's
2-23 Texas Civil Statutes) or a nonprofit health corporation certified
2-24 under Section 5.01, Medical Practice Act (Article 4495b, Vernon's
2-25 Texas Civil Statutes); or
2-26 (C) another person wholly owned by physicians.
2-27 (10) "Ordinary care" means, in the case of a health
3-1 insurance carrier, health maintenance organization, or managed care
3-2 entity, that degree of care that a health insurance carrier, health
3-3 maintenance organization, or managed care entity of ordinary
3-4 prudence would use under the same or similar circumstances. In the
3-5 case of a person who is an employee, agent, ostensible agent, or
3-6 representative of a health insurance carrier, health maintenance
3-7 organization, or managed care entity, "ordinary care" means that
3-8 degree of care that a person of ordinary prudence in the same
3-9 profession, specialty, or area of practice as such person would use
3-10 in the same or similar circumstances.
3-11 Sec. 88.002. APPLICATION. (a) A health insurance carrier,
3-12 health maintenance organization, or other managed care entity for a
3-13 health care plan has the duty to exercise ordinary care when making
3-14 health care treatment decisions and is liable for damages for harm
3-15 to an insured or enrollee proximately caused by its failure to
3-16 exercise such ordinary care.
3-17 (b) A health insurance carrier, health maintenance
3-18 organization, or other managed care entity for a health care plan
3-19 is also liable for damages for harm to an insured or enrollee
3-20 proximately caused by the health care treatment decisions made by
3-21 its:
3-22 (1) employees;
3-23 (2) agents;
3-24 (3) ostensible agents; or
3-25 (4) representatives who are acting on its behalf and
3-26 over whom it has the right to exercise influence or control or has
3-27 actually exercised influence or control which result in the failure
4-1 to exercise ordinary care.
4-2 (c) The standards in Subsections (a) and (b) create no
4-3 obligation on the part of the health insurance carrier, health
4-4 maintenance organization, or other managed care entity to provide
4-5 to an insured or enrollee treatment which is not covered by the
4-6 health care plan of the entity.
4-7 (d) A health insurance carrier, health maintenance
4-8 organization, or managed care entity may not remove a physician or
4-9 health care provider from its plan or refuse to renew the physician
4-10 or health care provider with its plan for advocating on behalf of
4-11 an enrollee for appropriate and medically necessary health care for
4-12 the enrollee.
4-13 (e) A health insurance carrier, health maintenance
4-14 organization, or other managed care entity may not enter into a
4-15 contract with a physician, hospital, or other health care provider
4-16 or pharmaceutical company which includes an indemnification or hold
4-17 harmless clause for the acts or conduct of the health insurance
4-18 carrier, health maintenance organization, or other managed care
4-19 entity. Any such indemnification or hold harmless clause in an
4-20 existing contract is hereby declared void.
4-21 (f) Nothing in any law of this state prohibiting a health
4-22 insurance carrier, health maintenance organization, or other
4-23 managed care entity from practicing medicine or being licensed to
4-24 practice medicine may be asserted as a defense by such health
4-25 insurance carrier, health maintenance organization, or other
4-26 managed care entity in an action brought against it pursuant to
4-27 this section or any other law.
5-1 (g) In an action against a health insurance carrier, health
5-2 maintenance organization, or managed care entity, a finding that a
5-3 physician or other health care provider is an employee, agent,
5-4 ostensible agent, or representative of such health insurance
5-5 carrier, health maintenance organization, or managed care entity
5-6 shall not be based solely on proof that such person's name appears
5-7 in a listing of approved physicians or health care providers made
5-8 available to insureds or enrollees under a health care plan.
5-9 (h) This chapter does not apply to workers' compensation
5-10 insurance coverage as defined in Section 401.011, Labor Code.
5-11 Sec. 88.003. LIMITATIONS ON CAUSE OF ACTION. (a) A person
5-12 may not maintain a cause of action under this chapter against a
5-13 health insurance carrier, health maintenance organization, or other
5-14 managed care entity that is required to comply with the utilization
5-15 review requirements of Article 21.58A, Insurance Code, or the Texas
5-16 Health Maintenance Organization Act (Chapter 20A, Vernon's Texas
5-17 Insurance Code), unless the affected insured or enrollee or the
5-18 insured's or enrollee's representative:
5-19 (1) has exhausted the appeals and review applicable
5-20 under the utilization review requirements; or
5-21 (2) before instituting the action:
5-22 (A) gives written notice of the claim as
5-23 provided by Subsection (b); and
5-24 (B) agrees to submit the claim to a review by an
5-25 independent review organization under Article 21.58A, Insurance
5-26 Code, as required by Subsection (c).
5-27 (b) The notice required by Subsection (a)(2)(A) must be
6-1 delivered or mailed to the health insurance carrier, health
6-2 maintenance organization, or managed care entity against whom the
6-3 action is made not later than the 30th day before the date the
6-4 claim is filed.
6-5 (c) The insured or enrollee or the insured's or enrollee's
6-6 representative must submit the claim to a review by an independent
6-7 review organization if the health insurance carrier, health
6-8 maintenance organization, or managed care entity against whom the
6-9 claim is made requests the review not later than the 14th day after
6-10 the date notice under Subsection (a)(2)(A) is received by the
6-11 health insurance carrier, health maintenance organization, or
6-12 managed care entity. If the health insurance carrier, health
6-13 maintenance organization, or managed care entity does not request
6-14 the review within the period specified by this subsection, the
6-15 insured or enrollee or the insured's or enrollee's representative
6-16 is not required to submit the claim to independent review before
6-17 maintaining the action.
6-18 (d) Subject to Subsection (e), if the enrollee has not
6-19 complied with Subsection (a), an action under this section shall
6-20 not be dismissed by the court, but the court may, in its
6-21 discretion, order the parties to submit to an independent review,
6-22 mediation, or other nonbinding alternative dispute resolution and
6-23 may abate the action for a period of not to exceed 30 days for such
6-24 purposes. Such orders of the court shall be the sole remedy
6-25 available to a party complaining of an enrollee's failure to comply
6-26 with Subsection (a). Evidence of such internal review or appeal,
6-27 independent review, mediation, or alternative dispute resolution or
7-1 the results of same shall be inadmissible for any purpose in any
7-2 action between an enrollee and a health insurance carrier, health
7-3 maintenance organization, or managed care entity or an employee,
7-4 agent, ostensible agent, or representative of such a carrier,
7-5 organization, or entity.
7-6 (e) The enrollee is not required to comply with Subsection
7-7 (c) and no abatement or other order pursuant to Subsection (d) for
7-8 failure to comply shall be imposed if the enrollee has filed a
7-9 pleading alleging in substance that:
7-10 (1) harm to the enrollee has already occurred because
7-11 of the conduct of the health insurance carrier, health maintenance
7-12 organization, or managed care entity or because of an act or
7-13 omission of an employee, agent, ostensible agent, or representative
7-14 of such carrier, organization, or entity for whose conduct it is
7-15 liable under Section 88.002(b); and
7-16 (2) the review would not be beneficial to the
7-17 enrollee, unless the court, upon motion by a defendant carrier,
7-18 organization, or entity finds after hearing that such pleading was
7-19 not made in good faith, in which case the court may enter an order
7-20 pursuant to Subsection (d).
7-21 (f) If the insured or enrollee or the insured's or
7-22 enrollee's representative seeks to exhaust the appeals and review
7-23 or provides notice, as required by Subsection (a), before the
7-24 statute of limitations applicable to a claim against a managed care
7-25 entity has expired, the limitations period is tolled until the
7-26 later of:
7-27 (1) the 30th day after the date the insured or
8-1 enrollee or the insured's or enrollee's representative has
8-2 exhausted the process for appeals and review applicable under the
8-3 utilization review requirements; or
8-4 (2) the 40th day after the date the insured or
8-5 enrollee or the insured's or enrollee's representative gives notice
8-6 under Subsection (a)(2)(A).
8-7 (g) This section does not prohibit an insured or enrollee
8-8 from pursuing other appropriate remedies, including injunctive
8-9 relief, a declaratory judgment, or relief available under law, if
8-10 the requirement of exhausting the process for appeal and review
8-11 places the insured's or enrollee's health in serious jeopardy.
8-12 SECTION 2. Section 6, Article 21.58A, Insurance Code, is
8-13 amended by amending Subsection (b) and adding Subsection (c) to
8-14 read as follows:
8-15 (b) The procedures for appeals shall be reasonable and shall
8-16 include the following:
8-17 (1) a provision that an enrollee, a person acting on
8-18 behalf of the enrollee, or the enrollee's physician or health care
8-19 provider may appeal the adverse determination and shall be
8-20 provided, on request, a clear and concise statement of the clinical
8-21 basis for the adverse determination;
8-22 (2) a list of documents needed to be submitted by the
8-23 appealing party to the utilization review agent for the appeal;
8-24 (3) a provision that appeal decisions shall be made by
8-25 a physician, provided that, if the appeal is denied and within 10
8-26 working days the health care provider sets forth in writing good
8-27 cause for having a particular type of a specialty provider review
9-1 the case, the denial shall be reviewed by a health care provider in
9-2 the same or similar specialty as typically manages the medical
9-3 condition, procedure, or treatment under discussion for review of
9-4 the adverse determination;
9-5 (4) in addition to the written appeal, a method for an
9-6 expedited appeal procedure for emergency care denials and denials
9-7 of continued stays for hospitalized patients, which shall include a
9-8 health care provider who has not previously reviewed the case;
9-9 such appeal must be completed no later than one working day
9-10 following the day on which the appeal, including all information
9-11 necessary to complete the appeal, is made to the utilization review
9-12 agent; and
9-13 (5) written notification to the appealing party of the
9-14 determination of the appeal, as soon as practical, but in no case
9-15 later than the 30th day after the date the utilization agent
9-16 receives [30 days after receiving all the required documentation
9-17 of] the appeal. If the appeal is denied, the written notification
9-18 shall include a clear and concise statement of:
9-19 (A) the clinical basis for the appeal's denial;
9-20 (B) [and] the specialty of the physician making
9-21 the denial; and
9-22 (C) notice of the appealing party's right to
9-23 seek review of the denial by an independent review organization
9-24 under Section 6A of this article and the procedures for obtaining
9-25 that review.
9-26 (c) Notwithstanding any other law, in a circumstance
9-27 involving an enrollee's life-threatening condition, the enrollee is
10-1 entitled to an immediate appeal to an independent review
10-2 organization as provided by Section 6A of this article and is not
10-3 required to comply with procedures for an internal review of the
10-4 utilization review agent's adverse determination. For purposes of
10-5 this section, "life-threatening condition" means a disease or other
10-6 medical condition with respect to which death is probable unless
10-7 the course of the disease or condition is interrupted.
10-8 SECTION 3. Article 21.58A, Insurance Code, is amended by
10-9 adding Section 6A to read as follows:
10-10 Sec. 6A. INDEPENDENT REVIEW OF ADVERSE DETERMINATIONS. A
10-11 utilization review agent shall:
10-12 (1) permit any party whose appeal of an adverse
10-13 determination is denied by the utilization review agent to seek
10-14 review of that determination by an independent review organization
10-15 assigned to the appeal in accordance with Article 21.58C of this
10-16 code;
10-17 (2) provide to the appropriate independent review
10-18 organization not later than the third business day after the date
10-19 that the utilization review agent receives a request for review a
10-20 copy of:
10-21 (A) any medical records of the enrollee that are
10-22 relevant to the review;
10-23 (B) any documents used by the plan in making the
10-24 determination to be reviewed by the organization;
10-25 (C) the written notification described by
10-26 Section 6(b)(5) of this article;
10-27 (D) any documentation and written information
11-1 submitted to the utilization review agent in support of the appeal;
11-2 and
11-3 (E) a list of each physician or health care
11-4 provider who has provided care to the enrollee and who may have
11-5 medical records relevant to the appeal;
11-6 (3) comply with the independent review organization's
11-7 determination with respect to the medical necessity or
11-8 appropriateness of health care items and services for an enrollee;
11-9 and
11-10 (4) pay for the independent review.
11-11 SECTION 4. Section 8, Article 21.58A, Insurance Code, is
11-12 amended by adding Subsection (f) to read as follows:
11-13 (f) Confidential information in the custody of a utilization
11-14 review agent may be provided to an independent review organization,
11-15 subject to rules and standards adopted by the commissioner under
11-16 Article 21.58C of this code.
11-17 SECTION 5. Section 9(a)(3), Texas Health Maintenance
11-18 Organization Act (Article 20A.09, Vernon's Texas Insurance Code),
11-19 is amended to read as follows:
11-20 (3) An evidence of coverage shall contain:
11-21 (A) no provisions or statements which are
11-22 unjust, unfair, inequitable, misleading, deceptive, which encourage
11-23 misrepresentation, or which are untrue, misleading, or deceptive as
11-24 defined in Section 14 of this Act; and
11-25 (B) a clear and complete statement, if a
11-26 contract, or a reasonably complete facsimile, if a certificate, of:
11-27 (i) the medical, health care services, or
12-1 single health care service and the issuance of other benefits, if
12-2 any, to which the enrollee is entitled under the health care plan
12-3 or single health care service plan;
12-4 (ii) any limitation on the services, kinds
12-5 of services, benefits, or kinds of benefits to be provided,
12-6 including any deductible or co-payment feature;
12-7 (iii) where and in what manner information
12-8 is available as to how services may be obtained; and
12-9 (iv) a clear and understandable
12-10 description of the health maintenance organization's methods for
12-11 resolving enrollee complaints, including the enrollee's right to
12-12 appeal denials of an adverse determination, as that term is
12-13 defined by Section 12A of this Act (Article 20A.12A, Vernon's Texas
12-14 Insurance Code), to an independent review organization and the
12-15 procedures for making an appeal to an independent review
12-16 organization. Any subsequent changes may be evidenced in a
12-17 separate document issued to the enrollee.
12-18 SECTION 6. Section 12, Texas Health Maintenance Organization
12-19 Act (Article 20A.12, Vernon's Texas Insurance Code), is amended to
12-20 read as follows:
12-21 Art. 20A.12. COMPLAINT SYSTEM. (a) Every health
12-22 maintenance organization shall establish and maintain a complaint
12-23 system to provide reasonable procedures for the resolution of oral
12-24 and written complaints initiated by enrollees concerning health
12-25 care services.
12-26 (b) The commissioner [or board] may examine the [such]
12-27 complaint system.
13-1 SECTION 7. The Texas Health Maintenance Organization Act
13-2 (Chapter 20A, Vernon's Texas Insurance Code) is amended by adding
13-3 Section 12A to read as follows:
13-4 Sec. 12A. REVIEW OF ADVERSE DETERMINATIONS. (a) The
13-5 complaint system required by Section 12 of this Act (Article
13-6 20A.12, Vernon's Texas Insurance Code) must include:
13-7 (1) notification to the enrollee of the enrollee's
13-8 right to appeal an adverse determination to an independent review
13-9 organization;
13-10 (2) notification to the enrollee of the procedures for
13-11 appealing an adverse determination to an independent review
13-12 organization; and
13-13 (3) notification to an enrollee who has a
13-14 life-threatening condition of the enrollee's right to immediate
13-15 review by an independent review organization and the procedures to
13-16 obtain that review.
13-17 (b) The provisions of Article 21.58A, Insurance Code, that
13-18 relate to independent review apply to a health maintenance
13-19 organization under this section as if the health maintenance
13-20 organization were a utilization review agent.
13-21 (c) In this section:
13-22 (1) "Adverse determination" means determination by a
13-23 health maintenance organization that the health care services
13-24 furnished or proposed to be furnished to an enrollee are not
13-25 medically necessary or are not appropriate in the allocation of
13-26 health care resources.
13-27 (2) "Independent review organization" means an
14-1 organization selected as provided under Article 21.58C, Insurance
14-2 Code.
14-3 (3) "Life-threatening condition" has the meaning
14-4 assigned by Section 6, Article 21.58A, Insurance Code.
14-5 SECTION 8. Subchapter E, Chapter 21, Insurance Code, is
14-6 amended by adding Article 21.58C to read as follows:
14-7 Art. 21.58C. STANDARDS FOR INDEPENDENT REVIEW ORGANIZATIONS
14-8 Sec. 1. DEFINITIONS. In this article:
14-9 (1) "Life-threatening condition" has the meaning
14-10 assigned by Section 6, Article 21.58A, of this code.
14-11 (2) "Payor" has the meaning assigned by Section 2,
14-12 Article 21.58A, of this code.
14-13 Sec. 2. CERTIFICATION AND DESIGNATION OF INDEPENDENT REVIEW
14-14 ORGANIZATIONS. (a) The commissioner shall:
14-15 (1) promulgate standards and rules for:
14-16 (A) the certification, selection, and operation
14-17 of independent review organizations to perform independent review
14-18 described by Section 6, Article 21.58A, of this code; and
14-19 (B) the suspension and revocation of the
14-20 certification;
14-21 (2) designate annually each organization that meets
14-22 the standards as an independent review organization;
14-23 (3) charge payors fees in accordance with this article
14-24 as necessary to fund the operations of independent review
14-25 organizations; and
14-26 (4) provide ongoing oversight of the independent
14-27 review organizations to ensure continued compliance with this
15-1 article and the standards and rules adopted under this article.
15-2 (b) The standards required by Subsection (a)(1) of this
15-3 section must ensure:
15-4 (1) the timely response of an independent review
15-5 organization selected under this article;
15-6 (2) the confidentiality of medical records transmitted
15-7 to an independent review organization for use in independent
15-8 reviews;
15-9 (3) the qualifications and independence of each health
15-10 care provider or physician making review determinations for an
15-11 independent review organization;
15-12 (4) the fairness of the procedures used by an
15-13 independent review organization in making the determinations; and
15-14 (5) timely notice to enrollees of the results of the
15-15 independent review, including the clinical basis for the
15-16 determination.
15-17 (c) The standards adopted under Subsection (a)(1) of this
15-18 section must include standards that require each independent review
15-19 organization to make its determination:
15-20 (1) not later than the earlier of:
15-21 (A) the 15th day after the date the independent
15-22 review organization receives the information necessary to make the
15-23 determination; or
15-24 (B) the 20th day after the date the independent
15-25 review organization receives the request that the determination be
15-26 made; and
15-27 (2) in the case of a life-threatening condition, not
16-1 later than the earlier of:
16-2 (A) the fifth day after the date the independent
16-3 review organization receives the information necessary to make the
16-4 determination; or
16-5 (B) the eighth day after the date the
16-6 independent review organization receives the request that the
16-7 determination be made.
16-8 (d) To be certified as an independent review organization
16-9 under this article, an organization must submit to the commissioner
16-10 an application in the form required by the commissioner. The
16-11 application must include:
16-12 (1) for an applicant that is publicly held, the name
16-13 of each stockholder or owner of more than five percent of any stock
16-14 or options;
16-15 (2) the name of any holder of bonds or notes of the
16-16 applicant that exceed $100,000;
16-17 (3) the name and type of business of each corporation
16-18 or other organization that the applicant controls or is affiliated
16-19 with and the nature and extent of the affiliation or control;
16-20 (4) the name and a biographical sketch of each
16-21 director, officer, and executive of the applicant and any entity
16-22 listed under Subdivision (3) of this subsection and a description
16-23 of any relationship the named individual has with:
16-24 (A) a health benefit plan;
16-25 (B) a health maintenance organization;
16-26 (C) an insurer;
16-27 (D) a utilization review agent;
17-1 (E) a nonprofit health corporation;
17-2 (F) a payor;
17-3 (G) a health care provider; or
17-4 (H) a group representing any of the entities
17-5 described by Paragraphs (A) through (G) of this subdivision;
17-6 (5) the percentage of the applicant's revenues that
17-7 are anticipated to be derived from reviews conducted under Section
17-8 6A, Article 21.58A, of this code;
17-9 (6) a description of the areas of expertise of the
17-10 health care professionals making review determinations for the
17-11 applicant; and
17-12 (7) the procedures to be used by the independent
17-13 review organization in making review determinations with respect to
17-14 reviews conducted under Section 6A, Article 21.58A, of this code.
17-15 (e) The independent review organization shall annually
17-16 submit the information required by Subsection (d) of this section.
17-17 If at any time there is a material change in the information
17-18 included in the application under Subsection (d) of this section,
17-19 the independent review organization shall submit updated
17-20 information to the commissioner.
17-21 (f) An independent review organization may not be a
17-22 subsidiary of, or in any way owned or controlled by, a payor or a
17-23 trade or professional association of payors.
17-24 (g) An independent review organization conducting a review
17-25 under Section 6A, Article 21.58A, of this code is not liable for
17-26 damages arising from the determination made by the organization.
17-27 This subsection does not apply to an act or omission of the
18-1 independent review organization that is made in bad faith or that
18-2 involves gross negligence.
18-3 SECTION 9. Chapter 88, Civil Practice and Remedies Code, as
18-4 added by this Act, applies only to a cause of action that accrues
18-5 on or after the effective date of this Act. An action that accrues
18-6 before the effective date of this Act is governed by the law
18-7 applicable to the action immediately before the effective date of
18-8 this Act, and that law is continued in effect for that purpose.
18-9 SECTION 10. (a) The change in law made by Sections 2-4 and
18-10 6-8 of this Act applies only to an adverse determination of a
18-11 utilization review agent or health maintenance organization made on
18-12 or after the effective date of this Act.
18-13 (b) The change in law made by Section 5 of this Act to
18-14 Section 9, Texas Health Maintenance Organization Act (Article
18-15 20A.09, Vernon's Texas Insurance Code), applies only to an evidence
18-16 of coverage that is delivered, issued for delivery, or renewed on
18-17 or after January 1, 1998. An evidence of coverage that is
18-18 delivered, issued for delivery, or renewed before January 1, 1998,
18-19 is governed by the law as it existed immediately before the
18-20 effective date of this Act, and that law is continued in effect for
18-21 that purpose.
18-22 SECTION 11. This Act takes effect September 1, 1997.
18-23 SECTION 12. The importance of this legislation and the
18-24 crowded condition of the calendars in both houses create an
18-25 emergency and an imperative public necessity that the
18-26 constitutional rule requiring bills to be read on three several
18-27 days in each house be suspended, and this rule is hereby suspended.