By:  Duncan                                  S.B. No. 1813


                                A BILL TO BE ENTITLED

                                       AN ACT

 1-1     relating to the creation of a system of independent review for

 1-2     adverse medical determinations concerning insurance coverage.


 1-4           SECTION 1.  Chapter 1, Insurance Code, is amended by adding

 1-5     Article 1.35E to read as follows:


 1-7           (a)  The commissioner shall:

 1-8                 (1)  promulgate standards for the selection of

 1-9     independent review organizations to perform the reviews described

1-10     in Section 6(c), Article 21.58A of this code;

1-11                 (2)  designate annually each organization that meets

1-12     the standards as an independent review organization; and

1-13                 (3)  assure that a sufficient number of such

1-14     organizations are so designated to permit the expeditious review of

1-15     all adverse determinations and to provide a reasonable choice for

1-16     entities that are required to contract with the organizations for

1-17     the review of the determinations.

1-18           (b)  The standards required by Subsection (a)(1) of this

1-19     article shall be designed to assure:

1-20                 (1)  the independence of the organizations designated

1-21     under this article;

1-22                 (2)  the confidentiality of medical records transmitted

1-23     to such organizations for use in such reviews;

 2-1                 (3)  the qualifications and independence of the health

 2-2     care professionals making review determinations for the

 2-3     organizations; and

 2-4                 (4)  the fairness of the procedures of the

 2-5     organizations for making the determinations.

 2-6           (c)  In order to be designated as an independent review

 2-7     organization under this article, an organization shall submit to

 2-8     the commissioner, on initial application and annually thereafter

 2-9     and on any change occurring after the latest submission under this

2-10     subsection, the following information:

2-11                 (1)  in the case of a publicly held organization, the

2-12     names of all stockholders and owners of more than five percent of

2-13     any stock or options;

2-14                 (2)  the names of all holders of bonds or notes

2-15     exceeding $100,000;

2-16                 (3)  the names and type of business of all corporations

2-17     and organizations that the organization controls or is affiliated

2-18     with and the nature and extent of any ownership or control;

2-19                 (4)  the names and biographical sketches of all

2-20     directors, officers, and executives of the organization and a

2-21     description of any relationships such individuals may have with any

2-22     health benefit plan, health maintenance organization, insurer,

2-23     utilization review agent, nonprofit health corporation, payor,

2-24     health care provider, or group representing any such entities;

2-25                 (5)  the percentage of the organization's revenues that

 3-1     is derived from the reviews; and

 3-2                 (6)  a description of the areas of expertise of the

 3-3     health care professionals making review determinations for the

 3-4     organization.

 3-5           (d)  An independent review organization may not be a

 3-6     subsidiary of, nor in any way be owned or controlled by, a payor, a

 3-7     trade association of payors or providers, or a professional

 3-8     association of physicians or other health professionals.

 3-9           SECTION 2.  Section 6, Article 21.58A, Insurance Code, is

3-10     amended to read as follows:


3-12     REVIEW AGENTS.  (a)  A utilization review agent shall maintain and

3-13     make available a written description of procedures for appealing

3-14     adverse determinations [an appeal procedure of an adverse

3-15     determination].

3-16           (b)  The procedures for appeals shall be reasonable and shall

3-17     include the following:

3-18                 (1)  a provision that an enrollee, a person acting on

3-19     behalf of the enrollee, or the enrollee's physician or health care

3-20     provider may appeal the adverse determination and shall be

3-21     provided, on request, a clear and concise statement of the clinical

3-22     basis for the adverse determination;

3-23                 (2)  a provision that, within five working days from

3-24     receipt of the appeal, the utilization review agent shall send the

3-25     appealing party a letter acknowledging the date of receipt of the

 4-1     appeal and include a list of documents needed to be submitted by

 4-2     the appealing party to the utilization review agent for the appeal;

 4-3                 (3)  a provision that appeal decisions shall be made by

 4-4     a physician, provided that, if the appeal is denied and within 10

 4-5     working days the health care provider sets forth in writing good

 4-6     cause for having a particular type of a specialty provider review

 4-7     the case, the denial shall be reviewed by a health care provider in

 4-8     the same or similar specialty as typically manages the medical

 4-9     condition, procedure, or treatment under discussion for review of

4-10     the adverse determination;

4-11                 (4)  in addition to the written appeal, a method for an

4-12     expedited appeal procedure for emergency care denials and denials

4-13     of continued stays for hospitalized patients, which shall include a

4-14     health care provider who has not previously reviewed the case; such

4-15     appeal must be completed no later than one working day following

4-16     the day on which the appeal, including all information necessary to

4-17     complete the appeal, is made to the utilization review agent; and

4-18                 (5)  written notification to the appealing party of the

4-19     determination of the appeal, as soon as practical, but in no case

4-20     later than 30 days after receiving all the required documentation

4-21     of the appeal.  If the appeal is denied, the written notification

4-22     shall include a clear and concise statement of the clinical basis

4-23     for the appeal's denial, [and] the specialty of the physician

4-24     making the denial, and notice of the appealing party's right to

4-25     seek review of such denial by an independent review organization

 5-1     and procedures for seeking review.

 5-2           (c)  A utilization review agent shall:

 5-3                 (1)  contract with one or more independent review

 5-4     organizations designated in accordance with Article 1.35E of this

 5-5     code to review the agent's denials of appeals of adverse

 5-6     determinations;

 5-7                 (2)  permit any party whose appeal of an adverse

 5-8     determination is denied by the agent to seek review of such

 5-9     determination by an independent review organization if the amount

5-10     in controversy is $500 or more, the party has exhausted all

5-11     remedies available from the agent, and the enrollee's treating

5-12     physician certifies that the items and services for which review is

5-13     sought are medically necessary and an appropriate treatment option;

5-14                 (3)  provide to the appropriate independent review

5-15     organization within five working days of the agent's receipt of a

5-16     request for review:

5-17                       (A)  a copy of any medical records of the

5-18     enrollee that are relevant to such review;

5-19                       (B)  a copy of any documents used by the plan in

5-20     making the determination to be reviewed by the organization;

5-21                       (C)  a copy of the statement referred to in

5-22     Subsection (b)(5) of this section; and

5-23                       (D)  a copy of any documentation and written

5-24     information submitted to the plan in support of the appeal;

5-25                 (4)  include in the contract a requirement that the

 6-1     organization will make a determination to affirm or reverse the

 6-2     denial:

 6-3                       (A)  within 30 days of receipt by the

 6-4     organization of all information necessary to make the

 6-5     determination; or

 6-6                       (B)  in the case of denials of appeals for urgent

 6-7     and emergency care and continued stays for hospitalized patients,

 6-8     within a period of time that is appropriate under the

 6-9     circumstances;

6-10                 (5)  comply with any determination of the organization

6-11     with respect to the medical necessity or appropriateness of health

6-12     care items and services for an enrollee consistent with the scope

6-13     of benefits under the policy or plan of the enrollee as specified

6-14     in the applicable evidence of coverage contract; and

6-15                 (6)  be responsible for the cost of the independent

6-16     review.

6-17           (d)  A utilization review agent whose adverse determination

6-18     is reviewed by an independent review organization under Subsection

6-19     (c) of this section shall be held harmless for that determination

6-20     and shall not be liable  for any cause of action arising from that

6-21     determination or from the determination of the independent review

6-22     organization.

6-23           SECTION 3.  Section 2, Texas Health Maintenance Organization

6-24     Act (Article 20A.02, Vernon's Texas Insurance Code), is amended to

6-25     read as follows:

 7-1           Sec. 2.  DEFINITIONS.  For the purposes of this Act:

 7-2     (a)  "Adverse determination" means a determination by a health

 7-3     maintenance organization that the health care services furnished or

 7-4     proposed to be furnished to a patient are not medically necessary

 7-5     or not appropriate in the allocation of health care resources.

 7-6           (b)  "Basic health care services" means health care services

 7-7     which an enrolled population might reasonably require in order to

 7-8     be maintained in good health, including, as a minimum, emergency

 7-9     care, inpatient hospital and medical services, and outpatient

7-10     medical services.

7-11           (c) [(b)]  "Board" means the Texas Board of Health.

7-12           (d) [(c)]  "Commissioner" means the commissioner of

7-13     insurance.

7-14           (e) [(d)]  "Enrollee" means an individual who is enrolled in

7-15     a health care plan, including covered dependents.

7-16           (f) [(e)]  "Evidence of coverage" means any certificate,

7-17     agreement, or contract issued to an enrollee setting out the

7-18     coverage to which the enrollee is entitled.

7-19           (g) [(f)]  "Group hospital service corporation" means a

7-20     nonprofit corporation organized and operating under Chapter 20 of

7-21     the Insurance Code.

7-22           (h) [(g)]  "Health care" means prevention, maintenance,

7-23     rehabilitation, pharmaceutical, and chiropractic services provided

7-24     by qualified persons other than medical care.

7-25           (i) [(h)]  "Health care plan" means any plan whereby any

 8-1     person undertakes to provide, arrange for, pay for, or reimburse

 8-2     any part of the cost of any health care services; provided,

 8-3     however, a part of such plan consists of arranging for or the

 8-4     provision of health care services, as distinguished from

 8-5     indemnification against the cost of such service, on a prepaid

 8-6     basis through insurance or otherwise.

 8-7           (j) [(i)]  "Health care services" means any services,

 8-8     including the furnishing to any individual of pharmaceutical

 8-9     services, medical, chiropractic, or dental care, or hospitalization

8-10     or incident to the furnishing of such services, care, or

8-11     hospitalization, as well as the furnishing to any person of any and

8-12     all other services for the purpose of preventing, alleviating,

8-13     curing, or healing human illness or injury or a single health care

8-14     service plan.

8-15           (k) [(j)]  "Health maintenance organization" means any person

8-16     who arranges for or provides a health care plan or a single health

8-17     care service plan to enrollees on a prepaid basis.

8-18           (l) [(k)]  "Medical care" means furnishing those services

8-19     defined as practicing medicine under Section 1.03(8), Medical

8-20     Practice Act (Article 4495b, Vernon's Texas Civil Statutes).

8-21           (m) [(l)]  "Person" means any natural or artificial person,

8-22     including, but not limited to, individuals, partnerships,

8-23     associations, organizations, trusts, hospital districts, limited

8-24     liability companies, limited liability partnerships, or

8-25     corporations.

 9-1           (n) [(m)]  "Physician" means:

 9-2                 (1)  an individual licensed to practice medicine in

 9-3     this state;

 9-4                 (2)  a professional association organized under the

 9-5     Texas Professional Association Act (Article 1528f, Vernon's Texas

 9-6     Civil Statutes) or a nonprofit health corporation certified under

 9-7     Section 5.01, Medical Practice Act (Article 4495b, Vernon's Texas

 9-8     Civil Statutes); or

 9-9                 (3)  another person wholly owned by physicians.

9-10           (o) [(n)]  "Provider" means:

9-11                 (1)  any person other than a physician, including a

9-12     licensed doctor of chiropractic, registered nurse, pharmacist,

9-13     optometrist, pharmacy, hospital, or other institution or

9-14     organization or person that is licensed or otherwise authorized to

9-15     provide a health care service in this state;

9-16                 (2)  a person who is wholly owned or controlled by a

9-17     provider or by a group of providers who are licensed to provide the

9-18     same health care service; or

9-19                 (3)  a person who is wholly owned or controlled by one

9-20     or more hospitals and physicians, including a physician-hospital

9-21     organization.

9-22           (p) [(o)]  "Sponsoring organization" means a person who

9-23     guarantees the uncovered expenses of the health maintenance

9-24     organization and who is financially capable, as determined by the

9-25     commissioner, of meeting the obligations resulting from those

 10-1    guarantees.

 10-2          (q) [(p)]  "Uncovered expenses" means the estimated

 10-3    administrative expenses and the estimated cost of health care

 10-4    services that are not guaranteed, insured, or assumed by a person

 10-5    other than the health maintenance organization.  Health care

 10-6    services may be considered covered if the physician or provider

 10-7    agrees in writing that enrollees shall in no way be liable,

 10-8    assessable, or in any way subject to payment for services except as

 10-9    described in the evidence of coverage issued to the enrollee under

10-10    Section 9 of this Act.  The amount due on loans in the next

10-11    calendar year will be considered uncovered expenses unless

10-12    specifically subordinated to uncovered medical and health care

10-13    expenses or unless guaranteed by the sponsoring organization.

10-14          (r) [(q)]  "Uncovered liabilities" means obligations

10-15    resulting from unpaid uncovered expenses, the outstanding

10-16    indebtedness of loans that are not specifically subordinated to

10-17    uncovered medical and health care expenses or guaranteed by the

10-18    sponsoring organization, and all other monetary obligations that

10-19    are not similarly subordinated or guaranteed.

10-20          (s) [(r)]  "Single health care service" means a health care

10-21    service that an enrolled population may reasonably require in order

10-22    to be maintained in good health with respect to a particular health

10-23    care need for the purpose of preventing, alleviating, curing, or

10-24    healing human illness or injury of a single specified nature and

10-25    that is to be provided by one or more persons each of whom is

 11-1    licensed by the state to provide that specific health care service.

 11-2          (t) [(s)]  "Single health care service plan" means a plan

 11-3    under which any person undertakes to provide, arrange for, pay for,

 11-4    or reimburse any part of the cost of a single health care service,

 11-5    provided, that a part of the plan consists of arranging for or the

 11-6    provision of the single health care service, as distinguished from

 11-7    an indemnification against the cost of that service, on a prepaid

 11-8    basis through insurance or otherwise and that no part of that plan

 11-9    consists of arranging for the provision of more than one health

11-10    care need of a single specified nature.

11-11          (u) [(t)]  "Emergency care" means bona fide emergency

11-12    services provided after the sudden onset of a medical condition

11-13    manifesting itself by acute symptoms of sufficient severity,

11-14    including severe pain, such that the absence of immediate medical

11-15    attention could reasonably be expected to result in:

11-16                (1)  placing the patient's health in serious jeopardy;

11-17                (2)  serious impairment to bodily functions; or

11-18                (3)  serious dysfunction of any bodily organ or part.

11-19          (v) [(u)]  "Health maintenance organization delivery network"

11-20    means a health care delivery system in which a health maintenance

11-21    organization arranges for health care services directly or

11-22    indirectly through contracts and subcontracts with providers and

11-23    physicians.

11-24          SECTION 4.  Subdivision (3), Subsection (a), Section 9, Texas

11-25    Health Maintenance Organization Act (Article 20A.09, Vernon's Texas

 12-1    Insurance Code), is amended to read as follows:

 12-2                (3)  An evidence of coverage shall contain:

 12-3                      (A)  no provisions or statements which are

 12-4    unjust, unfair, inequitable, misleading, deceptive, which encourage

 12-5    misrepresentation, or which are untrue, misleading, or deceptive as

 12-6    defined in Section 14 of this Act; and

 12-7                      (B)  a clear and complete statement, if a

 12-8    contract, or a reasonably complete facsimile, if a certificate, of:

 12-9                            (i)  the medical, health care services, or

12-10    single health care service and the issuance of other benefits, if

12-11    any, to which the enrollee is entitled under the health care plan

12-12    or single health care service plan;

12-13                            (ii)  any limitation on the services, kinds

12-14    of services, benefits, or kinds of benefits to be provided,

12-15    including any deductible or co-payment feature;

12-16                            (iii)  where and in what manner information

12-17    is available as to how services may be obtained; and

12-18                            (iv)  a clear and understandable

12-19    description of the health maintenance organization's methods for

12-20    resolving enrollee complaints, including the enrollee's right to

12-21    appeal denials of adverse determinations to an independent review

12-22    organization and the process for making an appeal.  Any subsequent

12-23    changes may be evidenced in a separate document issued to the

12-24    enrollee.

12-25          SECTION 5.  Section 12, Texas Health Maintenance Organization

 13-1    Act (Article 20A.12, Vernon's Texas Insurance Code), is amended by

 13-2    amending Subsection (b) and adding Subsection (c) to read as

 13-3    follows:

 13-4          (b)  The commissioner [or board] may examine such complaint

 13-5    system.

 13-6          (c)  The system required by Subsection (a) of this section

 13-7    shall include procedures for appealing an adverse determination and

 13-8    for seeking independent review of a denial of an appeal.  The

 13-9    provisions of Section 6, Article 21.58A, Insurance Code, relating

13-10    to independent review shall apply to a health maintenance

13-11    organization under this article in the same manner and to the same

13-12    extent as they apply to a utilization review agent under that

13-13    section, except that Section 6(d) of Article 21.58A of the

13-14    Insurance Code shall apply to an enrollee's treating physician and

13-15    the health maintenance organization.

13-16          SECTION 6.  This Act takes effect on January 1, 1998, and

13-17    applies to adverse determinations occurring on or after such date.

13-18    An adverse determination occurring before the effective date of

13-19    this Act is governed by the law as it existed immediately before

13-20    the effective date of this Act, and that law is continued in effect

13-21    for that purpose.

13-22          SECTION 7.  The importance of this legislation and the

13-23    crowded condition of the calendars in both houses create an

13-24    emergency and an imperative public necessity that the

13-25    constitutional rule requiring bills to be read on three several

 14-1    days in each house be suspended, and this rule is hereby suspended.