By Davis of Harris                                    H.B. No. 2096
         76R8321 T                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to the control of health insurance fraud.
 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-4           SECTION 1.  Texas Insurance Code, Part I, Chapter 3, Life,
 1-5     Accident and Health Insurance, is amended to add a new Article
 1-6     3.101 of a new Subchapter L, Insurer Anti-fraud Programs, as
 1-7     follows:
 1-8           Art. 3.101.  STATEMENT OF PUBLIC POLICY.  The Legislature
 1-9     finds and declares that the business of health insurance involves
1-10     many transactions which have potential for abuse and illegal
1-11     activities.  There are numerous law enforcement agencies on the
1-12     state and local levels charged with the responsibility for
1-13     investigating and prosecuting fraudulent activity.  This chapter is
1-14     intended to permit the full utilization of the expertise of the
1-15     commissioner and the department so that they may more effectively
1-16     investigate and discover insurance frauds, halt fraudulent
1-17     activities, and assist and receive assistance from federal, state,
1-18     local, and administrative law enforcement agencies in prosecution
1-19     of persons who are parties in insurance frauds.
1-20           SECTION 2.  Texas Insurance Code, Part I, Chapter 3, Life,
1-21     Accident and Health Insurance, is amended to add a new Article
1-22     3.101-1 of a new Subchapter L, Insurer Anti-fraud Programs, as
1-23     follows:
1-24           Art. 3.101-1.  NOTICE OF PENALTY FOR FALSE OR FRAUDULENT
 2-1     CLAIMS; DISPLAY ON FORMS.  Any insurer who, in connection with any
 2-2     insurance contract or provision of contract described in this
 2-3     subsection, prints, reproduces, or furnishes a form to any person
 2-4     upon which that person gives notice to the insurer or makes claim
 2-5     against it by reason of accident, injury, or other noticed or
 2-6     claimed loss, or on a rider attached thereto, shall cause to be
 2-7     printed or displayed in comparative prominence with other content
 2-8     the statement or a statement substantially similar to the following
 2-9     in terms of intent and language:  "Any person who knowingly
2-10     presents false or fraudulent claim for the payment of a loss is
2-11     guilty of a crime and may be subject to fines and confinement in
2-12     state prison."  This statement shall be preceded by the words:
2-13     "For your protection, Texas law requires the following to appear on
2-14     this form" or other explanatory words of similar meaning.
2-15           SECTION 3.  Texas Insurance Code, Part I, Chapter 3, Life,
2-16     Accident and Health Insurance, is amended to add a new Article
2-17     3.101-2 of a new Subchapter L, Insurer Anti-fraud Programs, as
2-18     follows:
2-19           Art. 3.101-2.  ADMINISTRATIVE ACTION FOR FRAUD.  If the
2-20     commissioner of insurance determines that an insurer has been
2-21     defrauded by the action of a health care provider, including a
2-22     hospital, physician, dentist, chiropractor, nurse, or other
2-23     practitioner of the health care or healing arts, the commissioner
2-24     may order that the insurer retain such amounts that otherwise would
2-25     be owed to that health care provider.
2-26           SECTION 4.  Texas Insurance Code, Part I, Chapter 3, Life,
2-27     Accident and Health Insurance, is amended to add a new Article
 3-1     3.101-3 of a new Subchapter L, Insurer Anti-fraud Programs, as
 3-2     follows:
 3-3           Art. 3.101-3.  INSURER ANTI-FRAUD INVESTIGATIVE UNITS.  (a)
 3-4     Every insurer admitted to do business in this state that at any
 3-5     time in the previous calendar year had $10 million or more in
 3-6     direct premiums written shall:
 3-7                 (1)  Establish and maintain a division within the
 3-8     company to investigate possible fraudulent claims by insureds or by
 3-9     persons making claims against policies held by insureds; or
3-10                 (2)  Contract with others to investigate possible
3-11     fraudulent claims against policies held by insureds.
3-12           (b)  An insurer subject to this chapter shall file annually
3-13     for approval with the insurance fraud unit of the department (Texas
3-14     Insurance Code Article 1.10D) beginning on or before July 1, 2001,
3-15     a detailed description of the division established pursuant to this
3-16     statute and the results of its investigations.
3-17           (c)  Every insurer admitted to do business in this state,
3-18     that in the previous calendar year had less than $10 million in
3-19     direct premiums written, must adopt annually an anti-fraud plan and
3-20     file it for approval with the insurance fraud unit of the
3-21     department beginning on or before July 1, 2001.  After the
3-22     insurer's satisfaction of its first filing requirement under this
3-23     statute, the insurer shall thereafter comply with the filing dates
3-24     as established by the commissioner.
3-25           (d)  In discharge of its obligation to establish and maintain
3-26     an anti-fraud division, an insurer may contract with others to
3-27     investigate possible fraudulent claims against policies held by
 4-1     insureds.
 4-2           (e)  If an insurer establishes and maintains an anti-fraud
 4-3     division, then insurer's anti-fraud plan shall include:
 4-4                 (1)  A description of the insurer's procedures for
 4-5     detecting and investigating possible fraudulent insurance acts;
 4-6                 (2)  A description of the insurer's procedures for the
 4-7     mandatory reporting of possible fraudulent insurance acts to the
 4-8     Insurance fraud unit of the department;
 4-9                 (3)  A description of the insurer's plan for anti-fraud
4-10     education and training of its claims adjusters or other personnel;
4-11                 (4)  The names, addresses, telephone numbers, and fax
4-12     numbers of the persons assigned by the insurer to staff the
4-13     insurer's anti-fraud division; and
4-14                 (5)  A written description or chart outlining the
4-15     organizational arrangement of the insurer's anti-fraud personnel
4-16     who are responsible for the investigation and reporting of possible
4-17     fraudulent insurance acts.
4-18           (f)  If an insurer elects to contract with others to
4-19     investigate possible fraudulent claims against policies held by
4-20     insureds, then the insurer shall file for approval with the
4-21     insurance fraud unit of the department:
4-22                 (1)  A copy of the written contract between the insurer
4-23     and the entity with which the insurer has entered into an agreement
4-24     to investigate possible fraudulent insurance claims;
4-25                 (2)  The names, addresses, telephone numbers, and fax
4-26     numbers of the principals of the entity with which the insurer has
4-27     entered into an agreement to investigate possible fraudulent
 5-1     claims; and
 5-2                 (3)  The qualifications of the principals of the entity
 5-3     with which the insurer has entered into an agreement to investigate
 5-4     possible fraudulent claims.
 5-5           (g)  Any insurer who obtains a certificate of authority after
 5-6     January 1, 2000, shall have 18 months in which to comply with the
 5-7     requirements of this section.  After the insurer's satisfaction of
 5-8     its first filing requirement under this statute, the insurer shall
 5-9     thereafter comply with the filing dates as established by the
5-10     commissioner.
5-11           (h)  For purposes of this section, the term "division"
5-12     includes the assignment of fraud investigation to employees whose
5-13     principal responsibilities are the investigation and disposition of
5-14     claims.
5-15           (i)  If an insurer hires additional employees or contracts
5-16     with another entity to fulfill the requirements of this section,
5-17     the additional cost incurred must be included as an administrative
5-18     expense for ratemaking purposes.
5-19           SECTION 5.  Texas Insurance Code, Part I, Chapter 3, Life,
5-20     Accident and Health Insurance, is amended to add a new Article
5-21     3.101-4 of a new Subchapter L, Insurer Anti-fraud Programs, as
5-22     follows:
5-23           Art. 3.101-4.  IMMUNITY FOR INSURER-TO INSURER INFORMATION
5-24     SHARING.  (a)  In the course of investigating possible insurance
5-25     fraud claims, an insurer or its contracting entity may share
5-26     information with other insurers or entities that have contracted
5-27     with insurers to provide anti-fraud investigative services.
 6-1           (b)  The sharing of this information between insurers and
 6-2     their contracting entities under this statute will not subject the
 6-3     parties that are sharing the information to liability for
 6-4     defamation by the health care provider if the purpose of the
 6-5     provision of information is for the purpose of reporting,
 6-6     detecting, or preventing the commission of fraudulent insurance
 6-7     acts and is made without malice, fraudulent intent, or bad faith.
 6-8           (c)  This section does not affect or modify any common law or
 6-9     statutory privilege or immunity.
6-10           SECTION 6.  Texas Health & Safety Code, Title 1, is amended
6-11     by adding Section 2.001, as part of a new chapter 2, Health Care
6-12     Fraud Programs as follows:
6-13           Sec. 2.001.  PUBLIC POLICY.  It shall be the policy of this
6-14     state to confront aggressively the problem of health care fraud in
6-15     Texas by facilitating the detection and prevention of fraud at its
6-16     source.
6-17           SECTION 7.  Texas Health & Safety Code, Title 1, is amended
6-18     by adding Section 2.002. as part of a new chapter 2, Health Care
6-19     Fraud Programs as follows:
6-20           Sec. 2.002.  DEFINITIONS.  (a)  "Insurer" means
6-21                 (1)  any life, health, & accident insurer; health &
6-22     accident insurer; or health insurer; health maintenance
6-23     organization; or any other company operating pursuant to Chapter 3,
6-24     10, 20, 20A, 22, or 26 of the Code and that is authorized to issue,
6-25     deliver, or issue for delivery in this state policies,
6-26     certificates, or contracts;
6-27                 (2)  any approved nonprofit health corporation that is
 7-1     certified under Section 5.01(a), Medical Practice Act (Article
 7-2     4495b, Vernon's Texas Civil Statutes), and that holds a certificate
 7-3     of authority issued by the commissioner of insurance under Article
 7-4     21.52F, Insurance Code;
 7-5                 (3)  any entity that direct contracts with employers,
 7-6     employees, labor unions, trade associations, or other groups to
 7-7     provide health benefit coverage; or
 7-8                 (4)  any insurer authorized by the Texas Department of
 7-9     Insurance to write workers' compensation insurance in this state.
7-10           (b)  "Health maintenance organization" means an organization
7-11     as defined in Article 20A.02 of the Code.
7-12           (c)  "Health care provider" means any person or entity that
7-13     holds a license, certificate, or other form of authorization issued
7-14     by an agency, board, commission, or other governmental unit of this
7-15     state by which the holder is authorized to deliver, render, or
7-16     otherwise provide health care or medical services to the public;
7-17     this definition shall include but not be limited to all such
7-18     persons who hold such licenses, certificates, or other
7-19     authorizations issued pursuant to the provisions of Title 71 of the
7-20     Texas Revised Civil Statutes and Title 4 of the Texas Health &
7-21     Safety Code.
7-22           SECTION 8.  Texas Health & Safety Code, Title 1, is amended
7-23     by adding Section 2.003. as part of a new chapter 2, Health Care
7-24     Fraud Programs as follows:
7-25           Sec. 2.003.  UNPROFESSIONAL CONDUCT.  (a)  It shall
7-26     constitute unprofessional conduct and grounds for disciplinary
7-27     action for a provider to do any of the following in connection with
 8-1     his or her professional activities:
 8-2                 (1)  Knowingly present or cause to be presented any
 8-3     false or fraudulent claim for the payment of a loss under a
 8-4     contract of insurance
 8-5                 (2)  Knowingly prepare, make, or subscribe any writing,
 8-6     with intent to present or use the same, or to allow it to be
 8-7     presented or used in support of any false or fraudulent claim
 8-8                 (3)  Commit an offense that is a violation of Chapter
 8-9     35 of the Texas Penal Code or is a violation of any similar statute
8-10     under the laws of other jurisdictions.
8-11           (b)  In addition to such other provisions of civil or
8-12     criminal law, a violation of this provision shall constitute cause
8-13     for the suspension of the provider's license for one year upon a
8-14     first conviction for fraud in any jurisdiction and revocation of a
8-15     provider's license for a second conviction in any jurisdiction.
8-16     The first and second convictions need not occur in the same
8-17     jurisdiction for the revocation to be imposed.
8-18           SECTION 9.  Texas Health & Safety Code, Title 1, is amended
8-19     by adding Section 2.004 as part of a new chapter 2, Health Care
8-20     Fraud Programs, as follows:
8-21           Sec. 2.004.  NON-APPLICATION TO ERISA PLANS.  No portion of
8-22     this chapter shall be construed to apply to those self-funded
8-23     health care plans that may be governed by the provisions of
8-24     Employee Retirement Income Security Act of 1974, as amended.
8-25           SECTION 10.  Texas Insurance Code, Article 1.10D, is amended
8-26     by adding a new Section 3A, as follows:
8-27           Sec. 3A.  INSURER ANTI-FRAUD INVESTIGATIVE REPORTS.  (a)  The
 9-1     insurance fraud unit shall receive, review, and investigate in a
 9-2     timely manner all insurer anti-fraud reports submitted pursuant to
 9-3     the provisions of Texas Insurance Code, Article 3.101.
 9-4           (b)  The insurance fraud unit shall report in writing
 9-5     annually to the commissioner the number of cases completed and
 9-6     recommendations for new regulatory and statutory responses to the
 9-7     types of fraudulent activities being encountered by the insurance
 9-8     fraud unit.
 9-9           SECTION 11.  Texas Insurance Code, Article 1.10D, is amended
9-10     by adding a new Subsection 2(h), as follows:
9-11           (h)  The insurance fraud unit shall be funded by an
9-12     anti-fraud assessment levied against insurers calculated as a
9-13     percentage of the total premium written during the previous
9-14     calendar year.  The percentage and dates of payment shall be set by
9-15     the commissioner upon notice and hearing.  The anti-fraud
9-16     assessment may not exceed 0.50 percent of gross premiums written by
9-17     the insurer.  The insurer may take as a credit against any premium
9-18     tax obligations under the provisions of Article 4.11 of this code
9-19     the amount paid on the anti-fraud assessment.  The anti-fraud
9-20     assessment shall be paid to the office of the comptroller of public
9-21     accounts.
9-22           SECTION 12.  This Act takes effect January 1, 2000.
9-23           SECTION 13.  The importance of this legislation and the
9-24     crowded condition of the calendars in both houses create an
9-25     emergency and an imperative public necessity that the
9-26     constitutional rule requiring bills to be read on three several
9-27     days in each house be suspended, and this rule is hereby suspended.