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.