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A BILL TO BE ENTITLED
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AN ACT
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relating to the cancellation of a health benefit plan on the basis |
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of misrepresentation or a preexisting condition; providing |
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penalties. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subchapter B, Chapter 541, Insurance Code, is |
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amended by adding Section 541.062 to read as follows: |
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Sec. 541.062. BAD FAITH CANCELLATION. It is an unfair |
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method of competition or an unfair or deceptive act or practice for |
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a health benefit plan issuer to: |
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(1) set cancellation goals, quotas, or targets; |
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(2) pay compensation of any kind, including a bonus or |
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award, that varies according to the number of cancellations; |
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(3) set, as a condition of employment, a number or |
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volume of cancellations to be achieved; or |
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(4) set a performance standard, for employees or by |
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contract with another entity, based on the number or volume of |
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cancellations. |
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SECTION 2. Chapter 1202, Insurance Code, is amended by |
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adding Subchapter C to read as follows: |
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SUBCHAPTER C. INDEPENDENT REVIEW OF CERTAIN CANCELLATION DECISIONS |
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Sec. 1202.101. DEFINITIONS. In this subchapter: |
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(1) "Affected individual" means an individual who is |
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otherwise entitled to benefits under a health benefit plan that is |
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subject to a decision to cancel. |
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(2) "Independent review organization" means an |
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organization certified under Chapter 4202. |
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(3) "Screening criteria" means the elements or factors |
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used in a determination of whether to subject an issued health |
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benefit plan to additional review for possible cancellation, |
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including any applicable dollar amount or number of claims |
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submitted. |
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Sec. 1202.102. APPLICABILITY. (a) This subchapter applies |
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only to a health benefit plan, including a small or large employer |
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health benefit plan written under Chapter 1501, that provides |
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benefits for medical or surgical expenses incurred as a result of a |
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health condition, accident, or sickness, including an individual, |
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group, blanket, or franchise insurance policy or insurance |
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agreement, a group hospital service contract, or an individual or |
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group evidence of coverage or similar coverage document that is |
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offered by: |
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(1) an insurance company; |
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(2) a group hospital service corporation operating |
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under Chapter 842; |
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(3) a fraternal benefit society operating under |
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Chapter 885; |
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(4) a stipulated premium company operating under |
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Chapter 884; |
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(5) a reciprocal exchange operating under Chapter 942; |
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(6) a Lloyd's plan operating under Chapter 941; |
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(7) a health maintenance organization operating under |
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Chapter 843; |
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(8) a multiple employer welfare arrangement that holds |
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a certificate of authority under Chapter 846; or |
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(9) an approved nonprofit health corporation that |
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holds a certificate of authority under Chapter 844. |
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(b) This subchapter does not apply to: |
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(1) a health benefit plan that provides coverage: |
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(A) only for a specified disease or for another |
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limited benefit other than an accident policy; |
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(B) only for accidental death or dismemberment; |
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(C) for wages or payments in lieu of wages for a |
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period during which an employee is absent from work because of |
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sickness or injury; |
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(D) as a supplement to a liability insurance |
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policy; |
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(E) for credit insurance; |
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(F) only for dental or vision care; |
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(G) only for hospital expenses; or |
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(H) only for indemnity for hospital confinement; |
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(2) a Medicare supplemental policy as defined by |
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Section 1882(g)(1), Social Security Act (42 U.S.C. Section 1395ss), |
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as amended; |
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(3) a workers' compensation insurance policy; |
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(4) medical payment insurance coverage provided under |
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a motor vehicle insurance policy; or |
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(5) a long-term care insurance policy, including a |
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nursing home fixed indemnity policy, unless the commissioner |
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determines that the policy provides benefit coverage so |
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comprehensive that the policy is a health benefit plan described by |
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Subsection (a). |
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Sec. 1202.103. CANCELLATION FOR MISREPRESENTATION OR |
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PREEXISTING CONDITION. Notwithstanding any other law, a health |
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benefit plan issuer may not cancel a health benefit plan on the |
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basis of a misrepresentation or a preexisting condition except as |
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provided by this subchapter. |
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Sec. 1202.104. NOTICE OF INTENT TO CANCEL. (a) A health |
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benefit plan issuer may not cancel a health benefit plan on the |
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basis of a misrepresentation or a preexisting condition without |
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first notifying an affected individual in writing of the issuer's |
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intent to cancel the health benefit plan and the individual's |
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entitlement to an independent review. |
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(b) The notice required under Subsection (a) must include, |
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as applicable: |
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(1) the principal reasons for the decision to cancel |
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the health benefit plan; |
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(2) the clinical basis for a determination that a |
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preexisting condition exists; |
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(3) a description of any general screening criteria |
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used to evaluate issued health benefit plans and determine |
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eligibility for a decision to cancel; |
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(4) a statement that the individual is entitled to |
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appeal a cancellation decision to an independent review |
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organization; |
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(5) a statement that the individual has at least 45 |
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days in which to appeal the cancellation decision to an independent |
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review organization, and a description of the consequences of |
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failure to appeal within that time limit; |
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(6) a statement that there is no cost to the individual |
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to appeal the cancellation decision to an independent review |
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organization; and |
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(7) a description of the independent review process |
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under Chapters 4201 and 4202. |
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Sec. 1202.105. INDEPENDENT REVIEW PROCESS; PAYMENT OF |
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CLAIMS. (a) An affected individual may appeal a health benefit |
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plan issuer's cancellation decision to an independent review |
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organization not later than the 45th day after the date the |
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individual receives notice under Section 1202.104. |
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(b) A health benefit plan issuer shall comply with all |
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requests for information made by the independent review |
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organization and with the independent review organization's |
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determination regarding the appropriateness of the issuer's |
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decision to cancel. |
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(c) A health benefit plan issuer shall pay all otherwise |
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valid medical claims under an individual's plan until the later of: |
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(1) the date on which an independent review |
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organization determines that the decision to cancel is appropriate; |
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or |
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(2) the time to appeal to an independent review |
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organization has expired without an affected individual initiating |
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an appeal. |
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Sec. 1202.106. CANCELLATION AUTHORIZED; RECOVERY OF CLAIMS |
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PAID. (a) A health benefit plan issuer may cancel a health benefit |
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plan covering an affected individual on the later of: |
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(1) the date an independent review organization |
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determines that cancellation is appropriate; or |
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(2) the 45th day after the date an affected individual |
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receives notice under Section 1202.104, if the individual has not |
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initiated an appeal. |
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(b) An issuer that cancels a health benefit plan under this |
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section may seek to recover from an affected individual amounts |
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paid for the individual's medical claims under the cancelled health |
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benefit plan. |
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(c) An issuer that cancels a health benefit plan under this |
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section may not offset against or recoup or recover from a physician |
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or health care provider amounts paid for medical claims under a |
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cancelled health benefit plan. This subsection may not be waived, |
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voided, or modified by contract. |
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Sec. 1202.107. CANCELLATION RELATED TO A PREEXISTING |
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CONDITION; STANDARDS. (a) For purposes of this subchapter, a |
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cancellation for a preexisting condition is appropriate if, within |
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the 18-month period immediately preceding the date on which an |
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application for coverage under a health benefit plan is made, an |
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affected individual received or was advised by a physician or |
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health care provider to seek medical advice, diagnosis, care, or |
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treatment for a physical or mental condition, regardless of the |
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cause, and the individual's failure to disclose the condition: |
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(1) affects the risks assumed under the health benefit |
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plan; and |
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(2) is undertaken with the intent to deceive the |
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health benefit plan issuer. |
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(b) A health benefit plan issuer may not cancel a health |
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benefit plan based on a preexisting condition of a newborn |
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delivered after the application for coverage is made or as may |
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otherwise be prohibited by law. |
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Sec. 1202.108. CANCELLATION FOR MISREPRESENTATION; |
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STANDARDS. For purposes of this subchapter, a cancellation for a |
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misrepresentation not related to a preexisting condition is |
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inappropriate unless the misrepresentation: |
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(1) is of a material fact; |
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(2) affects the risks assumed under the health benefit |
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plan; and |
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(3) is made with the intent to deceive the health |
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benefit plan issuer. |
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Sec. 1202.109. REMEDIES NOT EXCLUSIVE. The remedies |
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provided by this subchapter are not exclusive and are in addition to |
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any other remedy or procedure provided by law or at common law. |
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Sec. 1202.110. RULES. The commissioner shall adopt rules |
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necessary to implement and administer this subchapter. |
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Sec. 1202.111. SANCTIONS AND PENALTIES. A health benefit |
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plan issuer that violates this subchapter commits an unfair |
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practice in violation of Chapter 541 and is subject to sanctions and |
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penalties under Chapter 82. |
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Sec. 1202.112. CONFIDENTIALITY. (a) A record, report, or |
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other information received or maintained by a health benefit plan |
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issuer, including any material received or developed during a |
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review of a cancellation decision under this subchapter, is |
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confidential. |
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(b) A health benefit plan issuer may not disclose the |
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identity of an individual or a decision to cancel an individual's |
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health benefit plan unless: |
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(1) an independent review organization determines the |
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decision to cancel is appropriate; or |
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(2) the time to appeal has expired without an affected |
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individual initiating an appeal. |
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SECTION 3. Section 4202.002, Insurance Code, is amended to |
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read as follows: |
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Sec. 4202.002. ADOPTION OF STANDARDS FOR INDEPENDENT REVIEW |
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ORGANIZATIONS. (a) The commissioner shall adopt standards and |
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rules for: |
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(1) the certification, selection, and operation of |
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independent review organizations to perform independent review |
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described by Subchapter C, Chapter 1202, or Subchapter I, Chapter |
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4201; and |
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(2) the suspension and revocation of the |
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certification. |
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(b) The standards adopted under this section must ensure: |
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(1) the timely response of an independent review |
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organization selected under this chapter; |
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(2) the confidentiality of medical records |
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transmitted to an independent review organization for use in |
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conducting an independent review; |
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(3) the qualifications and independence of each |
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physician or other health care provider making a review |
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determination for an independent review organization; |
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(4) the fairness of the procedures used by an |
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independent review organization in making review determinations; |
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[and] |
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(5) the timely notice to an enrollee of the results of |
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an independent review, including the clinical basis for the review |
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determination; and |
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(6) that review of a cancellation decision based on a |
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preexisting condition be conducted under the direction of a |
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physician. |
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SECTION 4. Sections 4202.003, 4202.004, and 4202.006, |
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Insurance Code, are amended to read as follows: |
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Sec. 4202.003. REQUIREMENTS REGARDING TIMELINESS OF |
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DETERMINATION. The standards adopted under Section 4202.002 must |
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require each independent review organization to make the |
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organization's determination: |
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(1) for a life-threatening condition as defined by |
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Section 4201.002, not later than the earlier of: |
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(A) the fifth day after the date the organization |
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receives the information necessary to make the determination; or |
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(B) the eighth day after the date the |
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organization receives the request that the determination be made; |
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and |
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(2) for a condition other than a life-threatening |
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condition or of the appropriateness of a cancellation under |
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Subchapter C, Chapter 1202, not later than the earlier of: |
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(A) the 15th day after the date the organization |
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receives the information necessary to make the determination; or |
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(B) the 20th day after the date the organization |
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receives the request that the determination be made. |
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Sec. 4202.004. CERTIFICATION. To be certified as an |
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independent review organization under this chapter, an |
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organization must submit to the commissioner an application in the |
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form required by the commissioner. The application must include: |
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(1) for an applicant that is publicly held, the name of |
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each shareholder or owner of more than five percent of any of the |
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applicant's stock or options; |
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(2) the name of any holder of the applicant's bonds or |
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notes that exceed $100,000; |
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(3) the name and type of business of each corporation |
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or other organization that the applicant controls or is affiliated |
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with and the nature and extent of the control or affiliation; |
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(4) the name and a biographical sketch of each |
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director, officer, and executive of the applicant and of any entity |
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listed under Subdivision (3) and a description of any relationship |
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the named individual has with: |
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(A) a health benefit plan; |
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(B) a health maintenance organization; |
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(C) an insurer; |
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(D) a utilization review agent; |
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(E) a nonprofit health corporation; |
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(F) a payor; |
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(G) a health care provider; or |
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(H) a group representing any of the entities |
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described by Paragraphs (A) through (G); |
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(5) the percentage of the applicant's revenues that |
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are anticipated to be derived from independent reviews conducted |
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under Subchapter I, Chapter 4201; |
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(6) a description of the areas of expertise of the |
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physicians or other health care providers making review |
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determinations for the applicant; and |
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(7) the procedures to be used by the applicant in |
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making independent review determinations under Subchapter C, |
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Chapter 1202, or Subchapter I, Chapter 4201. |
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Sec. 4202.006. PAYORS FEES. (a) The commissioner shall |
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charge payors fees in accordance with this chapter as necessary to |
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fund the operations of independent review organizations. |
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(b) A health benefit plan issuer shall pay for an |
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independent review of a cancellation decision under Subchapter C, |
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Chapter 1202. |
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SECTION 5. Section 4202.009, Insurance Code, is amended to |
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read as follows: |
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Sec. 4202.009. CONFIDENTIAL INFORMATION. (a) |
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Information that reveals the identity of a physician or other |
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individual health care provider who makes a review determination |
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for an independent review organization is confidential. |
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(b) A record, report, or other information received or |
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maintained by an independent review organization, including any |
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material received or developed during a review of a cancellation |
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decision under Subchapter C, Chapter 1202, is confidential. |
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(c) An independent review organization may not disclose the |
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identity of an affected individual or an issuer's decision to |
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cancel a health benefit plan under Subchapter C, Chapter 1202, |
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unless: |
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(1) an independent review organization determines the |
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decision to cancel is appropriate; or |
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(2) the time to appeal a cancellation under that |
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subchapter has expired without an affected individual initiating an |
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appeal. |
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SECTION 6. Section 4202.010(a), Insurance Code, is amended |
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to read as follows: |
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(a) An independent review organization conducting an |
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independent review under Subchapter C, Chapter 1202, or Subchapter |
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I, Chapter 4201, is not liable for damages arising from the review |
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determination made by the organization. |
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SECTION 7. The change in law made by this Act applies only |
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to an insurance policy that is delivered, issued for delivery, or |
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renewed on or after the effective date of this Act. An insurance |
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policy that is delivered, issued for delivery, or renewed before |
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the effective date of this Act is governed by the law as it existed |
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before the effective date of this Act, and that law is continued in |
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effect for that purpose. |
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SECTION 8. This Act takes effect immediately if it receives |
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a vote of two-thirds of all the members elected to each house, as |
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provided by Section 39, Article III, Texas Constitution. If this |
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Act does not receive the vote necessary for immediate effect, this |
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Act takes effect September 1, 2009. |