81R3755 TJS-F
 
  By: Davis, Wendy S.B. No. 1611
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the cancellation of a health benefit plan on the basis
  of misrepresentation or a preexisting condition; providing
  penalties.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subchapter B, Chapter 541, Insurance Code, is
  amended by adding Section 541.062 to read as follows:
         Sec. 541.062.  BAD FAITH CANCELLATION.  It is an unfair
  method of competition or an unfair or deceptive act or practice for
  a health benefit plan issuer to:
               (1)  set cancellation goals, quotas, or targets;
               (2)  pay compensation of any kind, including a bonus or
  award, that varies according to the number of cancellations;
               (3)  set, as a condition of employment, a number or
  volume of cancellations to be achieved; or
               (4)  set a performance standard, for employees or by
  contract with another entity, based on the number or volume of
  cancellations.
         SECTION 2.  Chapter 1202, Insurance Code, is amended by
  adding Subchapter C to read as follows:
  SUBCHAPTER C.  INDEPENDENT REVIEW OF CERTAIN CANCELLATION DECISIONS
         Sec. 1202.101.  DEFINITIONS. In this subchapter:
               (1)  "Affected individual" means an individual who is
  otherwise entitled to benefits under a health benefit plan that is
  subject to a decision to cancel.
               (2)  "Independent review organization" means an
  organization certified under Chapter 4202.
               (3)  "Screening criteria" means the elements or factors
  used in a determination of whether to subject an issued health
  benefit plan to additional review for possible cancellation,
  including any applicable dollar amount or number of claims
  submitted.
         Sec. 1202.102.  APPLICABILITY. (a)  This subchapter applies
  only to a health benefit plan, including a small or large employer
  health benefit plan written under Chapter 1501, that provides
  benefits for medical or surgical expenses incurred as a result of a
  health condition, accident, or sickness, including an individual,
  group, blanket, or franchise insurance policy or insurance
  agreement, a group hospital service contract, or an individual or
  group evidence of coverage or similar coverage document that is
  offered by:
               (1)  an insurance company;
               (2)  a group hospital service corporation operating
  under Chapter 842;
               (3)  a fraternal benefit society operating under
  Chapter 885;
               (4)  a stipulated premium company operating under
  Chapter 884;
               (5)  a reciprocal exchange operating under Chapter 942;
               (6)  a Lloyd's plan operating under Chapter 941;
               (7)  a health maintenance organization operating under
  Chapter 843;
               (8)  a multiple employer welfare arrangement that holds
  a certificate of authority under Chapter 846; or
               (9)  an approved nonprofit health corporation that
  holds a certificate of authority under Chapter 844.
         (b)  This subchapter does not apply to:
               (1)  a health benefit plan that provides coverage:
                     (A)  only for a specified disease or for another
  limited benefit other than an accident policy;
                     (B)  only for accidental death or dismemberment;
                     (C)  for wages or payments in lieu of wages for a
  period during which an employee is absent from work because of
  sickness or injury;
                     (D)  as a supplement to a liability insurance
  policy;
                     (E)  for credit insurance;
                     (F)  only for dental or vision care;
                     (G)  only for hospital expenses; or
                     (H)  only for indemnity for hospital confinement;
               (2)  a Medicare supplemental policy as defined by
  Section 1882(g)(1), Social Security Act (42 U.S.C. Section 1395ss),
  as amended;
               (3)  a workers' compensation insurance policy;
               (4)  medical payment insurance coverage provided under
  a motor vehicle insurance policy; or
               (5)  a long-term care insurance policy, including a
  nursing home fixed indemnity policy, unless the commissioner
  determines that the policy provides benefit coverage so
  comprehensive that the policy is a health benefit plan described by
  Subsection (a).
         Sec. 1202.103.  CANCELLATION FOR MISREPRESENTATION OR
  PREEXISTING CONDITION. Notwithstanding any other law, a health
  benefit plan issuer may not cancel a health benefit plan on the
  basis of a misrepresentation or a preexisting condition except as
  provided by this subchapter.
         Sec. 1202.104.  NOTICE OF INTENT TO CANCEL. (a)  A health
  benefit plan issuer may not cancel a health benefit plan on the
  basis of a misrepresentation or a preexisting condition without
  first notifying an affected individual in writing of the issuer's
  intent to cancel the health benefit plan and the individual's
  entitlement to an independent review.
         (b)  The notice required under Subsection (a) must include,
  as applicable:
               (1)  the principal reasons for the decision to cancel
  the health benefit plan;
               (2)  the clinical basis for a determination that a
  preexisting condition exists;
               (3)  a description of any general screening criteria
  used to evaluate issued health benefit plans and determine
  eligibility for a decision to cancel;
               (4)  a statement that the individual is entitled to
  appeal a cancellation decision to an independent review
  organization;
               (5)  a statement that the individual has at least 45
  days in which to appeal the cancellation decision to an independent
  review organization, and a description of the consequences of
  failure to appeal within that time limit;
               (6)  a statement that there is no cost to the individual
  to appeal the cancellation decision to an independent review
  organization; and
               (7)  a description of the independent review process
  under Chapters 4201 and 4202.
         Sec. 1202.105.  INDEPENDENT REVIEW PROCESS; PAYMENT OF
  CLAIMS.  (a)  An affected individual may appeal a health benefit
  plan issuer's cancellation decision to an independent review
  organization not later than the 45th day after the date the
  individual receives notice under Section 1202.104.
         (b)  A health benefit plan issuer shall comply with all
  requests for information made by the independent review
  organization and with the independent review organization's
  determination regarding the appropriateness of the issuer's
  decision to cancel.
         (c)  A health benefit plan issuer shall pay all otherwise
  valid medical claims under an individual's plan until the later of:
               (1)  the date on which an independent review
  organization determines that the decision to cancel is appropriate;
  or
               (2)  the time to appeal to an independent review
  organization has expired without an affected individual initiating
  an appeal.
         Sec. 1202.106.  CANCELLATION AUTHORIZED; RECOVERY OF CLAIMS
  PAID. (a)  A health benefit plan issuer may cancel a health benefit
  plan covering an affected individual on the later of:
               (1)  the date an independent review organization
  determines that cancellation is appropriate; or
               (2)  the 45th day after the date an affected individual
  receives notice under Section 1202.104, if the individual has not
  initiated an appeal.
         (b)  An issuer that cancels a health benefit plan under this
  section may seek to recover from an affected individual amounts
  paid for the individual's medical claims under the cancelled health
  benefit plan.
         (c)  An issuer that cancels a health benefit plan under this
  section may not offset against or recoup or recover from a physician
  or health care provider amounts paid for medical claims under a
  cancelled health benefit plan.  This subsection may not be waived,
  voided, or modified by contract.
         Sec. 1202.107.  CANCELLATION RELATED TO A PREEXISTING
  CONDITION; STANDARDS.  (a)  For purposes of this subchapter, a
  cancellation for a preexisting condition is appropriate if, within
  the 18-month period immediately preceding the date on which an
  application for coverage under a health benefit plan is made, an
  affected individual received or was advised by a physician or
  health care provider to seek medical advice, diagnosis, care, or
  treatment for a physical or mental condition, regardless of the
  cause, and the individual's failure to disclose the condition:
               (1)  affects the risks assumed under the health benefit
  plan; and
               (2)  is undertaken with the intent to deceive the
  health benefit plan issuer.
         (b)  A health benefit plan issuer may not cancel a health
  benefit plan based on a preexisting condition of a newborn
  delivered after the application for coverage is made or as may
  otherwise be prohibited by law.
         Sec. 1202.108.  CANCELLATION FOR MISREPRESENTATION;
  STANDARDS.  For purposes of this subchapter, a cancellation for a
  misrepresentation not related to a preexisting condition is
  inappropriate unless the misrepresentation:
               (1)  is of a material fact;
               (2)  affects the risks assumed under the health benefit
  plan; and
               (3)  is made with the intent to deceive the health
  benefit plan issuer.
         Sec. 1202.109.  REMEDIES NOT EXCLUSIVE. The remedies
  provided by this subchapter are not exclusive and are in addition to
  any other remedy or procedure provided by law or at common law.
         Sec. 1202.110.  RULES.  The commissioner shall adopt rules
  necessary to implement and administer this subchapter.
         Sec. 1202.111.  SANCTIONS AND PENALTIES. A health benefit
  plan issuer that violates this subchapter commits an unfair
  practice in violation of Chapter 541 and is subject to sanctions and
  penalties under Chapter 82.
         Sec. 1202.112.  CONFIDENTIALITY. (a) A record, report, or
  other information received or maintained by a health benefit plan
  issuer, including any material received or developed during a
  review of a cancellation decision under this subchapter, is
  confidential.
         (b)  A health benefit plan issuer may not disclose the
  identity of an individual or a decision to cancel an individual's
  health benefit plan unless:
               (1)  an independent review organization determines the
  decision to cancel is appropriate; or
               (2)  the time to appeal has expired without an affected
  individual initiating an appeal.
         SECTION 3.  Section 4202.002, Insurance Code, is amended to
  read as follows:
         Sec. 4202.002.  ADOPTION OF STANDARDS FOR INDEPENDENT REVIEW
  ORGANIZATIONS. (a)  The commissioner shall adopt standards and
  rules for:
               (1)  the certification, selection, and operation of
  independent review organizations to perform independent review
  described by Subchapter C, Chapter 1202, or Subchapter I, Chapter
  4201; and
               (2)  the suspension and revocation of the
  certification.
         (b)  The standards adopted under this section must ensure:
               (1)  the timely response of an independent review
  organization selected under this chapter;
               (2)  the confidentiality of medical records
  transmitted to an independent review organization for use in
  conducting an independent review;
               (3)  the qualifications and independence of each
  physician or other health care provider making a review
  determination for an independent review organization;
               (4)  the fairness of the procedures used by an
  independent review organization in making review determinations;
  [and]
               (5)  the timely notice to an enrollee of the results of
  an independent review, including the clinical basis for the review
  determination; and
               (6)  that review of a cancellation decision based on a
  preexisting condition be conducted under the direction of a
  physician.
         SECTION 4.  Sections 4202.003, 4202.004, and 4202.006,
  Insurance Code, are amended to read as follows:
         Sec. 4202.003.  REQUIREMENTS REGARDING TIMELINESS OF
  DETERMINATION. The standards adopted under Section 4202.002 must
  require each independent review organization to make the
  organization's determination:
               (1)  for a life-threatening condition as defined by
  Section 4201.002, not later than the earlier of:
                     (A)  the fifth day after the date the organization
  receives the information necessary to make the determination; or
                     (B)  the eighth day after the date the
  organization receives the request that the determination be made;
  and
               (2)  for a condition other than a life-threatening
  condition or of the appropriateness of a cancellation under
  Subchapter C, Chapter 1202, not later than the earlier of:
                     (A)  the 15th day after the date the organization
  receives the information necessary to make the determination; or
                     (B)  the 20th day after the date the organization
  receives the request that the determination be made.
         Sec. 4202.004.  CERTIFICATION. To be certified as an
  independent review organization under this chapter, an
  organization must submit to the commissioner an application in the
  form required by the commissioner.  The application must include:
               (1)  for an applicant that is publicly held, the name of
  each shareholder or owner of more than five percent of any of the
  applicant's stock or options;
               (2)  the name of any holder of the applicant's bonds or
  notes that exceed $100,000;
               (3)  the name and type of business of each corporation
  or other organization that the applicant controls or is affiliated
  with and the nature and extent of the control or affiliation;
               (4)  the name and a biographical sketch of each
  director, officer, and executive of the applicant and of any entity
  listed under Subdivision (3) and a description of any relationship
  the named individual has with:
                     (A)  a health benefit plan;
                     (B)  a health maintenance organization;
                     (C)  an insurer;
                     (D)  a utilization review agent;
                     (E)  a nonprofit health corporation;
                     (F)  a payor;
                     (G)  a health care provider; or
                     (H)  a group representing any of the entities
  described by Paragraphs (A) through (G);
               (5)  the percentage of the applicant's revenues that
  are anticipated to be derived from independent reviews conducted
  under Subchapter I, Chapter 4201;
               (6)  a description of the areas of expertise of the
  physicians or other health care providers making review
  determinations for the applicant; and
               (7)  the procedures to be used by the applicant in
  making independent review determinations under Subchapter C,
  Chapter 1202, or Subchapter I, Chapter 4201.
         Sec. 4202.006.  PAYORS FEES.  (a) The commissioner shall
  charge payors fees in accordance with this chapter as necessary to
  fund the operations of independent review organizations.
         (b)  A health benefit plan issuer shall pay for an
  independent review of a cancellation decision under Subchapter C,
  Chapter 1202.
         SECTION 5.  Section 4202.009, Insurance Code, is amended to
  read as follows:
         Sec. 4202.009.  CONFIDENTIAL INFORMATION.  (a) 
  Information that reveals the identity of a physician or other
  individual health care provider who makes a review determination
  for an independent review organization is confidential.
         (b)  A record, report, or other information received or
  maintained by an independent review organization, including any
  material received or developed during a review of a cancellation
  decision under Subchapter C, Chapter 1202, is confidential.
         (c)  An independent review organization may not disclose the
  identity of an affected individual or an issuer's decision to
  cancel a health benefit plan under Subchapter C, Chapter 1202,
  unless:
               (1)  an independent review organization determines the
  decision to cancel is appropriate; or
               (2)  the time to appeal a cancellation under that
  subchapter has expired without an affected individual initiating an
  appeal.
         SECTION 6.  Section 4202.010(a), Insurance Code, is amended
  to read as follows:
         (a)  An independent review organization conducting an
  independent review under Subchapter C, Chapter 1202, or Subchapter
  I, Chapter 4201, is not liable for damages arising from the review
  determination made by the organization.
         SECTION 7.  The change in law made by this Act applies only
  to an insurance policy that is delivered, issued for delivery, or
  renewed on or after the effective date of this Act. An insurance
  policy that is delivered, issued for delivery, or renewed before
  the effective date of this Act is governed by the law as it existed
  before the effective date of this Act, and that law is continued in
  effect for that purpose.
         SECTION 8.  This Act takes effect immediately if it receives
  a vote of two-thirds of all the members elected to each house, as
  provided by Section 39, Article III, Texas Constitution.  If this
  Act does not receive the vote necessary for immediate effect, this
  Act takes effect September 1, 2009.