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Third Substitute H.B. 35

Senator Lane Beattie proposes to substitute the following bill:


             1     
CATASTROPHIC MENTAL HEALTH INSURANCE COVERAGE

             2     
2000 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Sponsor: Judy Ann Buffmire

             5      AN ACT RELATING TO INSURANCE; DEFINING TERMS; REQUIRING INSURERS TO
             6      OFFER EMPLOYERS A CHOICE OF MENTAL HEALTH COVERAGE; CREATING AN
             7      EXEMPTION FROM THE RATING BANDS FOR EMPLOYERS OF 20 OR LESS WHO
             8      CHOOSE CATASTROPHIC MENTAL HEALTH COVERAGE; PERMITTING INSURERS TO
             9      USE MANAGED CARE AND CLOSED PANELS IN PROVIDING CATASTROPHIC
             10      MENTAL HEALTH COVERAGE; EXTENDING RULEMAKING AUTHORITY TO THE
             11      INSURANCE COMMISSIONER; REQUIRING AN INTERIM REVIEW AND
             12      RECOMMENDATION; AND PROVIDING A REPEAL DATE.
             13      This act affects sections of Utah Code Annotated 1953 as follows:
             14      AMENDS:
             15          31A-22-617, as last amended by Chapters 314 and 316, Laws of Utah 1994
             16          31A-22-618, as last amended by Chapter 204, Laws of Utah 1986
             17          31A-30-106, as last amended by Chapter 265, Laws of Utah 1997
             18          63-55-231, as last amended by Chapter 131, Laws of Utah 1999
             19      ENACTS:
             20          31A-22-625, Utah Code Annotated 1953
             21      Be it enacted by the Legislature of the state of Utah:
             22          Section 1. Section 31A-22-617 is amended to read:
             23           31A-22-617. Preferred provider contract provisions.
             24          Health insurance policies may provide for insureds to receive services or reimbursement
             25      under the policies in accordance with preferred health care provider contracts as follows:


             26          (1) Subject to restrictions under this section, any insurer or third party administrator may
             27      enter into contracts with health care providers as defined in Section 78-14-3 under which the health
             28      care providers agree to supply services, at prices specified in the contracts, to persons insured by
             29      an insurer. The health care provider contract may require the health care provider to accept the
             30      specified payment as payment in full, relinquishing the right to collect additional amounts from
             31      the insured person. The insurance contract may reward the insured for selection of preferred health
             32      care providers by reducing premium rates, reducing deductibles, coinsurance, or other copayments,
             33      or in any other reasonable manner.
             34          (2) (a) Subject to Subsections (2)(b) through (2)(f), an insurer using preferred health care
             35      provider contracts shall pay for the services of health care providers not under the contract, unless
             36      the illnesses or injuries treated by the health care provider are not within the scope of the insurance
             37      contract. As used in this section, "class of health care providers" means all health care providers
             38      licensed or licensed and certified by the state within the same professional, trade, occupational, or
             39      facility licensure or licensure and certification category established pursuant to Titles 26 and 58.
             40          (b) When the insured receives services from a health care provider not under contract, the
             41      insurer shall reimburse the insured for at least 75% of the average amount paid by the insurer for
             42      comparable services of preferred health care providers who are members of the same class of
             43      health care providers. The commissioner may adopt a rule dealing with the determination of what
             44      constitutes 75% of the average amount paid by the insurer for comparable services of preferred
             45      health care providers who are members of the same class of health care providers.
             46          (c) When reimbursing for services of health care providers not under contract, the insurer
             47      may make direct payment to the insured.
             48          (d) Notwithstanding Subsection (2)(b), an insurer using preferred health care provider
             49      contracts may impose a deductible on coverage of health care providers not under contract.
             50          (e) When selecting health care providers with whom to contract under Subsection (1), an
             51      insurer may not unfairly discriminate between classes of health care providers, but may
             52      discriminate within a class of health care providers, subject to Subsection (7).
             53          (f) For purposes of this section, unfair discrimination between classes of health care
             54      providers shall include:
             55          (i) refusal to contract with class members in reasonable proportion to the number of
             56      insureds covered by the insurer and the expected demand for services from class members; and


             57          (ii) refusal to cover procedures for one class of providers that are:
             58          (A) commonly utilized by members of the class of health care providers for the treatment
             59      of illnesses, injuries, or conditions;
             60          (B) otherwise covered by the insurer; and
             61          (C) within the scope of practice of the class of health care providers.
             62          (3) Before the insured consents to the insurance contract, the insurer shall fully disclose
             63      to the insured that it has entered into preferred health care provider contracts. The insurer shall
             64      provide sufficient detail on the preferred health care provider contracts to permit the insured to
             65      agree to the terms of the insurance contract. The insurer shall provide at least the following
             66      information:
             67          (a) a list of the health care providers under contract and if requested their business
             68      locations and specialties;
             69          (b) a description of the insured benefits, including any deductibles, coinsurance, or other
             70      copayments;
             71          (c) a description of the quality assurance program required under Subsection (4); and
             72          (d) a description of the grievance procedures required under Subsection (5).
             73          (4) (a) An insurer using preferred health care provider contracts shall maintain a quality
             74      assurance program for assuring that the care provided by the health care providers under contract
             75      meets prevailing standards in the state.
             76          (b) The commissioner in consultation with the executive director of the Department of
             77      Health may designate qualified persons to perform an audit of the quality assurance program. The
             78      auditors shall have full access to all records of the organization and its health care providers,
             79      including medical records of individual patients.
             80          (c) The information contained in the medical records of individual patients shall remain
             81      confidential. All information, interviews, reports, statements, memoranda, or other data furnished
             82      for purposes of the audit and any findings or conclusions of the auditors are privileged. The
             83      information is not subject to discovery, use, or receipt in evidence in any legal proceeding except
             84      hearings before the commissioner concerning alleged violations of this section.
             85          (5) An insurer using preferred health care provider contracts shall provide a reasonable
             86      procedure for resolving complaints and grievances initiated by the insureds and health care
             87      providers.


             88          (6) An insurer may not contract with a health care provider for treatment of illness or
             89      injury unless the health care provider is licensed to perform that treatment.
             90          (7) (a) No health care provider or insurer may discriminate against a preferred health care
             91      provider for agreeing to a contract under Subsection (1).
             92          (b) Any health care provider licensed to treat any illness or injury within the scope of the
             93      health care provider's practice, who is willing and able to meet the terms and conditions established
             94      by the insurer for designation as a preferred health care provider, shall be able to apply for and
             95      receive the designation as a preferred health care provider. Contract terms and conditions may
             96      include reasonable limitations on the number of designated preferred health care providers based
             97      upon substantial objective and economic grounds, or expected use of particular services based
             98      upon prior provider-patient profiles.
             99          (8) Upon the written request of a provider excluded from a provider contract, the
             100      commissioner may hold a hearing to determine if the insurer's exclusion of the provider is based
             101      on the criteria set forth in Subsection (7)(b).
             102          (9) Insurers are subject to the provisions of Sections 31A-22-613.5 , 31A-22-614.5 , and
             103      31A-22-618 .
             104          (10) Nothing in this section is to be construed as to require an insurer to offer a certain
             105      benefit or service as part of a health benefit plan.
             106          (11) This section does not apply to catastrophic mental health coverage provided in
             107      accordance with Section 31A-22-625 .
             108          Section 2. Section 31A-22-618 is amended to read:
             109           31A-22-618. Nondiscrimination among health care professionals.
             110          (1) Except as provided under Section 31A-22-617 , and except as to insurers licensed under
             111      Chapter 8, no insurer may unfairly discriminate against any licensed class of health care providers
             112      by structuring contract exclusions which exclude payment of benefits for the treatment of any
             113      illness, injury, or condition by any licensed class of health care providers when the treatment is
             114      within the scope of the licensee's practice and the illness, injury, or condition falls within the
             115      coverage of the contract. Upon the written request of an insured alleging an insurer has violated
             116      this section, the commissioner shall hold a hearing to determine if the violation exists. The
             117      commissioner may consolidate two or more related alleged violations into a single hearing.
             118          (2) This section does not apply to catastrophic mental health coverage provided in


             119      accordance with Section 31A-22-625 .
             120          Section 3. Section 31A-22-625 is enacted to read:
             121          31A-22-625. Catastrophic coverage of mental health conditions.
             122          (1) As used in this section:
             123          (a) (i) "Catastrophic mental heath coverage" means coverage in a health insurance policy
             124      or health maintenance organization contract that does not impose any lifetime limit, annual
             125      payment limit, episodic limit, inpatient or outpatient service limit, or maximum out-of-pocket limit
             126      that places a greater financial burden on an insured for the evaluation and treatment of a mental
             127      health condition than for the evaluation and treatment of a physical condition.
             128          (ii) "Catastrophic mental health coverage" does not include a restriction on cost sharing
             129      factors, such as deductibles, copayments, or coinsurance, prior to reaching any maximum
             130      out-of-pocket limit.
             131          (iii) Catastrophic mental health coverage" may include one maximum out-of-pocket limit
             132      for physical health conditions and another maximum out-of-pocket limit for mental health
             133      conditions, provided that, if separate out-of-pocket limits are established, the out-of-pocket limit
             134      for mental health conditions may not exceed the out-of-pocket limit for physical health conditions.
             135          (b) (i) "50/50 mental health coverage" means coverage in a health insurance policy or
             136      health maintenance organization contract that pays for at least 50% of covered services for the
             137      diagnosis and treatment of mental health conditions.
             138          (ii) "50/50 mental health coverage" does not include a restriction on episodic limits,
             139      inpatient or outpatient service limits, or maximum out-of-pocket limits.
             140          (c) "Large employer" means an employer that does not come within the definition of
             141      "small employer."
             142          (d) (i) "Mental health condition" means any condition or disorder involving mental illness
             143      that falls under any of the diagnostic categories listed in the Diagnostic and Statistical Manual, as
             144      periodically revised.
             145          (ii) "Mental health condition" does not include the following when diagnosed as the
             146      primary or substantial reason or need for treatment:
             147          (A) marital or family problem;
             148          (B) social, occupational, religious, or other social maladjustment;
             149          (C) conduct disorder;


             150          (D) chronic adjustment disorder;
             151          (E) psychosexual disorder;
             152          (F) chronic organic brain syndrome
             153          (G) personality disorder;
             154          (H) specific developmental disorder or learning disability; or
             155          (I) mental retardation.
             156          (e) "Small employer" is as defined in Section 31A-30-103 .
             157          (2) (a) At the time of purchase and renewal, an insurer shall offer to each small employer
             158      that it insures or seeks to insure a choice between catastrophic mental health coverage and 50/50
             159      mental health coverage.
             160          (b) In addition to Subsection (2)(a), an insurer may offer to provide:
             161          (i) catastrophic mental health coverage, 50/50 mental health coverage, or both at levels that
             162      exceed the minimum requirements of this section; or
             163          (ii) coverage that excludes benefits for mental health conditions.
             164          (c) A small employer may, at its option, choose either catastrophic mental health coverage,
             165      50/50 mental health coverage, or coverage offered under Subsection (2)(b), regardless of the
             166      employer's previous coverage for mental health conditions.
             167          (d) An insurer is exempt from the 30% index rating restriction in Subsection
             168      31A-30-106 (1)(b) and, for the first year only that catastrophic mental health coverage is chosen,
             169      the 15% annual adjustment restriction in Subsection 31A-30-106 (1)(c)(ii), for any small employer
             170      with 20 or less enrolled employees who chooses coverage that meets or exceeds catastrophic
             171      mental health coverage.
             172          (3) (a) At the time of purchase and renewal, an insurer shall offer catastrophic mental
             173      health coverage to each large employer that it insures or seeks to insure.
             174          (b) In addition to Subsection (3)(a), an insurer may offer to provide catastrophic mental
             175      health coverage at levels that exceed the minimum requirements of this section.
             176          (c) A large employer may, at its option, choose either catastrophic mental health coverage,
             177      coverage that excludes benefits for mental health conditions, or coverage offered under Subsection
             178      (3)(b).
             179          (4) (a) An insurer may provide catastrophic mental health coverage through a managed
             180      care organization or system in a manner consistent with the provisions in Chapter 8, Health


             181      Maintenance Organizations and Limited Health Plans, regardless of whether the policy or contract
             182      uses a managed care organization or system for the treatment of physical health conditions.
             183          (b) (i) Notwithstanding any other provision of this title, an insurer may:
             184          (A) establish a closed panel of providers for catastrophic mental health coverage; and
             185          (B) refuse to provide any benefit to be paid for services rendered by a nonpanel provider
             186      unless:
             187          (I) the insured is referred to a nonpanel provider with the prior authorization of the insurer;
             188      and
             189          (II) the nonpanel provider agrees to follow the insurer's protocols and treatment guidelines.
             190          (ii) If an insured receives services from a nonpanel provider in the manner permitted by
             191      Subsection (4)(b)(i)(B), the insurer shall reimburse the insured for not less than 75% of the average
             192      amount paid by the insurer for comparable services of panel providers under a noncapitated
             193      arrangement who are members of the same class of health care providers.
             194          (iii) Nothing in this Subsection (4)(b) may be construed as requiring an insurer to authorize
             195      a referral to a nonpanel provider.
             196          (d) To be eligible for catastrophic mental health coverage, a diagnosis or treatment of a
             197      mental health condition must be rendered:
             198          (i) by a mental health therapist as defined in Section 58-60-102 ; or
             199          (ii) in a health care facility licensed or otherwise authorized to provide mental health
             200      services pursuant to Title 26, Chapter 21, Health Care Facility Licensing and Inspection Act, or
             201      Title 62A, Chapter 2, Licensure of Programs and Facilities, that provides a program for the
             202      treatment of a mental health condition pursuant to a written plan.
             203          (5) The commissioner may disapprove any policy or contract that provides mental heath
             204      coverage in a manner that is inconsistent with the provisions of this section.
             205          (6) The commissioner shall:
             206          (a) adopt rules as necessary to ensure compliance with this section; and
             207          (b) provide general figures on the percentage of contracts and policies that include no
             208      mental health coverage, 50/50 mental health coverage, catastrophic mental health coverage, and
             209      coverage that exceeds the minimum requirements of this section.
             210          (7) The Health and Human Services Interim Committee shall review:
             211          (a) the impact of this section on insurers, employers, providers, and consumers of mental


             212      health services before January 1, 2004; and
             213          (b) make a recommendation as to whether the provisions of this section should be
             214      modified and whether the cost-sharing requirements for mental health conditions should be the
             215      same as for physical health conditions.
             216          (8) (a) An insurer shall offer catastrophic mental health coverage as part of a health
             217      maintenance organization contract that is governed by Chapter 8, Health Maintenance
             218      Organizations and Limited Health Plans, that is in effect on or after January 1, 2001.
             219          (b) An insurer shall offer catastrophic mental health coverage as a part of a health
             220      insurance policy that is not governed by Chapter 8, Health Maintenance Organizations and Limited
             221      Health Plans, that is in effect on or after July 1, 2001.
             222          (c) This section does not apply to the purchase or renewal of an individual insurance policy
             223      or contract.
             224          (d) Notwithstanding Subsection (8)(c), nothing in this section may be construed as
             225      discouraging or otherwise preventing insurers from continuing to provide mental health coverage
             226      in connection with an individual policy or contract.
             227          (9) This section shall be repealed in accordance with Section 63-55-231 .
             228          Section 4. Section 31A-30-106 is amended to read:
             229           31A-30-106. Premiums -- Rating restrictions -- Disclosure.
             230          (1) Premium rates for health benefit plans under this chapter are subject to the following
             231      provisions:
             232          (a) The index rate for a rating period for any class of business shall not exceed the index
             233      rate for any other class of business by more than 20%.
             234          (b) For a class of business, the premium rates charged during a rating period to covered
             235      insureds with similar case characteristics for the same or similar coverage, or the rates that could
             236      be charged to such employers under the rating system for that class of business, may not vary from
             237      the index rate by more than 30% of the index rate, except as provided in Section 31A-22-625 .
             238          (c) The percentage increase in the premium rate charged to a covered insured for a new
             239      rating period, adjusted pro rata for rating periods less than a year, may not exceed the sum of the
             240      following:
             241          (i) the percentage change in the new business premium rate measured from the first day
             242      of the prior rating period to the first day of the new rating period. In the case of a health benefit


             243      plan into which the covered carrier is no longer enrolling new covered insureds, the covered carrier
             244      shall use the percentage change in the base premium rate, provided that such change does not
             245      exceed, on a percentage basis, the change in the new business premium rate for the most similar
             246      health benefit plan into which the covered carrier is actively enrolling new covered insureds;
             247          (ii) any adjustment, not to exceed 15% annually and adjusted pro rata for rating periods
             248      of less than one year, due to the claim experience, health status, or duration of coverage of the
             249      covered individuals as determined from the covered carrier's rate manual for the class of business,
             250      except as provided in Section 31A-22-625 ; and
             251          (iii) any adjustment due to change in coverage or change in the case characteristics of the
             252      covered insured as determined from the covered carrier's rate manual for the class of business.
             253          (d) Adjustments in rates for claims experience, health status, and duration from issue may
             254      not be charged to individual employees or dependents. Any such adjustment shall be applied
             255      uniformly to the rates charged for all employees and dependents of the small employer.
             256          (e) A covered carrier may utilize industry as a case characteristic in establishing premium
             257      rates, provided that the highest rate factor associated with any industry classification does not
             258      exceed the lowest rate factor associated with any industry classification by more than 15%.
             259          (f) In the case of health benefit plans issued prior to July 1, 1994, a premium rate for a
             260      rating period, adjusted pro rata for rating period of less than a year, may exceed the ranges under
             261      Subsections (1)(a) and (b) until July 1, 1996. In that case, the percentage increase in the premium
             262      rate charged to a covered insured for a new rating period may not exceed the sum of the following:
             263          (i) the percentage change in the new business premium rate measured from the first day
             264      of the prior rating period to the first day of the new rating period. In the case where a covered
             265      carrier is not issuing any new policies the covered carrier shall use the percentage change in the
             266      base premium rate, provided that such change does not exceed, on a percentage basis, the change
             267      in the new business premium rate for the most similar health benefit plan into which the covered
             268      carrier is actively enrolling new covered insureds; and
             269          (ii) any adjustment due to change in coverage or change in the case characteristics of the
             270      covered insured as determined from the carrier's rate manual for the class of business.
             271          (g) The commissioner may grant a one-year extension of the July 1, 1996, deadline
             272      specified in Subsection (f) if the commissioner determines that an extension is needed to avoid
             273      significant disruption of the health insurance market subject to this chapter or to insure the


             274      financial stability of carriers in the market.
             275          (h) (i) Covered carriers shall apply rating factors, including case characteristics,
             276      consistently with respect to all covered insureds in a class of business. Rating factors shall produce
             277      premiums for identical groups which differ only by the amounts attributable to plan design and do
             278      not reflect differences due to the nature of the groups assumed to select particular health benefit
             279      plans.
             280          (ii) A covered carrier shall treat all health benefit plans issued or renewed in the same
             281      calendar month as having the same rating period.
             282          (i) For the purposes of this subsection, a health benefit plan that utilizes a restricted
             283      network provision shall not be considered similar coverage to a health benefit plan that does not
             284      utilize such a network, provided that utilization of the restricted network provision results in
             285      substantial difference in claims costs.
             286          (j) The covered carrier shall not, without prior approval of the commissioner, use case
             287      characteristics other than age, gender, industry, geographic area, family composition, and group
             288      size.
             289          (k) The commissioner may establish regulations in accordance with Title 63, Chapter 46a,
             290      Utah Administrative Rulemaking Act, to implement the provisions of this chapter and to assure
             291      that rating practices used by covered carriers are consistent with the purposes of this chapter,
             292      including regulations that:
             293          (i) assure that differences in rates charged for health benefit plans by covered carriers are
             294      reasonable and reflect objective differences in plan design (not including differences due to the
             295      nature of the groups assumed to select particular health benefit plans);
             296          (ii) prescribe the manner in which case characteristics may be used by covered carriers;
             297          (iii) require insurers, as a condition of transacting business with regard to health insurance
             298      disability policies after January 1, 1995, to reissue a health insurance disability policy to any
             299      policyholder whose insurance disability policy has, after January 1, 1994, been terminated by the
             300      insurer for reasons other than those listed in Subsections 31A-30-107 (1)(a) through (1)(e) or not
             301      renewed by the insurer after January 1, 1994. The commissioner may prescribe terms for the
             302      reissue of coverage that the commissioner determines are reasonable and necessary to provide
             303      continuity of coverage to insured individuals;
             304          (iv) implement the individual enrollment cap under Section 31A-30-110 , including


             305      specifying the contents for certification, auditing standards, underwriting criteria for uninsurable
             306      classification, and limitations on high risk enrollees under Section 31A-30-111 ; and
             307          (v) establish the individual enrollment cap under Subsection 31A-30-110 (1).
             308          (l) Before implementing regulations for underwriting criteria for uninsurable classification,
             309      the commissioner shall contract with an independent consulting organization to develop
             310      industry-wide underwriting criteria for uninsurability based on an individual's expected claims
             311      under open enrollment coverage exceeding 200% of that expected for a standard insurable
             312      individual with the same case characteristics.
             313          (m) The commissioner shall revise rules issued for Sections 31A-22-602 and 31A-22-605
             314      regarding individual disability policy rates to allow rating in accordance with this section.
             315          (2) A covered carrier shall not transfer a covered insured involuntarily into or out of a class
             316      of business. A covered carrier shall not offer to transfer a covered insured into or out of a class
             317      of business unless such offer is made to transfer all covered insureds in the class of business
             318      without regard to case characteristics, claim experience, health status, or duration of coverage since
             319      issue.
             320          (3) Upon offering for sale any health benefit plan to a small employer, or individual, the
             321      covered carrier shall, as part of its solicitation and sales materials, disclose or make available all
             322      of the following:
             323          (a) the extent to which premium rates for a specified covered insured are established or
             324      adjusted in part based on the actual or expected variation in claims costs or actual or expected
             325      variation in health status of covered individuals;
             326          (b) provisions concerning the covered carrier's right to change premium rates and the
             327      factors other than claim experience which affect changes in premium rates;
             328          (c) provisions relating to renewability of policies and contracts; and
             329          (d) provisions relating to any preexisting condition provision.
             330          (4) (a) Each covered carrier shall maintain at its principal place of business a complete and
             331      detailed description of its rating practices and renewal underwriting practices, including
             332      information and documentation that demonstrate that its rating methods and practices are based
             333      upon commonly accepted actuarial assumptions and are in accordance with sound actuarial
             334      principles.
             335          (b) Each covered carrier shall file with the commissioner, on or before March 15 of each


             336      year, in a form, manner, and containing such information as prescribed by the commissioner, an
             337      actuarial certification certifying that the covered carrier is in compliance with this chapter and that
             338      the rating methods of the covered carrier are actuarially sound. A copy of that certification shall
             339      be retained by the covered carrier at its principal place of business.
             340          (c) A covered carrier shall make the information and documentation described in this
             341      subsection available to the commissioner upon request.
             342          (d) Records submitted to the commissioner under the provisions of this section shall be
             343      maintained by the commissioner as protected records under Title 63, Chapter 2, Government
             344      Records Access and Management Act.
             345          Section 5. Section 63-55-231 is amended to read:
             346           63-55-231. Repeal dates, Title 31A.
             347          (1) Section 31A-2-208.5 , Comparison tables, is repealed July 1, 2005.
             348          (2) Section 31A-22-315 , Motor Vehicle Insurance Reporting, is repealed July 1, 2000.
             349          (3) Title 31A, Chapter 31, Insurance Fraud Act, is repealed July 1, 2007.
             350          (4) Section 31A-22-625 , Catastrophic Coverage of Mental Health Conditions, is repealed
             351      July 1, 2011.


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