First Substitute S.B. 66

Senator Michael G. Waddoups proposes the following substitute bill:

1 EMPLOYER HEALTH INSURANCE OPTIONS -
2 CAFETERIA PLANS
3 2007 GENERAL SESSION
4 STATE OF UTAH
5 Chief Sponsor: Michael G. Waddoups
6 House Sponsor: ____________
7 Cosponsors:
8 D. Chris Buttars
9 Allen M. ChristensenGene Davis
Margaret DaytonJohn W. Hickman
Ed Mayne 10
11 LONG TITLE
12 General Description:
13 This bill amends the Insurance Code to require certain health insurers to offer a swing
14 out option to employers and employees.
15 Highlighted Provisions:
16 This bill:
17 . defines terms;
18 . beginning July 1, 2007, requires health insurers to offer to employers a swing out
19 option;
20 . if an employer chooses a swing out option, requires an insurer to inform employees
21 of the swing out option;
22 . permits an employer to pass the cost of a swing out option on to the employee;
23 . establishes a reimbursement rate for noncontracted providers;
24 . establishes certain requirements for applying out-of-pocket expenses;
25 . prohibits an insurer from discriminating against a health care provider under

26 contract with the insurer when the health care provider refers patients with a swing out option
27 out of network;
28 . requires the Insurance Department to report by November 2010 to the legislative
29 Business and Labor Interim Committee concerning swing out options in the state;
30 . coordinates requirements of the swing out option with the preferred provider
31 contract provisions; and
32 . makes technical changes.
33 Monies Appropriated in this Bill:
34 None
35 Other Special Clauses:
36 None
37 Utah Code Sections Affected:
38 AMENDS:
39 31A-8-103, as last amended by Chapters 2 and 90, Laws of Utah 2004
40 ENACTS:
41 31A-22-635, Utah Code Annotated 1953
42
43 Be it enacted by the Legislature of the state of Utah:
44 Section 1. Section 31A-8-103 is amended to read:
45 31A-8-103. Applicability to other provisions of law.
46 (1) (a) Except for exemptions specifically granted under this title, an organization is
47 subject to regulation under all of the provisions of this title.
48 (b) Notwithstanding any provision of this title, an organization licensed under this
49 chapter:
50 (i) is wholly exempt from:
51 (A) Chapter 7, Nonprofit Health Service Insurance Corporations;
52 (B) Chapter 9, Insurance Fraternals;
53 (C) Chapter 10, Annuities;
54 (D) Chapter 11, Motor Clubs;
55 (E) Chapter 12, State Risk Management Fund;
56 (F) Chapter 13, Employee Welfare Funds and Plans;

57 (G) Chapter 19a, Utah Rate Regulation Act; and
58 (H) Chapter 28, Guaranty Associations; and
59 (ii) is not subject to:
60 (A) Chapter 3, Department Funding, Fees, and Taxes, except for Part 1;
61 (B) Section 31A-4-107 ;
62 (C) Chapter 5, Domestic Stock and Mutual Insurance Corporations, except for
63 provisions specifically made applicable by this chapter;
64 (D) Chapter 14, Foreign Insurers, except for provisions specifically made applicable by
65 this chapter;
66 (E) Chapter 17, Determination of Financial Condition, except:
67 (I) Parts 2 and 6; or
68 (II) as made applicable by the commissioner by rule consistent with this chapter;
69 (F) Chapter 18, Investments, except as made applicable by the commissioner by rule
70 consistent with this chapter; and
71 (G) Chapter 22, Contracts in Specific Lines, except for Parts 6, 7, and 12.
72 (2) The commissioner may by rule waive other specific provisions of this title that the
73 commissioner considers inapplicable to health maintenance organizations or limited health
74 plans, upon a finding that the waiver will not endanger the interests of:
75 (a) enrollees;
76 (b) investors; or
77 (c) the public.
78 (3) Title 16, Chapter 6a, Utah Revised Nonprofit Corporation Act, and Title 16,
79 Chapter 10a, Utah Revised Business Corporation Act, do not apply to an organization except as
80 specifically made applicable by:
81 (a) this chapter;
82 (b) a provision referenced under this chapter; or
83 (c) a rule adopted by the commissioner to deal with corporate law issues of health
84 maintenance organizations that are not settled under this chapter.
85 (4) (a) Whenever in this chapter, Chapter 5, or Chapter 14 is made applicable to an
86 organization, the application is:
87 (i) of those provisions that apply to a mutual corporation if the organization is

88 nonprofit; and
89 (ii) of those that apply to a stock corporation if the organization is for profit.
90 (b) When Chapter 5 or 14 is made applicable to an organization under this chapter,
91 "mutual" means nonprofit organization.
92 (5) Solicitation of enrollees by an organization is not a violation of any provision of
93 law relating to solicitation or advertising by health professionals if that solicitation is made in
94 accordance with:
95 (a) this chapter; and
96 (b) Chapter 23a, Insurance Marketing - Licensing Producers, Consultants, and
97 Reinsurance Intermediaries.
98 (6) This title does not prohibit any health maintenance organization from meeting the
99 requirements of any federal law that enables the health maintenance organization to:
100 (a) receive federal funds; or
101 (b) obtain or maintain federal qualification status.
102 (7) (a) Except as provided in Section 31A-8-501 , and Subsection (7)(b), an
103 organization is exempt from statutes in this title or department rules that restrict or limit the
104 organization's freedom of choice in contracting with or selecting health care providers,
105 including Section 31A-22-618 .
106 (b) An organization shall offer a swing out option in compliance with Section
107 31A-22-635 .
108 (8) An organization is exempt from the assessment or payment of premium taxes
109 imposed by Sections 59-9-101 through 59-9-104 .
110 Section 2. Section 31A-22-635 is enacted to read:
111 31A-22-635. Offer of swing out option.
112 (1) For purposes of this section:
113 (a) "Class of health care provider" means all health care providers as defined in Section
114 78-14-3 :
115 (i) who are licensed or certified by the state under either:
116 (A) Title 26, Chapter 21, Health Care Facility Licensing and Inspection Act; or
117 (B) Title 58, Occupations and Professions; and
118 (ii) who are within the same professional, trade, occupational, or facility licensure or

119 certification category established pursuant to Title 26, Chapter 21, Health Care Facility
120 Licensing and Inspection Act, and Title 58 Occupations and Professions.
121 (b) "Employer" means an employer with 2 or more employees.
122 (c) "Fee schedule rate" means the total amount a contracted or participating provider is
123 entitled to receive for covered services regardless of how the responsibility for payment is
124 divided between the insurer and the insured.
125 (d) "Swing out option" means a health insurance plan or rider to a health insurance
126 plan under which the insurer will reimburse a health care provider for providing covered
127 services to an insured, without regard to whether the health care provider is a participating
128 provider or belongs to the health insurance plan network.
129 (2) (a) This section applies to an insurer who is subject to:
130 (i) Chapter 8, Health Maintenance Organizations and Limited Health Plans;
131 (ii) Chapter 22, Part 6, Accident and Health Insurance;
132 (iii) Chapter 30, Individual, Small Employer, and Group Health Insurance Act, to the
133 extent required by Subsection (1)(b); and
134 (iv) notwithstanding Section 31A-1-103 , Title 49, Chapter 20, Public Employees'
135 Benefit and Insurance Program Act.
136 (b) This section does not apply when an individual's health maintenance organization
137 benefit plan or health insurance plan is a Medicaid program or the Children's Health Insurance
138 Program under Title 26, Chapter 18, Medicaid Assistance Act.
139 (3) (a) (i) Beginning with policies issued after or renewed after July 1, 2007, an insurer
140 subject to Subsection (2)(a) shall offer at least one swing out option in accordance with this
141 section.
142 (ii) (A) An insurer shall offer a swing out option to every employer which would allow
143 an enrollee to receive covered services from out-of-network health care providers without
144 having to obtain a referral or prior authorization from the insurer.
145 (B) An insurer shall provide each enrollee in a plan whose employer elects the swing
146 out option, with the opportunity, at the time of enrollment and during the open enrollment
147 period, to enroll in the swing-out option. The insurer shall provide written notice of the
148 swing-out option to each enrollee in a plan whose employer elects the swing-out option and
149 shall include in that notice a detailed explanation of the financial costs to be incurred by an

150 enrollee who selects that plan.
151 (iii) Any premium differential associated with the swing out option shall be:
152 (A) actuarially sound; and
153 (B) explained to the employer in writing.
154 (iv) The commission may audit any records necessary to determine compliance with
155 this section.
156 (v) An employer may chose to pay any, all, or no part of additional cost that is
157 associated with an employee's selection of a swing out option.
158 (b) The commissioner shall report to the Legislature's Business and Labor Interim
159 Committee by November 1, 2010 concerning:
160 (i) the number of swing out options offered in the state;
161 (ii) the number of lives covered by swing out options in the state; and
162 (iii) premium differentials for the swing out options offered in the state.
163 (c) A swing out option required by this section shall pay for covered services provided
164 by a nonparticipating provider as follows:
165 (i) pay an amount equal to 85% of the fee schedule rate that would be paid to the
166 insured for covered services by a participating provider who is a member of the same class of
167 health care provider;
168 (ii) pay the provider directly for the services; and
169 (iii) calculate and apply deductibles and cost sharing in accordance with Subsection
170 (4).
171 (4) (a) A swing out option subject to this section:
172 (i) may require that an enrollee pay a higher deductible or copayment for the plan
173 pursuant to Subsection (4)(b); and
174 (ii) may not require that an enrollee pay a separate deductible, separate copayment or
175 separate coinsurance for services provided by a noncontracted or nonparticipating provider.
176 (b) Higher copayments, coinsurance, and deductibles permitted by Subsection (4)(a)(i):
177 (i) may not exceed, in the aggregate, 150% of the copayments, coinsurance, and
178 deductibles required for contracted or participating providers; and
179 (ii) are subject to other limits established by the department by administrative rule
180 adopted pursuant to Title 63, Chapter 46a, Utah Administrative Rulemaking Act.

181 (5) When an insured receives services from a nonparticipating provider who is
182 reimbursed under the provisions of Subsection (3), the insured is responsible for:
183 (a) any copayments or deductibles that are imposed by the insurer under Subsection
184 (4); and
185 (b) in accordance with Subsection (6), the balance of provider charges that are not
186 reimbursed by the insurer.
187 (6) Notwithstanding any other section of this title, a provider who accepts direct
188 payment for health care services from an insurer may not collect from an insured an amount
189 that exceeds the insurer's fee schedule rate unless the insured has been informed of and agreed
190 to in writing, the specific cost of the service.
191 (7) An insurer subject to this section may not discriminate against a health care
192 provider based on a health care provider's referral patterns for patients who are covered by a
193 swing out option.
194 (8) (a) Except as provided in this Subsection (8) and Section 31A-8-103 , an insurer
195 regulated by Chapter 22, Part 6, Accident and Health Insurance, must comply with Section
196 31A-22-617 .
197 (b) When reimbursing under a swing out option required by this section:
198 (i) the reimbursement provisions of Subsection (3) of this section supercede the
199 reimbursement provisions in Subsection 31A-22-617 (2)(b);
200 (ii) the cost sharing provisions of Subsection (4) supercede Subsection
201 31A-22-617 (2)(d); and
202 (iii) the requirement for payment directly to the provider in Subsection (3)(c)(ii)
203 supercedes Subsection 31A-22-617 (2)(c).
204 (9) The department may require an insurer to submit information to the department to
205 demonstrate compliance with this section.