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S.B. 172






Sponsor: Peter C. Knudson

             6      This act amends the Insurance Code. The act amends provisions related to health care
             7      provider claims practices. The act amends the definition of provider to include a general
             8      acute hospital to whom an insurer has an indirect obligation to pay. This act makes
             9      technical amendments to the calculations of penalties for failure to timely pay a claim.
             10      This act affects sections of Utah Code Annotated 1953 as follows:
             11      AMENDS:
             12          31A-26-301.6, as enacted by Chapter 240, Laws of Utah 2001
             13      Be it enacted by the Legislature of the state of Utah:
             14          Section 1. Section 31A-26-301.6 is amended to read:
             15           31A-26-301.6. Health care provider claims practices.
             16          (1) As used in this section:
             17          (a) "Articulable reason" may include a determination regarding:
             18          (i) eligibility for coverage;
             19          (ii) preexisting conditions;
             20          (iii) applicability of other public or private insurance;
             21          (iv) medical necessity; and
             22          (v) any other reason that would justify an extension of the time to investigate a claim.
             23          (b) "Health care provider" means a person licensed to provide health care under Title 26,
             24      Chapter 21, Health Care Facility Licensing and Inspection Act, or Title 58, Occupations and
             25      Professions.
             26          (c) "Insurer" means an admitted or authorized insurer, as defined in Section 31A-1-301 ,
             27      and includes:

             28          (i) a health maintenance organization; and
             29          (ii) a third-party administrator that is subject to this title, provided that nothing in this
             30      section may be construed as requiring a third party administrator to use its own funds to pay claims
             31      that have not been funded by the entity for which the third party administrator is paying claims.
             32          (d) (i) "Provider" means a health care provider to whom an insurer is obligated to pay
             33      directly in connection with a claim by virtue of:
             34          [(i)] (A) an agreement between the insurer and the provider;
             35          [(ii)] (B) a health insurance policy or contract of the insurer; or
             36          [(iii)] (C) state or federal law[.]; and
             37          (ii) a general acute hospital as defined in Section 26-21-2 to whom an insurer is obligated
             38      to pay indirectly in connection with a claim by virtue of any of the factors described in Subsections
             39      (1)(d)(i)(A) through (C).
             40          (2) An insurer shall timely pay every valid insurance claim submitted by a provider in
             41      accordance with this section.
             42          (3) (a) Within 30 days of receiving a written claim, an insurer shall do one of the
             43      following:
             44          (i) pay the claim unless Subsection (3)(a)(ii), (iii), (iv), or (v) applies;
             45          (ii) provide a written explanation if the claim is denied;
             46          (iii) specifically describe and request any additional information from the provider that is
             47      necessary to process the claim;
             48          (iv) inform the provider, pursuant to Subsection (4), of the 30-day extension of the
             49      insurer's investigation of the claim; or
             50          (v) request additional information and inform the provider of the 30-day extension if both
             51      Subsections (3)(a)(iii) and (iv) apply.
             52          (b) A provider shall respond to each request by an insurer for additional necessary
             53      information made under Subsection (3)(a)(iii) or (v) within 30 days of receipt of the request by
             54      providing the requested information that is in the possession of the provider, unless:
             55          (i) the provider has requested and received the permission of the insurer to extend the
             56      30-day period; or
             57          (ii) the provider explains to the insurer in writing that additional time, which may not
             58      exceed 30 days, is necessary to comply with the request for information.

             59          (c) Subsection (7) shall apply after an insurer has received the information requested.
             60          (4) The time to investigate a claim may be extended by the insurer for an additional
             61      30-days if:
             62          (a) the investigation of the claim cannot reasonably be completed within the initial 30-day
             63      period of Subsection (3)(a);
             64          (b) before the end of the 30-day period in Subsection (3)(a), the insurer informs the
             65      provider in writing of the reason for the payment delay, the nature of the investigation, the
             66      timelines for investigations established in this section, and the anticipated completion date.
             67          (5) Notwithstanding Subsection (4), the time to investigate a claim may be extended
             68      beyond the initial 30-day period and the extended 30-day period if:
             69          (a) due to matters beyond the control of the insurer, the investigation cannot reasonably
             70      be completed within 60 days as to some part or all of the claim;
             71          (b) before the end of the combined 60-day period, the insurer makes a written request to
             72      the commissioner for an extension, including the reason for the delay, the nature of the
             73      investigation, the anticipated completion date, and the amount of any partial payment of the claim
             74      made pursuant to Subsection (5)(d);
             75          (c) before the end of the combined 60-day period, the commissioner informs the insurer
             76      that the request for an extension has been granted, based on a finding that:
             77          (i) there is a good faith and articulable reason to believe that the insurer is not obligated
             78      to pay some part or all of the claim; and
             79          (ii) the investigation cannot reasonably be completed within 60 days; and
             80          (d) the insurer identifies and pays all sums the insurer is obligated to pay on the claim and
             81      which are not subject to the extension requested under this Subsection (5).
             82          (6) An extension granted by the commissioner under Subsection (5)(c) shall include the
             83      completion date for the investigation.
             84          (7) (a) An insurer shall pay all sums to the provider that the insurer is obligated to pay on
             85      the claim, and provide a written explanation of any part of the claim that is denied within 20 days
             86      of:
             87          (i) receiving the information requested under Subsection (3)(a)(iii);
             88          (ii) completing an investigation under Subsection (4) or (5); or
             89          (iii) the latter of Subsection (3)(a)(iii) or (iv), if Subsection (3)(a)(v) applies.

             90          (b) (i) Except as provided in Subsection (7)(c), an insurer may send a follow-up request
             91      for additional information within the 20-day time period in Subsection (7)(a) if the previous
             92      response of the provider was not sufficient for the insurer to make a decision on the claim.
             93          (ii) A follow-up request for additional necessary information shall state with specificity:
             94          (A) the reason why the previous response was insufficient;
             95          (B) the information that is necessary to comply with the request for information; and
             96          (C) the reason why the requested information is necessary to process the claim.
             97          (c) Unless an insurer has an extension for an investigation pursuant to Subsection (4) or
             98      (5), the insurer shall pay all sums it is obligated to pay on a claim and provide a written
             99      explanation of any part of the claim that is denied within 15 days of receiving a notice from the
             100      provider that the provider has submitted all requested information in the provider's possession that
             101      is related to the claim.
             102          (8) (a) Whenever an insurer makes a payment to a provider on any part of a claim under
             103      this section, the insurer shall also send to the insured an explanation of benefits paid.
             104          (b) Whenever an insurer denies any part of a claim under this section, the insurer shall also
             105      send to the insured a written explanation of the part of the claim that was denied and notice of the
             106      grievance review process established under Section 31A-22-629 .
             107          (c) This Subsection (8) does not apply to a person receiving benefits under the state
             108      Medicaid program as defined in Section 26-18-2 , unless required by the Department of Health or
             109      federal law.
             110          (9) (a) Beginning with health care claims submitted on or after January 1, 2002, a late fee
             111      shall be imposed on:
             112          (i) an insurer that fails to timely pay a claim in accordance with this section; and
             113          (ii) a provider that fails to timely provide information on a claim in accordance with this
             114      section.
             115          (b) For the first 90 days that a claim payment or a provider response to a request for
             116      information is late, the late fee shall be determined by multiplying together:
             117          (i) the total amount of the claim;
             118          (ii) the total number of days the response or the payment was late; and
             119          (iii) .1%.
             120          (c) For a claim payment or a provider response to a request for information that is 91 or

             121      more days late, the late fee shall be determined by adding together:
             122          (i) the late fee for a 90-day period under Subsection (9)(b); and
             123          (ii) the following [sum] multiplied together:
             124          (A) the total amount of the claim;
             125          (B) the total number of days the response or payment was late beyond the initial 90-day
             126      period; and
             127          (C) the rate of interest set in accordance with Section 15-1-1 .
             128          (d) Any late fee paid or collected under this section shall be separately identified on the
             129      documentation used by the insurer to pay the claim.
             130          (e) For purposes of this Subsection (9), "late fee" does not include an amount that is less
             131      than $1.
             132          (10) Each insurer shall establish a grievance review process to resolve claims-related
             133      disputes between the insurer and providers.
             134          (11) No insurer or person representing an insurer may engage in any unfair claim
             135      settlement practice with respect to a provider. Unfair claim settlement practices include:
             136          (a) knowingly misrepresenting a material fact or the contents of an insurance policy in
             137      connection with a claim;
             138          (b) failing to acknowledge and substantively respond within 15 days to any written
             139      communication from a provider relating to a pending claim;
             140          (c) denying or threatening to deny the payment of a claim for any reason that is not clearly
             141      described in the insured's policy;
             142          (d) failing to maintain a payment process sufficient to comply with this section;
             143          (e) failing to maintain claims documentation sufficient to demonstrate compliance with
             144      this section;
             145          (f) failing, upon request, to give to the provider written information regarding the specific
             146      rate and terms under which the provider will be paid for health care services;
             147          (g) failing to timely pay a valid claim in accordance with this section as a means of
             148      influencing, intimidating, retaliating, or gaining an advantage over the provider with respect to an
             149      unrelated claim, an undisputed part of a pending claim, or some other aspect of the contractual
             150      relationship;
             151          (h) failing to pay the sum when required and as required under Subsection (9) when a

             152      violation has occurred;
             153          (i) threatening to retaliate or actual retaliation against a provider for availing himself of
             154      the provisions of this section;
             155          (j) any material violation of this section; and
             156          (k) any other unfair claim settlement practice established in rule or law.
             157          (12) (a) The provisions of this section shall apply to each contract between an insurer and
             158      a provider for the duration of the contract.
             159          (b) Notwithstanding Subsection (12)(a), this section may not be the basis for a bad faith
             160      insurance claim.
             161          (c) Nothing in Subsection (12)(a) may be construed as limiting the ability of an insurer and
             162      a provider from including provisions in their contract that are more stringent than the provisions
             163      of this section.
             164          (13) (a) Pursuant to Chapter 2, Part 2, Duties and Powers of Commissioner, and beginning
             165      January 1, 2002, the commissioner may conduct examinations to determine an insurer's level of
             166      compliance with this section and impose sanctions for each violation.
             167          (b) The commissioner may adopt rules only as necessary to implement this section.
             168          (c) After December 31, 2002, the commissioner may establish rules to facilitate the
             169      exchange of electronic confirmations when claims-related information has been received.
             170          (d) Notwithstanding the provisions of Subsection (13)(b), the commissioner may not adopt
             171      rules regarding the grievance process required by Subsection (10).
             172          (14) Nothing in this section may be construed as limiting the collection rights of a provider
             173      under Section 31A-26-301.5 .
             174          (15) Nothing in this section may be construed as limiting the ability of an insurer to:
             175          (a) recover any amount improperly paid to a provider:
             176          (i) in accordance with Section 31A-31-103 or any other provision of state or federal law;
             177          (ii) within 36 months for a coordination of benefits error; or
             178          (iii) within 18 months for any other reason not identified in Subsection (15)(a)(i) or (ii);
             179          (b) take any action against a provider that is permitted under the terms of the provider
             180      contract and not prohibited by this section;
             181          (c) report the provider to a state or federal agency with regulatory authority over the
             182      provider for unprofessional, unlawful, or fraudulent conduct; or

             183          (d) enter into a mutual agreement with a provider to resolve alleged violations of this
             184      section through mediation or binding arbitration.

Legislative Review Note
    as of 2-21-02 8:36 AM

A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel

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