Download Zipped Introduced WordPerfect HB0070.ZIP
[Status][Bill Documents][Fiscal Note][Bills Directory]

H.B. 70






Sponsor: James A. Dunnigan

             7      LONG TITLE
             8      General Description:
             9          This bill enacts the Health Discount Program Consumer Protection Act in the Insurance
             10      Code to regulate the offer and marketing of health discount programs.
             11      Highlighted Provisions:
             12          This bill:
             13          .    defines terms;
             14          .    describes the general scope and purposes of the act;
             15          .    requires a license to operate a health discount program unless the operator is already
             16      a licensed insurer in the state, and designates the term of the license;
             17          .    requires:
             18              .    operators of health discount programs to disclose certain information to the
             19      commissioner prior to offering discount programs in the state;
             20              .    disclosure of terms to enrollees prior to accepting money from the enrollees;
             21              .    certain record keeping by operators of health discount programs; and
             22              .    notice to the commissioner when certain information changes;
             23          .    creates certain advertising restrictions and requirements;
             24          .    makes health discount program operators subject to the provisions of:
             25              .    Chapter 15, Unauthorized Insurers, Surplus Lines, and Risk Retention Groups;
             26      and
             27              .    Chapter 31, Insurance Fraud Act; and

             28          .    enacts a provision in Chapter 31, Insurance Fraud Act, to designate certain
             29      intentional acts a felony.
             30      Monies Appropriated in this Bill:
             31          None
             32      Other Special Clauses:
             33          This bill takes effect on July 1, 2005.
             34      Utah Code Sections Affected:
             35      AMENDS:
             36          31A-2-308, as last amended by Chapter 298, Laws of Utah 2003
             37          31A-15-102, as last amended by Chapter 298, Laws of Utah 2003
             38      ENACTS:
             39          31A-8a-101, Utah Code Annotated 1953
             40          31A-8a-102, Utah Code Annotated 1953
             41          31A-8a-103, Utah Code Annotated 1953
             42          31A-8a-201, Utah Code Annotated 1953
             43          31A-8a-202, Utah Code Annotated 1953
             44          31A-8a-203, Utah Code Annotated 1953
             45          31A-8a-204, Utah Code Annotated 1953
             46          31A-8a-205, Utah Code Annotated 1953
             47          31A-8a-206, Utah Code Annotated 1953
             48          31A-8a-207, Utah Code Annotated 1953
             49          31A-8a-208, Utah Code Annotated 1953
             50          31A-8a-209, Utah Code Annotated 1953
             51          31A-8a-210, Utah Code Annotated 1953
             52          31A-31-111, Utah Code Annotated 1953
             54      Be it enacted by the Legislature of the state of Utah:
             55          Section 1. Section 31A-2-308 is amended to read:
             56           31A-2-308. Enforcement penalties and procedures.
             57          (1) (a) A person who violates any insurance statute or rule or any order issued under
             58      Subsection 31A-2-201 (4) shall forfeit to the state twice the amount of any profit gained from

             59      the violation, in addition to any other forfeiture or penalty imposed.
             60          (b) (i) The commissioner may order an individual producer, limited line producer,
             61      customer service representative, managing general agent, reinsurance intermediary, adjuster, or
             62      insurance consultant who violates an insurance statute or rule to forfeit to the state not more
             63      than $2,500 for each violation.
             64          (ii) The commissioner may order any other person who violates an insurance statute or
             65      rule to forfeit to the state not more than $5,000 for each violation.
             66          (c) (i) The commissioner may order an individual producer, limited line producer,
             67      customer service representative, managing general agent, reinsurance intermediary, adjuster, or
             68      insurance consultant who violates an order issued under Subsection 31A-2-201 (4) to forfeit to
             69      the state not more than $2,500 for each violation. Each day the violation continues is a
             70      separate violation.
             71          (ii) The commissioner may order any other person who violates an order issued under
             72      Subsection 31A-2-201 (4) to forfeit to the state not more than $5,000 for each violation. Each
             73      day the violation continues is a separate violation.
             74          (d) The commissioner may accept or compromise any forfeiture under this Subsection
             75      (1) until after a complaint is filed under Subsection (2). After the filing of the complaint, only
             76      the attorney general may compromise the forfeiture.
             77          (2) When a person fails to comply with an order issued under Subsection
             78      31A-2-201 (4), including a forfeiture order, the commissioner may file an action in any court of
             79      competent jurisdiction or obtain a court order or judgment:
             80          (a) enforcing the commissioner's order;
             81          (b) (i) directing compliance with the commissioner's order and restraining further
             82      violation of the order; and
             83          (ii) subjecting the person ordered to the procedures and sanctions available to the court
             84      for punishing contempt if the failure to comply continues; or
             85          (c) imposing a forfeiture in an amount the court considers just, up to $10,000 for each
             86      day the failure to comply continues after the filing of the complaint until judgment is rendered.
             87          (3) The Utah Rules of Civil Procedure govern actions brought under Subsection (2),
             88      except that the commissioner may file a complaint seeking a court-ordered forfeiture under
             89      Subsection (2)(c) no sooner than two weeks after giving written notice of the commissioner's

             90      intention to proceed under Subsection (2)(c). The commissioner's order issued under
             91      Subsection 31A-2-201 (4) may contain a notice of intention to seek a court-ordered forfeiture if
             92      the commissioner's order is disobeyed.
             93          (4) If, after a court order is issued under Subsection (2), the person fails to comply with
             94      the commissioner's order or judgment:
             95          (a) the commissioner may certify the fact of the failure to the court by affidavit; and
             96          (b) the court may, after a hearing following at least five days written notice to the
             97      parties subject to the order or judgment, amend the order or judgment to add the forfeiture or
             98      forfeitures, as prescribed in Subsection (2)(c), until the person complies.
             99          (5) (a) The proceeds of all forfeitures under this section, including collection expenses,
             100      shall be paid into the General Fund.
             101          (b) The expenses of collection shall be credited to the Insurance Department's budget.
             102          (c) The attorney general's budget shall be credited to the extent the Insurance
             103      Department reimburses the attorney general's office for its collection expenses under this
             104      section.
             105          (6) (a) Forfeitures and judgments under this section bear interest at the rate charged by
             106      the United States Internal Revenue Service for past due taxes on the:
             107          (i) date of entry of the commissioner's order under Subsection (1); or
             108          (ii) date of judgment under Subsection (2).
             109          (b) Interest accrues from the later of the dates described in Subsection (6)(a) until the
             110      forfeiture and accrued interest are fully paid.
             111          (7) A forfeiture may not be imposed under Subsection (2)(c) if:
             112          (a) at the time the forfeiture action is commenced, the person was in compliance with
             113      the commissioner's order; or
             114          (b) the violation of the order occurred during the order's suspension.
             115          (8) The commissioner may seek an injunction as an alternative to issuing an order
             116      under Subsection 31A-2-201 (4).
             117          (9) (a) A person is guilty of a class B misdemeanor if that person:
             118          (i) intentionally violates:
             119          (A) an insurance statute or rule of this state; or
             120          (B) an order issued under Subsection 31A-2-201 (4);

             121          (ii) intentionally permits a person over whom that person has authority to violate:
             122          (A) an insurance statute or rule of this state; or
             123          (B) an order issued under Subsection 31A-2-201 (4); or
             124          (iii) intentionally aids any person in violating:
             125          (A) an insurance statute or rule of this state; or
             126          (B) an order issued under Subsection 31A-2-201 (4).
             127          (b) Unless a specific criminal penalty is provided elsewhere in this title, the person may
             128      be fined not more than:
             129          (i) $10,000 if a corporation; or
             130          (ii) $5,000 if a person other than a corporation.
             131          (c) If the person is an individual, the person may, in addition, be imprisoned for up to
             132      one year.
             133          (d) As used in this Subsection (9), "intentionally" has the same meaning as under
             134      Subsection 76-2-103 (1).
             135          (10) (a) A person who knowingly and intentionally violates Section 31A-4-102 ,
             136      31A-8a-208 , 31A-15-105 , 31A-23a-116 , or 31A-31-111 is guilty of a felony as provided in this
             137      Subsection (10).
             138          (b) When the value of the property, money, or other things obtained or sought to be
             139      obtained in violation of Subsection (10)(a):
             140          (i) is less than $5,000, a person is guilty of a third degree felony; or
             141          (ii) is or exceeds $5,000, a person is guilty of a second degree felony.
             142          [(10)] (11) (a) After a hearing, the commissioner may, in whole or in part, revoke,
             143      suspend, place on probation, limit, or refuse to renew the licensee's license or certificate of
             144      authority:
             145          (i) when a licensee of the department, other than a domestic insurer:
             146          (A) persistently or substantially violates the insurance law; or
             147          (B) violates an order of the commissioner under Subsection 31A-2-201 (4);
             148          (ii) if there are grounds for delinquency proceedings against the licensee under Section
             149      31A-27-301 or Section 31A-27-307 ; or
             150          (iii) if the licensee's methods and practices in the conduct of the licensee's business
             151      endanger, or the licensee's financial resources are inadequate to safeguard, the legitimate

             152      interests of the licensee's customers and the public.
             153          (b) Additional license termination or probation provisions for licensees other than
             154      insurers are set forth in Sections 31A-19a-303 , 31A-19a-304 , 31A-23a-111 , 31A-23a-112 ,
             155      31A-25-208 , 31A-25-209 , 31A-26-213 , 31A-26-214 , 31A-35-501 , and 31A-35-503 .
             156          [(11)] (12) The enforcement penalties and procedures set forth in this section are not
             157      exclusive, but are cumulative of other rights and remedies the commissioner has pursuant to
             158      applicable law.
             159          Section 2. Section 31A-8a-101 is enacted to read:

Part 1. General Provisions

             162          31A-8a-101. Title.
             163          This chapter is known as the "Health Discount Program Consumer Protection Act."
             164          Section 3. Section 31A-8a-102 is enacted to read:
             165          31A-8a-102. Definitions.
             166          For purposes of this chapter:
             167          (1) "Health care provider" means any person that has agreed either directly or
             168      indirectly, by contract or any other arrangement with a health discount program operator, to
             169      provide a discount to enrollees of a health discount program.
             170          (2) "Health discount program" means a business arrangement or contract in which a
             171      person pays fees, dues, charges, or other consideration in exchange for a program that provides
             172      access to health care providers who agree to provide a discount for medical services.
             173          (3) "Operates a health discount program" or "health discount program operator" means
             174      to:
             175          (a) enter into a contract or agreement either directly or indirectly with a health care
             176      provider in this state which the health care provider agrees to provide discounts to enrollees of
             177      the health discount program;
             178          (b) enter into a contract or agreement either directly or indirectly with a person in this
             179      state to provide access to more than one health care provider who has agreed to provide
             180      discounts for medical services to enrollees of the health discount program;
             181          (c) sell or distribute a health discount program in this state; or
             182          (d) place your name on and market or promote a health discount program in this state.

             183          Section 4. Section 31A-8a-103 is enacted to read:
             184          31A-8a-103. Scope and purposes.
             185          (1) A person shall comply with the provisions of this chapter if the person operates a
             186      health discount program in this state.
             187          (2) Notwithstanding any provision in this title, a person who only operates or markets a
             188      health discount program is exempt from:
             189          (a) Section 31A-4-113 ;
             190          (b) Section 31A-4-113.5 ;
             191          (c) Chapter 6a, Service Contracts;
             192          (d) Chapter 7, Nonprofit Health Service Insurance Corporations;
             193          (e) Section 31A-8-209 ;
             194          (f) Section 31A-8-211 ;
             195          (g) Section 31A-8-214 ;
             196          (h) Chapters 9 through 12;
             197          (i) Chapters 17 and 18;
             198          (j) Chapter 19a, Utah Rate Regulation Act;
             199          (k) Sections 31A-23a-103 and 31A-23a-104 ;
             200          (l) Chapters 25 and 26;
             201          (m) Chapters 28 and 29;
             202          (n) Chapter 33, Workers' Compensation Fund; and
             203          (o) Chapters 35 through 38.
             204          (3) A person licensed under this title as an accident and health insurer or health
             205      maintenance organization:
             206          (a) is not required to obtain a license as required by Section 31A-8a-201 to operate a
             207      health discount program; and
             208          (b) is required to comply with all other provisions of this chapter.
             209          (4) The purposes of this chapter include:
             210          (a) full disclosure in the sale of health discount programs;
             211          (b) reasonable regulation of the marketing and disclosure practices of health discount
             212      program operators; and
             213          (c) licensing standards for health discount programs.

             214          Section 5. Section 31A-8a-201 is enacted to read:
Part 2. Licensure

             216          31A-8a-201. License required.
             217          (1) Except as provided in Subsection 31A-8a-103 (3), prior to operating a health
             218      discount program, a person must:
             219          (a) be authorized to transact business in this state; and
             220          (b) be licensed by the commissioner.
             221          (2) (a) An application for licensure under this chapter must be filed with the
             222      commissioner on a form prescribed by the commissioner.
             223          (b) The application shall be sworn to by an officer or authorized representative of the
             224      health discount program and shall include:
             225          (i) articles of incorporation with bylaws or other enabling documents that establish the
             226      organizational structure;
             227          (ii) information required by the commissioner by administrative rule which the
             228      commissioner determines is necessary to:
             229          (A) identify and locate principals, operators, and marketers involved with the health
             230      discount program; and
             231          (B) protect the interests of enrollees of health discount programs, health care providers,
             232      and consumers;
             233          (iii) biographical information and a criminal background check when requested by the
             234      commissioner under the provisions of Subsection 31A-23a-105 (3);
             235          (iv) the disclosures required in Section 31A-8a-203 ; and
             236          (v) the fee established in accordance with Section 31A-3-103 .
             237          Section 6. Section 31A-8a-202 is enacted to read:
             238          31A-8a-202. Commissioner to issue license -- Renewals.
             239          (1) The commissioner may issue a license to a person:
             240          (a) who files an application and pays the fee in accordance with Section 31A-8a-201 ;
             241      and
             242          (b) who the commissioner determines is in compliance with this chapter.
             243          (2) (a) A license issued under this chapter is valid until the immediately following
             244      December 31st and may be renewed in accordance with Subsection (2)(b).

             245          (b) A license may be renewed if:
             246          (i) the commissioner finds that the person operating the health discount program is in
             247      compliance with this chapter;
             248          (ii) the operator of the health discount program pays any applicable fees for renewal;
             249      and
             250          (iii) the operator of the health discount program certifies that the information in the
             251      application for renewal is accurate.
             252          Section 7. Section 31A-8a-203 is enacted to read:
             253          31A-8a-203. Information filed with the department.
             254          (1) Prior to operating a health discount program, a person must submit the following to
             255      the commissioner:
             256          (a) a copy of contract forms used by the health discount program for:
             257          (i) health care providers or health care provider networks participating in the health
             258      discount program, including the discounts for medical services provided to enrollees;
             259          (ii) marketing;
             260          (iii) administration of the health discount program;
             261          (iv) enrollment;
             262          (v) investment management for the health discount programs; and
             263          (vi) subcontracts for any services;
             264          (b) the program's proposed marketing plan; and
             265          (c) dispute resolution procedures for program holders.
             266          (2) The commissioner must approve:
             267          (a) the form of contracts used by the health discount program operator;
             268          (b) the marketing plan; and
             269          (c) dispute resolution procedures.
             270          (3) The commissioner may adopt rules in accordance with Title 63, Chapter 46a, Utah
             271      Administrative Rulemaking Act, to implement this section.
             272          Section 8. Section 31A-8a-204 is enacted to read:
             273          31A-8a-204. Advertising restrictions and requirements.
             274          (1) An operator of a health discount program may not:
             275          (a) use any form of words or terms that may confuse health discount programs with

             276      other types of health insurance in advertising or marketing such as "health plan," "health
             277      benefit plan," "coverage," "copay," "copayments," "preexisting conditions," "guaranteed issue,"
             278      "premium," "enrollment," and "preferred provider";
             279          (b) use other terms as designated by the commissioner by administrative rule in
             280      advertisement or marketing that could reasonably mislead a consumer to believe that a discount
             281      health program is any other form of health insurance; or
             282          (c) refer to sales representatives as "agents," "producers," or "consultants."
             283          (2) A health discount program operator:
             284          (a) must have a written agreement with any marketer of the health discount program
             285      prior to marketing, selling, promoting, or distributing the health discount programs;
             286          (b) must approve in writing all advertisement, marketing materials, brochures, and
             287      discount programs prior to their use or distribution;
             288          (c) is liable for any act or omission of its marketer or distributor; and
             289          (d) must make the following disclosures:
             290          (i) in writing in at least 12-point type or no smaller than the largest type on the page if
             291      type appears on the page that is larger than 12-point type; and
             292          (ii) with any marketing or advertising to the public and with any enrollment forms
             293      given to an enrollee:
             294          (A) the program is not a comprehensive health insurance policy;
             295          (B) the program provides discounts only at certain health care providers for health care
             296      services;
             297          (C) the program holder is obligated to pay for all health care services but will receive a
             298      discount from those health care providers who have contracted with the health discount
             299      program; and
             300          (D) the corporate name and the location of the health discount program operator.
             301          (3) A health discount program operator or marketer who sells the health discount
             302      program with another product must provide the consumer a written itemization of the fees of
             303      the health discount program separate from any fees or charges for the other product.
             304          Section 9. Section 31A-8a-205 is enacted to read:
             305          31A-8a-205. Disclosure of health discount program terms.
             306          (1) Health discount program operators must provide to each potential enrollee a copy

             307      of the terms of the discount program prior to purchase.
             308          (2) The disclosure required by Subsection (1) should be clear and thorough and should
             309      include any administrative or monthly fees, trial periods, procedures for securing discounts,
             310      methods for calculating discounts, cancellation procedures and corresponding refund requests,
             311      and procedures for filing disputes.
             312          (3) A contract must be signed by the enrollee acknowledging the terms before any fees
             313      are collected.
             314          Section 10. Section 31A-8a-206 is enacted to read:
             315          31A-8a-206. Provider agreements -- Record keeping.
             316          (1) A health discount program operator may not place any restrictions on an enrollee's
             317      access to health care providers such as waiting periods or notification periods.
             318          (2) A health discount program operator may not reimburse health care providers for
             319      services rendered to an enrollee.
             320          (3) (a) A health discount program operator must have a written agreement with a health
             321      care provider who agrees to provide discounts to health discount program enrollees.
             322          (b) If the written agreement is with a provider network, the health discount plan must
             323      require the provider network to have written agreements with each of its health care providers.
             324          (4) The health discount program operator shall maintain a copy of each active health
             325      care provider agreement.
             326          Section 11. Section 31A-8a-207 is enacted to read:
             327          31A-8a-207. Notice of change.
             328          (1) A health discount program operator must provide the commissioner notice of:
             329          (a) any change in the health discount program's organizational name, change of
             330      business or mailing address, or change in ownership or principals; and
             331          (b) any change in the information submitted in accordance with Section 31A-8a-203 .
             332          (2) (a) The notice required by Subsection (1) should be submitted 30 days prior to any
             333      change.
             334          (b) The commissioner must approve any changes in forms that required approval under
             335      Section 31A-8a-203 .
             336          Section 12. Section 31A-8a-208 is enacted to read:
             337          31A-8a-208. Representing or aiding an unauthorized insurer.

             338          (1) The provisions of this chapter and Chapter 15, Unauthorized Insurers, Surplus
             339      Lines, and Risk Retention Groups, apply to the activities of an unlicensed health discount
             340      program operator as if the health discount program was an unauthorized insurance contract and
             341      the unlicensed health discount program operator was an unauthorized insurer.
             342          (2) A person who knowingly and intentionally represents or aids an unauthorized
             343      insurer in violation of the provisions of this chapter or Chapter 15, Unauthorized Insurers,
             344      Surplus Lines, and Risk Retention Groups, is guilty of a third degree felony.
             345          Section 13. Section 31A-8a-209 is enacted to read:
             346          31A-8a-209. Health discount program fraud.
             347          For purposes of Chapter 31, Insurance Fraud Act, a health discount program operator is
             348      an insurer as defined in Section 31A-31-102 and is subject to the provisions of Chapter 31,
             349      Insurance Fraud Act.
             350          Section 14. Section 31A-8a-210 is enacted to read:
             351          31A-8a-210. Rulemaking authority.
             352          The commissioner has authority to adopt administrative rules in accordance with Title
             353      63, Chapter 46a, Utah Administrative Rulemaking Act:
             354          (1) to enforce this chapter; and
             355          (2) as necessary to protect the public interest.
             356          Section 15. Section 31A-15-102 is amended to read:
             357           31A-15-102. Assisting unauthorized insurers.
             358          (1) No person may do any act enumerated under Subsection (2) who knows or should
             359      know that the act may assist in the illegal placement of insurance with an unauthorized insurer
             360      or the subsequent servicing of an insurance policy illegally placed with an unauthorized
             361      insurer.
             362          (2) An act performed by mail is performed both at the place of mailing and at the place
             363      of delivery. Any of the following acts, whether performed by mail or otherwise, fall within the
             364      prohibition of Subsection (1):
             365          (a) soliciting, making, or proposing to make an insurance contract;
             366          (b) taking, receiving, or forwarding an application for insurance;
             367          (c) collecting or receiving, in full or in part, an insurance premium;
             368          (d) issuing or delivering an insurance policy or other evidence of an insurance contract

             369      except as a messenger not employed by the insurer, or an insurance producer;
             370          (e) doing any of the following in connection with the solicitation, negotiation,
             371      procuring, or effectuation of insurance coverage for another: inspecting risks, setting rates,
             372      advertising, disseminating information, or advising on risk management;
             373          (f) publishing or disseminating any advertisement encouraging the placement or
             374      servicing of insurance that would violate Subsection (1); however this provision does not apply
             375      to publication or dissemination to an audience primarily outside Utah that also reaches persons
             376      in Utah unless the extension to persons inside Utah can be conveniently avoided without
             377      substantial expense other than loss of revenue; nor does it apply to regional or national network
             378      programs on radio or television unless they originate in Utah;
             379          (g) investigating, settling, adjusting, or litigating claims; or
             380          (h) representing or assisting any person to do an unauthorized insurance business or to
             381      procure insurance from an unauthorized insurer.
             382          (3) Subsection (1) does not prohibit:
             383          (a) an attorney acting for a client;
             384          (b) a full-time salaried employee of an insured acting in the capacity of an insurance
             385      buyer or manager; or
             386          (c) insurance activities described under Section 31A-15-103 .
             387          (4) Any act performed in Utah which is prohibited under this section constitutes
             388      appointment of the commissioner or the lieutenant governor as agent for service of process
             389      under Sections 31A-2-309 and 31A-2-310 .
             390          (5) Any person or entity who knows or should know that the person's or entity's actions
             391      assist in the illegal placement of insurance in violation of this section is guilty of a third degree
             392      felony.
             393          Section 16. Section 31A-31-111 is enacted to read:
             394          31A-31-111. Health discount program fraud.
             395          (1) In addition to any other fraudulent acts prohibited by this chapter, a person commits
             396      a fraudulent insurance act if that person with intent to deceive or defraud:
             397          (a) accepts fees, dues, charges, or other consideration for providing a health discount
             398      program as defined in Section 31A-8a-102 without having health care providers under contract
             399      who have agreed to provide the discounts promised to enrollees; or

             400          (b) operates a health discount program without complying with the provisions of
             401      Section 31A-8a-201 .
             402          (2) In addition to any other civil penalties or remedies provided by law, a person who
             403      violates this section is guilty of a third degree felony.
             404          Section 17. Effective date.
             405          This bill takes effect on July 1, 2005.

Legislative Review Note
    as of 12-17-04 9:45 AM

Based on a limited legal review, this legislation has not been determined to have a high
probability of being held unconstitutional.

Office of Legislative Research and General Counsel

[Bill Documents][Bills Directory]