H.B. 1002 Enrolled

PROVIDER CONTRACTING AMENDMENTS
2005 FIRST SPECIAL SESSION
STATE OF UTAH
Chief Sponsor: Rebecca D. Lockhart
Senate Sponsor: Curtis S. Bramble

LONG TITLE
General Description:
This bill amends the Insurance Code to modify the conditions under which a health care
provider may bring an action against a health maintenance organization or preferred
provider organization for payment, and requires objective provider contracting
provisions.
Highlighted Provisions:
This bill:
. specifies when a participating provider in a health maintenance organization may
bring an action for enforcement of payment;
. specifies when a participating provider in a preferred provider organization may
bring an action for enforcement of payment;
. requires comparable payment of network providers when the network's panel of
providers are leased to another unaffiliated entity;
. requires the use of objective criteria for adding or terminating a provider from an
HMO or PPO panel; and
. prohibits an insurer from taking adverse action against a contracted provider when
an insured decides to access health care outside the provider network.
Monies Appropriated in this Bill:
None
Other Special Clauses:
This bill takes effect on January 1, 2006.
Utah Code Sections Affected:

AMENDS:
31A-8-407, as last amended by Chapter 252, Laws of Utah 2003
31A-22-617, as last amended by Chapter 131, Laws of Utah 2003
ENACTS:
31A-22-617.1, Utah Code Annotated 1953

Be it enacted by the Legislature of the state of Utah:
Section 1. Section 31A-8-407 is amended to read:
31A-8-407. Written contracts -- Limited liability of enrollee -- Provider claim
disputes -- Leased networks.
(1) (a) Every contract between an organization and a participating provider of health care
services shall be in writing and shall set forth that if the organization:
(i) fails to pay for health care services as set forth in the contract, the enrollee may not be
liable to the provider for any sums owed by the organization; and
(ii) becomes insolvent, the rehabilitator or liquidator may require the participating
provider of health care services to:
(A) continue to provide health care services under the contract between the participating
provider and the organization until the earlier of:
(I) 90 days after the date of the filing of a petition for rehabilitation or the petition for
liquidation; or
(II) the date the term of the contract ends; and
(B) subject to Subsection (1)(c), reduce the fees the participating provider is otherwise
entitled to receive from the organization under the contract between the participating provider
and the organization during the time period described in Subsection (1)(a)(ii)(A).
(b) If the conditions of Subsection (1)(c) are met, the participating provider shall:
(i) accept the reduced payment as payment in full; and
(ii) relinquish the right to collect additional amounts from the insolvent organization's
enrollee.

(c) Notwithstanding Subsection (1)(a)(ii)(B):
(i) the rehabilitator or liquidator may not reduce a fee to less than 75% of the regular fee
set forth in the participating provider contract; and
(ii) the enrollee shall continue to pay the same copayments, deductibles, and other
payments for services received from the participating provider that the enrollee was required to
pay before the filing of:
(A) the petition for rehabilitation; or
(B) the petition for liquidation.
(2) A participating provider may not collect or attempt to collect from the enrollee sums
owed by the organization or the amount of the regular fee reduction authorized under Subsection
(1)(a)(ii) if the participating provider contract:
(a) is not in writing as required in Subsection (1); or
(b) fails to contain the language required by Subsection (1).
(3) (a) A person listed in Subsection (3)(b) may not bill or maintain any action at law
against an enrollee to collect:
(i) sums owed by the organization; or
(ii) the amount of the regular fee reduction authorized under Subsection (1)(a)(ii).
(b) Subsection (3)(a) applies to:
(i) a participating provider;
(ii) an agent;
(iii) a trustee; or
(iv) an assignee of a person described in Subsections (3)(b)(i) through (iii).
(c) In any dispute involving a provider's claim for reimbursement, the same shall be
determined in accordance with applicable law, the provider contract, the subscriber contract, and
the organization's written payment policies in effect at the time services were rendered.
(d) If the parties are unable to resolve their dispute, the matter shall be subject to binding
arbitration by a jointly selected arbitrator. Each party is to bear its own expense except the cost
of the jointly selected arbitrator shall be equally shared. This Subsection (3)(d) does not apply to

the claim of a general acute hospital to the extent it is inconsistent with the hospital's provider
agreement.
(e) An organization may not penalize a provider solely for pursuing a claims dispute or
otherwise demanding payment for a sum believed owing.
(4) If an organization permits another private entity with which it does not share common
ownership or control to use or otherwise lease one or more of the organization's networks that
include participating providers, the organization shall ensure, at a minimum, that the entity pays
participating providers in accordance with the same fee schedule and general payment policies as
the organization would for that network unless payment for services is governed by a public
program's fee schedule.
Section 2. Section 31A-22-617 is amended to read:
31A-22-617. Preferred provider contract provisions.
Health insurance policies may provide for insureds to receive services or reimbursement
under the policies in accordance with preferred health care provider contracts as follows:
(1) Subject to restrictions under this section, any insurer or third party administrator may
enter into contracts with health care providers as defined in Section 78-14-3 under which the
health care providers agree to supply services, at prices specified in the contracts, to persons
insured by an insurer.
(a) (i) A health care provider contract may require the health care provider to accept the
specified payment as payment in full, relinquishing the right to collect additional amounts from the
insured person.
(ii) In any dispute involving a provider's claim for reimbursement, the same shall be
determined in accordance with applicable law, the provider contract, the subscriber contract, and
the insurer's written payment policies in effect at the time services were rendered.
(iii) If the parties are unable to resolve their dispute, the matter shall be subject to binding
arbitration by a jointly selected arbitrator. Each party is to bear its own expense except the cost
of the jointly selected arbitrator shall be equally shared. This Subsection (1)(a)(iii) does not apply
to the claim of a general acute hospital to the extent it is inconsistent with the hospital's provider

agreement.
(iv) An organization may not penalize a provider solely for pursuing a claims dispute or
otherwise demanding payment for a sum believed owing.
(v) If an insurer permits another entity with which it does not share common ownership
or control to use or otherwise lease one or more of the organization's networks of participating
providers, the organization shall ensure, at a minimum, that the entity pays participating providers
in accordance with the same fee schedule and general payment policies as the organization would
for that network.
(b) The insurance contract may reward the insured for selection of preferred health care
providers by:
(i) reducing premium rates;
(ii) reducing deductibles;
(iii) coinsurance;
(iv) other copayments; or
(v) any other reasonable manner.
(c) If the insurer is a managed care organization, as defined in Subsection
31A-27-311.5 (1)(f):
(i) the insurance contract and the health care provider contract shall provide that in the
event the managed care organization becomes insolvent, the rehabilitator or liquidator may:
(A) require the health care provider to continue to provide health care services under the
contract until the earlier of:
(I) 90 days after the date of the filing of a petition for rehabilitation or the petition for
liquidation; or
(II) the date the term of the contract ends; and
(B) subject to Subsection (1)(c)(v), reduce the fees the provider is otherwise entitled to
receive from the managed care organization during the time period described in Subsection
(1)(c)(i)(A);
(ii) the provider is required to:

(A) accept the reduced payment under Subsection (1)(c)(i)(B) as payment in full; and
(B) relinquish the right to collect additional amounts from the insolvent managed care
organization's enrollee, as defined in Subsection 31A-27-311.5 (1)(b);
(iii) if the contract between the health care provider and the managed care organization
has not been reduced to writing, or the contract fails to contain the language required by
Subsection (1)(c)(i), the provider may not collect or attempt to collect from the enrollee:
(A) sums owed by the insolvent managed care organization; or
(B) the amount of the regular fee reduction authorized under Subsection (1)(c)(i)(B);
(iv) the following may not bill or maintain any action at law against an enrollee to collect
sums owed by the insolvent managed care organization or the amount of the regular fee reduction
authorized under Subsection (1)(c)(i)(B):
(A) a provider;
(B) an agent;
(C) a trustee; or
(D) an assignee of a person described in Subsections (1)(c)(iv)(A) through (C); and
(v) notwithstanding Subsection (1)(c)(i):
(A) a rehabilitator or liquidator may not reduce a fee by less than 75% of the provider's
regular fee set forth in the contract; and
(B) the enrollee shall continue to pay the copayments, deductibles, and other payments
for services received from the provider that the enrollee was required to pay before the filing of:
(I) a petition for rehabilitation; or
(II) a petition for liquidation.
(2) (a) Subject to Subsections (2)(b) through (2)(f), an insurer using preferred health care
provider contracts shall pay for the services of health care providers not under the contract, unless
the illnesses or injuries treated by the health care provider are not within the scope of the
insurance contract. As used in this section, "class of health care providers" means all health care
providers licensed or licensed and certified by the state within the same professional, trade,
occupational, or facility licensure or licensure and certification category established pursuant to

Titles 26, Utah Health Code and 58, Occupations and Professions.
(b) When the insured receives services from a health care provider not under contract, the
insurer shall reimburse the insured for at least 75% of the average amount paid by the insurer for
comparable services of preferred health care providers who are members of the same class of
health care providers. The commissioner may adopt a rule dealing with the determination of what
constitutes 75% of the average amount paid by the insurer for comparable services of preferred
health care providers who are members of the same class of health care providers.
(c) When reimbursing for services of health care providers not under contract, the insurer
may make direct payment to the insured.
(d) Notwithstanding Subsection (2)(b), an insurer using preferred health care provider
contracts may impose a deductible on coverage of health care providers not under contract.
(e) When selecting health care providers with whom to contract under Subsection (1), an
insurer may not unfairly discriminate between classes of health care providers, but may
discriminate within a class of health care providers, subject to Subsection (7).
(f) For purposes of this section, unfair discrimination between classes of health care
providers shall include:
(i) refusal to contract with class members in reasonable proportion to the number of
insureds covered by the insurer and the expected demand for services from class members; and
(ii) refusal to cover procedures for one class of providers that are:
(A) commonly utilized by members of the class of health care providers for the treatment
of illnesses, injuries, or conditions;
(B) otherwise covered by the insurer; and
(C) within the scope of practice of the class of health care providers.
(3) Before the insured consents to the insurance contract, the insurer shall fully disclose
to the insured that it has entered into preferred health care provider contracts. The insurer shall
provide sufficient detail on the preferred health care provider contracts to permit the insured to
agree to the terms of the insurance contract. The insurer shall provide at least the following
information:

(a) a list of the health care providers under contract and if requested their business
locations and specialties;
(b) a description of the insured benefits, including any deductibles, coinsurance, or other
copayments;
(c) a description of the quality assurance program required under Subsection (4); and
(d) a description of the adverse benefit determination procedures required under
Subsection (5).
(4) (a) An insurer using preferred health care provider contracts shall maintain a quality
assurance program for assuring that the care provided by the health care providers under contract
meets prevailing standards in the state.
(b) The commissioner in consultation with the executive director of the Department of
Health may designate qualified persons to perform an audit of the quality assurance program. The
auditors shall have full access to all records of the organization and its health care providers,
including medical records of individual patients.
(c) The information contained in the medical records of individual patients shall remain
confidential. All information, interviews, reports, statements, memoranda, or other data furnished
for purposes of the audit and any findings or conclusions of the auditors are privileged. The
information is not subject to discovery, use, or receipt in evidence in any legal proceeding except
hearings before the commissioner concerning alleged violations of this section.
(5) An insurer using preferred health care provider contracts shall provide a reasonable
procedure for resolving complaints and adverse benefit determinations initiated by the insureds
and health care providers.
(6) An insurer may not contract with a health care provider for treatment of illness or
injury unless the health care provider is licensed to perform that treatment.
(7) (a) A health care provider or insurer may not discriminate against a preferred health
care provider for agreeing to a contract under Subsection (1).
(b) Any health care provider licensed to treat any illness or injury within the scope of the
health care provider's practice, who is willing and able to meet the terms and conditions

established by the insurer for designation as a preferred health care provider, shall be able to apply
for and receive the designation as a preferred health care provider. Contract terms and conditions
may include reasonable limitations on the number of designated preferred health care providers
based upon substantial objective and economic grounds, or expected use of particular services
based upon prior provider-patient profiles.
(8) Upon the written request of a provider excluded from a provider contract, the
commissioner may hold a hearing to determine if the insurer's exclusion of the provider is based
on the criteria set forth in Subsection (7)(b).
(9) Insurers are subject to the provisions of Sections 31A-22-613.5 , 31A-22-614.5 , and
31A-22-618 .
(10) Nothing in this section is to be construed as to require an insurer to offer a certain
benefit or service as part of a health benefit plan.
(11) This section does not apply to catastrophic mental health coverage provided in
accordance with Section 31A-22-625 .
Section 3. Section 31A-22-617.1 is enacted to read:
31A-22-617.1. Objective criteria for adding or terminating participating providers
-- Termination of contracts -- Review process.
(1) (a) Every insurer, including a health maintenance organization governed by Chapter 8,
Health Maintenance Organizations and Limited Health Plans, shall establish criteria for adding
health care providers to a new or existing provider panel.
(b) Criteria under Subsection (1)(a) may include, but are not limited to:
(i) training, certification, and hospital privileges;
(ii) number of physicians needed to adequately serve the insurer's population; and
(iii) any other factor that is reasonably related to promote or protect good patient care,
address costs, take into account on-call and cross-coverage relationships between providers, or
serve the lawful interests of the insurer.
(c) An insurer shall make such criteria available to any provider upon request and shall file
the same with the department.

(d) Upon receipt of a provider application and upon receiving all necessary information,
an insurer shall make a decision on a provider's application for participation within 120 days.
(e) If the provider applicant is rejected, the insurer shall inform the provider of the reason
for the rejection relative to the criteria established in accordance with Subsection (1)(b).
(f) An insurer may not reject a provider applicant based solely on:
(i) the provider's staff privileges at a general acute care hospital not under contract with
the insurer; or
(ii) the provider's referral patterns for patients who are not covered by the insurer.
(g) Criteria set out in Subsection (1)(b) may be modified or changed from time to time to
meet the business needs of the market in which the insurer operates and, if modified, will be filed
with the department as provided in Subsection (1)(c).
(h) With the exception of Subsection (1)(f), this section does not create any new or
additional private right of action for redress.
(2) (a) For the first two years, an insurer may terminate its contract with a provider with
or without cause upon giving the requisite amount of notice provided in the agreement, but in no
case shall it be less than 60 days.
(b) An agreement may be terminated for cause as provided in the contract established
between the insurer and the provider. Such contract shall contain sufficiently certain criteria so
that the provider can be reasonably informed of the grounds for termination for cause.
(c) Prior to termination for cause, the insurer shall:
(i) inform the provider of the intent to terminate and the grounds for doing so;
(ii) at the request of the provider, meet with the provider to discuss the reasons for
termination;
(iii) if the insurer has a reasonable basis to believe that the provider may correct the
conduct giving rise to the notice of termination, the insurer may, at its discretion, place the
provider on probation with corrective action requirements, restrictions, or both, as necessary to
protect patient care; and
(iv) if the insurer has a reasonable basis to believe that the provider has engaged in

fraudulent conduct or poses a significant risk to patient care or safety, the insurer may
immediately suspend the provider from further performance under the contract, provided that the
remaining provisions of this Subsection (2) are followed in a timely manner before termination
may become final.
(d) Each insurer shall establish an internal appeal process for actions that may result in
terminated participation with cause and make known to the provider the procedure for appealing
such termination.
(i) Providers dissatisfied with the results of the appeal process may, if both parties agree,
submit the matters in dispute to mediation.
(ii) If the matters in dispute are not mediated, or should mediation be unsuccessful, the
dispute shall be subject to binding arbitration by an arbitrator jointly selected by the parties, the
cost of which shall be jointly shared. Each party shall bear its own additional expenses.
(e) A termination under Subsection (2)(a) or (b) may not be based on:
(i) the provider's staff privileges at a general acute care hospital not under contract with
the insurer; or
(ii) the provider's referral patterns for patients who are not covered by the insurer.
(3) Notwithstanding any other section of this title, an insurer may not take adverse action
against or reduce reimbursement to a contracted provider who is not under a capitated
reimbursement arrangement because of the decision of an insured to access health care services
from a noncontracted provider in a manner permitted by the insured's health insurance plan,
regardless of how the plan is designated.
Section 4. Effective date.
This bill takes effect on January 1, 2006.