H.B. 1002

1

PROVIDER CONTRACTING AMENDMENTS
2 2005 FIRST SPECIAL SESSION
3 STATE OF UTAH
4 Sponsor: Rebecca D. Lockhart
5
6 LONG TITLE
7 General Description:
8 This bill amends the Insurance Code to modify the conditions under which a health care
9 provider may bring an action against a health maintenance organization or preferred
10 provider organization for payment, and requires objective provider contracting
11 provisions.
12 Highlighted Provisions:
13 This bill:
14 . specifies when a participating provider in a health maintenance organization may
15 bring an action for enforcement of payment;
16 . specifies when a participating provider in a preferred provider organization may
17 bring an action for enforcement of payment;
18 . requires comparable payment of network providers when the network's panel of
19 providers are leased to another unaffiliated entity;
20 . requires the use of objective criteria for adding or terminating a provider from an
21 HMO or PPO panel; and
22 . prohibits an insurer from taking adverse action against a contracted provider when
23 an insured decides to access health care outside the provider network.
24 Monies Appropriated in this Bill:
25 None
26 Other Special Clauses:
27 This bill takes effect on January 1, 2006.

28 Utah Code Sections Affected:
29 AMENDS:
30 31A-8-407, as last amended by Chapter 252, Laws of Utah 2003
31 31A-22-617, as last amended by Chapter 131, Laws of Utah 2003
32 ENACTS:
33 31A-22-617.1, Utah Code Annotated 1953
34
35 Be it enacted by the Legislature of the state of Utah:
36 Section 1. Section 31A-8-407 is amended to read:
37 31A-8-407. Written contracts -- Limited liability of enrollee.
38 (1) (a) Every contract between an organization and a participating provider of health
39 care services shall be in writing and shall set forth that if the organization:
40 (i) fails to pay for health care services as set forth in the contract, the enrollee may not
41 be liable to the provider for any sums owed by the organization; and
42 (ii) becomes insolvent, the rehabilitator or liquidator may require the participating
43 provider of health care services to:
44 (A) continue to provide health care services under the contract between the
45 participating provider and the organization until the earlier of:
46 (I) 90 days after the date of the filing of a petition for rehabilitation or the petition for
47 liquidation; or
48 (II) the date the term of the contract ends; and
49 (B) subject to Subsection (1)(c), reduce the fees the participating provider is otherwise
50 entitled to receive from the organization under the contract between the participating provider
51 and the organization during the time period described in Subsection (1)(a)(ii)(A).
52 (b) If the conditions of Subsection (1)(c) are met, the participating provider shall:
53 (i) accept the reduced payment as payment in full; and
54 (ii) relinquish the right to collect additional amounts from the insolvent organization's
55 enrollee.
56 (c) Notwithstanding Subsection (1)(a)(ii)(B):
57 (i) the rehabilitator or liquidator may not reduce a fee to less than 75% of the regular
58 fee set forth in the participating provider contract; and

59 (ii) the enrollee shall continue to pay the same copayments, deductibles, and other
60 payments for services received from the participating provider that the enrollee was required to
61 pay before the filing of:
62 (A) the petition for rehabilitation; or
63 (B) the petition for liquidation.
64 (2) A participating provider may not collect or attempt to collect from the enrollee
65 sums owed by the organization or the amount of the regular fee reduction authorized under
66 Subsection (1)(a)(ii) if the participating provider contract:
67 (a) is not in writing as required in Subsection (1); or
68 (b) fails to contain the language required by Subsection (1).
69 (3) (a) A person listed in Subsection (3)(b) may not bill or maintain any action at law
70 against an enrollee to collect:
71 (i) sums owed by the organization; or
72 (ii) the amount of the regular fee reduction authorized under Subsection (1)(a)(ii).
73 (b) Subsection (3)(a) applies to:
74 (i) a participating provider;
75 (ii) an agent;
76 (iii) a trustee; or
77 (iv) an assignee of a person described in Subsections (3)(b)(i) through (iii).
78 (c) In any dispute involving a provider's claim for reimbursement, the same shall be
79 determined in accordance with applicable law, the provider contract, the subscriber contract,
80 and the organization's written payment policies in effect at the time services were rendered.
81 (d) If the parties are unable to resolve their dispute, the matter shall be subject to
82 binding arbitration by a jointly selected arbitrator. Each party is to bear its own expense except
83 the cost of the jointly selected arbitrator shall be equally shared. This Subsection (3)(d) does
84 not apply to the claim of a general acute hospital to the extent it is inconsistent with the
85 hospital's provider agreement.
86 (e) An organization may not penalize a provider solely for pursuing a claims dispute or
87 otherwise demanding payment for a sum believed owing.
88 (4) If an organization permits another private entity with which it does not share
89 common ownership or control to use or otherwise lease one or more of the organization's

90 networks that include participating providers, the organization shall ensure, at a minimum, that
91 the entity pays participating providers in accordance with the same fee schedule and general
92 payment policies as the organization would for that network unless payment for services is
93 governed by a public program's fee schedule.
94 Section 2. Section 31A-22-617 is amended to read:
95 31A-22-617. Preferred provider contract provisions.
96 Health insurance policies may provide for insureds to receive services or
97 reimbursement under the policies in accordance with preferred health care provider contracts as
98 follows:
99 (1) Subject to restrictions under this section, any insurer or third party administrator
100 may enter into contracts with health care providers as defined in Section 78-14-3 under which
101 the health care providers agree to supply services, at prices specified in the contracts, to
102 persons insured by an insurer.
103 (a) (i) A health care provider contract may require the health care provider to accept the
104 specified payment as payment in full, relinquishing the right to collect additional amounts from
105 the insured person.
106 (ii) In any dispute involving a provider's claim for reimbursement, the same shall be
107 determined in accordance with applicable law, the provider contract, the subscriber contract,
108 and the insurer's written payment policies in effect at the time services were rendered.
109 (iii) If the parties are unable to resolve their dispute, the matter shall be subject to
110 binding arbitration by a jointly selected arbitrator. Each party is to bear its own expense except
111 the cost of the jointly selected arbitrator shall be equally shared. This Subsection (1)(a)(iii)
112 does not apply to the claim of a general acute hospital to the extent it is inconsistent with the
113 hospital's provider agreement.
114 (iv) An organization may not penalize a provider solely for pursuing a claims dispute
115 or otherwise demanding payment for a sum believed owing.
116 (v) If an insurer permits another entity with which it does not share common ownership
117 or control to use or otherwise lease one or more of the organization's networks of participating
118 providers, the organization shall ensure, at a minimum, that the entity pays participating
119 providers in accordance with the same fee schedule and general payment policies as the
120 organization would for that network.

121 (b) The insurance contract may reward the insured for selection of preferred health care
122 providers by:
123 (i) reducing premium rates;
124 (ii) reducing deductibles;
125 (iii) coinsurance;
126 (iv) other copayments; or
127 (v) any other reasonable manner.
128 (c) If the insurer is a managed care organization, as defined in Subsection
129 31A-27-311.5 (1)(f):
130 (i) the insurance contract and the health care provider contract shall provide that in the
131 event the managed care organization becomes insolvent, the rehabilitator or liquidator may:
132 (A) require the health care provider to continue to provide health care services under
133 the contract until the earlier of:
134 (I) 90 days after the date of the filing of a petition for rehabilitation or the petition for
135 liquidation; or
136 (II) the date the term of the contract ends; and
137 (B) subject to Subsection (1)(c)(v), reduce the fees the provider is otherwise entitled to
138 receive from the managed care organization during the time period described in Subsection
139 (1)(c)(i)(A);
140 (ii) the provider is required to:
141 (A) accept the reduced payment under Subsection (1)(c)(i)(B) as payment in full; and
142 (B) relinquish the right to collect additional amounts from the insolvent managed care
143 organization's enrollee, as defined in Subsection 31A-27-311.5 (1)(b);
144 (iii) if the contract between the health care provider and the managed care organization
145 has not been reduced to writing, or the contract fails to contain the language required by
146 Subsection (1)(c)(i), the provider may not collect or attempt to collect from the enrollee:
147 (A) sums owed by the insolvent managed care organization; or
148 (B) the amount of the regular fee reduction authorized under Subsection (1)(c)(i)(B);
149 (iv) the following may not bill or maintain any action at law against an enrollee to
150 collect sums owed by the insolvent managed care organization or the amount of the regular fee
151 reduction authorized under Subsection (1)(c)(i)(B):

152 (A) a provider;
153 (B) an agent;
154 (C) a trustee; or
155 (D) an assignee of a person described in Subsections (1)(c)(iv)(A) through (C); and
156 (v) notwithstanding Subsection (1)(c)(i):
157 (A) a rehabilitator or liquidator may not reduce a fee by less than 75% of the provider's
158 regular fee set forth in the contract; and
159 (B) the enrollee shall continue to pay the copayments, deductibles, and other payments
160 for services received from the provider that the enrollee was required to pay before the filing
161 of:
162 (I) a petition for rehabilitation; or
163 (II) a petition for liquidation.
164 (2) (a) Subject to Subsections (2)(b) through (2)(f), an insurer using preferred health
165 care provider contracts shall pay for the services of health care providers not under the contract,
166 unless the illnesses or injuries treated by the health care provider are not within the scope of the
167 insurance contract. As used in this section, "class of health care providers" means all health
168 care providers licensed or licensed and certified by the state within the same professional,
169 trade, occupational, or facility licensure or licensure and certification category established
170 pursuant to Titles 26, Utah Health Code and 58, Occupations and Professions.
171 (b) When the insured receives services from a health care provider not under contract,
172 the insurer shall reimburse the insured for at least 75% of the average amount paid by the
173 insurer for comparable services of preferred health care providers who are members of the
174 same class of health care providers. The commissioner may adopt a rule dealing with the
175 determination of what constitutes 75% of the average amount paid by the insurer for
176 comparable services of preferred health care providers who are members of the same class of
177 health care providers.
178 (c) When reimbursing for services of health care providers not under contract, the
179 insurer may make direct payment to the insured.
180 (d) Notwithstanding Subsection (2)(b), an insurer using preferred health care provider
181 contracts may impose a deductible on coverage of health care providers not under contract.
182 (e) When selecting health care providers with whom to contract under Subsection (1),

183 an insurer may not unfairly discriminate between classes of health care providers, but may
184 discriminate within a class of health care providers, subject to Subsection (7).
185 (f) For purposes of this section, unfair discrimination between classes of health care
186 providers shall include:
187 (i) refusal to contract with class members in reasonable proportion to the number of
188 insureds covered by the insurer and the expected demand for services from class members; and
189 (ii) refusal to cover procedures for one class of providers that are:
190 (A) commonly utilized by members of the class of health care providers for the
191 treatment of illnesses, injuries, or conditions;
192 (B) otherwise covered by the insurer; and
193 (C) within the scope of practice of the class of health care providers.
194 (3) Before the insured consents to the insurance contract, the insurer shall fully disclose
195 to the insured that it has entered into preferred health care provider contracts. The insurer shall
196 provide sufficient detail on the preferred health care provider contracts to permit the insured to
197 agree to the terms of the insurance contract. The insurer shall provide at least the following
198 information:
199 (a) a list of the health care providers under contract and if requested their business
200 locations and specialties;
201 (b) a description of the insured benefits, including any deductibles, coinsurance, or
202 other copayments;
203 (c) a description of the quality assurance program required under Subsection (4); and
204 (d) a description of the adverse benefit determination procedures required under
205 Subsection (5).
206 (4) (a) An insurer using preferred health care provider contracts shall maintain a quality
207 assurance program for assuring that the care provided by the health care providers under
208 contract meets prevailing standards in the state.
209 (b) The commissioner in consultation with the executive director of the Department of
210 Health may designate qualified persons to perform an audit of the quality assurance program.
211 The auditors shall have full access to all records of the organization and its health care
212 providers, including medical records of individual patients.
213 (c) The information contained in the medical records of individual patients shall

214 remain confidential. All information, interviews, reports, statements, memoranda, or other data
215 furnished for purposes of the audit and any findings or conclusions of the auditors are
216 privileged. The information is not subject to discovery, use, or receipt in evidence in any legal
217 proceeding except hearings before the commissioner concerning alleged violations of this
218 section.
219 (5) An insurer using preferred health care provider contracts shall provide a reasonable
220 procedure for resolving complaints and adverse benefit determinations initiated by the insureds
221 and health care providers.
222 (6) An insurer may not contract with a health care provider for treatment of illness or
223 injury unless the health care provider is licensed to perform that treatment.
224 (7) (a) A health care provider or insurer may not discriminate against a preferred health
225 care provider for agreeing to a contract under Subsection (1).
226 (b) Any health care provider licensed to treat any illness or injury within the scope of
227 the health care provider's practice, who is willing and able to meet the terms and conditions
228 established by the insurer for designation as a preferred health care provider, shall be able to
229 apply for and receive the designation as a preferred health care provider. Contract terms and
230 conditions may include reasonable limitations on the number of designated preferred health
231 care providers based upon substantial objective and economic grounds, or expected use of
232 particular services based upon prior provider-patient profiles.
233 (8) Upon the written request of a provider excluded from a provider contract, the
234 commissioner may hold a hearing to determine if the insurer's exclusion of the provider is
235 based on the criteria set forth in Subsection (7)(b).
236 (9) Insurers are subject to the provisions of Sections 31A-22-613.5 , 31A-22-614.5 , and
237 31A-22-618 .
238 (10) Nothing in this section is to be construed as to require an insurer to offer a certain
239 benefit or service as part of a health benefit plan.
240 (11) This section does not apply to catastrophic mental health coverage provided in
241 accordance with Section 31A-22-625 .
242 Section 3. Section 31A-22-617.1 is enacted to read:
243 31A-22-617.1. Objective criteria for adding or terminating participating
244 providers.

245 (1) (a) Every insurer, including a health maintenance organization governed by Chapter
246 8, Health Maintenance Organizations and Limited Health Plans, shall establish criteria for
247 adding health care providers to a new or existing provider panel.
248 (b) Criteria under Subsection (1)(a) may include, but are not limited to:
249 (i) training, certification, and hospital privileges;
250 (ii) number of physicians needed to adequately serve the insurer's population; and
251 (iii) any other factor that is reasonably related to promote or protect good patient care,
252 address costs, take into account on-call and cross-coverage relationships between providers, or
253 serve the lawful interests of the insurer.
254 (c) An insurer shall make such criteria available to any provider upon request and shall
255 file the same with the department.
256 (d) Upon receipt of a provider application and upon receiving all necessary
257 information, an insurer shall make a decision on a provider's application for participation
258 within 120 days.
259 (e) If the provider applicant is rejected, the insurer shall inform the provider of the
260 reason for the rejection relative to the criteria established in accordance with Subsection (1)(b).
261 (f) An insurer may not reject a provider applicant based solely on:
262 (i) the provider's staff privileges at a general acute care hospital not under contract with
263 the insurer; or
264 (ii) the provider's referral patterns for patients who are not covered by the insurer.
265 (g) Criteria set out in Subsection (1)(b) may be modified or changed from time to time
266 to meet the business needs of the market in which the insurer operates and, if modified, will be
267 filed with the department as provided in Subsection (1)(c).
268 (h) With the exception of Subsection (1)(f), this section does not create any new or
269 additional private right of action for redress.
270 (2) (a) For the first two years, an insurer may terminate its contract with a provider
271 with or without cause upon giving the requisite amount of notice provided in the agreement,
272 but in no case shall it be less than 60 days.
273 (b) An agreement may be terminated for cause as provided in the contract established
274 between the insurer and the provider. Such contract shall contain sufficiently certain criteria so
275 that the provider can be reasonably informed of the grounds for termination for cause.

276 (c) Prior to termination for cause, the insurer shall:
277 (i) inform the provider of the intent to terminate and the grounds for doing so;
278 (ii) at the request of the provider, meet with the provider to discuss the reasons for
279 termination;
280 (iii) if the insurer has a reasonable basis to believe that the provider may correct the
281 conduct giving rise to the notice of termination, the insurer may, at its discretion, place the
282 provider on probation with corrective action requirements, restrictions, or both, as necessary to
283 protect patient care; and
284 (iv) if the insurer has a reasonable basis to believe that the provider has engaged in
285 fraudulent conduct or poses a significant risk to patient care or safety, the insurer may
286 immediately suspend the provider from further performance under the contract, provided that
287 the remaining provisions of this Subsection (2) are followed in a timely manner before
288 termination may become final.
289 (d) Each insurer shall establish an internal appeal process for actions that may result in
290 terminated participation with cause and make known to the provider the procedure for
291 appealing such termination.
292 (i) Providers dissatisfied with the results of the appeal process may, if both parties
293 agree, submit the matters in dispute to mediation.
294 (ii) If the matters in dispute are not mediated, or should mediation be unsuccessful, the
295 dispute shall be subject to binding arbitration, by an arbitrator jointly selected by the parties the
296 cost of which shall be jointly shared. Each party shall bear its own additional expenses.
297 (e) A termination under Subsection (2)(a) or (b) may not be based on:
298 (i) the provider's staff privileges at a general acute care hospital not under contract with
299 the insurer; or
300 (ii) the provider's referral patterns for patients who are not covered by the insurer.
301 (3) Notwithstanding any other section of this title, an insurer may not take adverse
302 action against or reduce reimbursement to a contracted provider who is not under a capitated
303 reimbursement arrangement because of the decision of an insured to access health care services
304 from a noncontracted provider in a manner permitted by the insured's health insurance plan,
305 regardless of how the plan is designated.
306 Section 4. Effective date.

307 This bill takes effect on January 1, 2006.




Legislative Review Note
as of 4-13-05 8:48 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