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PAG LIN 1 1 Section 1. Section 514J.2, Code 2001, is amended by adding 1 2 the following new subsection: 1 3 NEW SUBSECTION. 5A. "Medically necessary" and "medical 1 4 necessity" mean, with respect to a service or benefit, a 1 5 service or benefit that is consistent with generally accepted 1 6 principles of professional medical practice. 1 7 Sec. 2. Section 514J.5, subsection 1, paragraph b, Code 1 8 2001, is amended to read as follows: 1 9 b. The enrollee has been denied coverage based on a 1 10 determination by the carrier or organized delivery system that 1 11 the proposed service or treatmentdoes not meet the definition1 12of medical necessity as defined in the enrollee's evidence of1 13coverageis not medically necessary. 1 14 Sec. 3. NEW SECTION. 514L.1 TITLE. 1 15 This chapter shall be known and may be cited as the "Third- 1 16 Party Payor Liability Act". 1 17 Sec. 4. NEW SECTION. 514L.2 DEFINITIONS. 1 18 As used in this chapter, unless the context otherwise 1 19 requires: 1 20 1. "Appropriate and medically necessary" means with 1 21 respect to a health care service, treatment decision, or 1 22 benefit a health care service, treatment decision, or benefit 1 23 that is consistent with generally accepted principles of 1 24 professional practice. 1 25 2. "Enrollee" means an individual who is enrolled in a 1 26 health care plan, including covered dependents. 1 27 3. "Health care plan" means a plan under which a person 1 28 undertakes to provide, arrange for, pay for, or reimburse any 1 29 part of the cost of any health care service. 1 30 4. "Health care provider" means a person licensed or 1 31 certified under chapter 147, 148, 148A, 148C, 149, 150, 150A, 1 32 151, 152, 153, 154, 154B, or 155A to provide in this state 1 33 professional health care services to an individual during that 1 34 individual's medical care, treatment, or confinement. 1 35 5. "Health care treatment decision" means a determination 2 1 made when health care services are actually provided under the 2 2 health care plan and a decision which affects the quality of 2 3 the diagnosis, care, or treatment provided to the plan's 2 4 insureds or enrollees. 2 5 6. "Health insurance carrier" means an entity subject to 2 6 the insurance laws and regulations of this state, or subject 2 7 to the jurisdiction of the commissioner of insurance, that 2 8 contracts or offers to contract, or that subcontracts or 2 9 offers to subcontract, to provide, deliver, arrange for, pay 2 10 for, or reimburse any of the costs of providing health care 2 11 services, including an insurance company offering sickness and 2 12 accident plans, a health maintenance organization, a nonprofit 2 13 health service corporation, or any other entity providing a 2 14 plan of health insurance, health benefits, or health services. 2 15 7. "Health maintenance organization" means a health 2 16 maintenance organization as defined in section 514B.1. 2 17 8. "Insured" means an individual who is covered by a 2 18 health care plan provided by a health insurance carrier. 2 19 9. "Managed care entity" means an entity that provides a 2 20 health care plan that selects and contracts with health care 2 21 providers; manages and coordinates health care services 2 22 delivery; monitors necessity, appropriateness, and quality of 2 23 health care services delivered by health care providers; and 2 24 performs utilization review and cost control. 2 25 10. "Ordinary care" means, in the case of a third-party 2 26 payor, that degree of care that a third-party of ordinary 2 27 prudence would provide under the same or similar 2 28 circumstances. In the case of a person who is an employee, 2 29 agent, or representative of a third-party payor, "ordinary 2 30 care" means that degree of care that a person of ordinary 2 31 prudence in the same profession, specialty, or area of 2 32 practice as such person would use in the same or similar 2 33 circumstances. 2 34 11. "Organized delivery system" means an organized 2 35 delivery system as licensed by the director of public health. 3 1 12. "Physician" means an individual licensed under chapter 3 2 148, 150, or 150A to practice medicine and surgery, 3 3 osteopathy, or osteopathic medicine and surgery. 3 4 13. "Third-party payor" means a health insurance carrier, 3 5 health maintenance organization, managed care entity, or 3 6 organized delivery system. 3 7 Sec. 5. NEW SECTION. 514L.3 THIRD-PARTY PAYOR DUTY TO 3 8 EXERCISE ORDINARY CARE – LIABILITY. 3 9 1. A third-party payor has the duty to exercise ordinary 3 10 care when making health care treatment decisions and is liable 3 11 for damages for harm to an insured or enrollee proximately 3 12 caused by the third-party payor's failure to exercise such 3 13 ordinary care. 3 14 2. A third-party payor is liable for damages for harm to 3 15 an insured or enrollee proximately caused by the health care 3 16 services treatment decision made by an employee, agent, or 3 17 representative of the third-party payor who is acting on 3 18 behalf of the third-party payor and over whom the third-party 3 19 payor has the right to exercise influence or control or has 3 20 actually exercised influence or control if such decision 3 21 results in the failure to exercise ordinary care. 3 22 3. In an action brought against a third-party payor 3 23 pursuant to this section, any of the following shall be 3 24 defenses: 3 25 a. That neither the third-party payor, nor an employee, 3 26 agent, or representative of the third-party payor controlled, 3 27 influenced, or participated in the health care treatment 3 28 decision. 3 29 b. That the third-party payor did not deny or delay 3 30 payment for any health care services prescribed or recommended 3 31 by a health care provider to the insured or enrollee. 3 32 4. Subsections 1 and 2 do not create an obligation on the 3 33 part of the third-party payor to provide any health care 3 34 services to an insured or enrollee that are not covered by the 3 35 health care plan offered by the third-party payor. 4 1 5. A provision under state law prohibiting a third-party 4 2 payor from practicing medicine or being licensed to practice 4 3 medicine shall not be asserted as a defense by such third- 4 4 party payor in an action brought against it pursuant to this 4 5 section or any other applicable law. 4 6 Sec. 6. NEW SECTION. 514L.4 THIRD-PARTY PAYOR 4 7 PROHIBITIONS. 4 8 1. A third-party payor shall not remove a health care 4 9 provider from its plan or refuse to renew the participation of 4 10 a health care provider under its plan for advocating 4 11 appropriate and medically necessary health care services for 4 12 an insured or enrollee. 4 13 2. A third-party payor shall not enter into a contract 4 14 with a hospital or health care provider or pharmaceutical 4 15 company which includes an indemnification or hold harmless 4 16 clause for the acts or conduct of the third-party payor. Any 4 17 such indemnification or hold harmless clause in an existing 4 18 contract is void. 4 19 3. In an action against a third-party payor, a finding 4 20 that a health care provider is an employee, agent, or 4 21 representative of such third-party payor shall not be based 4 22 solely on proof that such a health care provider's name 4 23 appears in a listing of approved health care providers made 4 24 available to an insured or enrollee under a health care plan. 4 25 Sec. 7. NEW SECTION. 514L.5 EXCLUSIONS. 4 26 1. This chapter does not apply to workers' compensation 4 27 coverages. 4 28 2. This chapter does not create any liability on the part 4 29 of an employer or an employer group purchasing organization 4 30 that purchases health care services coverage or assumes risk 4 31 on behalf of its employees for providing health care services. 4 32 Sec. 8. APPLICABILITY. Sections 1 and 2 of this Act are 4 33 applicable to all carriers and organized delivery systems, as 4 34 those entities are defined in section 514J.2, whose policies, 4 35 contracts, and plans are delivered, issued for delivery, 5 1 continued, or renewed in this state on or after January 1, 5 2 2002. 5 3 EXPLANATION 5 4 This bill creates new Code chapter 514L, the third-party 5 5 payor liability Act, regarding third-party payor liability for 5 6 health care treatment decisions, and prohibiting certain other 5 7 acts by third-party payors, and also adds a definition of 5 8 "medically necessary" to Code chapter 514J, which deals with 5 9 external review of health care coverage decisions. 5 10 New Code section 514L.2 contains definitions for the new 5 11 chapter. "Third-party payor" is defined as a health insurance 5 12 carrier, health maintenance organization, managed care entity, 5 13 or organized delivery system. "Appropriate and medically 5 14 necessary" is defined as a health care service, treatment 5 15 decision, or benefit that is consistent with generally 5 16 accepted principles of professional practice. Code section 5 17 514L.2 also defines the terms "enrollee", "health care plan", 5 18 "health care provider", "health care treatment decision", 5 19 "health insurance carrier", "health maintenance organization", 5 20 "insured", "managed care entity", "ordinary care", "organized 5 21 delivery system", and "physician". 5 22 New Code section 514L.3 requires a third-party payor to 5 23 exercise a duty of ordinary care when making health care 5 24 treatment decisions, and imposes liability for damages 5 25 proximately caused by the failure to exercise that duty of 5 26 care. A third-party payor is also liable for damages 5 27 proximately caused to an insured or enrollee because of 5 28 treatment decisions made by an employee, agent, or 5 29 representative of the third-party payor where the third-party 5 30 payor's exercise of influence or control over such party has 5 31 resulted in a failure to exercise ordinary care. 5 32 A third-party payor may assert the following as defenses to 5 33 an action based on failure to exercise ordinary care: that 5 34 the third-party payor did not influence, control, or 5 35 participate in the health care treatment decision, or that the 6 1 third-party payor did not deny or delay payment for prescribed 6 2 or recommended health care services. Code section 514L.3 also 6 3 provides that the third-party payor may not assert as a 6 4 defense that state law prohibits a third-party payor from 6 5 practicing medicine. 6 6 New Code section 514L.4 provides that third-party payors 6 7 may not remove or refuse to renew the participation of a 6 8 health care provider for advocating appropriate and medically 6 9 necessary health care services, and may not include an 6 10 indemnification or hold-harmless clause for the acts of the 6 11 third-party payor in its contract with a health care provider. 6 12 New Code section 514L.5 provides that the chapter does not 6 13 apply to workers' compensation coverage, and does not create 6 14 liability for employers who purchase or provide health care 6 15 coverage. 6 16 The bill also adds a definition of "medically necessary" 6 17 and "medical necessity" to Code chapter 514J, which deals with 6 18 external review of health care coverage decisions. The 6 19 defined terms are used in Code section 514J.1, which states 6 20 the intent of the general assembly with regard to the chapter; 6 21 Code section 514J.2, which provides the definition for 6 22 "coverage decision"; Code section 514J.12, which provides the 6 23 standard of review to be applied in evaluating a denial of 6 24 coverage; and Code section 514J.5, which is also amended in 6 25 this bill to make the use of the term "medical necessity" 6 26 consistent with the new definition. 6 27 The bill also contains an applicability provision, 6 28 providing that the changes are applicable to insurance 6 29 policies, contracts, and plans delivered, issued for delivery, 6 30 continued, or renewed in this state on or after January 1, 6 31 2002. 6 32 LSB 1328XS 79 6 33 jj/cf/24
Text: SF00544 Text: SF00546 Text: SF00500 - SF00599 Text: SF Index Bills and Amendments: General Index Bill History: General Index
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