Senate File 2305 - Reprinted SENATE FILE 2305 BY COMMITTEE ON COMMERCE (SUCCESSOR TO SSB 3165) (As Amended and Passed by the Senate February 27, 2018 ) A BILL FOR An Act relating to workers’ compensation and insurance fraud 1 and other prohibited health service provider practices, 2 providing penalties, and including effective date and 3 applicability provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 SF 2305 (3) 87 asf/rj/jh
S.F. 2305 Section 1. NEW SECTION . 507F.1 Definitions. 1 As used in this chapter, unless the context otherwise 2 requires, “workers’ compensation insurer” includes any insurer 3 as defined in section 507A.3 that issues a policy of workers’ 4 compensation liability insurance and any group or self-insured 5 plan as described in section 87.4. 6 Sec. 2. NEW SECTION . 507F.2 Purpose of workers’ 7 compensation fraud unit. 8 A workers’ compensation fraud unit is created within the 9 insurance fraud bureau within the insurance division. Upon a 10 reasonable determination by the workers’ compensation fraud 11 unit, by its own inquiries or as a result of complaints filed 12 with the insurance fraud bureau or the workers’ compensation 13 fraud unit, that a person has engaged in, is engaging in, 14 or may be engaging in an act or practice that violates this 15 chapter, the workers’ compensation fraud unit may administer 16 oaths and affirmations, issue and serve subpoenas ordering the 17 attendance of witnesses, collect evidence related to such act 18 or practice, commence a suit, and prosecute a violation of this 19 chapter. 20 Sec. 3. NEW SECTION . 507F.3 Workers’ compensation 21 fraudulent practice —— penalties. 22 1. A person commits the offense of workers’ compensation 23 fraudulent practice if the person, with the intent to defraud 24 a workers’ compensation insurer does any act that constitutes 25 a violation of section 507E.3. 26 2. A person who commits an offense under this section that 27 results in a loss to a workers’ compensation insurer of ten 28 thousand dollars or less is, upon conviction, guilty of a class 29 “D” felony. 30 3. A person who commits an offense under this section that 31 results in a loss to a workers’ compensation insurer of more 32 than ten thousand dollars is, upon conviction, guilty of a 33 class “C” felony. 34 4. Fifty percent of the criminal penalty collected under 35 -1- SF 2305 (3) 87 asf/rj/jh 1/ 8
S.F. 2305 this section shall be deposited in the workers’ compensation 1 fraud penalty fund created in section 507F.5. The remaining 2 fifty percent of the criminal penalty collected under this 3 section shall be deposited pursuant to section 602.8108. 4 Sec. 4. NEW SECTION . 507F.4 Restitution. 5 In addition to the criminal penalties established in this 6 chapter, the court shall order a person who commits an offense 7 under this chapter to pay restitution to persons aggrieved by 8 the violation. Restitution shall be ordered in addition to a 9 fine and the possibility of imprisonment, but not in lieu of a 10 fine and the possibility of imprisonment. 11 Sec. 5. NEW SECTION . 507F.5 Fund created. 12 A workers’ compensation fraud penalty fund is created in 13 the state treasury as a separate fund under the control of 14 the commissioner of insurance for purposes of this chapter. 15 Notwithstanding section 8.33, any balance in the fund on June 16 30 of each fiscal year shall not revert to the general fund of 17 the state, but shall be available for purposes of this chapter 18 in subsequent fiscal years. The commissioner of insurance may 19 request additional full time equivalent positions as needed and 20 the request shall be granted so long as sufficient funds are 21 within the workers’ compensation fraud penalty fund. 22 Sec. 6. NEW SECTION . 507F.6 Examination of information 23 outside the state. 24 As a unit within the insurance fraud bureau, the workers’ 25 compensation fraud unit, pursuant to section 507E.4, may obtain 26 and examine any information that is related to enforcement of 27 this chapter in possession of a person located outside the 28 state. 29 Sec. 7. NEW SECTION . 507F.7 Confidentiality. 30 As a unit within the insurance fraud bureau, all of the 31 provisions of section 507E.5 shall apply to the workers’ 32 compensation fraud unit. 33 Sec. 8. NEW SECTION . 507F.8 Immunity from liability. 34 A person is immune from civil liability for acts under this 35 -2- SF 2305 (3) 87 asf/rj/jh 2/ 8
S.F. 2305 chapter if the person meets the requirements set forth in 1 section 507E.7. 2 Sec. 9. NEW SECTION . 507F.9 Election of prosecution. 3 If a person commits an offense under this chapter, the 4 prosecuting attorney may elect to proceed under this chapter 5 or any other law of this state. 6 Sec. 10. NEW SECTION . 507F.10 Prosecuting attorney status. 7 1. The workers’ compensation fraud unit shall employ at 8 least one full-time prosecuting attorney. The prosecuting 9 attorney, having specialized knowledge and training, shall 10 in all counties in this state prosecute all criminal actions 11 which may be brought under this chapter in which the workers’ 12 compensation fraud unit may be interested, when, in the 13 prosecuting attorney’s judgment, the interest of the unit 14 requires such action. 15 2. The prosecuting attorney may request a county attorney 16 to assist with or handle the prosecution of a criminal action 17 which may be brought under this chapter. 18 3. The prosecuting attorney shall report to the 19 commissioner of insurance. 20 Sec. 11. NEW SECTION . 507F.11 Law enforcement officer 21 status. 22 As a unit within the insurance fraud bureau, all of the 23 provisions of section 507E.8 shall apply to the workers’ 24 compensation fraud unit. 25 Sec. 12. NEW SECTION . 507F.12 Suspension of benefits. 26 If a person is currently receiving or has a pending 27 application for workers’ compensation benefits under chapter 28 85, 85A, or 85B and the workers’ compensation fraud unit makes 29 a determination to file charges in district court alleging a 30 violation of this chapter by a person receiving benefits under 31 chapter 85, 85A, or 85B, the workers’ compensation fraud unit 32 shall notify the workers’ compensation commissioner, who shall 33 suspend benefits or suspend any pending application. 34 A person convicted of a workers’ compensation fraudulent 35 -3- SF 2305 (3) 87 asf/rj/jh 3/ 8
S.F. 2305 practice shall be prohibited from receiving benefits under 1 chapters 85, 85A, and 85B for the particular claim or injury 2 giving rise to the criminal action. If the person is acquitted 3 or the charges are dismissed, the workers’ compensation fraud 4 unit shall notify the workers’ compensation commissioner of 5 such action and the commissioner shall resume the payment of 6 any benefits previously suspended or resume any suspended 7 application. A person whose benefits have been suspended and 8 the payment of benefits resumed has the option to receive 9 a back payment in a lump sum upon resumption of payment of 10 benefits. 11 Sec. 13. NEW SECTION . 507F.13 Rulemaking authority. 12 The commissioner of insurance may adopt rules pursuant to 13 chapter 17A to administer this chapter. 14 Sec. 14. Section 85.27, subsections 3 and 4, Code 2018, are 15 amended to read as follows: 16 3. A medical service provided under this chapter or chapter 17 85A or 85B shall not be billed at a rate higher than a health 18 service provider’s standard retail rate for the medical 19 service. A health service provider who bills and receives 20 payment in excess of the health service provider’s standard 21 rate for a medical service provided to treat a workers’ 22 compensation injury shall reimburse the employer or insurance 23 carrier which paid for the medical service for the excess 24 payments received by the health service provider. 25 Notwithstanding section 85.26, subsection 4 , charges believed 26 to be excessive or unnecessary may be referred by the 27 employer, insurance carrier, or health service provider to the 28 workers’ compensation commissioner for determination, and the 29 commissioner may utilize the procedures provided in sections 30 86.38 and 86.39 , or set by rule, and conduct such inquiry as 31 the commissioner deems necessary. Any health service provider 32 charges not in dispute shall be paid directly to the health 33 service provider prior to utilization of procedures provided 34 in sections 86.38 and 86.39 or set by rule. A health service 35 -4- SF 2305 (3) 87 asf/rj/jh 4/ 8
S.F. 2305 provider rendering treatment to an employee whose injury is 1 compensable under this section agrees to be bound by such 2 charges as allowed by the workers’ compensation commissioner 3 and shall not recover in law or equity any amount in excess of 4 charges set by the commissioner. When a dispute under this 5 chapter , chapter 85A , or chapter 85B regarding reasonableness 6 of a fee for medical services arises between a health service 7 provider and an employer or insurance carrier, the health 8 service provider, employer, or insurance carrier shall not seek 9 payment from the injured employee. A health service provider 10 shall not seek payment for fees in dispute from the insurance 11 carrier or employer until the commissioner finds, pursuant to 12 informal dispute resolution procedures established by rule by 13 the commissioner, that the disputed amount is reasonable. This 14 section does not affect the responsibility of an insurance 15 carrier or an employer to pay amounts not in dispute or a 16 health service provider’s right to receive payment from an 17 employee’s nonoccupational plan as provided in section 85.38, 18 subsection 2 . 19 4. For purposes of this section , the employer is obliged to 20 furnish reasonable services and supplies to treat an injured 21 employee, and has the right to choose the care. The employer 22 retains the right to choose the employee’s care for all 23 services throughout the course of treatment. If the employer 24 chooses the care, the employer shall hold the employee harmless 25 for the cost of care until the employer notifies the employee 26 that the employer is no longer authorizing all or any part of 27 the care and the reason for the change in authorization. An 28 employer is not liable for the cost of care that the employer 29 arranges in response to a sudden emergency if the employee’s 30 condition, for which care was arranged, is not related to 31 the employment. The treatment must be offered promptly 32 and be reasonably suited to treat the injury without undue 33 inconvenience to the employee. If the employee has reason to 34 be dissatisfied with the care offered, the employee should 35 -5- SF 2305 (3) 87 asf/rj/jh 5/ 8
S.F. 2305 communicate the basis of such dissatisfaction to the employer, 1 in writing if requested, following which the employer and the 2 employee may agree to alternate care reasonably suited to 3 treat the injury. If the employer and employee cannot agree 4 on such alternate care, the commissioner may, upon application 5 and reasonable proofs of the necessity therefor, allow and 6 order other care. In an emergency, the employee may choose 7 the employee’s care at the employer’s expense, provided the 8 employer or the employer’s agent cannot be reached immediately. 9 An application made under this subsection shall be considered 10 an original proceeding for purposes of commencement and 11 contested case proceedings under section 85.26 . The hearing 12 shall be conducted pursuant to chapter 17A . Before a hearing 13 is scheduled, the parties may choose a telephone hearing or 14 an in-person hearing. A request for an in-person hearing 15 shall be approved unless the in-person hearing would be 16 impractical because of the distance between the parties to the 17 hearing. The workers’ compensation commissioner shall issue a 18 decision within ten working days of receipt of an application 19 for alternate care made pursuant to a telephone hearing or 20 within fourteen working days of receipt of an application for 21 alternate care made pursuant to an in-person hearing. The 22 employer shall notify an injured employee of the employee’s 23 ability to contest the employer’s choice of care pursuant to 24 this subsection . 25 Sec. 15. NEW SECTION . 85.37A Suspension of benefits for 26 workers’ compensation fraud. 27 Section 507F.12 requires the workers’ compensation 28 commissioner to suspend a person’s benefits if the workers’ 29 compensation fraud unit makes a determination to file charges 30 in district court alleging the person has violated chapter 31 507F. 32 Sec. 16. NEW SECTION . 86.39A Criminal penalty for workers’ 33 compensation fraud. 34 Chapter 507F sets forth criminal penalties for committing a 35 -6- SF 2305 (3) 87 asf/rj/jh 6/ 8
S.F. 2305 workers’ compensation fraudulent practice. 1 Sec. 17. Section 507E.6, Code 2018, is amended to read as 2 follows: 3 507E.6 Duties of insurer and fraud bureau . 4 1. An insurer which believes that a claim or application 5 for insurance coverage is being made which is a violation of 6 section 507E.3 or believes that a violation of section 507E.3A 7 has occurred, shall provide, within sixty days of the receipt 8 of such claim or application becoming aware of a possible 9 violation , written notification to the bureau of the claim or 10 application suspected violation on a form prescribed by the 11 bureau , including any additional information requested by the 12 bureau related to the claim or application or the party making 13 the claim or application . 14 2. The fraud bureau shall review each notification and 15 determine whether further investigation is warranted. 16 3. If the bureau determines that further investigation 17 is warranted, the bureau shall conduct an independent 18 investigation of the facts surrounding the claim or application 19 for insurance coverage notification to determine the extent, 20 if any, to which fraud occurred in the submission of the claim 21 or application . If the notification pertains to workers’ 22 compensation insurance fraud, the bureau shall deliver the 23 notice to the workers’ compensation fraud unit, which shall 24 determine if an investigation and prosecution are warranted. 25 Upon formal request made by the bureau, the insurer shall 26 provide all additional information related to the notification 27 within ten business days or a time period specifically 28 identified by the bureau. 29 4. The bureau shall report any alleged violation of law 30 disclosed by the investigation to the appropriate licensing 31 agency or prosecuting authority having jurisdiction with 32 respect to such violation. 33 Sec. 18. Section 507E.8, Code 2018, is amended to read as 34 follows: 35 -7- SF 2305 (3) 87 asf/rj/jh 7/ 8
S.F. 2305 507E.8 Law enforcement officer status. 1 1. Bureau investigators shall have the power and status 2 of law enforcement officers who by the nature of their duties 3 may be required to perform the duties of a peace officer when 4 making arrests for criminal violations established as a result 5 of their investigations pursuant to this chapter or chapter 6 507F . 7 2. The general laws applicable to arrests by law enforcement 8 officers of the state also apply to bureau investigators. 9 Bureau investigators shall have the power to execute arrest 10 warrants and search warrants for the same criminal violations, 11 serve subpoenas issued for the examination, investigation, and 12 trial of all offenses identified through their investigations, 13 and arrest upon probable cause without warrant a person found 14 in the act of committing a violation of the provisions of this 15 chapter or chapter 507F . 16 Sec. 19. EFFECTIVE DATE. This Act, being deemed of 17 immediate importance, takes effect upon enactment. 18 Sec. 20. APPLICABILITY. This Act applies on and after the 19 effective date of this Act to acts of workers’ compensation 20 fraudulent practices or prohibited health service providers’ 21 practices committed on or after the effective date of this Act. 22 -8- SF 2305 (3) 87 asf/rj/jh 8/ 8