HB2117 - 451R - House Bill Summary

House of Representatives

HB 2117

health care services organizations; insolvency

Sponsors: Representative Carpenter

DPA	Committee on Financial Institutions and Insurance
DPA	Caucus and COW
X	As Transmitted to the Governor

HB 2117 increases the regulatory tools available to the Department of Insurance (Department) to find health care coverage for enrollees displaced by a Health Care Services Organization (HCSO) insolvency. The bill states that enrollee claims have the same priority as indemnity claims, expands the open enrollment provisions, establishes a higher priority for contract providers in regards to claims distribution and requires contract providers to remain in network for the duration of the contract period under the enrollee’s health care plan or for 60 days from the date of insolvency, whichever is longer.

History

In the event that a delinquency proceeding takes place against an insurer domiciled in Arizona, a priority of distribution of claims has been established by A.R.S. 20-629. The order of distribution is prioritized from: (1) the administration expenses incurred from the delinquency proceeding, (2) claims of the guaranty fund, (3) claims under insurance policies and contracts and investment contracts, (4) claims of the federal government, (5) claims for compensation owed to employees of the insurer, (6) claims of any state or local government, (7) claims of other general creditors, (8) claims filed after the date specified for filing proofs and (9) claims of surplus note or certificate of contribution holders and claims of shareholders. Every claim in each class shall be paid in full before the members of the next class receive payment.

Pursuant to A.R.S. 20-1069, HCSOs are required to have a plan for the risk of insolvency that take effect the moment an HCSO becomes insolvent. The plan must include a continuation of benefits period. Enrollees of an HCSO that becomes insolvent shall be offered enrollment by the other carriers that participated in open enrollment. The enrollees must be provided the same coverage and rates offered at the last open enrollment period without any waiting periods or pre-existing condition exclusion.

Provisions

HCSO INSOLVENCY

· Defines continuation of benefits, court, HCSO, open enrollment carrier, receiver and successor.

· Establishes that claims of enrollees in a HCSO delinquency proceeding have the same priority as indemnity claims.

· Establishes that claims of health care providers in a HCSO delinquency proceeding have a higher priority than general creditors.

· Provides an exception to the requirement that each open enrollment carrier offer a 30 day open enrollment period to enrollees of an insolvent HCSO in the event that the Director determines the carrier does not have the resources to provide health care services to all of the group enrollees of the insolvent HCSO.

· Requires each HCSO to which a group or non-group was allocated to offer coverage similar to the coverage provided by the insolvent HCSO at a rate in accordance with the new HCSO’s rating methodology.

· Allows the receiver to request that the Receivership Court approve an alternative plan to provide coverage to displaced enrollees.

· Allows the Receivership Court to order that an offer of coverage provided in this section terminates the obligations of the insolvent HCSO to its enrollee.

· Requires all HCSO contracts with providers include a statement that the contracted provider shall remain in the network for the period of the insolvency unless the receiver is not able to pay the health care provider’s post receivership claims at the contract rate, or the Receivership Court determines that the insolvent HCSO has satisfied its obligations to its enrollees.

· Establishes the highest priority in a delinquency proceeding for provider claims for services rendered after an HCSO becomes insolvent and is not properly funded.

· Requires the receiver to submit a report regarding the adequacy of the plan for the risk of insolvency soon after commencement of a delinquency proceeding.

· Requires the receiver to notify the Receivership Court and providers if the receiver determines that the plan for the risk of insolvency is inadequate.

· Removes language allowing the Director to allocate the insolvent HCSO’s group contracts and non-group enrollees to other HCSO’s in the service area.

· Establishes that notice from the receiver indicating there is inadequate assurance to pay provider claims after the insolvency is reason to terminate a provider contract.

· Makes individuals eligible for coverage with guaranteed issue in the event that their coverage terminates during the delinquency proceeding.

BALANCED BILLING VIOLATIONS; PENALTIES

· Requires the Director to impose a penalty against a health care provider or hospital for a violation of A.R.S. 20-1072 (Balance Billing Statute).

· States that the penalty imposed for a violation of A.R.S. 20-1072 shall be up to three times the amount of the health care provider or hospital charges at issue.

BONDING EXEMPTION; THIRD PARTY INTERMEDIARIES

· Creates an exemption from the bonding requirement for a third party intermediary (TPA) who meets one of the following conditions:

1) The TPA has not been delegated the responsibility to process and pay the claims of the health care providers for which the TPA has assumed the business risk.

2) The TPA has been delegated the responsibility to process and pay the claims of health care providers, but have a contract with the health care providers stipulating that the providers agree to hold the health care insurers and their insureds harmless from having to pay the claims of the health care providers in the event that the TPA fails to pay such claims.

EMERGENCY CLAUSE

· Contains an emergency clause.

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· 44th Legislature

· Second Regular Session 3 May 2, 2001