HBA-TYH H.B. 3361 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 3361 By: Eiland Insurance 4/12/1999 Introduced BACKGROUND AND PURPOSE Health insurance fraud can be expensive and may result in increases in the cost of insurance coverage. Fraud can be committed by claimants, providers, employees, or insurers. H.B. 3361 requires insurers to establish an internal division to investigate fraudulent claims for contracts. The insurer must file a plan with the Texas Department of Insurance describing procedures to be used in investigating and reporting findings of fraud. An insurer or the insurance fraud unit is given the ability to request the commissioner of insurance (commissioner) to conduct a hearing on potential fraud cases, and the commissioner is given the power to issue penalties. This bill also establishes a health insurance fraud recovery account to be used by the commissioner to cover costs of the insurance fraud unit, provides immunity for insurer-to-insurer information sharing, and defines unprofessional conduct for health care providers and sets forth the penalties for such conduct. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the commissioner of insurance in SECTION 2 (Article 3.97-6, Insurance Code) in this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Article 1.10D, Insurance Code, by adding Section 3A, as follows: Sec. 3A. INSURER ANTI-FRAUD INVESTIGATIVE REPORTS. Requires the insurance fraud unit (unit) to receive, review, and investigate in a timely manner insurer anti-fraud reports submitted under Subchapter K, Chpter 3. Requires the unit to report annually in writing to the commissioner of insurance (commissioner) the number of cases completed and any recommendations for new regulatory and statutory responses to the types of fraudulent activities encountered by the unit. SECTION 2. Amends Chapter 3, Insurance Code, by adding Subchapter K, as follows: SUBCHAPTER K. INSURER ANTI-FRAUD PROGRAMS Art. 3.97-1. DEFINITIONS. Defines "health care provider," "insurance fraud unit," and "insurer." Art. 3.97-2. NOTICE OF PENALTY FOR FALSE OR FRAUDULENT CLAIMS; DISPLAY ON FORMS. Requires an insurer, if the insurer provides a form for a person to use to make a claim against a policy issued by the insurer or to give notice of a person's intent to make a claim against a policy issued by the insurer, to provide on that form, in comparative prominence with the other content on the form, a statement. Sets forth the language of the statement. Provides that the statement must be preceded by the words: "For your protection, Texas law requires the following to appear on this form." Art. 3.97-3. ADMINISTRATIVE ACTION FOR FRAUD. (a) Authorizes the unit or an insurer to request that the commissioner conduct a hearing under Chapter 2001 (Administrative Procedure), Government Code, to determine whether a health care provider has committed fraud in relation to that insurer. (b) Authorizes the commissioner, if the commissioner determines in a hearing that a health care provider has committed fraud, to assess an administrative penalty against the health care provider under the criteria and procedures adopted under Article 1.10E (Administrative Penalties) except the amount collected is required to be remitted to the comptroller for deposit into the health insurance fraud recovery account. (c) Provides that an administrative penalty is in addition to other penalties and remedies provided by law. (d) Authorizes the commissioner, if the commissioner determines in a hearing that an insurer has been defrauded by the action of the health care provider, to order the enumerated actions, in addition to an administrative penalty imposed under Subsection (b). (e) Requires the commissioner and the unit, on the detection of fraud committed by a health care provider, to notify the agency that regulates the health care provider for practice in this state and the attorney general of the fraud committed by the health care provider. Art. 3.97-4. HEALTH INSURANCE FRAUD RECOVERY ACCOUNT. Provides that the health insurance fraud recovery account is an account in the general revenue fund. Provides that the health insurance fraud recovery account consists of legislative appropriations, gifts and grants, and other money required by law to be deposited in the account. Authorizes the Texas Department of Insurance to solicit and accept gifts in kind and grants of money from the federal government, local governments, private corporations, or other persons to be used for the purposes of this subchapter. Provides that the account is exempt from the application of Section 403.095 (Use of Dedicated Revenue), Government Code. Provides that income from the account remains in the account. Art. 3.97-5. USE OF MONEY IN HEALTH INSURANCE FRAUD RECOVERY ACCOUNT. Authorizes money deposited to the credit of the health insurance fraud recovery account to be used only by the commissioner to defray the expenses of the unit. Requires the commissioner to report annually to the governor, the lieutenant governor, the speaker of the house of representatives, and the legislative budget board regarding amounts deposited to and expended from the account. Art. 3.97-6. INSURER ANTI-FRAUD INVESTIGATIVE UNITS. (a) Defines "division." (b) Requires an insurer that writes $10 million or more in direct premiums in a calendar year to investigate or contract for the investigation of fraudulent claims for the following calendar year. (c) Requires an insurer to whom Subsection (b) of this article applies to adopt an anti-fraud plan and annually file that plan with the insurance fraud unit. Provides that the plan must include specified information. (d) Requires the insurer, if an insurer elects to contract for the investigation of fraudulent claims against policies held by insureds under Subsection (b), to file with the insurance fraud unit information related to the contracting entity. (e) Requires the commissioner to determine, by rule, the terms of the contracts between insurers and contracting entities and the qualifications of entities with which insurers are authorized to contract under this subchapter. (f) Requires an insurer to whom Subsection (b) of this article does not apply to adopt an anti-fraud plan and annually file that plan with the unit. Provides that the plan must include procedures for investigating and reporting fraud. (g) Requires the additional cost incurred, if an insurer hires additional employees or contracts with another entity, to be included as an administrative expense for ratemaking purposes. (h) Requires an insurer who obtains a certificate of authority after January 1, 2000, to issue an insurance policy in this state to comply with the requirements of this article within 18 months after the date the certificate of authority is issued. Art. 3.97-7. IMMUNITY FOR INSURER-TO-INSURER INFORMATION SHARING. Authorizes an insurer or its contracting entity, in the course of investigating insurance fraud claims, to share information with other insurers or entities that have contracted with insurers to provide anti-fraud investigative services. Provides that an insurer and its contracting entities who share information are not subject to suit by a health care provider if all the enumerated conditions exist. Provides that this article does not affect or modify common law or a statutory privilege or immunity. SECTION 3. Amends Title 1, Health and Safety Code, by adding Chapter 2, as follows: CHAPTER 2. UNPROFESSIONAL CONDUCT BY HEALTH CARE PROVIDER Sec. 2.001. DEFINITION. Defines "health care provider." Sec. 2.002. UNPROFESSIONAL CONDUCT. Provides that a health care provider commits unprofessional conduct if the health care provider, in connection with the provider's professional activities, knowingly participates in fraudulent actions. Provides that in addition to other provisions of civil or criminal law, commission of unprofessional conduct constitutes cause for the revocation or suspension of a provider's license, permit, registration, certificate, or other authority or other disciplinary action. SECTION 4. (a) Effective date: September 1, 1999. (b) Requires the insurance fraud unit to make the initial report to the commissioner required under Section 3A(b), Article 1.10D, Insurance Code, as added by this Act, not later than January 1, 2001. (c) Requires the initial filing with the commissioner of insurance required under Article 3.97-6, Insurance Code, as added by this Act, to be made not later than July 1, 2001. SECTION 5. Emergency clause.