HBA-ATS C.S.H.B. 3603 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 3603 By: Thompson Insurance 4/25/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Health care fraud and abuse is a nationwide problem, draining up to $100 billion annually from the national health care system. Although many losses occur in Medicare and Medicaid, private sector health benefit programs are not immune to fraud. While health care fraud can take many forms, the most common involves billing for services not performed or billing for more expensive services than those actually provided. Other examples include providing inadequate service and dispensing outdated medication. These fraudulent activities increase the costs of medical care and endanger the welfare of patients. C.S.H.B. 3603 requires the Texas Department of Insurance's insurance fraud unit (unit) to receive, review, and investigate all insurer antifraud reports. In addition, this bill requires an insurer, in connection with any insurance contract, to prominently display on a printed, reproduced, or furnished form given to a person to make a claim against a policy issued by the insurer, the statement "A person commits insurance fraud if, with intent to defraud or deceive an insurer, the person presents a claim for payment to an insurer which the person knows contains false or misleading information concerning a matter that is material to the claim and the matter affects a person's right to payment or the amount of payment. Persons that commit insurance fraud may be subject to criminal penalties, including fines and imprisonment." The absence of such a notice on a policy, rider, claim form, or other insurance document is prohibited from constituting grounds for a defense against a charge or indictment of insurance fraud. Under this bill, every insurer authorized to do business in this state is required to adopt an antifraud plan and file it for approval with the unit beginning on or before July 1, 2001, and required to file annually thereafter any material change in its antifraud plan. The presentation of a claim, that a provider knows to contain false or fraudulent information concerning a matter that is material to the claim and the matter affects a provider's right to payment or the amount of payment, to an insurer by the provider in the provider's professional capacity with the intent to defraud or deceive the insurer constitutes unprofessional conduct and grounds for disciplinary action. A violation of this provision constitutes a case for the suspension of the provider's license for one year upon a first conviction for a felony offense of fraud, and a case for revocation of a provider's license for a second conviction for a felony offense of fraud. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Article 1.10D, Insurance Code, by adding Section 1A, to set forth legislative findings and intent. SECTION 2. Amends Article 1.10D, Insurance Code, by adding Section 2A, as follows: Sec. 2A. INSURER ANTI-FRAUD INVESTIGATIVE REPORTS. Requires the insurance fraud unit (unit) to receive, review, and investigate all insurer antifraud reports. Requires the unit to report in writing annually to the commissioner of insurance (commissioner) the number of cases and to report recommendations for new regulatory and statutory responses to the types of fraud encountered by the unit. SECTION 3. Amends Section 6, Article 1.10D, Insurance Code, by amending Subsection (a) and adding Subsection (e), as follows: (a) Includes an insurer's special investigative unit, including a person contracted to provide such services, or an insurer's employee responsible for the investigation of suspected insurance fraud, among the entities to whom a person may file a report of insurance fraud without fear of liability. (e) Requires that information provided to the unit or to an authorized government agency (agency) not be subject to public disclosure. Authorizes the unit or an agency to use the information only for the performance of its duties. Provides that an insurer must exercise reasonable care concerning the accuracy of the information provided. SECTION 4. Amends Article 1.10D, Insurance Code, by adding Section 8, to require the unit to forward to the agency, board, or commission any information concerning the complaint upon the entry of a final civil judgment or criminal conviction involving fraud. SECTION 5. Amends Chapter 3, Insurance Code, by adding Subchapter K, as follows: SUBCHAPTER K. INSURER ANTIFRAUD PROGRAMS Art. 3.97-1. DEFINITIONS. Defines "health care provider" and "insurer." Art. 3.97-2. NOTICE OF PENALTY FOR FALSE OR FRAUDULENT CLAIMS; DISPLAY ON FORMS. (a) Requires an insurer, in connection with any insurance contract, to prominently display on a printed, reproduced, or furnished form given to a person to make a claim against a policy issued by the insurer, the statement "A person commits insurance fraud if, with intent to defraud or deceive an insurer, the person presents a claim for payment to an insurer which the person knows contains false or misleading information concerning a matter that is material to the claim and the matter affects a person's right to payment or the amount of payment. Persons that commit insurance fraud may be subject to criminal penalties, including fines and imprisonment." Prohibits the absence of such a notice on a policy, rider, claim form, or other insurance document from constituting grounds for a defense against a charge or indictment of insurance fraud. (b) Prohibits this section from applying to reinsurance contracts, reinsurance agreements, or reinsurance claims transactions. Art. 3.97-3. INSURER ANTIFRAUD PLANS. Requires every insurer authorized to do business in this state to adopt an antifraud plan and file it for approval with the unit beginning on or before July 1, 2001. Requires the insurer to file annually thereafter any material change in its antifraud plan. Provides that the plan must include a description of the insurer's procedures for detecting and investigating possible fraudulent insurance acts, a description of the insurer's procedures for reporting possible fraudulent insurance acts to the unit, and a description of the insurer's procedures for maintaining patient confidentiality, including the patient's medical records. SECTION 6. Amends Title 1, Health and Safety Code, by adding Section 2.001, as part of a new Chapter 2, Health Care Fraud Programs, to proclaim that the policy of this state is to confront aggressively the problem of health care fraud by facilitating the detection and prevention of fraud at its source. SECTION 7. Amends Title 1, Health and Safety Code, by adding Section 2.002, as part of a new Chapter 2, Health Care Fraud Programs, to define "insurer," "health maintenance organization," and "health care provider." SECTION 8. Amends Title 1, Health and Safety Code, by adding Section 2.003, as part of a new Chapter 2, Health Care Fraud Programs, as follows: Sec. 2.003. UNPROFESSIONAL CONDUCT. (a) Requires the presentation of a claim, that a provider knows to contain false or fraudulent information concerning a matter that is material to the claim and the matter affects a provider's right to payment or the amount of payment, to an insurer by the provider in the provider's professional capacity with the intent to defraud or deceive the insurer to constitute unprofessional conduct and grounds for disciplinary action. (b) Requires a violation of this provision to constitute a case for the suspension of the provider's license for one year upon a first conviction for a felony offense of fraud, and a case for revocation of a provider's license for a second conviction for a felony offense of fraud. Authorizes an agency, commission, or board that regulates a provider to probate a suspension or revocation imposed under this subsection upon an express determination that such action would be in the best interests of the public. SECTION 9. Effective date: September 1, 1999. SECTION 10. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 3603 differs from the original bill in the caption, by providing that this Act relates to the control of insurance fraud, rather than relates to the control of health insurance fraud; providing civil penalties. C.S.H.B. 3603 differs from the original bill by redesignating SECTION 1 of the original to SECTION 5. In new SECTION 1, the substitute amends Article 1.10D, Insurance Code, by adding Section 1A, to set forth legislative findings and intent. C.S.H.B. 3603 differs from the original bill by removing the proposed addition of Article 4512q, V.T.C.S., in SECTION 2 of the original. Proposed Article 4512q provides that a health care provider (provider) violates Article 4512q if the provider intentionally or knowingly presents or causes to be presented to a person a bill for medical treatment and knows that the treatment was not provided or was unreasonable or medically or clinically unnecessary. The proposed article also provides that such a violation constitutes cause for the revocation or suspension of the provider's license, permit, registration, certificate, or other authority or other disciplinary action against the provider. In addition, proposed Article 4512q: sets forth that a provider that violates this article is liable to the state for a civil penalty not to exceed $2,000 for each violation; requires the attorney general, on request of the Texas Department of Insurance or an agency that regulates the provider, to sue to collect the penalty in a district court in Travis County or in the county in which the violation occurred; authorizes the attorney general to recover reasonable expenses incurred in obtaining the civil penalty; requires the deposit of the civil penalty in the state treasury to the credit of the general revenue fund; and provides that a health care provider is not liable under this section for an isolated billing error. In new SECTION 2, the substitute amends Article 1.10D, Insurance Code, by adding Section 2A, to require the insurance fraud unit (unit) to receive, review, and investigate all insurer antifraud reports and to require the unit to report in writing annually to the commissioner of insurance (commissioner) the number of cases and to report recommendations for new regulatory and statutory responses to the types of fraud encountered by the unit. C.S.H.B. 3603 differs from the original bill by redesignating SECTIONS 3 (effective date) and 4 (emergency clause) of the original to SECTIONS 9 and 10. In new SECTION 3, the substitute amends Section 6, Article 1.10D, Insurance Code, by amending Subsection (a) and adding Subsection (e). The proposed amendment of Subsection (a) is for the inclusion of an insurer's special investigative unit, including a person contracted to provide such services, or an insurer's employee responsible for the investigation of suspected insurance fraud, among the entities to whom a person may file a report of insurance fraud without fear of liability. Proposed Subsection (e) requires that information provided to the unit or to an authorized government agency (agency) not be subject to public disclosure. It also authorizes the unit or an agency to use the information only for the performance of its duties, and provides that an insurer must exercise reasonable care concerning the accuracy of the information provided. In new SECTION 4, the substitute amends Article 1.10D, Insurance Code, by adding Section 8, to require the unit to forward to the agency, board, or commission any information concerning the complaint upon the entry of a final civil judgment or criminal conviction involving fraud. In redesignated SECTION 5, the substitute differs from the original in proposed Article 3.97-2(a), Insurance Code, by requiring an insurer, in connection with any insurance contract, to prominently display on a printed, reproduced, or furnished form given to a person to make a claim against a policy issued by the insurer, the statement "A person commits insurance fraud if, with intent to defraud or deceive an insurer, the person presents a claim for payment to an insurer which the person knows contains false or misleading information concerning a matter that is material to the claim and the matter affects a person's right to payment or the amount of payment. Persons that commit insurance fraud may be subject to criminal penalties, including fines and imprisonment." The original required an insurer to prominently display on a form given to a person making a claim against a policy issued by the insurer, the statement "Any person who knowingly presents a false or fraudulent claim for the payment of a loss is guilty of a crime and may be subject to fines and confinement in state prison." In addition, the substitute adds the proposed provision prohibiting the absence of such a notice on a policy, rider, claim form, or other insurance document from constituting grounds for a defense against a charge or indictment of insurance fraud. The substitute modifies proposed Article 3.97-2(b) by removing the proposed provision that would have provided that the warning on the form be preceded by the words: "For your protection, Texas law requires the following to appear on this form." The substitute replaces this with the prohibition against proposed Article 3.97-2 from applying to reinsurance contracts, reinsurance agreements, or reinsurance claims transactions. The substitute differs from the original in proposed Article 3.97-3 by requiring every insurer admitted to do business in this state, rather than authorizing an insurer, to adopt an antifraud plan. The substitute also requires the insurer to file the plan for approval with the unit beginning on or before July 1, 2001, rather than requiring the insurer annually to file the plan with the unit. The substitute also requires the insurer to file annually thereafter any material change in its antifraud plan. The substitute also includes a description of the insurer's procedures for maintaining patient confidentiality, including the patient's medical records, among the information required in the plan. The substitute differs from the original by removing the proposed addition of Article 3.97-4. This proposed article would have: authorized an insurer to share information with other insurers in the course of investigating insurance fraud claims; enumerated the types of information that may be shared; provided that an insurer, before providing this information to another insurer, must provide a copy of the information to each health care provider that the information concerns; prohibited an insurer from providing this information if the information is provided with malice, fraudulent intent, or bad faith; and provided that proposed Article 3.97-4 does not affect or modify common law or a statutory privilege or immunity. In new SECTION 6, the substitute amends Title 1, Health and Safety Code, by adding Section 2.001, as part of a new Chapter 2, Health Care Fraud Programs, to proclaim that the policy of this state is to confront aggressively the problem of health care fraud by facilitating the detection and prevention of fraud at its source. In new SECTION 7, the substitute amends Title 1, Health and Safety Code, by adding Section 2.002, as part of a new Chapter 2, Health Care Fraud Programs, to define "insurer," "health maintenance organization," and "health care provider." In new SECTION 8, the substitute amends Title 1, Health and Safety Code, by adding Section 2.003, as part of a new Chapter 2, Health Care Fraud Programs. Proposed Section 2.003(a) requires the presentation of a claim, that a provider knows to contain false or fraudulent information concerning a matter that is material to the claim and the matter affects a provider's right to payment or the amount of payment, to an insurer by the provider in the provider's professional capacity with the intent to defraud or deceive the insurer to constitute unprofessional conduct and grounds for disciplinary action. Proposed Section 2.003(b)(1) requires a violation of this provision to constitute a case for the suspension of the provider's license for one year upon a first conviction for a felony offense of fraud, and a case for revocation of a provider's license for a second conviction for a felony offense of fraud. Proposed Section 2.003(b)(2) authorizes an agency, commission, or board that regulates a provider to probate a suspension or revocation imposed under this subsection upon an express determination that such action would be in the best interests of the public.