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F I S C A L I M P A C T R E P O R T

SPONSOR Papen

DATE TYPED 3/18/05

HB

SHORT TITLE PRC Review of Patient Protection Act Appeals

SB 374/aSPAC/aHBIC

ANALYST Wilson

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

See Narrative

Duplicates SB 374

SOURCES OF INFORMATION

LFC Files

Responses Received From

Attorney General’s Office (AGO)

Public Regulation Commission (PRC)

Public School Insurance Authority (PRC)

Retiree Health Care Authority (RHCA)

SUMMARY

Synopsis of HBIC Amendment

The House Business and Industry Committee amendment removes language stating that the su-

perintendent of insurance shall fix the reasonable compensation of each appointee to the external

review based upon, but not limited to, compensation amounts suggested by national or state legal

or medical professional societies, organizations or associations. The amendment also removes

the requirement that the superintendent shall prepare a detailed statement of compensation due

each appointee and shall present the statement to the enrollee's health insurer.

Synopsis of SPAC

The Senate Public Affairs Committee amendment to SB 374 makes clarifying changes. “Super-

intendent” is changed to” commission” to conform to the intent of the bill and the wording al-

lowing the commission to appoint a hearing officer is reiterated.

Senate Bill 374/aSPAC/aHBIC -- Page 2

Synopsis of Original Bill

Senate Bill 374 eliminates the Insurance Superintendent’s adjudication and rule-making role in

reviewing external appeals or non-utilization complaints under the Patient Protection Act and the

Insurance Division’s (ID) Managed Health Care and Grievance Procedure Rules.

The bill establishes the Public Regulation Commissioners as the decision-makers for managed

health care grievance appeals and non-utilization complaints.

This bill also grants the Public Regulation Commissioners the rule-making authority to imple-

ment the grievance and complaint processes and impose administrative penalties.

Significant Issues

The PRC provided the following:

This bill may complicate the Superintendent’s ability to set policy and regulate managed

health care plans. The Superintendent and ID staff has developed a historical and institu-

tional knowledge and expertise in interpreting insurance coverage and administering the

Patient Protection Act. The fact that these responsibilities have been housed within the

ID has assisted the Superintendent and staff in closely monitoring trends, interacting with

the industry and consumers through task forces, and appropriately responding through

rule, investigation, examination or other action to remedy business practices in a manner

that maximizes the competitiveness and solvency in the delicate commercial managed

health care market and consumer protection.

This bill also poses a cost-benefit policy question as to whether the existing or proposed

alternative dispute resolution system best serves managed health care plans and consum-

ers who are the parties to grievance appeals. Is a single appointed decision-maker in the

form of a Superintendent, who is supervised by the Public Regulation Commissioners a

more cost-effective, qualitative and timely framework to better serve managed health care

plans and consumers.

Due to the unique rights of managed health care enrollees under the Managed Health

Care Rule and Patient Protection Act, the managed health care bureau was established in

the ID in 1999. Under the original 1999 program design, the ID developed a “Managed

Health Care Assistance and Advocacy Program” with three primary goals:

• regulation & enforcement;

• consumer assistance & advocacy; and

• education & outreach.

Under this design, the key function of the managed health care bureau was to assist the

Superintendent in administering requests for external review appeals for enrollees who

had been denied a requested health care service by a managed health care plan. Staff also

monitored the internal review process, reviewed compliance plans, assisted other ID units

such as the life and health form and rate filing units and the examinations units in review-

ing managed health care contracts, worked closely with the life and health actuary in ad-

ministrative enforcement actions and answering consumer inquiries.

Senate Bill 374/aSPAC/aHBIC -- Page 3

Over time, the education and outreach functions of the unit were developed to provide

standard Power-Point presentations around the State to advise enrollees of commercial

health care plans of their rights under the Patient Protection Act and the Superintendent’s

grievance procedures.

Being an alternative dispute resolution process, the managed health care unit has never

engaged in the role of consumer advocate, but assists the Superintendent in administering

and enforcing the Patient Protection Act and Managed Health Care Rule. For instance,

the patient and the managed health care plan are the parties to a grievance with the Super-

intendent exercising the role of administrative decision maker. The managed health care

unit staff assists the parties and the Superintendent in administering this process.

FISCAL IMPLICATIONS

The PRC may need increased staff and fiscal support in terms of hearing officers, general coun-

sel attorneys, legal division staff attorneys, court reporters and other costs associated with admin-

istering, hearing and enforcing these grievance appeals and rules. Such resources could come

from the managed health care unit in the ID.

ADMINISTRATIVE IMPLICATIONS

The PRC will need to reassign existing staff to fulfill the requirements of this bill.

DUPLICATION

HB 624 duplicates SB 374.

DW/njw:sb:lg:yr