REPORT TITLE:
HMO


DESCRIPTION:
Makes health maintenance organizations, managed care entities,
health insurers, and mutual benefit societies liable for harm to
insured or enrollee caused by failure to exercise ordinary care
when making health treatment decisions.  Requires claimant to
give notice of claim and agree to review by an independent review
organization.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           998
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO PATIENTS' BILL OF RIGHTS AND RESPONSIBILITIES ACT.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Chapter 432E, Hawaii Revised Statutes, is
 
 2 amended by adding a new part to be appropriately designated and
 
 3 to read as follows:
 
 4                 "PART    . HEALTH CARE LIABILITY
 
 5      §432E-A  Definitions.  As used in this part:
 
 6      "Adverse determination" means determination by a health
 
 7 maintenance organization, health insurance carrier, or managed
 
 8 care entity that the health care services furnished or proposed
 
 9 to be furnished to an enrollee are not medically necessary.
 
10      "Appropriate and medically necessary" means the standard for
 
11 health care services as determined by physicians and health care
 
12 providers in accordance with the prevailing practices and
 
13 standards of the medical profession and community.
 
14      "Enrollee" means an individual who is enrolled in a health
 
15 care plan, including covered dependents.
 
16      "Health care plan" means any plan whereby any person
 
17 undertakes to provide, arrange for, pay for, or reimburse any
 
18 part of the cost of any health care services.
 
19      "Health care treatment decision" means a determination made
 

 
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 1 when medical services are actually provided by the health care
 
 2 plan and a decision which affects the quality of the diagnosis,
 
 3 care, or treatment provided to the plan's insureds or enrollees.
 
 4      "Health insurance carrier" means an authorized insurance
 
 5 company that issues policies of accident and sickness insurance
 
 6 under article 10A, chapter 431 or a mutual benefit society that
 
 7 issues hospital or medical service plan contracts under
 
 8 article 1, chapter 432.
 
 9      "Managed care entity" means any entity which delivers,
 
10 administers, or assumes risk for health care services with
 
11 systems or techniques to control or influence the quality,
 
12 accessibility, utilization, or costs and prices of such services
 
13 to a defined enrollee population, but does not include an
 
14 employer purchasing coverage or acting on behalf of its employees
 
15 or the employees of one or more subsidiaries or affiliated
 
16 corporations of the employer.
 
17      "Ordinary care" means, in the case of a health insurance
 
18 carrier, health maintenance organization, or managed care entity,
 
19 that degree of care that a health insurance carrier, health
 
20 maintenance organization, or managed care entity of ordinary
 
21 prudence would use under the same or similar circumstances.  In
 
22 the case of a person who is an employee, agent, ostensible agent,
 
23 or representative of a health insurance carrier, health
 

 
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 1 maintenance organization, or managed care entity, "ordinary care"
 
 2 means that degree of care that a person of ordinary prudence in
 
 3 the same profession, specialty, or area of practice as such
 
 4 person would use in the same or similar circumstances.
 
 5      "Provider" has the meaning ascribed to it under section
 
 6 432D-1.
 
 7      §432E-B  Applicability of part.(a)  A health insurance
 
 8 carrier, health maintenance organization, or other managed care
 
 9 entity for a health care plan has the duty to exercise ordinary
 
10 care when making health care treatment decisions and is liable
 
11 for damages for harm to an insured or enrollee proximately caused
 
12 by its failure to exercise such ordinary care.
 
13      (b)  A health insurance carrier, health maintenance
 
14 organization, or other managed care entity for a health care plan
 
15 is also liable for damages for harm to an insured or enrollee
 
16 proximately caused by the health care treatment decisions made by
 
17 its:
 
18      (1)  Employees;
 
19      (2)  Agents;
 
20      (3)  Ostensible agents; or
 
21      (4)  Representatives who are acting on its behalf and over
 
22           whom it has the right to exercise influence or control
 
23           or has actually exercised influence or control which
 

 
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 1           result in the failure to exercise ordinary care.
 
 2      (c)  It shall be a defense to any action asserted against a
 
 3 health insurance carrier, health maintenance organization, or
 
 4 other managed care entity for a health care plan that:
 
 5      (1)  Neither the health insurance carrier, health
 
 6           maintenance organization, or other managed care entity,
 
 7           nor any employee, agent, ostensible agent, or
 
 8           representative for whose conduct such health insurance
 
 9           carrier, health maintenance organization, or other
 
10           managed care entity is liable under subsection (b),
 
11           controlled, influenced, or participated in the health
 
12           care treatment decision; and
 
13      (2)  The health insurance carrier, health maintenance
 
14           organization, or other managed care entity did not deny
 
15           or delay payment for any treatment prescribed or
 
16           recommended by a provider to the insured or enrollee.
 
17      (d)  The standards in subsections (a) and (b) create no
 
18 obligation on the part of the health insurance carrier, health
 
19 maintenance organization, or other managed care entity to provide
 
20 to an insured or enrollee treatment which is not covered by the
 
21 health care plan of the entity.
 
22      (e)  This part does not create any liability on the part of
 
23 an employer or an employer group purchasing organization that
 

 
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 1 purchases coverage or assumes risk on behalf of its employees.
 
 2      (f)  A health insurance carrier, health maintenance
 
 3 organization, or managed care entity may not remove a physician
 
 4 or health care provider from its plan or refuse to renew the
 
 5 physician or health care provider with its plan for advocating on
 
 6 behalf of an enrollee for appropriate and medically necessary
 
 7 health care for the enrollee.
 
 8      (g)  A health insurance carrier, health maintenance
 
 9 organization, or other managed care entity may not enter into a
 
10 contract with a physician, hospital, or other health care
 
11 provider or pharmaceutical company which includes an
 
12 indemnification or hold harmless clause for the acts or conduct
 
13 of the health insurance carrier, health maintenance organization,
 
14 or other managed care entity.  Any such indemnification or hold
 
15 harmless clause in an existing contract is hereby declared void.
 
16      (h)  Nothing in any law of this State prohibiting a health
 
17 insurance carrier, health maintenance organization, or other
 
18 managed care entity from practicing medicine or being licensed to
 
19 practice medicine may be asserted as a defense by such health
 
20 insurance carrier, health maintenance organization, or other
 
21 managed care entity in an action brought against it pursuant to
 
22 this section or any other law.
 
23      (i)  In an action against a health insurance carrier, health
 

 
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 1 maintenance organization, or managed care entity, a finding that
 
 2 a physician or other health care provider is an employee, agent,
 
 3 ostensible agent, or representative of such health insurance
 
 4 carrier, health maintenance organization, or managed care entity
 
 5 shall not be based solely on proof that such person's name
 
 6 appears in a listing of approved physicians or health care
 
 7 providers made available to insureds or enrollees under a health
 
 8 care plan.
 
 9      (j)  This part does not apply to workers' compensation
 
10 insurance coverage under chapter 386.
 
11      §432E-C  Limitations on cause of action.(a)  A person may
 
12 not maintain a cause of action under this part against a health
 
13 insurance carrier, health maintenance organization, or other
 
14 managed care entity, unless the affected insured or enrollee or
 
15 the insured's or enrollee's representative before instituting the
 
16 action:
 
17      (1)  Gives written notice of the claim as provided by
 
18           subsection (b); and
 
19      (2)  Agrees to submit the claim to a review by an
 
20           independent review organization.
 
21      (b)  The notice required by subsection (a)(1) must be
 
22 delivered or mailed to the health insurance carrier, health
 
23 maintenance organization, or managed care entity against whom the
 

 
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 1 action is made not later than the thirtieth day before the date
 
 2 the claim is filed.
 
 3      (c)  The insured or enrollee or the insured's or enrollee's
 
 4 representative must submit the claim to a review by an
 
 5 independent review organization if the health insurance carrier,
 
 6 health maintenance organization, or managed care entity against
 
 7 whom the claim is made requests the review not later than the
 
 8 fourteenth day after the date notice under subsection (a)(1) is
 
 9 received by the health insurance carrier, health maintenance
 
10 organization, or managed care entity.  If the health insurance
 
11 carrier, health maintenance organization, or managed care entity
 
12 does not request the review within the period specified by this
 
13 subsection, the insured or enrollee or the insured's or
 
14 enrollee's representative is not required to submit the claim to
 
15 independent review before maintaining the action.
 
16      (d)  Subject to subsection (e), if the enrollee has not
 
17 complied with subsection (a), an action under this section shall
 
18 not be dismissed by the court, but the court, in its discretion,
 
19 may order the parties to submit to an independent review or
 
20 mediation or other nonbinding alternative dispute resolution and
 
21 may abate the action for a period of not to exceed thirty days
 
22 for such purposes.  Such orders of the court shall be the sole
 
23 remedy available to a party complaining of an enrollee's failure
 

 
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 1 to comply with subsection (a).
 
 2      (e)  The enrollee is not required to comply with subsection
 
 3 (c) and no abatement or other order pursuant to subsection (d)
 
 4 for failure to comply shall be imposed if the enrollee has filed
 
 5 a pleading alleging in substance that:
 
 6      (1)  Harm to the enrollee has already occurred because of
 
 7           the conduct of the health insurance carrier, health
 
 8           maintenance organization, or managed care entity or
 
 9           because of an act or omission of an employee, agent,
 
10           ostensible agent, or representative of such carrier,
 
11           organization, or entity for whose conduct it is liable
 
12           under section 432E-B(b); and
 
13      (2)  The review would not be beneficial to the enrollee,
 
14           unless the court, upon motion by a defendant carrier,
 
15           organization, or entity finds after hearing that the
 
16           pleading was not made in good faith, in which case the
 
17           court may enter an order pursuant to subsection (d).
 
18      (f)  If the insured or enrollee or the insured's or
 
19 enrollee's representative seeks to exhaust the appeals and review
 
20 or provides notice, as required by subsection (a), before the
 
21 statute of limitations applicable to a claim against a managed
 
22 care entity has expired, the limitations period is tolled until
 
23 the later of:
 

 
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 1      (1)  The thirtieth day after the date the insured or
 
 2           enrollee or the insured's or enrollee's representative
 
 3           has exhausted the process for appeals and review
 
 4           applicable under the formal grievance procedures; or
 
 5      (2)  The fortieth day after the date the insured or enrollee
 
 6           or the insured's or enrollee's representative gives
 
 7           notice under subsection (a)(1).
 
 8      (g)  This section does not prohibit an insured or enrollee
 
 9 from pursuing other appropriate remedies, including injunctive
 
10 relief, a declaratory judgment, or relief available under law, if
 
11 the requirement of exhausting the process for appeal and review
 
12 places the insured's or enrollee's health in serious jeopardy.
 
13      §432E-D  Review of adverse determinations.  Any formal
 
14 grievance procedure must include:
 
15      (1)  Notification to the enrollee of the enrollee's right to
 
16           appeal an adverse determination to an independent
 
17           review organization;
 
18      (2)  Notification to the enrollee of the procedures for
 
19           appealing an adverse determination to an independent
 
20           review organization; and
 
21      (3)  Notification to an enrollee who has a life-threatening
 
22           condition of the enrollee's right to immediate review
 
23           by an independent review organization and the
 

 
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 1           procedures to obtain that review.
 
 2      §432E-E  Certification and designation of independent review
 
 3 organizations.  (a)  The commissioner shall:
 
 4      (1)  Adopt standards and rules under chapter 91 for:
 
 5           (A)  The certification, selection, and operation of
 
 6                independent review organizations to perform
 
 7                independent review; and
 
 8           (B)  The suspension and revocation of the
 
 9                certification;
 
10      (2)  Designate annually each organization that meets the
 
11           standards as an independent review organization;
 
12      (3)  Charge payors fees in accordance with this article as
 
13           necessary to fund the operations of independent review
 
14           organizations; and
 
15      (4)  Provide ongoing oversight of the independent review
 
16           organizations to ensure continued compliance with this
 
17           article and the standards and rules adopted under this
 
18           article.
 
19      (b)  The standards required by subsection (a)(1) must
 
20 ensure:
 
21      (1)  The timely response of an independent review
 
22           organization selected under this article;
 
23      (2)  The confidentiality of medical records transmitted to
 

 
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 1           an independent review organization for use in
 
 2           independent reviews;
 
 3      (3)  The qualifications and independence of each health care
 
 4           provider or physician making review determinations for
 
 5           an independent review organization;
 
 6      (4)  The fairness of the procedures used by an independent
 
 7           review organization in making the determinations; and
 
 8      (5)  Timely notice to enrollees of the results of the
 
 9           independent review, including the clinical basis for
 
10           the determination.
 
11      (c)  The standards adopted under subsection (a)(1) must
 
12 include standards that require each independent review
 
13 organization to make its determination:
 
14      (1)  Not later than the earlier of:
 
15           (A)  The fifteenth day after the date the independent
 
16                review organization receives the information
 
17                necessary to make the determination; or
 
18           (B)  The twentieth day after the date the independent
 
19                review organization receives the request that the
 
20                determination be made; and
 
21      (2)  In the case of a life-threatening condition, not later
 
22           than the earlier of:
 
23           (A)  The fifth day after the date the independent
 

 
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 1                review organization receives the information
 
 2                necessary to make the determination; or
 
 3           (B)  The eighth day after the date the independent
 
 4                review organization receives the request that the
 
 5                determination be made.
 
 6      (d)  To be certified as an independent review organization
 
 7 under this article, an organization must submit to the
 
 8 commissioner an application in the form required by the
 
 9 commissioner.  The application must include:
 
10      (1)  For an applicant that is publicly held, the name of
 
11           each stockholder or owner of more than five per cent of
 
12           any stock or options;
 
13      (2)  The name of any holder of bonds or notes of the
 
14           applicant that exceed $100,000;
 
15      (3)  The name and type of business of each corporation or
 
16           other organization that the applicant controls or is
 
17           affiliated with and the nature and extent of the
 
18           affiliation or control;
 
19      (4)  The name and a biographical sketch of each director,
 
20           officer, and executive of the applicant and a
 
21           description of any relationship the named individual
 
22           has with:
 
23           (A)  A health benefit plan;
 

 
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 1           (B)  A health maintenance organization;
 
 2           (C)  An insurer;
 
 3           (D)  A nonprofit health corporation; or
 
 4           (E)  A health care provider;
 
 5      (5)  The percentage of the applicant's revenues that are
 
 6           anticipated to be derived from independent reviews;
 
 7      (6)  A description of the areas of expertise of the health
 
 8           care professionals making review determinations for the
 
 9           applicant; and
 
10      (7)  The procedures to be used by the independent review
 
11           organization in making review determinations.
 
12      (e)  The independent review organization shall annually
 
13 submit to the commissioner the information required by subsection
 
14 (d).  If at any time there is a material change in the
 
15 information included in the application under subsection (d), the
 
16 independent review organization shall submit updated information
 
17 to the commissioner.
 
18      (f)  An independent review organization conducting a review
 
19 is not liable for damages arising from the determination made by
 
20 the organization.  This subsection does not apply to an act or
 
21 omission of the independent review organization that is made in
 
22 bad faith or that involves gross negligence."
 
23      SECTION 2.  In codifying the new part added to chapter 432E,
 

 
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 1 Hawaii Revised Statutes, by section 1 of this Act, the revisor of
 
 2 statutes shall substitute appropriate section numbers for the
 
 3 letters used in the designation of the new sections in this Act.
 
 4      SECTION 3.  This Act shall take effect upon its approval.
 
 5 
 
 6                           INTRODUCED BY:  _______________________