SENATE BILL NO. 694 September 21, 1999, Introduced by Senator SCHUETTE and referred to the Committee on Health Policy. A bill to amend 1956 PA 218, entitled "The insurance code of 1956," by amending the title and section 2006 (MCL 500.2006), the title as amended by 1998 PA 457, and by adding section 2006a. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 TITLE 2 An act to revise, consolidate, and classify the laws relat- 3 ing to the insurance and surety business; to regulate the incor- 4 poration or formation of domestic insurance and surety companies 5 and associations and the admission of foreign and alien companies 6 and associations; to provide their rights, powers, and immunities 7 and to prescribe the conditions on which companies and associa- 8 tions organized, existing, or authorized under this act may 9 exercise their powers; to provide the rights, powers, DUTIES, and 10 immunities and to prescribe the conditions on which other 03024'99 DKH 2 1 persons, firms, corporations, associations, risk retention 2 groups, and purchasing groups engaged inanA THIRD PARTY 3 ADMINISTRATOR, insurance, or surety business may exercise their 4 powers; to provide for the imposition of a privilege fee on 5 domestic insurance companies and associations and the state acci- 6 dent fund; to provide for the imposition of a tax on the business 7 of foreign and alien companies and associations; to provide for 8 the imposition of a tax on risk retention groups and purchasing 9 groups; to provide for the imposition of a tax on the business of 10 surplus line agents; to provide for the imposition of regulatory 11 fees on certain insurers; to modify tort liability arising out of 12 certain accidents; to provide for limited actions with respect to 13 that modified tort liability and to prescribe certain procedures 14 for maintaining those actions; to require security for losses 15 arising out of certain accidents; to provide for the continued 16 availability and affordability of automobile insurance and home- 17 owners insurance in this state and to facilitate the purchase of 18 that insurance by all residents of this state at fair and reason- 19 able rates; to provide for certain reporting with respect to 20 insurance and with respect to certain claims against uninsured or 21 self-insured persons; to prescribe duties for certain state 22 departments and officers with respect to that reporting; to pro- 23 vide for certain assessments; to establish and continue certain 24 state insurance funds; to modify and clarify the status, rights, 25 powers, duties, and operations of the nonprofit malpractice 26 insurance fund; to provide for the departmental supervision and 27 regulation of the insurance and surety business within this 03024'99 3 1 state; to provide for regulation over worker's compensation 2 self-insurers; to provide for the conservation, rehabilitation, 3 or liquidation of unsound or insolvent insurers; to provide for 4 the protection of policyholders, claimants, and creditors of 5 unsound or insolvent insurers; to provide for associations of 6 insurers to protect policyholders and claimants in the event of 7 insurer insolvencies; to prescribe educational requirements for 8 insurance agents and solicitors; to provide for the regulation of 9 multiple employer welfare arrangements; to create an automobile 10 theft prevention authority to reduce the number of automobile 11 thefts in this state; to prescribe the powers and duties of the 12 automobile theft prevention authority; to provide certain powers 13 and duties upon certain officials, departments, and authorities 14 of this state; to repeal acts and parts of acts; and to provide 15 penalties for the violation of this act. 16 Sec. 2006. (1) A person must pay on a timely basis to its 17 insured, an individual or entity directly entitled to benefits 18 under its insured's contract of insurance, or a third party tort 19 claimant the benefits provided under the terms of its policy, or, 20 in the alternative, the person must pay to its insured, an indi- 21 vidual or entity directly entitled to benefits under its 22 insured's contract of insurance, or a third party tort claimant 23 12% interest, as provided in subsection (4), on claims not paid 24 on a timely basis. Failure to pay claims on a timely basis or to 25 pay interest on claims as provided in subsection (4) is an unfair 26 trade practice unless the claim is reasonably in dispute. 03024'99 4 1 (2) A person shall not be found to have committed an unfair 2 trade practice under this section if the person is found liable 3 for a claim pursuant to a judgment rendered by a court of law, 4 and the person pays to its insured, individual or entity directly 5 entitled to benefits under its insured's contract of insurance, 6 or third party tort claimant interest as provided in subsection 7 (4). 8 (3) An insurer shall specify in writing the materials 9whichTHAT constitute a satisfactory proof of loss not later 10 than 30 days after receipt of a claim unless the claim is settled 11 within the 30 days. If proof of loss is not supplied as to the 12 entire claim, the amount supported by proof of loss shall be 13deemed to beCONSIDERED paid on a timely basis if paid within 14 60 days after receipt of proof of loss by the insurer. Any part 15 of the remainder of the claim that is later supported by proof of 16 loss shall bedeemed to beCONSIDERED paid on a timely basis if 17 paid within 60 days after receipt of the proof of loss by the 18 insurer.WhereIF the proof of loss provided by the claimant 19 contains factswhichTHAT clearly indicate the need for addi- 20 tional medical information by the insurer in order to determine 21 its liability under a policy of life insurance, the claim shall 22 bedeemed to beCONSIDERED paid on a timely basis if paid 23 within 60 days after receipt of necessary medical information by 24 the insurer. Payment of a claim shall not be untimely during any 25 period in which the insurer is unable to pay the claim when there 26 is no recipient who is legally able to give a valid release for 27 the payment, or where the insurer is unable to determine who is 03024'99 5 1 entitled to receive the payment, if the insurer has promptly 2 notified the claimant of that inability and has offered in good 3 faith to promptly pay the claim upon determination of who is 4 entitled to receive the payment. 5 (4)WhenIF benefits are not paid on a timely basis the 6 benefits paid shall bear simple interest from a date 60 days 7 after satisfactory proof of loss was received by the insurer at 8 the rate of 12% per annum, if the claimant is the insured or an 9 individual or entity directly entitled to benefits under the 10 insured's contract of insurance.WhereIF the claimant is a 11 third party tort claimant, then the benefits paid shall bear 12 interest from a date 60 days after satisfactory proof of loss was 13 received by the insurer at the rate of 12% per annum if the 14 liability of the insurer for the claim is not reasonably in 15 dispute,andthe insurer has refused payment in bad faith,16suchAND THE bad faithhaving beenWAS determined by a court 17 of law. The interest shall be paid in addition to and at the 18 time of payment of the loss. If the loss exceeds the limits of 19 insurance coverage available, interest shall be payable based 20 upon the limits of insurance coverage rather than the amount of 21 the loss. If payment is offered by the insurer but is rejected 22 by the claimant, and the claimant does not subsequently recover 23 an amount in excess of the amount offered, interestshallIS 24 notbedue. Interest paid pursuant to this section shall be 25 offset by any award of interest that is payable by the insurer 26 pursuant to the award. 03024'99 6 1 (5)WhereIF a person contracts to provide benefits and 2 reinsures all or a portion of the risk, the person contracting to 3 provide benefitsshall beIS liable for interest due to an 4 insured, an individual or entity directly entitled to benefits 5 under its insured's contract of insurance, or a third party tort 6 claimant under this section where a reinsurer fails to pay bene- 7 fits on a timely basis. 8 (6)In the event ofIF THERE IS any specific inconsistency 9 between this section andthe provisions of Act No. 294 of the10Public Acts of 1972, as amended, being sections 500.3101 to11500.3177 of the Compiled Laws of 1970 or of the provisions of Act12No. 317 of the Public Acts of 1969, as amended, being sections13418.101 to 418.941 of the Compiled Laws of 1970,SECTIONS 3101 14 TO 3177 OR THE WORKER'S DISABILITY COMPENSATION ACT OF 1969, 1969 15 PA 317, MCL 418.101 TO 418.941, the provisions of this section 16shallDO not apply. 17 (7) THIS SECTION DOES NOT APPLY TO ANY OF THE FOLLOWING: 18 (A) BENEFITS PROVIDED UNDER AN EXPENSE-INCURRED HOSPITAL, 19 MEDICAL, SURGICAL, VISION, OR DENTAL POLICY OR CERTIFICATE, 20 INCLUDING ANY POLICY OR CERTIFICATE THAT PROVIDES COVERAGE FOR 21 SPECIFIC DISEASES OR ACCIDENTS ONLY, OR ANY HOSPITAL INDEMNITY, 22 MEDICARE SUPPLEMENT, LONG-TERM CARE, DISABILITY INCOME, OR 1-TIME 23 LIMITED DURATION POLICY OR CERTIFICATE. 24 (B) HOSPITAL, MEDICAL, SURGICAL, VISION, DENTAL, AND SICK 25 CARE BENEFITS PROVIDED UNDER A POLICY OR CERTIFICATE REGULATED 26 UNDER CHAPTER 31. 03024'99 7 1 (C) HOSPITAL, MEDICAL, SURGICAL, VISION, DENTAL, AND SICK 2 CARE BENEFITS PROVIDED BY A MEWA REGULATED UNDER CHAPTER 70. 3 (D) HOSPITAL, MEDICAL, SURGICAL, VISION, DENTAL, AND SICK 4 CARE BENEFITS PROVIDED UNDER A POLICY OR CERTIFICATE OF WORKER'S 5 COMPENSATION INSURANCE. 6 SEC. 2006A. (1) NOTWITHSTANDING ANY OTHER PROVISION OF THIS 7 ACT, THIS SECTION APPLIES TO ALL OF THE FOLLOWING: 8 (A) BENEFITS PROVIDED UNDER AN EXPENSE-INCURRED HOSPITAL, 9 MEDICAL, SURGICAL, VISION, OR DENTAL POLICY OR CERTIFICATE, 10 INCLUDING ANY POLICY OR CERTIFICATE THAT PROVIDES COVERAGE FOR 11 SPECIFIC DISEASES OR ACCIDENTS ONLY, OR ANY HOSPITAL INDEMNITY, 12 MEDICARE SUPPLEMENT, LONG-TERM CARE, DISABILITY INCOME, OR 1-TIME 13 LIMITED DURATION POLICY OR CERTIFICATE. 14 (B) HOSPITAL, MEDICAL, SURGICAL, VISION, DENTAL, AND SICK 15 CARE BENEFITS PROVIDED UNDER A POLICY OR CERTIFICATE REGULATED 16 UNDER CHAPTER 31. 17 (C) HOSPITAL, MEDICAL, SURGICAL, VISION, DENTAL, AND SICK 18 CARE BENEFITS PROVIDED BY A MEWA REGULATED UNDER CHAPTER 70. 19 (D) HOSPITAL, MEDICAL, SURGICAL, VISION, DENTAL, AND SICK 20 CARE BENEFITS PROVIDED UNDER A POLICY OR CERTIFICATE OF WORKER'S 21 COMPENSATION INSURANCE. 22 (E) BENEFITS PROVIDED UNDER A HEALTH MAINTENANCE ORGANIZA- 23 TION CONTRACT. 24 (F) BENEFITS PROVIDED UNDER A HEALTH CARE CORPORATION 25 CERTIFICATE. 26 (G) CLAIMS FOR BENEFITS ADMINISTERED BY A THIRD PARTY 27 ADMINISTRATOR. 03024'99 8 1 (2) EXCEPT AS OTHERWISE PROVIDED IN SUBSECTION (4), AN 2 INSURER SHALL PAY IN FULL THE CLAIM PAYMENT AMOUNT FOR A HEALTH 3 CARE CLAIM, OR ANY UNDISPUTED PART OF A HEALTH CARE CLAIM, AS 4 FOLLOWS: 5 (A) WITHIN 30 DAYS FOLLOWING RECEIPT OF A CLEAN CLAIM BY 6 ELECTRONIC TRANSMISSION. 7 (B) WITHIN 45 DAYS FOLLOWING RECEIPT OF A CLEAN CLAIM BY 8 HARD COPY. 9 (3) A HEALTH CARE CLAIM SHALL BE CONSIDERED A CLEAN CLAIM, 10 UNLESS AN INSURER, WITHIN 30 DAYS FOLLOWING RECEIPT OF A CLAIM BY 11 ELECTRONIC TRANSMISSION OR WITHIN 45 DAYS FOLLOWING RECEIPT OF A 12 CLAIM BY HARD COPY, REQUESTS IN WRITING FROM THE CLAIMANT ALL 13 ADDITIONAL INFORMATION, IF ANY, REASONABLY NEEDED TO DETERMINE 14 LIABILITY TO PAY THE HEALTH CARE CLAIM. UPON THE INSURER'S 15 RECEIPT OF ALL ADDITIONAL REQUESTED INFORMATION, THE HEALTH CARE 16 CLAIM SHALL BE CONSIDERED A CLEAN CLAIM. AN INSURER THAT 17 REQUESTS ADDITIONAL INFORMATION THAT IS NOT REASONABLY NEEDED TO 18 DETERMINE LIABILITY TO PAY A HEALTH CARE CLAIM IS LIABLE FOR THE 19 PAYMENT OF INTEREST AS PROVIDED IN SUBSECTION (8). 20 (4) AN INSURER SHALL PAY A CLEAN CLAIM WITHIN THE APPLICABLE 21 30- AND 45-DAY TIME PERIODS PRESCRIBED IN SUBSECTION (2)(A) AND 22 (B) UNLESS THE INSURER REASONABLY DISPUTES ITS OBLIGATION TO PAY 23 THE CLEAN CLAIM, IN WHOLE OR IN PART, BASED ON 1 OR MORE OF THE 24 FOLLOWING GROUNDS: 25 (A) THE ELIGIBILITY OF A PERSON FOR COVERAGE. 26 (B) THE LIABILITY OF ANOTHER INSURER OR PERSON FOR ALL OR 27 PART OF THE CLAIM. 03024'99 9 1 (C) THE AMOUNT OF THE CLAIM. 2 (D) THE COVERED BENEFITS. 3 (E) THE MANNER IN WHICH SERVICES WERE ACCESSED OR PROVIDED. 4 (F) THAT THE CLAIM WAS SUBMITTED FRAUDULENTLY SO LONG AS 5 THERE IS A REASONABLE BASIS SUPPORTED BY SPECIFIC INFORMATION 6 AVAILABLE FOR REVIEW BY THE COMMISSIONER TO SUPPORT THIS BELIEF. 7 (5) FOLLOWING RECEIPT OF A CLEAN CLAIM AND WITHIN THE APPLI- 8 CABLE 30- AND 45-DAY TIME PERIODS PRESCRIBED IN SUBSECTION (2)(A) 9 AND (B), AN INSURER THAT DISPUTES ITS OBLIGATION TO PAY A CLEAN 10 CLAIM, IN WHOLE OR IN PART, SHALL NOTIFY THE CLAIMANT IN WRITING 11 THAT IT IS NOT OBLIGATED TO PAY SOME OR ALL OF THE CLAIM STATING 12 WITH SPECIFICITY ALL REASONS WHY IT IS NOT LIABLE. AN INSURER 13 THAT VIOLATES SUBSECTION (4) OR UNREASONABLY DISPUTES LIABILITY 14 TO PAY A CLAIM IS LIABLE FOR THE PAYMENT OF INTEREST AS PROVIDED 15 IN SUBSECTION (8). 16 (6) EACH HEALTH CARE CLAIM PROCESSED IN VIOLATION OF THIS 17 SECTION CONSTITUTES A SEPARATE VIOLATION AND IS AN UNFAIR TRADE 18 PRACTICE. AN INSURER IS RESPONSIBLE TO ENSURE THAT ANY PERSON 19 THAT PROCESSES HEALTH CARE CLAIMS ON ITS BEHALF COMPLIES WITH 20 THIS SECTION. 21 (7) IF, AFTER OPPORTUNITY FOR A HEARING HELD PURSUANT TO THE 22 ADMINISTRATIVE PROCEDURES ACT OF 1969, 1969 PA 306, MCL 24.201 TO 23 24.328, THE COMMISSIONER DETERMINES THAT AN INSURER HAS VIOLATED 24 THIS SECTION, THE COMMISSIONER SHALL REDUCE HIS OR HER FINDINGS 25 AND DECISION TO WRITING AND SHALL ISSUE AND CAUSE TO BE SERVED 26 UPON THE INSURER A COPY OF THE FINDINGS AND AN ORDER REQUIRING 27 THE INSURER TO CEASE AND DESIST FROM VIOLATING THIS SECTION AND 03024'99 10 1 SHALL ORDER PAYMENT OF A MONETARY PENALTY OF $5,000.00 FOR EACH 2 VIOLATION. IF AN INSURER KNOWINGLY AND REPEATEDLY VIOLATES THIS 3 SECTION, THE COMMISSIONER MAY ORDER THE SUSPENSION OR REVOCATION 4 OF THE INSURER'S CERTIFICATE OF AUTHORITY OR LICENSE. 5 (8) AN INSURER THAT VIOLATES THIS SECTION SHALL PAY THE 6 CLAIMANT INTEREST ON THE CLAIM PAYMENT AMOUNT COMPUTED AT THE 7 RATE OF 18% PER ANNUM FROM THE DATE ON WHICH THE CLAIM PAYMENT 8 AMOUNT WAS REQUIRED TO BE PAID UNTIL THE DATE ON WHICH THE CLAIM 9 PAYMENT AMOUNT IS PAID IN FULL. INTEREST SHALL BE PAID AT THE 10 TIME THE CLAIM PAYMENT AMOUNT IS PAID IN FULL. 11 (9) A POLICYHOLDER, COVERED PERSON, OR CLAIMANT MAY BRING A 12 CIVIL ACTION AGAINST AN INSURER TO RECOVER THE CLAIM PAYMENT 13 AMOUNT AND INTEREST PAYABLE UNDER SUBSECTION (8), TOGETHER WITH 14 ACTUAL ATTORNEY FEES AND LITIGATION EXPENSES AND COSTS. THIS 15 SUBSECTION DOES NOT ABROGATE OR IMPAIR ANY OTHER LEGAL OR EQUITA- 16 BLE ACTION, CLAIM, OR REMEDY THAT A POLICYHOLDER, COVERED PERSON, 17 OR CLAIMANT MAY HAVE AGAINST AN INSURER. 18 (10) IF AN INSURER CONTRACTS TO PROVIDE BENEFITS AND REIN- 19 SURES ALL OR A PORTION OF THE RISK, THE INSURER IS LIABLE FOR 20 INTEREST DUE TO A CLAIMANT UNDER THIS SECTION IF A REINSURER 21 FAILS TO PAY BENEFITS ON A TIMELY BASIS. 22 (11) A HEALTH CARE PROVIDER WHOSE MEMBERSHIP ON ANY PROVIDER 23 PANEL IS TERMINATED SHALL BE PROVIDED WITH A WRITTEN EXPLANATION 24 OF ALL REASONS FOR THE TERMINATION. THE PERSON WHO MAINTAINS THE 25 PANEL SHALL FURNISH THE EXPLANATION TO THE HEALTH CARE PROVIDER 26 WHEN THE HEALTH CARE PROVIDER IS GIVEN NOTICE OF TERMINATION. 03024'99 11 1 (12) A PERSON SHALL NOT TERMINATE THE PARTICIPATION OF A 2 HEALTH CARE PROVIDER ON ANY PROVIDER PANEL, OR OTHERWISE 3 DISCRIMINATE AGAINST A HEALTH CARE PROVIDER, BECAUSE THE HEALTH 4 CARE PROVIDER CLAIMS THAT A PERSON HAS VIOLATED THIS SECTION. A 5 HEALTH CARE PROVIDER WHO ALLEGES A VIOLATION OF THIS SUBSECTION 6 MAY BRING A CIVIL ACTION FOR APPROPRIATE INJUNCTIVE RELIEF, DAM- 7 AGES, OR BOTH, TOGETHER WITH ACTUAL ATTORNEY FEES AND LITIGATION 8 EXPENSES AND COSTS. 9 (13) FOR PURPOSES OF THIS SECTION: 10 (A) "CLAIM PAYMENT AMOUNT" MEANS THE AMOUNT THAT AN INSURER 11 IS LIABLE TO PAY ON A HEALTH CARE CLAIM. 12 (B) "CLAIMANT" MEANS A PERSON WHO SUBMITS A HEALTH CARE 13 CLAIM TO AN INSURER, INCLUDING A POLICYHOLDER, COVERED PERSON, OR 14 HEALTH CARE PROVIDER. 15 (C) "CLEAN CLAIM" MEANS A HEALTH CARE CLAIM THAT CAN BE PRO- 16 CESSED IN ACCORDANCE WITH AN INSURER'S REASONABLE PROCEDURES 17 WITHOUT THE OBTAINING OF ADDITIONAL INFORMATION FROM THE CLAIMANT 18 OR ANY OTHER PERSON. 19 (D) "HEALTH CARE CLAIM" MEANS A REQUEST FOR THE PAYMENT OF 20 ANY OF THE FOLLOWING BENEFITS: 21 (i) BENEFITS UNDER AN EXPENSE-INCURRED HOSPITAL, MEDICAL, 22 SURGICAL, VISION, OR DENTAL POLICY OR CERTIFICATE, INCLUDING ANY 23 POLICY OR CERTIFICATE THAT PROVIDES COVERAGE FOR SPECIFIC DIS- 24 EASES OR ACCIDENTS ONLY, OR ANY HOSPITAL INDEMNITY, MEDICARE SUP- 25 PLEMENT, LONG-TERM CARE, DISABILITY INCOME, OR 1-TIME LIMITED 26 DURATION POLICY OR CERTIFICATE. 03024'99 12 1 (ii) HOSPITAL, MEDICAL, SURGICAL, VISION, DENTAL, AND SICK 2 CARE BENEFITS PROVIDED UNDER A POLICY OR CERTIFICATE REGULATED 3 UNDER CHAPTER 31. 4 (iii) HOSPITAL, MEDICAL, SURGICAL, VISION, DENTAL, AND SICK 5 CARE BENEFITS PROVIDED BY A MEWA REGULATED UNDER CHAPTER 70. 6 (iv) HOSPITAL, MEDICAL, SURGICAL, VISION, DENTAL, AND SICK 7 CARE BENEFITS PROVIDED UNDER A POLICY OR CERTIFICATE OF WORKER'S 8 COMPENSATION INSURANCE. 9 (v) BENEFITS PROVIDED UNDER A HEALTH MAINTENANCE ORGANIZA- 10 TION CONTRACT. 11 (vi) BENEFITS PROVIDED UNDER A HEALTH CARE CORPORATION 12 CERTIFICATE. 13 (vii) CLAIMS FOR BENEFITS ADMINISTERED BY A THIRD PARTY 14 ADMINISTRATOR. 15 (E) "HEALTH CARE PROVIDER" MEANS A PERSON LICENSED, CERTI- 16 FIED, OR REGISTERED UNDER PART 62 OR PARTS 161 TO 183 OF THE 17 PUBLIC HEALTH CODE, 1978 PA 368, MCL 333.6201 TO 333.6251 AND 18 333.16101 TO 333.18311, OR A HEALTH FACILITY. 19 (F) "HEALTH FACILITY" MEANS: 20 (i) A FACILITY OR AGENCY LICENSED OR AUTHORIZED UNDER ARTI- 21 CLE 17 OF THE PUBLIC HEALTH CODE, 1978 PA 368, MCL 333.20101 TO 22 333.22260. 23 (ii) A MENTAL HOSPITAL, PSYCHIATRIC HOSPITAL, PSYCHIATRIC 24 UNIT, OR MENTAL RETARDATION FACILITY OPERATED BY THE DEPARTMENT 25 OF MENTAL HEALTH OR CERTIFIED OR LICENSED UNDER 1974 PA 258, MCL 26 330.1001 TO 330.2106. 03024'99 13 1 (iii) A FACILITY PROVIDING OUTPATIENT PHYSICAL THERAPY 2 SERVICES, INCLUDING SPEECH PATHOLOGY SERVICES. 3 (iv) A KIDNEY DISEASE TREATMENT CENTER, INCLUDING A FREE- 4 STANDING HEMODIALYSIS UNIT. 5 (v) AN ORGANIZED AMBULATORY HEALTH CARE FACILITY. 6 (vi) A TERTIARY HEALTH CARE SERVICE FACILITY. 7 (vii) A SUBSTANCE ABUSE TREATMENT PROGRAM LICENSED UNDER 8 PARTS 61 TO 65 OF THE PUBLIC HEALTH CODE, 1978 PA 368, MCL 9 333.6101 TO 333.6523. 10 (viii) AN OUTPATIENT PSYCHIATRIC CLINIC. 11 (ix) A HOME HEALTH AGENCY. 12 (G) "INSURER" INCLUDES A HEALTH MAINTENANCE ORGANIZATION, 13 HEALTH CARE CORPORATION, THIRD PARTY ADMINISTRATOR, AND A MEWA 14 REGULATED UNDER CHAPTER 70. 15 Enacting section 1. This amendatory act takes effect on 16 January 1, 2000 and applies to all health care claims submitted 17 for payment on and after January 1, 2000. 03024'99 Final page. DKH