Office of Sen.

Mike Johnston
Colorado General Assembly | 200 E. Colfax Avenue | Denver, CO 80203 | 303.866.4864

SB 13- 124 Requirements of Insurance Intermediaries Sen. Kefalas & Rep. Primavera Staff Name: Colinford Mattis What the Bill Does: The proposed bill revises the established definition of intermediary (i.e. people authorized by health care providers or insurance carriers to negotiate and execute provider contracts with insurance carriers) by adding specific functions that an intermediary performs. It also holds intermediaries to the same standards as carriers regarding prompt payment of claims, and allows the commissioner of insurance to investigate complaints of non-compliance; but, it does not empower the Commissioner to take corrective action. Lastly, it defines the willful violation of specifically defined prohibitions as unfair method of competition and an unfair or deceptive act in the business of insurance. Considering the current realities for intermediaries, the purpose of the proposed bill is to have more transparency among carriers, intermediaries, providers, and persons covered under a health insurance policy greater oversight over intermediaries is needed and they need to be held to the same standards as carriers regarding transparency, prompt payment of claims, and adherence to agreed-upon terms in a contract. Colorado Context: In June 2008, Colorado enacted the Fair Accountable Insurance Rates Act, which requires individual and small group health insurance carriers to file with the Commissioner of Insurance a detailed description of their rating, underwriting and renewal practices; requires approval by the commissioner for certain rate increases.1 Furthermore, as of November 2011, the state of Colorado, along with twenty-five other states, meets strict standards of consumers right to health insurance appeals process and has in place an independent review process for coverage denials for consumers. Colorado meets the 16 minimum consumer protections set forth based on the Uniform Health Carrier External Review Model Act written by the National Association of Insurance Commissioners (NAIC).2 The division of insurance
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FACT SHEET MEMORANDUM

National Conference of State Legislatures. Small and Large Business Health Insurance: State Roles. http://www.ncsl.org/issues-research/health/small-business-healthinsurance.aspx

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received about 500 complaints and inquiries by providers in 2012 regarding intermediaries.3 National Context: In the United States, over the past 40 years health expenditures paid by carriers and intermediaries have outpaced the growth of the U.S. economy, whereas consumer out-of-pocket spending, adjusted for inflation, has grown slower than the U.S. economy. Thus, health care consumers typically rely on these intermediaries instead of interacting directly with other parts of the health care system. This heavy reliance on intermediaries is a key characteristic of the current health care market.4 Specifically, the 2010 Affordable Care Act grants consumers the right for independent review of decisions made by their health care carrier. As of November 2011, twenty-six states, including Colorado meet strict standards regarding reviews of claimants. Twelve states meet similar standards, meaning they have some form of an external review process. Lastly, thirteen states do not have a review process for carriers or intermediaries in place and will outsource this service to an independent review organization.5 Bill Provisions: Defines an intermediary as a person authorized by health care providers or carriers to negotiate and execute provider contracts with carriers. Furthermore, an intermediary includes any person that does the following: conducts utilization management, utilization review, provider credentialing, administration of health insurance benefits, setting or negotiation of reimbursement rates, payment to providers, network development, claims processing, or disease management programs on behalf of a carrier. A carriers delegation to a third arty or intermediary still holds them and the third party or intermediary accountable to the requirements of this bill. The Commissioner of Insurance may investigate claims filed by a provider against a carrier for improper handling or denial of benefits. The Commissioner of Insurance may investigate complaints filed by a provider against an intermediary for timely payment of a claim, change of billing codes, or the denial of benefits. A persons insurance benefits cannot be used to pay an intermediarys administrative costs and said costs cannot be added to a covered persons charges.

National Conference of State Legislatures. Right to Health Insurance Appeals Process. http://www.ncsl.org/issues-research/health/right-to-health-insurance-appeals-in-aca.aspx 3 SB13-124 Colorado Legislative Council Staff Fiscal Note. pp. 2 4 D. Andrew Austin & Thomas L. Hungerford. (April 2010) The Market Structure of the Health Insurance Industry. Congressional Research Service. pp. 12-13 http://www.ncsl.org/documents/health/mrktstrofhlthins.pdf 5 National Conference of State Legislatures. Right to Health Insurance Appeals Process. http://www.ncsl.org/issues-research/health/right-to-health-insurance-appeals-in-aca.aspx

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For a complete list of fact sheets, visit www.mikejohnston.org/in-the-legislature.

An intermediary cannot change the current procedural terminology code or diagnostic code determined by the provider so that the code indicates services not preformed by the provider. An intermediary cannot change provider charges so that they indicate services not performed by the provider. An intermediary cannot alter a contract between a provider and a carrier or intermediary without the written consent of the involved parties. An intermediary cannot deny reimbursements to a licensed provider with a contract with the carrier or intermediary if the services provided meet all the requirements of the health coverage plan. An intermediary cannot take retaliatory action against a provider for disclosing information about the intermediarys practices to a covered person. An intermediary will inform a covered person that the intermediary performs utilization review. The Commissioner of Insurance has the authority to investigate complaints made by a provider or a policyholder against an intermediary for violations. Willful violation of section 10-16-706 (10) is defined as unfair methods of competition and unfair or deceptive acts or practices in the business of insurance. This act will take effect on January 1, 2014. However, if a referendum petition is filed within 90 days after the final adjournment of the general assembly, then it will take effect when the governor officially declares the vote of the November 2014 election, assuming the act or section in dispute is approved by the people during the election.

Fiscal Impact: The Colorado Legislative Council estimates there will be a fiscal impact of $19,016 because this bill is expected to increase expenditures in the Division of Insurance in the DORA by $6,339 and 0.1 FTE in FY 2013-14, and $12,677 and 0.2 FTE in FY 2014-15.

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For a complete list of fact sheets, visit www.mikejohnston.org/in-the-legislature.