[First Reprint]

SENATE, No. 269

STATE OF NEW JERSEY

PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION

By Senators SINAGRA and MATHEUSSEN

An Act concerning patient protections under health benefits plans, supplementing Titles 26 and 17 of the Revised Statutes and Title 17B of the New Jersey Statutes and amending P.L.1973, c.337.

    Be It Enacted by the Senate and General Assembly of the State of New Jersey:

    1. This act shall be known and may be cited as the "Health Care Quality Act."

    2. (New section) As used in sections 2 through 11 of this act:

    "Carrier" means an insurance company, health service corporation, hospital service corporation, medical service corporation or health maintenance organization authorized to issue health benefits plans in this State.

    "Commissioner" means the Commissioner of Health.

    "Covered person" means a person on whose behalf a carrier or other entity offering the plan is obligated to pay benefits pursuant to the health benefits plan.

    "Covered service" means a health care service provided to a covered person under a health benefits plan for which the carrier or other entity offering the plan is obligated to pay benefits.

    "Department" means the Department of Health.

    "Health benefits plan" means a benefits plan which pays hospital and medical expense benefits for covered services and is delivered or issued for delivery in this State by or through a carrier or any other entity. For the purposes of this act, health benefits plan shall not include the following plans, policies or contracts: accident only, credit, disability, long-term care, Medicare supplement coverage, CHAMPUS supplement coverage, coverage for Medicare services pursuant to a contract with the United States government, coverage for Medicaid services pursuant to a contract with the State, coverage arising out of a workers' compensation or similar law, automobile medical payment insurance, personal injury protection insurance issued pursuant to P.L.1972, c.70 (C.39:6A-1 et seq.) or hospital confinement indemnity coverage.

    "Health care provider" means an individual or entity which, acting within the scope of its licensure or certification, provides a covered service defined by the health benefits plan. Health care provider includes, but is not limited to, a physician and other health care professionals licensed pursuant to Title 45 of the Revised Statutes, and a hospital and other health care facilities licensed pursuant to Title 26 of the Revised Statutes.

    "Managed care plan" means a health benefits plan that integrates the financing and delivery of appropriate health care services to covered persons by arrangements with participating providers, who are selected to participate on the basis of explicit standards, to furnish a comprehensive set of health care services and financial incentives for covered persons to use the participating providers and procedures provided for in the plan. A managed care plan may be issued by or through a carrier which assumes financial risk for the plan or any other entity that provides and finances health benefits for a covered person.

    "Network contractor" means an entity that enters into a contractual arrangement with a health care provider to form a network of providers to deliver ¹a comprehensive package of¹ health care services¹, which includes hospital and medical services,¹ to residents of this State and contracts with a payer for access to the network for the payer's managed care plan. A network contractor ¹[shall] does¹ not assume financial risk for the health care services provided by the network for a managed care plan ¹[or enter into risk sharing arrangements with providers]¹. A network contractor may contract with payers to provide utilization management and quality assurance programs and other related services. ¹Network contractor shall not include an entity that operates under an exclusive contract with one or more health maintenance organizations which hold a certificate of authority pursuant to P.L.1973, c.337 (C.26:2J-1 et seq.).¹

    "Utilization management" means a system for reviewing the appropriate and efficient allocation of health care services under a health benefits plan according to specified guidelines, in order to recommend or determine whether, or to what extent, a health care service given or proposed to be given to a covered person should or will be reimbursed, covered, paid for, or otherwise provided under the health benefits plan. The system may include: preadmission certification, the application of practice guidelines, continued stay review, discharge planning, preauthorization of ambulatory procedures, and retrospective review.

    3. (New section) a. A managed care plan in effect on the effective date of this act which provides benefits to residents of this State shall file a registration form with the department within 90 days of the effective date of this act. A managed care plan established after the effective date of this act or for which corporate ownership changes after the effective date of this act shall file a registration form with the department at least 30 days prior to the date the plan will begin to provide benefits to residents of this State. The registration form shall be valid for two years, but the managed care plan shall notify the department within 10 business days of any change in information provided on the registration form.

    b. A carrier which offers an individual or group health benefits plan to residents of this State on an indemnity basis on the effective date of this act shall file a registration form with the department within 90 days of the effective date of this act. A carrier authorized to issue health benefits plans in this State after the effective date of this act or for which corporate ownership changes after the effective date of this act shall file a registration form with the department at least 30 days prior to the date the carrier will begin to offer a health benefits plan to residents of this State. The registration form shall be valid for two years, but the carrier shall notify the department within 10 business days of any change in information provided on the registration form.

    c. A network contractor in operation on the effective date of this act shall file a registration form with the department within 90 days of the effective date of this act. A network contractor established after the effective date of this act or for which corporate ownership changes after the effective date of this act shall file a registration form with the department at least 30 days prior to the date the entity will begin to offer its services in this State. The registration form shall be valid for two years, but the network contractor shall notify the department within 10 business days of any change in information provided on the registration form.

    d. The commissioner shall establish a registration form for managed care plans, indemnity carriers and network contractors which shall request, at a minimum, the official address and telephone number of the place of business of the managed care plan, carrier or network contractor.

    e. The filing of a registration form by a managed care plan, indemnity carrier or network contractor with the department pursuant to this act is for informational purposes only in order to enable the department to carry out the provisions of this act. The registration required pursuant to this act shall not be construed to authorize the department to regulate managed care plans, carriers or network contractors in any manner not otherwise provided by law.

    f. A managed care plan, indemnity carrier or network contractor filing a registration form with the department pursuant to this act shall pay a biennial registration fee of $200.

    g. A health maintenance organization which holds a certificate of authority pursuant to P.L.1973, c.337 (C.26:2J-1 et seq.) shall be exempt from the registration requirements of this section but shall comply with the provisions of sections 2 and 4 through 21 of this act.

    A health maintenance organization shall be required to comply with the provisions of P.L.1973, c.337 (C.26:2J-1 et seq.) and any rules and regulations adopted pursuant thereto, except that in the event that the provisions of this act conflict with the provisions of P.L.1973, c.337 (C.26:2J-1 et seq.), the provisions of this act shall supercede the provisions of P.L.1973, c.337

    h. A carrier which issues health benefit plans utilizing a selective contracting arrangement pursuant to section 22 of P.L.1993, c.162 (C.17B:27A-54) shall be exempt from the registration requirements of this section with respect to the selective contracting arrangement, but shall comply with the provisions of sections 2 and 4 through 21 of this act.

    A carrier shall be required to comply with the provisions of section 22 of P.L.1993, c.162 (C.17B:27A-54) and any rules and regulations adopted pursuant thereto, except that in the event that the provisions of this act conflict with the provisions of section 22 of P.L.1993, c.162 (C.17B:27A-54), the provisions of this act shall supercede the provisions of P.L.1993, c.162.

    4. (New section) A managed care plan or indemnity carrier, as appropriate, shall disclose in writing¹, in easily understandable language,¹ to a ¹[policy or contract holder] subscriber, insured¹ or enrollee, ¹[in the case of a health maintenance organization] as the case may be¹, the terms and conditions of its health benefits plan, and shall ¹[promptly notify a policy or contract holder or enrollee in writing of any changes in those terms and conditions] promptly provide the subscriber, insured or enrollee with written notification of any change in the terms and conditions prior to the effective date of the change¹. ¹[The policy or contract holder shall ensure that each covered person under the policy or contract is provided with a copy of the disclosure statement.] The managed care plan or indemnity carrier shall provide the required information at the time of enrollment and annually thereafter.¹

    a. The information required to be disclosed pursuant to this section shall include¹[, but need not be limited to,]¹ a description of:

    (1) covered services and benefits to which the covered person is entitled;

    (2) treatment policies and restrictions or limitations on covered services and benefits¹,including, but not limited to, physical and occupational therapy services, clinical laboratory tests, hospital and surgical procedures, prescription drugs and biologics, radiological examinations and behavioral health services¹;

    (3) financial responsibility of the covered person, including copayments and deductibles;

    (4) prior authorization and any other review requirements with respect to accessing covered services;

    (5) where and in what manner covered services may be obtained;

    (6) changes in covered benefits, including any addition, reduction or elimination of specific benefits;

    (7) the covered person's right to appeal and the procedure for initiating an appeal of a utilization management decision made by or on behalf of the managed care plan or carrier with respect to the denial, reduction or termination of a covered health care benefit or the denial of payment for a health care service;

    (8) the procedure to initiate an appeal pursuant to the provisions of P.L. , c. (C. )(pending before the Legislature as Senate Bill No. ¹[1404 of 1994] 266 of 1996¹); and

    (9) ¹[the percentage breakdown of premium dollars spent on benefits and on administration, respectively, by the carrier on insured health benefits plans issued in the State] such other information as the commissioner shall require¹.

    b. The carrier or managed care plan shall file the information required pursuant to this section with the department.

    5. (New section) a. In addition to the disclosure requirements provided in section 4 of this act, a managed care plan shall disclose to a prospective ¹[covered person] subscriber, insured or enrollee, as the case may be¹, in writing, ¹in easily understandable language,¹the following information¹[, and shall promptly notify a covered person in writing of any changes in the information]¹:

    (1) ¹[Information] A participating provider directory providing information¹ on a covered person's access to primary care physicians and specialists, including the number of available participating physicians, by provider category or specialty, and their professional office addresses¹[, the percentage of participating primary care physicians who are accepting new patients and the expected waiting time for an initial appointment and medical visit]. The managed care plan shall promptly notify a subscriber, insured or enrollee, who is affected, of any changes in the list of primary care physicians¹; ¹[and]¹

    (2) ¹[Information] General information¹ about the financial ¹[affiliations] incentives¹ between participating physicians under contract with the managed care plan or network contractor, as applicable, and other participating health care providers and facilities to which the participating physicians refer their managed care patients¹[.];

    (3) The percentage of the managed care plan's network physicians who are board certified; and

    (4) The managed care plan's standard for customary waiting times for appointments for urgent and routine care.

    The managed care plan shall provide the information required in this subsection at the time of enrollment and annually thereafter.¹

    b. ¹Upon request of a covered person, a managed care plan shall promptly inform the person:

    (1) whether a particular network physician is board certified; and

    (2) whether a particular network physician is currently accepting new patients.

    c.¹ The managed care plan shall file the information required pursuant to this section with the department.

    6. (New section) a. A managed care plan shall designate a ¹[New Jersey]¹ licensed physician to serve as medical director of the plan. ¹The medical director, or his designee, shall be designated to serve as the medical director for medical services provided to the managed care plan's covered persons in the State and shall be licensed to practice medicine in New Jersey.¹

    The medical director shall be responsible for treatment policies, protocols, quality assurance activities and utilization management decisions of the plan. The treatment policies, protocols, quality assurance program and utilization management decisions of the plan shall be based on nationally recognized standards of health care practice. ¹The quality assurance and utilization management programs shall be in accordance with standards adopted by regulation of the department pursuant to this act.¹

    b. A network contractor shall maintain quality assurance and utilization management programs for the network. ¹The quality assurance and utilization management programs shall be in accordance with standards adopted by regulation of the department pursuant to this act.¹ The network contractor may contract with a payer for use of the quality assurance and utilization management programs for the payer's managed care plan.

    The network contractor shall designate a ¹[New Jersey]¹ licensed physician to serve as medical director of the network. ¹The medical director, or his designee, shall be designated to serve as the medical director for medical services provided by the network to covered persons in the State and shall be licensed to practice medicine in New Jersey.¹ The medical director shall be responsible for quality assurance activities and utilization management decisions of the network. The quality assurance activities and utilization management decisions shall be based on nationally recognized standards of health care practice.

    c. The medical director of the plan or network shall ensure that:

    (1) Any utilization management decision to deny, reduce or terminate a health care benefit or to deny payment for a health care service, because that service is not medically necessary, shall be made by a physician with knowledge in the area of the health care ¹[service] practice¹. In the case of a health care service prescribed or provided by a dentist, the decision shall be made by a dentist with knowledge in the area of the health care ¹[service] practice¹;

    (2) A utilization management decision shall not retrospectively deny coverage for health care services provided to a covered person when prior approval has been obtained from the plan or network, as appropriate, for those services, unless the approval was based upon fraudulent information submitted by the covered person or the participating provider;

    (3) A procedure is implemented whereby participating physicians and dentists have an opportunity to review and comment on all medical and surgical and dental protocols, respectively, of the plan; and

    (4) The utilization management program is available on a 24-hour basis to respond to authorization requests for emergency services and is available, at a minimum, during normal working hours for inquiries and authorization requests for nonemergency health care services.

    7. (New section) Each application for credentialing or participation, as appropriate, to a managed care plan or network contractor shall be reviewed by a committee of the plan or contractor that includes appropriate representation of health care professionals with knowledge in the applicant's scope of professional practice.

    8. (New section) A managed care plan or network contractor shall establish a policy governing removal of health care ¹[professionals] providers¹ from the plan or network which includes the following:

    a. The plan or contractor shall inform all participating health care ¹[professionals] providers¹ of the plan's or contractor's removal policy at the time the plan or contractor contracts with the health care ¹[professionals] providers¹ to participate in the plan or network, and at each renewal thereof.

    b. If a health care ¹[professional's] provider's¹ credentialing will be withdrawn or participation terminated prior to the date of termination of the contract, the plan or contractor shall provide the ¹[professional] provider¹ with 90-days notice of the withdrawal or termination, unless the withdrawal or termination is for breach of contract or because¹, in the opinion of the medical director,¹ the health care ¹[professional] provider¹ represents an imminent danger to an individual patient or to the public health, safety or welfare.

    c. If the plan or contractor finds that a health care ¹[professional] provider¹ represents an imminent danger to an individual patient or to the public health, safety or welfare, the plan or contractor shall promptly notify the appropriate professional State licensing board ¹or State licensing authority, as appropriate¹.

    9. (New section) A managed care plan's or network contractor's contract with a participating health care provider:

    a. Shall state that the health care provider shall not be penalized or the contract terminated by the managed care plan or network contractor because the health care provider acts as an advocate for the patient in seeking appropriate, medically necessary covered health care services;¹[ and]¹

    b. Shall not provide financial incentives to the health care provider for withholding covered health care services¹that are medically necessary, in the opinion of the medical director; and

    c. Shall protect the ability of a health care provider to communicate openly with a patient about all appropriate diagnostic testing and treatment options¹.

    10. (New section) a. A managed care plan shall offer a point-of-service plan option ¹rider¹ to every policy or contract holder which would allow a covered person to receive covered health care benefits from out-of-network providers without having to obtain a referral or prior authorization from the managed care plan. The point-of-service plan option ¹[shall] may¹ require that a covered person pay a higher deductible or copayment and higher premium for the plan option, pursuant to limits established by the department by regulation.

    b. A managed care plan shall provide each covered person in a plan whose policy or contract holder elects the point-of-service plan option, with the opportunity, at the time of enrollment and during the annual open enrollment period, to enroll in the point-of-service plan option. The managed care plan shall provide written notice of the point-of-service plan option to each covered person in a plan whose policy or contract holder elects the point-of-service option and shall include in that notice a detailed explanation of the financial costs to be incurred by a covered person who selects that plan option.

    c. The requirements of this section shall not apply to a managed care plan which only provides health care services to Medicaid recipients ¹pursuant to P.L.1968, c.413 (C.30:4D-1 et seq.), or a managed care plan which has been in operation for less than three years¹.

    11. (New section) A managed care plan, indemnity carrier or network contractor that violates any provision of this act shall be liable to a civil penalty of not less than $250 and not greater than $10,000 for each day the plan, carrier or contractor is in violation of the act ¹if reasonable notice in writing is given of the intent to levy the penalty and the managed care plan, indemnity carrier or network contractor has 30 days, or such additional time as the commissioner shall determine to be reasonable, to remedy the condition which gave rise to the violation, and fails to do so within the time allowed¹. The penalty shall be collected by the commissioner in the name of the State in a summary proceeding in accordance with "the penalty enforcement law," N.J.S.2A:58-1 et seq.

    12. (New section) The commissioner shall enforce the provisions of this act and adopt rules and regulations, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), necessary to carry out the provisions of this act.

    13. (New section) Notwithstanding the provisions of chapter 26 of Title 17B of the New Jersey Statutes to the contrary, no policy shall be delivered, issued, executed or renewed on or after the effective date of this act unless the policy meets the requirements of P.L. , c. (C. )(pending before the Legislature as this bill).

    14. (New section) Notwithstanding the provisions of chapter 27 of Title 17B of the New Jersey Statutes to the contrary, no policy shall be delivered, issued, executed or renewed on or after the effective date of this act unless the policy meets the requirements of P.L. , c. (C.    )(pending before the Legislature as this bill).

    15. (New section) Notwithstanding the provisions of P.L.1992, c.162 (C.17B:27A-17 et seq.) to the contrary, no policy or contract shall be delivered, issued, executed or renewed on or after the effective date of this act unless the policy or contract meets the requirements of P.L. , c. (C. )(pending before the Legislature as this bill).

    16. (New section) Notwithstanding the provisions of P.L.1992, c.161 (C.17B:27A-2 et seq.) to the contrary, no policy or contract shall be delivered, issued, executed or renewed on or after the effective date of this act unless the policy or contract meets the requirements of P.L. , c. (C. )(pending before the Legislature as this bill).

    17. (New section) Notwithstanding the provisions of P.L.1938, c.366 (C.17:48-1 et seq.) to the contrary, no individual or group contract shall be delivered, issued, executed or renewed on or after the effective date of this act unless the contract meets the requirements of P.L. , c. (C. )(pending before the Legislature as this bill).

    18. (New section) Notwithstanding the provisions of P.L.1940, c.74 (C.17:48A-1 et seq.) to the contrary, no individual or group contract shall be delivered, issued, executed or renewed on or after the effective date of this act unless the contract meets the requirements of P.L. , c. (C. )(pending before the Legislature as this bill).

    19. (New section) Notwithstanding the provisions of P.L.1985, c.236 (C.17:48E-1 et seq.) to the contrary, no individual or group contract shall be delivered, issued, executed or renewed on or after the effective date of this act unless the contract meets the requirements of P.L. , c. (C. )(pending before the Legislature as this bill).

    20. (New section) Notwithstanding the provisions of P.L.1973, c.337 (C.26:2J-1 et seq.) to the contrary, a certificate of authority to establish and operate a health maintenance organization in this State shall not be issued or continued on or after the effective date of this act unless the health maintenance organization meets the requirements of P.L. , c. (C. ) (pending before the Legislature as this bill).

    21. Section 24 of P.L.1973, c. 337 (C.26:2J-24) is amended to read as follows:

    24. a. The commissioner may, in lieu of suspension or revocation of a certificate of authority under section 18 hereof, levy an administrative penalty in an amount not less than [$100.00] $250 nor more than[$1,000.00] $10,000 for each day the health maintenance organization is in violation of P.L.1973, c.337 (C.26:2J-1 et seq.), if reasonable notice in writing is given of the intent to levy the penalty [and the health maintenance organization has a reasonable time within which to remedy the defect in its operations which gave rise to the penalty citation, and fails to do so within said time]¹and the health maintenance organization has 30 days, or such additional time as the commissioner shall determine to be reasonable, to remedy the defect in its operations which gave rise to the penalty citation, and fails to do so within the time allowed¹. Any such penalty may be recovered in a summary proceeding pursuant to [the Penalty Enforcement Law (N.J.S.2A:58-1 et seq.)] "the penalty enforcement law," N.J.S.2A:58-1 et seq.

    b. Any person who violates this act is a disorderly person and shall be prosecuted and punished pursuant to the "disorderly persons law" subtitle 12 of Title 2A of the New Jersey Statutes.

    c. (1) If the commissioner or the Commissioner of Insurance shall for any reason have cause to believe that any violation of this act has occurred or is threatened, the commissioner or Commissioner of Insurance may give notice to the health maintenance organization and to the representatives, or other persons who appear to be involved in such suspected violation, to arrange a conference with the alleged violators or their authorized representatives for the purpose of attempting to ascertain the facts relating to such suspected violation, and, in the event it appears that any violation has occurred or is threatened, to arrive at an adequate and effective means of correcting or preventing such violation.

    (2) Proceedings under this subsection c. shall not be governed by any formal procedural requirements, and may be conducted in such manner as the commissioner or the Commissioner of Insurance may deem appropriate under the circumstances.

    d. (1) The commissioner or the Commissioner of Insurance may issue an order directing a health maintenance organization or a representative of a health maintenance organization to cease and desist from engaging in any act or practice in violation of the provisions of this act.

    (2) Within 20 days after service of the order of cease and desist, the respondent may request a hearing on the question of whether acts or practices in violation of this act have occurred. Such hearings shall be conducted pursuant to the Administrative Procedure Act, P.L.1968, c. 410 (C. 52:14B-1 et seq.) and judicial review shall be available as provided therein.

    e. In the case of any violation of the provisions of this act, if the commissioner elects not to issue a cease and desist order, or in the event of noncompliance with a cease and desist order issued pursuant to subsection d. of this section, the commissioner may institute a proceeding to obtain injunctive relief, in accordance with the applicable Court Rules.

(cf: P.L.1973, c.337, s.24)

    22. This act shall take effect on the 180th day after enactment.

Designated the "Health Care Quality Act."