SENATE, No. 945
STATE OF NEW JERSEY
INTRODUCED MARCH 14, 1996
By Senator SINGER
An Act providing for the certification of managed care health benefits plans, supplementing Title 26 of the Revised Statutes and amending P.L.1973, c.337.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. (New section) This act shall be known and may be cited as the "Patient Protection Act."
2. (New section) The Legislature finds and declares that:
a. Because managed care health benefits plans use techniques that include decisions regarding health benefits coverage and the appropriateness of health care services, it is a vital function of State government to protect patients from unfair managed care practices.
b. Some insurance companies and other managed care organizations are discontinuing health care providers from their networks after their names have been used to attract new plan members, making decisions to refuse or terminate health care services and other decisions that affect patient health, and restricting patients' options regarding their choice of health care provider.
c. It is essential to ensure fairness in managed care plans and to provide a mechanism for delineating necessary protections for both providers and patients; and it is, therefore, in the public interest to require the establishment of standards for the certification of managed care plans which will prevent the indirect "redlining" of certain patients by discontinuing providers who treat those patients and ensure provider fairness, utilization review safeguards, and health benefits coverage options for all covered persons.
3. (New section) As used in 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 managed care entity is obligated to pay benefits pursuant to the managed care plan.
"Covered service" means a health care service provided to a covered person under a managed care plan for which the managed care entity is obligated to pay benefits.
"Department" means the Department of Health.
"Emergency services" means health care services provided after the sudden onset of a medical condition that manifests itself by symptoms of sufficient severity, including severe pain, that the absence of immediate medical attention could reasonably be expected by a prudent layperson, who possesses an average knowledge of health and medicine, to result in: placing that person's health in serious jeopardy, serious impairment to bodily functions, or serious dysfunction of any bodily organ or part.
"Health benefits plan" means a policy, contract or other agreement delivered or issued for delivery in this State by a carrier.
"Health care professional" means a health care professional licensed pursuant to Title 45 of the Revised Statutes.
"Health care provider" means a health care facility as defined in section 2 of P.L.1971, c.136 (C.26:2H-2) or a health care professional or other provider recognized under State law.
"Health care service" means a service that is provided by a health care provider, including admitting a patient to a health care facility, and that is involved in or incident to the furnishing to a person of preventive, diagnostic, therapeutic, or rehabilitative care for the purpose of ensuring the restoration, protection, maintenance, and support of physical, mental, or emotional health.
"Managed care entity" means a carrier that operates a managed care plan.
"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. Managed care includes, but is not limited to, a health maintenance organization or HMO, a preferred provider organization or PPO, an exclusive provider organization or EPO, a point-of-service plan or POS, or any other similar health benefits delivery system, whether issued by or through a carrier.
"Participating provider" means a health care provider that has entered into an agreement with a managed care entity to provide health care services to a covered person.
"Qualified managed care plan" means a managed care plan certified by the commissioner pursuant to this act.
"Utilization review program" 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.
4. (New section) a. Except as provided in section 12 of this act, beginning on the 180th day after the effective date of this act, a managed care entity shall not operate or offer a managed care plan in this State which does not meet the requirements for certification established by the commissioner in accordance with the provisions of this act.
b. An application for a managed care plan certificate shall be submitted on such a form, and in such a manner, as the commissioner requires, shall be signed under oath by the chief executive officer of the managed care entity or by a legal representative of the managed care entity, and shall include the following:
(1) The name, address, telephone number, and normal business hours of the managed care entity;
(2) The name, address, and telephone number of a person who is employed by, or otherwise represents, the managed care entity and who is available to answer questions concerning the application which may be posed by Department of Health staff;
(3) The proposed plan of operation for the managed care plan, including the mechanism by which the plan will provide or arrange for the provision of health care services; and
(4) Such other information as the commissioner may require to ensure that the managed care entity can and will comply with the requirements for certification.
If there is a material change in any of the information included in the application subsequent to its initial submission, including a change subsequent to the issuance or renewal of the certificate, the managed care entity shall inform the commissioner of the change on such a form, and in such a manner, as the commissioner requires.
c. The commissioner shall issue a managed care plan certificate to a managed care entity if, in the determination of the commissioner, the application demonstrates that:
(1) the proposed managed care plan will provide health care services in a manner to assure adequate availability and accessibility of participating providers and to enhance availability, accessibility and continuity of health care services, including emergency services;
(2) the proposed managed care plan provides a continuous quality of health care assurance and improvement program, a utilization review program which meets standards adopted by the commissioner, and a complaint resolution mechanism to provide reasonable procedures for the resolution of complaints by participating providers and covered persons;
(3) The managed care entity has established a mechanism to ensure that covered persons are provided an opportunity to participate in matters of policy and operation with respect to the managed care plan through an advisory panel, advisory referenda on major policy decisions, or by other means;
(4) the managed care entity is financially sound and may reasonably be expected to meet its obligations to prospective and actual covered persons, as evidenced by its compliance with financial reserve requirements to be established by the commissioner in consultation with the Commissioner of Insurance;
(5) the managed care entity has a procedure to establish and maintain a uniform system of cost accounting approved by the commissioner and a uniform system of reports and audits meeting the requirements of the commissioner; and
(6) the managed care entity has adopted procedures to ensure compliance with all State and federal laws governing the confidentiality of its records with respect to covered persons and participating providers.
d. Upon receipt of an application for a managed care plan certificate, the commissioner shall transmit a copy thereof to the Commissioner of Insurance, whose approval shall be required to the extent that the proposed managed care plan involves the doing of an insurance business or a contract with an insurance company or a hospital service, medical service or health service corporation.
e. If an application is rejected by the commissioner, the commissioner shall specify in what respect it fails to comply with the requirements for certification and, if applicable, the requirements of the Commissioner of Insurance.
f. A managed care plan certificate issued pursuant to subsection a. of this section shall be valid for three years from the date of issuance by the commissioner, and shall be renewed thereafter, upon payment of the renewal fee by the managed care entity, if the managed care entity meets such standards for recertification as the commissioner may adopt.
g. The commissioner shall establish uniform application and renewal fees for the certificate, the amount of which shall be no greater than is reasonably necessary to enable the commissioner to carry out the provisions of this act.
5. (New section) a. A managed care entity shall notify a prospective covered person in writing as to the terms and conditions of its qualified managed care plan, and shall notify a covered person in writing of any changes in those terms and conditions, on a form and in a manner to be prescribed by the commissioner. The notice shall be in a uniform format applicable to all qualified managed care plans and written in easily understandable language which is consistent with standards for health insurance coverage offered as a supplement to the federal Medicare program established pursuant to section 1801 of the federal Social Security Act (42 U.S.C. §1395 et seq.).
b. The notice required pursuant to subsection a. of this section shall include, but need not be limited to, a description of:
(1) treatment policies, practice standards and restrictions on covered services;
(2) prior authorization and any other review requirements with respect to covered services, as well as the covered person's right to appeal a utilization review action taken by the managed care plan's utilization review program;
(3) contractual arrangements with participating providers which limit a covered person's options with respect to the receipt of covered services, as well as a list of the names and professional office addresses of participating providers by provider category;
(4) contractual arrangements with participating providers governing reimbursement by the managed care entity which would provide an incentive for a provider to limit the amount of care provided to a covered person;
(5) the value of health care benefits provided by the managed care plan as a percentage of the value of its premiums based upon the plan's preceding year of operation; or, in the case of a new managed care plan, the present value of expected health care benefits provided by the plan as a percentage of the present value of expected premiums;
(6) financial responsibility requirements for covered persons for covered services provided by a participating provider and for those provided by a nonparticipating provider;
(7) the number of covered persons enrolled during the preceding year, the number at the end of that year and the number whose enrollments were terminated during that year; and
(8) the number of providers who contracted with the managed care plan during the preceding year, the number of participating providers at the end of that year and the number who were terminated during that year.
c. A managed care entity shall also make the information provided pursuant to paragraph (5) and any changes in the information provided pursuant to paragraphs (1) through (3) of subsection b. of this section available to each of its covered persons on an annual basis. The information provided pursuant to this subsection shall be transmitted to each covered person no later than 45 days preceding the commencement of the person's annual open enrollment period.
6. (New section) a. A qualified managed care plan shall include a utilization review program overseen by a medical director responsible for all decisions made by the program, who shall be a physician licensed by the State Board of Medical Examiners to practice medicine and surgery.
b. The criteria and procedures used by the utilization review program shall be developed in consultation with participating providers, shall be based upon nationally recognized standards, and shall be disseminated to each participating provider, and to a covered person upon his request.
c. The utilization review program shall respond to inquiries regarding, or requests for prior authorization for, nonemergency health care services from participating providers or covered persons within four business days, and shall be available on a 24-hour basis to respond to prior authorization requests for emergency services.
d. The utilization review program shall not take an adverse utilization review action unless: (1) the proposed adverse action is reviewed and approved by a health care professional who is competent and legally authorized to perform the health care service that is the subject of the adverse action; and (2) the utilization review program establishes a procedure whereby any covered person subjected to an adverse utilization review action may appeal that adverse action.
e. The utilization review program shall not affirm an adverse utilization review action which is appealed by a covered person unless the appellate review of the action is conducted by a health care professional who was not involved in approving the adverse action, is competent to provide the health care service that is the subject of the adverse action, and is a member of the same health care profession as, or of a health care profession that requires the same level of education as, or a higher level of education than, the covered person's provider of record.
f. The utilization review program shall not retrospectively deny coverage for health care services provided to a covered person when prior approval has been obtained from the program for those services, unless the approval was based upon fraudulent information submitted by the covered person or the participating provider.
g. No prior authorization shall be required for emergency services rendered outside of the geographic service area of a managed care plan.
h. A medical screening examination of a covered person upon arrival in a hospital, as required under federal law and as specified by regulation of the department, which is necessary to determine a covered person’s medical need for emergency services, shall be a covered service to the same extent as any emergency service.
7. (New section) a. A managed care entity shall provide an opportunity for any health care provider doing business within the managed care entity's geographic service area to apply to be a participating provider in its plan if :
(1) the provider is willing to meet the terms and conditions of the plan:
(2) the provider meets the provider credentialing requirements of the plan; and
(3) the managed care entity has determined that there is a need for the plan to include the health care services provided by the provider, in accordance with standards to be developed by the commissioner.
The managed care entity shall make available to a provider applicant upon request a copy of the criteria used by the entity to accept or deny his application to be a participating provider.
b. A managed care entity shall not deny an application to enter into a contract with a prospective participating provider, or terminate a contract with a participating provider, unless the entity provides the provider with written notice of the reasons for denial or termination, as applicable.
c. The managed care entity shall establish a mechanism to ensure that participating providers are able to participate in the development of policies and procedures governing health care services delivery by a qualified managed care plan, including, but not limited to: provider credentialing requirements, coverage of new technology and procedures, quality assurance and improvement, and health care management procedures.
8. (New section) a. A managed care entity shall provide each covered person in its managed care plan with the opportunity, at the time of enrollment and during a one-month period in each subsequent year, to enroll in a point-of-service plan option, subject to the provisions of subsection b. of this section. The managed care entity shall provide written notice of the point-of-service plan option to each covered person upon enrollment and annually thereafter, and shall include in that notice a detailed explanation of the financial costs to be incurred by a covered person who selects that option.
b. A covered person who enrolls in a point-of-service plan option may receive a covered service from a health care provider who is not a participating provider, but the covered person may be required to pay a higher annual premium which reflects the actuarial value of this expanded coverage, or an annual deductible plus a coinsurance charge which shall not exceed 20% of the cost of the service provided, or both.
9. (New section) Notwithstanding the provisions of any law to the contrary, if a managed care plan terminates its contract with a participating provider at the plan's initiative, a covered person who has selected that provider to receive covered services may continue to receive covered services from that provider, at the covered person's option, until the end of the covered person's period of enrollment, or for up to one year of treatment, whichever date is later, in the case of post-operative follow-up care, oncological treatment and psychiatric treatment, or, in the case of obstetrical care, through the duration of a pregnancy, including childbirth; and, during that period, those health care services shall be covered by the managed care plan under the same terms and conditions as they were covered while the provider was participating in the managed care plan.
10. (New section) A managed care entity which uses any materially misleading or deceptive advertising copy, advertising practice, or plan of solicitation in connection with the solicitation of enrollment in a qualified managed care plan is subject to a denial, suspension or revocation of its managed care plan certificate, and shall be liable to a civil penalty of not less than $250 and not greater than $10,000 for each day that the managed care entity engages in this practice. 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.
11. (New section) The commissioner may deny, revoke or suspend a certificate issued pursuant to this act for a violation of the provisions of this act or the rules and regulations adopted pursuant thereto, after serving a notice on the managed care entity which sets forth the reasons for the commissioner's action. The commissioner shall provide for an appropriate and timely right of appeal for the managed care entity.
12. (New section) A managed care entity which violates a 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 that the entity is in violation of this act. 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.
13. (New section) A health maintenance organization which holds a certificate of authority pursuant to P.L.1973, c.337 (C.26:2J-1 et seq.) on the effective date of this act is exempted from the requirement of obtaining a managed care plan certificate pursuant to section 4 of this act but is subject to the provisions of sections 5 through 12 of this act.
14. (New section) Nothing in this act shall be construed as prohibiting a person from purchasing any health care service with that person's own funds, whether or not the service is covered under the person's health benefits plan, or an employer from providing coverage for benefits in addition to those included in the employer's health benefits plan.
15. Section 19 of P.L.1973, c.337 (C.26:2J-19) is amended to read as follows:
19. a. The commissioner may suspend or revoke any certificate of authority issued to a health maintenance organization under this act if he finds that any of the following conditions exist:
(1) The health maintenance organization is operating in a manner significantly contrary to that described in section 3[, hereof] of P.L.1973, c.337 (C.26:2J-3), unless amendments to such submissions have been filed with the commissioner;
(2) The health maintenance organization issues evidence of coverage which does not comply with the requirements of section 8 [hereof] of P.L.1973, c.337 (C.26:2J-8);
(3) the health maintenance organization does not provide or arrange for basic health care services;
(4) the commissioner finds that:
(a) the health maintenance organization does not meet the requirements of [section 4 a. (2), hereof] paragraph (2) of subsection a. of section 4 of P.L.1973, c.337 (C.26:2J-4); or
(b) the health maintenance organization is unable to fulfill its obligations to furnish health care services.
(5) the health maintenance organization is no longer financially responsible and may reasonably be expected to be unable to meet its obligations to enrollees or prospective enrollees;
(6) the health maintenance organization has failed to implement a mechanism affording the enrollees an opportunity to participate in matters of policy and operation under section 6 [, hereof] of P.L.1973, c.337 (C.26:2J-6);
(7) the health maintenance organization has failed to implement the complaint system required by section 12 [, hereof] of P.L.1973, c.337 (C.26:2J-12), in a manner to reasonably resolve valid complaints;
(8) the continued operation of the health maintenance organization would be hazardous to the health and safety of its enrollees;
(9) the health maintenance organization has otherwise failed to substantially comply with this act; [or]
(10) the health maintenance organization, or any person on its behalf, has advertised or merchandised its services in an untrue, misrepresentative, misleading, deceptive or unfair manner; or
(11) the health maintenance organization has failed to substantially comply with the applicable requirements of P.L. , c. (C............)(pending before the Legislature as this bill).
b. A certificate of authority shall be suspended or revoked only after compliance with the requirements of section 21[, hereof] of P.L.1973, c.337 (C.26:2J-21).
c. When the certificate of authority of a health maintenance organization is suspended, the health maintenance organization shall not, during the period of such suspension, enroll any additional enrollees except newborn children or other newly acquired dependents of existing enrollees, and shall not engage in any advertising or solicitation whatsoever.
d. When the certificate of authority of a health maintenance organization is revoked, such organization shall proceed, immediately following the effective date of the order of revocation, to dissolve its structure, and shall conduct no further business except as may be essential to the orderly conclusion of the affairs of such organization. It shall engage in no further advertising or solicitation whatsoever. The commissioner or where applicable the Commissioner of Insurance may, by written order, permit such further operation of the organization as he may find to be in the best interest of enrollees, to the end that enrollees will be afforded the greatest practical opportunity to obtain continuing health care coverage.
(cf: P.L.1973, c.337, s.19)
16. 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] of P.L.1973, c.337 (C.26:2H-18), 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. 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)
17. The commissioner, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), shall adopt rules and regulations to effectuate the purposes of this act.
18. This act shall take effect on the 180th day after the date of enactment, but the commissioner may take such anticipatory administrative action in advance as shall be necessary for the implementation of the act.
STATEMENT
This bill requires that managed care health benefits plans be certified by the Commissioner of Health in order to operate or provide health benefits in this State.
Under the bill, the commissioner is directed to issue a managed care plan certificate to a managed care entity which satisfies the commissioner in its application for certification that:
● the proposed managed care plan will provide health care services in a manner to assure adequate availability and accessibility of participating providers;
● the proposed plan provides a continuous quality of health care assurance and improvement program, a utilization review program which meets standards adopted by the commissioner, and a complaint resolution mechanism;
● the managed care entity has established a mechanism to ensure that covered persons are provided an opportunity to participate in matters of policy and operation with respect to a qualified managed care plan;
● the managed care entity is financially sound;
● the managed care entity has a procedure to establish and maintain a uniform system of cost accounting and a uniform system of reports and audits; and
● the managed care entity complies with State and federal laws governing the confidentiality of its records.
The bill requires a managed care entity to notify a prospective covered person in writing as to the terms and conditions of its qualified managed care plan, in easily understandable language, and to notify a covered person in writing of any changes in those terms and conditions. The notice shall include, but need not be limited to, a description of:
● treatment policies, practice standards and restrictions on covered services;
● prior authorization and any other review requirements with respect to covered services, including the covered person's right to appeal a utilization review action;
● contractual arrangements with participating providers which limit a covered person's options to receive covered services, as well as a list of the names and addresses of participating providers by provider category;
● contractual arrangements with participating providers governing reimbursement which would provide an incentive for a provider to limit the amount of care provided to a covered person;
● the value of health care benefits provided by the managed care plan as a percentage of the value of its premiums based on the plan's preceding year of operation;
● financial responsibility requirements for covered persons;
● the managed care entity's financial condition;
● the number of covered persons enrolled during the preceding year and the number whose enrollments were terminated during that year; and
● the number of providers who contracted with the managed care plan during the preceding year and the number who were terminated during that year.
The bill further requires, with respect to a utilization review program operated by a certified managed care plan, that:
● the program be overseen by a licensed physician;
● the criteria and procedures used by the program be developed in consultation with participating providers, be based upon nationally recognized standards, and be disseminated to each participating provider, and to a covered person upon his request;
● the program respond to inquiries regarding, or requests for prior authorization for, health care services from participating providers or covered persons within four business days, and be available on a 24-hour basis to respond to prior authorization requests for emergency services;
● the program not retrospectively deny coverage for health care services when prior approval has been obtained for those services unless the approval was based upon fraudulent information;
● no prior authorization be required for emergency services rendered outside a plan's geographic service, or for screening by a health care provider to determine a covered person’s medical need for emergency services, which shall be a covered service; and
● a medical screening examination upon arrival in a hospital which is necessary to determine a covered person’s medical need for emergency services be covered to the same extent as any emergency service.
In addition, the bill provides that:
● a managed care entity shall provide an opportunity for any health care provider doing business within the entity's geographic service area to apply to be a participating provider in its managed care plan if: the provider is willing to meet the terms and conditions of the plan and meets the provider credentialing requirements of the plan; and if the entity has determined that there is a need for the plan to include the health care services provided by the provider, in accordance with standards developed by the commissioner;
● a managed care entity shall not deny an application to enter into a contract with a prospective participating provider, or terminate a contract with a participating provider, unless the entity provides written notice of the reasons for denial or termination; and
● the managed care entity shall establish a mechanism to ensure that participating providers are able to participate in the development of policies and procedures governing health care services delivery.
The bill mandates that a managed care entity provide each covered person in its managed care plan with the opportunity to enroll in a point-of-service plan option.
The bill also provides that if a managed care plan terminates its contract with a participating provider at the plan's initiative, a covered person may continue to receive covered services from that provider until the end of the enrollment period, or for up to one year of treatment, whichever date is later, in the case of post-operative follow-up care, oncological treatment and psychiatric treatment, or, in the case of obstetrical care, through the duration of a pregnancy; and, during that period, those services shall be covered by the plan under the same terms and conditions as when the provider was participating in the plan.
The bill imposes a penalty for violations of the bill of between $250 and $10,000 for each day the violation continues and increases the penalties in the law governing health maintenance organizations, P.L.1973, c.337 (C.26:2J-1 et seq.), to these same amounts.
A health maintenance organization which holds a certificate of authority pursuant to P.L.1973, c.337 on the effective date of the bill is exempted from the requirement of obtaining a managed care certificate but is subject to the other provisions of the bill.
The bill takes effect on the 180th day after the date of enactment, and its certification requirement for managed care plans becomes operative on the 180th day after the effective date.
Designated the "Patient Protection Act."