SENATE BILL No. 451

May 3, 2001, Introduced by Senators SCHUETTE, EMERSON, GOUGEON, NORTH,

PETERS, GARCIA, MC MANUS, DE BEAUSSAERT, GOSCHKA, BENNETT,

STILLE, SCOTT, JAYE, BYRUM, SIKKEMA, BULLARD, MC COTTER, HAMMERSTROM, VAN REGENMORTER and SCHWARZ and referred to the

Committee on Health Policy.

A bill to amend 1956 PA 218, entitled

"The insurance code of 1956,"

by amending section 2006 (MCL 500.2006).

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

1 Sec. 2006. (1) A person must pay on a timely basis to its

2 insured, an individual or entity directly entitled to benefits

3 under its insured's contract of insurance, or a third party tort

4 claimant the benefits provided under the terms of its policy, or,

5 in the alternative, the person must pay to its insured, an indi-

6 vidual or entity directly entitled to benefits under its

7 insured's contract of insurance, or a third party tort claimant

8 12% interest, as provided in subsection (4), on claims not paid

9 on a timely basis. Failure to pay claims on a timely basis or to

10 pay interest on claims as provided in subsection (4) is an unfair

11 trade practice unless the claim is reasonably in dispute.

01636'01 * DKH

2

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

9 which THAT 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

13 deemed to be CONSIDERED 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 be deemed to be CONSIDERED paid on a timely basis if

17 paid within 60 days after receipt of the proof of loss by the

18 insurer. Where IF the proof of loss provided by the claimant

19 contains facts which THAT 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 be deemed to be CONSIDERED 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

01636'01 *

3

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) When IF 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. Where IF 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, and the insurer has refused payment in bad faith ,

16 such AND THE bad faith having been WAS 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, interest shall IS

24 not be due. 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.

01636'01 *

4

1 (5) Where IF a person contracts to provide benefits and

2 reinsures all or a portion of the risk, the person contracting to

3 provide benefits shall be IS 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 of IF THERE IS any specific inconsistency

9 between this section and the provisions of Act No. 294 of the

10 Public Acts of 1972, as amended, being sections 500.3101 to

11 500.3177 of the Compiled Laws of 1970 or of the provisions of Act

12 No. 317 of the Public Acts of 1969, as amended, being sections

13 418.101 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

16 shall DO not apply.

17 (7) SUBSECTIONS (1) TO (6) DO NOT APPLY AND SUBSECTIONS (8)

18 TO (15) DO APPLY TO HEALTH PLANS WHEN PAYING CLAIMS TO HEALTH

19 PROVIDERS THAT DO NOT ARISE OUT OF SECTIONS 3101 TO 3177 OR THE

20 WORKER'S DISABILITY COMPENSATION ACT OF 1969, 1969 PA 317,

21 MCL 418.101 TO 418.941.

22 (8) A HEALTH PLAN SHALL USE THE FOLLOWING TIMELY PROCESSING

23 AND PAYMENT PROCEDURES WHEN PAYING CLAIMS TO HEALTH PROVIDERS:

24 (A) A CLEAN CLAIM SHALL BE PAID WITHIN 45 DAYS AFTER RECEIPT

25 OF THE CLAIM BY THE HEALTH PLAN. A CLEAN CLAIM THAT IS NOT PAID

26 WITHIN 45 DAYS SHALL BEAR SIMPLE INTEREST AT A RATE OF 12% PER

27 ANNUM.

01636'01 *

5

1 (B) A HEALTH PLAN SHALL STATE IN WRITING TO THE HEALTH

2 PROVIDER ANY DEFECT IN THE CLAIM WITHIN 15 DAYS AFTER RECEIPT OF

3 THE CLAIM BY THE HEALTH PLAN.

4 (C) A HEALTH PROVIDER SHALL HAVE 30 DAYS AFTER RECEIPT OF A

5 NOTICE THAT A CLAIM OR A PORTION OF A CLAIM IS DEFECTIVE WITHIN

6 WHICH TO CORRECT THE DEFECT. THE HEALTH PLAN SHALL PAY THE CLAIM

7 WITHIN 30 DAYS AFTER THE DEFECT IS CORRECTED.

8 (D) A HEALTH PLAN SHALL NOTIFY THE HEALTH PROVIDER OF THE

9 DEFECT, IF A CLAIM, OR A PORTION OF A CLAIM, IS RETURNED FROM A

10 HEALTH PROVIDER UNDER SUBDIVISION (C) AND REMAINS DEFECTIVE FOR

11 THE ORIGINAL REASON OR A NEW REASON.

12 (9) A HEALTH PLAN SHALL REPORT TO THE COMMISSIONER THE

13 NUMBER OF CLAIMS THAT HAVE NOT BEEN PAID WITHIN THE TIME LIMITS

14 PRESCRIBED IN SUBSECTION (8). THE REPORT IS DUE ON JANUARY 1,

15 APRIL 1, JULY 1, AND OCTOBER 1 OF EACH YEAR. HOWEVER, A REPORT

16 IS NOT DUE DURING THE 6-MONTH PERIOD FOLLOWING THE EFFECTIVE DATE

17 OF THE AMENDATORY ACT THAT ADDED THIS SUBSECTION.

18 (10) IF A HEALTH PLAN DETERMINES THAT 1 OR MORE SERVICES

19 LISTED ON A CLAIM ARE PAYABLE, THE HEALTH PLAN SHALL PAY FOR

20 THOSE SERVICES AND SHALL NOT DENY THE ENTIRE CLAIM BECAUSE 1 OR

21 MORE OTHER SERVICES LISTED ON THE CLAIM ARE DEFECTIVE.

22 (11) IF, AFTER OPPORTUNITY FOR A HEARING HELD PURSUANT TO

23 THE ADMINISTRATIVE PROCEDURES ACT OF 1969, 1969 PA 306,

24 MCL 24.201 TO 24.328, THE COMMISSIONER DETERMINES THAT A HEALTH

25 PLAN HAS ENGAGED IN A PATTERN OF VIOLATING SUBSECTION (8), THE

26 COMMISSIONER SHALL REDUCE HIS OR HER FINDINGS AND DECISION TO

27 WRITING, SHALL ISSUE AND CAUSE TO BE SERVED UPON THE HEALTH PLAN

01636'01 *

6

1 A COPY OF THE FINDINGS AND AN ORDER REQUIRING THE HEALTH PLAN TO

2 CEASE AND DESIST FROM VIOLATING THIS SECTION, AND SHALL ORDER

3 PAYMENT OF NOT MORE THAN $5,000.00 FOR EACH VIOLATION, BUT NOT TO

4 EXCEED $50,000.00 IN THE AGGREGATE FOR MULTIPLE VIOLATIONS. IN

5 ADDITION, THE COMMISSIONER MAY ORDER THE SUSPENSION OR REVOCATION

6 OF THE HEALTH PLAN'S CERTIFICATE OF AUTHORITY IF THE HEALTH PLAN

7 KNOWINGLY AND PERSISTENTLY VIOLATED THIS SECTION.

8 (12) A HEALTH PROVIDER MAY BRING A CIVIL ACTION AGAINST A

9 HEALTH PLAN TO RECOVER THE CLAIM PAYMENT AMOUNT AND INTEREST PAY-

10 ABLE UNDER SUBSECTION (8), TOGETHER WITH ACTUAL ATTORNEY FEES AND

11 LITIGATION EXPENSES AND COSTS. THIS SUBSECTION DOES NOT ABROGATE

12 OR IMPAIR ANY OTHER LEGAL OR EQUITABLE ACTION, CLAIM, OR REMEDY

13 THAT A HEALTH PROVIDER MAY HAVE.

14 (13) A HEALTH PROVIDER WHOSE MEMBERSHIP ON ANY PROVIDER

15 PANEL IS TERMINATED, IN WHOLE OR IN PART, SHALL BE GIVEN A WRIT-

16 TEN EXPLANATION OF ALL REASONS FOR THE TERMINATION. THE PERSON

17 WHO MAINTAINS THE PANEL SHALL FURNISH THE EXPLANATION TO THE

18 HEALTH PROVIDER WHEN THE HEALTH PROVIDER IS GIVEN NOTICE OF

19 TERMINATION.

20 (14) A PERSON SHALL NOT TERMINATE THE PARTICIPATION OF A

21 HEALTH PROVIDER IN ANY PROVIDER PANEL OR OTHERWISE DISCRIMINATE

22 AGAINST A HEALTH PROVIDER BECAUSE THE HEALTH PROVIDER CLAIMS THAT

23 A PERSON HAS VIOLATED SUBSECTION (8), (9), (10), OR (13). A

24 HEALTH PROVIDER THAT ALLEGES A VIOLATION OF THIS SUBSECTION MAY

25 BRING A CIVIL ACTION FOR APPROPRIATE INJUNCTIVE RELIEF, DAMAGES,

26 OR BOTH, TOGETHER WITH ACTUAL ATTORNEY FEES AND LITIGATION

27 EXPENSES AND COSTS.

01636'01 *

7

1 (15) AS USED IN SUBSECTIONS (7) TO (14):

2 (A) "CLEAN CLAIM" MEANS A CLAIM THAT, AT A MINIMUM, SATIS-

3 FIES ALL OF THE FOLLOWING:

4 (i) IDENTIFIES THE HEALTH PROVIDER THAT PROVIDED TREATMENT

5 OR SERVICE, INCLUDING A MATCHING IDENTIFYING NUMBER.

6 (ii) IDENTIFIES THE PATIENT AND HEALTH PLAN SUBSCRIBER.

7 (iii) LISTS THE DATE AND PLACE OF SERVICE.

8 (iv) IS FOR COVERED SERVICES FOR AN ELIGIBLE INDIVIDUAL.

9 (v) IF REASONABLY REQUIRED BY THE HEALTH PLAN, SUBSTANTIATES

10 THE MEDICAL NECESSITY AND APPROPRIATENESS OF THE CARE OR SERVICE

11 PROVIDED.

12 (B) "HEALTH PLAN" MEANS ALL OF THE FOLLOWING:

13 (i) AN INSURER PROVIDING BENEFITS UNDER AN EXPENSE-INCURRED

14 HOSPITAL, MEDICAL, SURGICAL, VISION, OR DENTAL POLICY OR CERTIFI-

15 CATE, INCLUDING ANY POLICY OR CERTIFICATE THAT PROVIDES COVERAGE

16 FOR SPECIFIC DISEASES OR ACCIDENTS ONLY, OR ANY HOSPITAL INDEMNI-

17 TY, MEDICARE SUPPLEMENT, LONG-TERM CARE, DISABILITY INCOME, OR

18 1-TIME LIMITED DURATION POLICY OR CERTIFICATE.

19 (ii) A MEWA REGULATED UNDER CHAPTER 70 THAT PROVIDES HOSPI-

20 TAL, MEDICAL, SURGICAL, VISION, DENTAL, AND SICK CARE BENEFITS.

21 (iii) A HEALTH MAINTENANCE ORGANIZATION LICENSED OR ISSUED A

22 CERTIFICATE OF AUTHORITY IN THIS STATE.

23 (iv) A HEALTH CARE CORPORATION FOR BENEFITS PROVIDED UNDER A

24 CERTIFICATE ISSUED UNDER THE NONPROFIT HEALTH CARE CORPORATION

25 REFORM ACT, 1980 PA 350, MCL 550.1101 TO 550.1704.

01636'01 *

8

1 (C) "HEALTH PROVIDER" MEANS A HEALTH PROFESSIONAL, A HEALTH

2 FACILITY, OR ANY ENTITY CONSISTING OF HEALTH PROFESSIONALS OR

3 HEALTH FACILITIES. HEALTH PROVIDER DOES NOT INCLUDE A PHARMACY.

4 Enacting section 1. This amendatory act takes effect on

5 January 1, 2002 and applies to all health care claims submitted

6 for payment on and after January 1, 2002.

01636'01 * Final page. DKH