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Second Regular Session

Sixty-first General Assembly

LLS NO. 98­0064.01 EBD HOUSE BILL 98­1205

STATE OF COLORADO

BY REPRESENTATIVES Kreutz, Entz, Epps, Grossman, June and Pankey;

also SENATOR Arnold.

HEWI

A BILL FOR AN ACT

CONCERNING THE ESTABLISHMENT OF A DUTY OF ORDINARY CARE FOR HEALTH CARE COVERAGE CARRIERS PROVIDING COVERAGE THROUGH MANAGED CARE PLANS WITH RESPECT TO DECISIONS RELATING TO HEALTH CARE SERVICES.

Bill Summary

(Note: This summary applies to this bill as introduced and does not necessarily reflect any amendments that may be subsequently adopted.)

Makes legislative findings that managed care plans operated by carriers regulated by the division of insurance have a significant impact on the delivery of health care to covered persons; that citizens of this state that are covered persons pay significant sums in premiums to carriers providing coverage through such plans; that the conduct of carriers in the operation of such plans is of vital importance to the physical and mental health of Colorado residents; that such plans constitute an integral part of the business of insurance to carriers operating such plans and regulated under the Colorado insurance laws; and that this act is a law of general application that involves traditional areas of state regulation of the business of insurance and, as such, the standard of care specified in this act is consistent with the applicable provisions of the federal "McCarran­Ferguson Act", as amended, and the federal "Employee Retirement Income Security Act of 1974", as amended.

Establishes that carriers operating managed care plans have a duty to exercise ordinary care when making decisions with respect to health care services and are liable for damages for harm to a covered person proximately caused by the carrier's or managed care plan's failure to exercise ordinary care. Provides affirmative defenses to any action filed alleging the breach of this standard of care.

Specifies that the standard of care set forth in this act does not create any obligation on the part of a carrier providing coverage through a managed care plan to provide to a covered person treatment that is not covered by the plan. Specifies that the standard of care does not create any liability on the part of an employer or other entity that purchases coverage or assumes risk on behalf of its employees.

Prohibits carriers entering into contracts with health care providers from including in such contracts an indemnification or hold harmless clause for the acts or conduct of the carrier or managed care plan and declares such clauses void as against public policy.

Requires notice to be given to a carrier at least 30 days prior to filing an action alleging breach of the standard of care specified in this act. Specifies that an action alleging breach of the standard of care specified in this act must be brought within 2 years after the date the action accrues as provided by law or within 3 years after the act or omission that gave rise to the action. Specifies that the damages clause of any pleading in any such action shall not recite any specific sum as alleged damages other than an allegation that the damages are in excess of any minimum dollar amount necessary to establish the jurisdiction of the court. Requires a carrier providing coverage through a managed care plan to report judgments and settlements to the division of insurance.

For purposes of the "Health Care Availability Act", adds carriers providing coverage through a managed care plan to the definition of "health care institution".

Be it enacted by the General Assembly of the State of Colorado:

SECTION 1.  Part 1 of article 16 of title 10, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SECTION to read:

10­16­113.5.  Civil liability of carriers providing coverage through managed care plans ­ duty of ordinary care with respect to health care services decisions ­ legislative declaration. (1) (a)  THE GENERAL ASSEMBLY HEREBY FINDS AND DETERMINES THAT:

(I)  MANAGED CARE PLANS, AS DEFINED IN SECTION 10­16­102 (26.5), OPERATED BY CARRIERS, AS DEFINED IN SECTION 10­16­102 (8), HAVE A SIGNIFICANT IMPACT ON THE DELIVERY OF HEALTH CARE SERVICES, AS DEFINED IN SECTION 10­16­102 (22), THAT HEALTH CARE PROFESSIONALS PROVIDE TO COVERED PERSONS, AS DEFINED IN SECTION 10­16­102 (13.5);

(II)  CITIZENS OF THIS STATE THAT ARE COVERED PERSONS PAY SIGNIFICANT SUMS IN PREMIUMS TO CARRIERS THAT PROVIDE COVERAGE THROUGH THE OPERATION OF MANAGED CARE PLANS;

(III)  THE CONDUCT OF CARRIERS IN THE OPERATION OF MANAGED CARE PLANS IS OF VITAL IMPORTANCE TO THE PHYSICAL AND MENTAL HEALTH OF RESIDENTS OF THIS STATE;

(IV)  THE CONDUCT OF CARRIERS IN THE OPERATION OF MANAGED CARE PLANS CONSTITUTES AN INTEGRAL PART OF THE BUSINESS OF INSURANCE OF CARRIERS OPERATING SUCH PLANS AND IS SUBJECT TO REGULATION UNDER THIS TITLE AS PART OF THE REGULATION OF THE BUSINESS OF INSURANCE; AND

(V)  THIS SECTION IS A LAW OF GENERAL APPLICATION THAT INVOLVES TRADITIONAL AREAS OF STATE REGULATION OF THE BUSINESS OF INSURANCE AND, AS SUCH, THE PROVISIONS OF THIS SECTION ARE CONSISTENT WITH THE APPLICABLE PROVISIONS OF THE FEDERAL "MCCARRAN­FERGUSON ACT", AS AMENDED, 15 U.S.C. SEC. 1011 ET SEQ. AND THE FEDERAL "EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974", AS AMENDED, INCLUDING BUT NOT LIMITED TO 42 U.S.C. SECS. 1144 AND 1191.

(b)  THE GENERAL ASSEMBLY, THEREFORE, DECLARES THAT THIS SECTION IS ENACTED TO PROMOTE THE PUBLIC WELFARE AS PART OF THIS STATE'S REGULATION OF THE BUSINESS OF INSURANCE IN ORDER TO PROVIDE COVERED PERSONS WITH A CIVIL RIGHT OF ACTION IF CARRIERS THAT OPERATE MANAGED CARE PLANS VIOLATE THE STANDARD OF CARE SET FORTH IN THIS SECTION.

(2)  AS USED IN THIS SECTION, "ORDINARY CARE" MEANS:

(a)  IN THE CASE OF A CARRIER PROVIDING COVERAGE THROUGH A MANAGED CARE PLAN, THAT DEGREE OF CARE THAT A CARRIER PROVIDING COVERAGE THROUGH A MANAGED CARE PLAN OF ORDINARY PRUDENCE WOULD USE UNDER THE SAME OR SIMILAR CIRCUMSTANCES;

(b)  IN THE CASE OF A PERSON WHO IS AN AGENT OF A CARRIER PROVIDING COVERAGE THROUGH A MANAGED CARE PLAN, THAT DEGREE OF CARE THAT AN AGENT OF A CARRIER PROVIDING COVERAGE THROUGH A MANAGED CARE PLAN WOULD USE UNDER THE SAME OR SIMILAR CIRCUMSTANCES.

(3)  A CARRIER PROVIDING COVERAGE THROUGH A MANAGED CARE PLAN HAS THE DUTY TO EXERCISE ORDINARY CARE WHEN MAKING DECISIONS WITH RESPECT TO HEALTH CARE SERVICES AND IS LIABLE FOR DAMAGES FOR HARM TO A COVERED PERSON PROXIMATELY CAUSED BY SUCH CARRIER'S OR MANAGED CARE PLAN'S FAILURE TO EXERCISE ORDINARY CARE.

(4)  A CARRIER PROVIDING COVERAGE THROUGH A MANAGED CARE PLAN SHALL BE LIABLE FOR DAMAGES FOR HARM TO A COVERED PERSON PROXIMATELY CAUSED BY THE HEALTH CARE SERVICES DECISIONS MADE BY THE CARRIER OR SUCH MANAGED CARE PLAN'S EMPLOYEES, AGENTS, OR REPRESENTATIVES WHO ARE ACTING ON BEHALF OF SUCH PLAN, AND OVER WHOM A CARRIER OPERATING SUCH PLAN HAS THE RIGHT TO EXERCISE INFLUENCE OR CONTROL, OR HAS ACTUALLY EXERCISED INFLUENCE OR CONTROL THAT RESULTS IN THE FAILURE TO EXERCISE ORDINARY CARE.

(5)  IT SHALL BE A DEFENSE TO ANY ACTION ASSERTED AGAINST A CARRIER THAT:

(a)  THE CARRIER, THE MANAGED CARE PLAN, OR ANY AGENT, EMPLOYEE, OR REPRESENTATIVE OF SUCH CARRIER OR PLAN FOR WHOSE CONDUCT SUCH CARRIER OR PLAN IS LIABLE UNDER SUBSECTION (4) OF THIS SECTION DID NOT CONTROL, INFLUENCE, OR PARTICIPATE IN THE HEALTH CARE SERVICES DECISION; AND

(b)  THE CARRIER OR MANAGED CARE PLAN DID NOT DENY OR DELAY PAYMENT FOR ANY TREATMENT PRESCRIBED OR RECOMMENDED BY A PROVIDER TO THE COVERED PERSON.

(6)  THE STANDARDS IN SUBSECTIONS (3) AND (4) OF THIS SECTION CREATE NO OBLIGATION ON THE PART OF A CARRIER PROVIDING COVERAGE THROUGH A MANAGED CARE PLAN TO PROVIDE TO A COVERED PERSON TREATMENT THAT IS NOT COVERED BY THE PLAN.

(7)  THIS SECTION DOES NOT CREATE ANY LIABILITY ON THE PART OF AN EMPLOYER OR OTHER ENTITY THAT PURCHASES COVERAGE OR ASSUMES RISK ON BEHALF OF ITS EMPLOYEES.

(8)  A CARRIER PROVIDING COVERAGE THROUGH A MANAGED CARE PLAN MAY NOT ENTER INTO A CONTRACT WITH A HEALTH CARE PROVIDER THAT INCLUDES AN INDEMNIFICATION OR HOLD HARMLESS CLAUSE FOR THE ACTS OR CONDUCT OF THE CARRIER OR MANAGED CARE PLAN. ANY SUCH INDEMNIFICATION OR HOLD HARMLESS CLAUSE SHALL BE VOID AS AGAINST THE PUBLIC POLICY OF COLORADO.

(9)  NOTWITHSTANDING THE PROVISIONS OF SECTION 10­16­421 OR ANY OTHER PROVISION OF LAW TO THE CONTRARY, NO LAW THAT PROHIBITS A CARRIER PROVIDING COVERAGE THROUGH A MANAGED CARE PLAN FROM PRACTICING MEDICINE OR BEING LICENSED TO PRACTICE MEDICINE MAY BE ASSERTED AS A DEFENSE BY SUCH CARRIER IN ANY ACTION BROUGHT AGAINST IT PURSUANT TO THIS SECTION.

(10)  IN AN ACTION AGAINST A CARRIER PROVIDING COVERAGE THROUGH A MANAGED CARE PLAN UNDER THIS SECTION, A FINDING THAT A HEALTH CARE PROVIDER IS AN EMPLOYEE, AGENT, OR REPRESENTATIVE OF SUCH CARRIER OR MANAGED CARE PLAN SHALL NOT BE BASED SOLELY ON PROOF THAT SUCH PERSON'S NAME APPEARS IN A LISTING OF APPROVED HEALTH CARE PROVIDERS MADE AVAILABLE TO COVERED PERSONS UNDER SUCH PLAN.

(11)  A COVERED PERSON WHO FILES AN ACTION PURSUANT TO THIS SECTION SHALL COMPLY WITH THE REQUIREMENTS OF PART 6 OF ARTICLE 20 OF TITLE 13, C.R.S.

(12)  A PERSON MAY NOT MAINTAIN A CAUSE OF ACTION PURSUANT TO THIS SECTION AGAINST A CARRIER PROVIDING COVERAGE THROUGH A MANAGED CARE PLAN UNLESS SUCH PERSON BEFORE INSTITUTING THE ACTION GIVES WRITTEN NOTICE OF THE CLAIM. SUCH NOTICE SHALL BE DELIVERED OR MAILED TO THE CARRIER PROVIDING COVERAGE THROUGH A MANAGED CARE PLAN NOT LATER THAN THE THIRTIETH DAY BEFORE THE DATE THE CLAIM IS FILED.

(13)  NO ACTION ALLEGING A VIOLATION OF THE PROVISIONS OF THIS SECTION SHALL BE MAINTAINED UNLESS SUCH ACTION IS INSTITUTED WITHIN TWO YEARS AFTER THE DATE THAT SUCH ACTION ACCRUES PURSUANT TO SECTION 13­80­108 (1), C.R.S., BUT IN NO EVENT SHALL AN ACTION BE BROUGHT MORE THAN THREE YEARS AFTER THE ACT OR OMISSION THAT GAVE RISE TO THE ACTION.

(14)  IN ANY ACTION ALLEGING A VIOLATION OF THE PROVISIONS OF THIS SECTION, THE AD DAMNUM CLAUSE OR PRAYER FOR DAMAGES IN ANY PLEADING SHALL NOT RECITE ANY SUM AS ALLEGED DAMAGES OTHER THAN AN ALLEGATION THAT DAMAGES ARE IN EXCESS OF ANY MINIMUM DOLLAR AMOUNT NECESSARY TO ESTABLISH THE JURISDICTION OF THE COURT.

(15)  ANY FINAL JUDGMENT, SETTLEMENT, OR ARBITRATION AWARD UNDER THIS SECTION AGAINST ANY CARRIER AS DEFINED IN SECTION 10­16­102 (8), PROVIDING COVERAGE THROUGH A MANAGED CARE PLAN AS DEFINED IN SECTION 10­16­102 (26.5), WHEN MAKING DECISIONS WITH RESPECT TO HEALTH CARE SERVICES, AS DEFINED IN SECTION 10­16­102 (22), ENTERED UNDER THIS SECTION SHALL BE REPORTED WITHIN FOURTEEN DAYS BY SUCH CARRIER TO THE DIVISION OF INSURANCE FOR REVIEW, INVESTIGATION, AND, WHERE APPROPRIATE, DISCIPLINARY OR OTHER ACTION. ANY CARRIER THAT KNOWINGLY FAILS TO REPORT AS REQUIRED BY THIS SUBSECTION SHALL BE SUBJECT TO A CIVIL PENALTY OF NOT MORE THAN TWO THOUSAND FIVE HUNDRED DOLLARS. SUCH PENALTY SHALL BE DETERMINED AND COLLECTED BY THE DISTRICT COURT IN THE CITY AND COUNTY OF DENVER. ALL PENALTIES COLLECTED PURSUANT TO THIS SECTION SHALL BE TRANSMITTED TO THE STATE TREASURER, WHO SHALL CREDIT THE SAME TO THE GENERAL FUND.

SECTION 2.  13­64­202 (3), Colorado Revised Statutes, is amended to read:

13­64­202.  Definitions. As used in this part 2, unless the context otherwise requires:

(3)  "Health care institution" means any licensed or certified hospital, health care facility, dispensary, or other institution for the treatment or care of the sick or injured. EXCEPT FOR THE PURPOSES OF SECTION 13­64­301, "HEALTH CARE INSTITUTION" INCLUDES A CARRIER, AS DEFINED IN SECTION 10­16­102 (8), C.R.S., PROVIDING COVERAGE THROUGH A MANAGED CARE PLAN, AS DEFINED IN SECTION 10­16­102 (26.5), C.R.S., WHEN MAKING DECISIONS WITH RESPECT TO HEALTH CARE SERVICES AS DEFINED IN SECTION 10­16­102 (22), C.R.S.

SECTION 3.  Effective date ­ applicability. This act shall take effect July 1, 1998, and shall apply to acts or omissions occurring on or after said date.

SECTION 4.  Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.