Senate Bill No. 343
(By Senators Burdette, Mr. President and Blatnik)
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[Introduced February 14, 1994; referred to the Committee
on Health and Human Resources.]
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A BILL to amend chapter thirty-three of the code of West
Virginia, one thousand nine hundred thirty-one, as amended,
by adding thereto a new article, designated article thirty-
nine, relating to establishing a system of managed care and
utilization review for the delivery of behavioral health
services to consumers; making certain legislative findings;
limiting the scope to behavioral health services; defining
certain terms; creating the West Virginia managed care
review board; providing that the board assist the insurance
commissioner in developing rules relating to the operation,
powers and duties of managed care companies; prohibiting a
managed care company from conducting managed care activities
in this state unless the commissioner has granted the
managed care company a certificate of authority; authorizing
the commissioner to promulgate necessary rules; giving the
commissioner the authority to issue, deny, refuse to issue
and revoke certificates of authority to managed care
companies and to otherwise enforce the provisions of the
article; providing that the commissioner shall deny a
certificate of authority if the holder does not comply with
performance assurances; providing for notice, hearings and
review; requiring that a managed care company submit to the
commissioner a managed care plan; providing that managed
care companies make certain determinations regarding course
of treatment; granting authority to grant adverse decisions;
giving the office of consumer protection in the attorney
general's office authority to intervene in certain actions;
allowing the commissioner to establish reporting
requirements in order to evaluate the effectiveness of
managed care companies; providing criminal penalties for
violations; and establishing a managed care fund in the
state treasury.
Be it enacted by the Legislature of West Virginia:
That chapter thirty-three of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, be amended by
adding thereto a new article, designated article thirty-nine, to
read as follows:
ARTICLE 39. MANAGED CARE AND UTILIZATION REVIEW.
§33-39-1. Legislative findings.
The Legislature finds that:
(a) Consumers of behavioral health services in West Virginia
are at great risk of reduced accessibility due to escalating
costs of such services;
(b) There exists a need for the examination of a cost
effective means for delivery of services without compromising
quality, necessary treatment and confidentiality;
(c) Managed care activities carried out by entities
certified in accordance with this article can foster these goals;
(d) The provisions of this article serve to protect
consumers, business and providers by ensuring that managed care
entities are qualified to perform managed care activities and to
make informed decisions on the appropriateness of medical care
while maintaining client confidentiality and fair business
practices in accordance with state and federal laws.
§33-39-2. Scope.
The provisions of this article are limited to managed care
activities of behavioral health services only and do not apply to
any other health care services.
§33-39-3. Definitions.
The following words when used in this article have meanings
ascribed to them in this section, except in those instances where
the context clearly indicates a different meaning:
(a) "Adverse decision" means:
(1) A utilization review determination made by a managed
care company that a proposed or delivered behavioral health
service:
(A) Is or was not necessary, appropriate or efficient; and
(B) May result in noncoverage of the service.
(2) There is no adverse decision if the managed care companyand the behavioral health provider on behalf of the consumer
reach an agreement on the proposed or delivered services.
(b) "Behavioral health services" means any medical or
remedial services recommended by a physician or psychologist for
the purpose of reducing physical or mental disability and
restoration of a consumer to his or her best possible functional
level. These services are designed for all individuals with
conditions associated with mental illness, developmental
disabilities and substance abuse and/or drug dependency.
(c) "Board" means the managed care review board created to
develop rules regarding the development, implementation,
licensing and oversight of persons authorized by this article to
engage in managed care activities.
(d) "Certificate" means a certificate of authority granted
by the commissioner to a managed care company.
(e) "Commissioner" means the insurance commissioner of West
Virginia.
(f) "Consumer" means a recipient of behavioral health
services or a person or entity that renders payment on behalf of
a recipient of behavioral health services.
(g) "Managed care" means a system for reviewing the
appropriate and efficient allocation of behavioral health
resources and services given or proposed to be given to a
consumer or group of consumers. Managed care may include, but is
not limited to, preauthorization, utilization review and case
management.
(h) "Managed care company" means a person or entity
performing managed care and utilization review who is affiliated
with, under contract with, acting on behalf of or directly
employed by:
(1) Any resident or foreign corporation, partnership or
business company licensed to do business in this state; or
(2) A third party that provides or administers behavioral
health benefits or services to citizens of this state, including:
(A) A health maintenance organization issued a certificate
of authority in accordance with article twenty-five-a of this
chapter;
(B) A health insurer as defined in this chapter;
(C) A nonprofit hospital service corporation, medical
service corporation, health service corporation or health care
corporation authorized to offer behavioral health services in
this state in accordance with this chapter; or
(D) Any insurer, benefits or compensation program which
receives funds in whole or in part from state revenues, including
workers' compensation, medicaid, public employees insurance and
any other health services or benefits program administered by the
West Virginia department of health and human resources; or
(3) Third party administrators as defined in this section;
(4) Any nonresident or foreign managed care company
providing managed care activities for a minimum of one hundred
individuals located within this state; or
(5) Any other organization, person or entity deemed properand necessary by the commissioner.
(i) "Provider" means any agency, facility or individual
providing behavioral health services as defined in this article.
(k) "Secretary" means the secretary of the department of
health and human resources of West Virginia.
(l) "Third party administrator" means a person who directly
or indirectly solicits or effects coverage of, underwrites,
collects charges or premiums from, or adjusts or settles claims
on residents of this state, or residents of another state from
offices within this state, in connection with health insurance
coverage, except any of the following:
(1) An employer on behalf of its employees of one or more
subsidiaries or affiliated corporations of such employer;
(2) A union on behalf of its members;
(3) An agent or broker licensed to sell health insurance in
this state, whose activities are limited exclusively to the sale
of insurance;
(4) A person who adjusts or settles claims in the normal
course of that person's practice or employment as an attorney at
law and who does not collect charges or premiums in connection
with health insurance coverage;
(5) An adjuster licensed by this state whose activities are
limited to adjustments of claims;
(6) A person who acts solely as an administrator of one or
more bona fide employee benefit plans established by an employer
or an employee organization, or both, for which the insurancelaws of this state are preempted pursuant to the Employee Income
Security Act of 1974.
§33-39-4. Managed care review board; reimbursement.
(a) There is hereby created the West Virginia managed care
review board. The board shall consist of nine members appointed
by the governor, by and with the advice of the Senate, and the
commissioner, or his or her designee, who shall serve as an ex
officio, nonvoting member. Of the members appointed by the
governor, one member shall be a representative from the West
Virginia behavioral health providers association, one member
shall be a licensed psychiatrist, one member shall be a
representative from the West Virginia hospital association, one
member shall be a licensed psychologist, one member shall be a
licensed registered nurse with experience in the care of
behavioral health consumers, one member shall be a licensed
social worker, one member shall be a representative from a
managed care provider, and two members shall be lay persons who
are also consumers of behavioral health care services. The two
lay members shall be selected by the governor and the remaining
members shall be selected by the governor from a list of five
individual names submitted to the governor from each member's
respective association. The respective associations shall submit
the names of nominees to the governor within thirty days from the
effective date of this article, and the governor shall make all
appointments of the board within forty-five days from receipt of
such nominations. Of the original board members appointed, themember who is a social worker shall serve for one year, the one
member who is a registered nurse shall serve for two years, the
member who is a licensed psychiatrist shall serve for three
years, the member who is a representative of the West Virginia
hospital association shall serve for four years and the
representative from a managed care company shall serve for five
years. The remaining members shall serve for six years. All
subsequent appointments shall be for six years, except that in
the case of a vacancy, the appointee shall be appointed for the
remainder of the unexpired term. Any vacancy shall be filled by
appointment of the governor, by and with the advice of the
Senate, from the same group as was represented by the outgoing
members. All members of the board, unless sooner removed, shall
continue to serve until their respective terms expire and until
their successors are appointed and have qualified.
(b) No member of the board nor any member of his or her
immediate family may have, or have had, within the two years
preceding his or her appointment under this article, any
ownership interest in the provision of managed care services.
(c) The board shall meet once every quarter and each
appointed citizen board member shall serve without compensation
but shall be reimbursed for the cost of reasonable and necessary
expenses actually incurred in the performance of his or her
duties.
§33-39-5. Powers and duties of board.
The board shall:
(a) Assist the commissioner in developing rules relating to
the operation, powers and duties of managed care companies;
(b) Review such rules on an annual basis to assure that
managed care companies are carrying out the goals consistent with
this article. Upon review of such rules the board may advise the
commissioner as to any changes it deems appropriate;
(c) Meet and confer with providers to assure that the goals
of this article are being met; and
(d) Carry out any other powers and duties as prescribed for
it by the commissioner.
Nothing in this section gives the board the authority to
interfere with the discretion and judgment given to the
commissioner. The purpose of the board is to assist and enhance
the role of the commissioner in carrying out his or her mandate
and by acting as a means of communication between managed care
companies, providers, consumers and the commissioner.
§33-39-6. Certificate of authority.
(a) A managed care company may not conduct managed care
activities in this state unless the commissioner has granted the
managed care company a certificate of authority. The
commissioner shall issue a certificate to an applicant that has
met all the requirements stated herein and all applicable rules
promulgated in accordance with this article. A certificate issue
under this article is not transferable.
(b) Any person or entity performing managed care activities
in this state prior to the effective date of this article has oneyear from such effective date to conform to the requirements of
this article.
(c) The commissioner may refuse to issue a certificate of
authority to any person or entity who is in violation of this
section.
§33-39-7. Powers and duties of the insurance commissioner.
(a) In addition to all other duties and powers granted to
the commissioner in accordance with this chapter and all other
applicable state laws, the commissioner is hereby authorized,
after consultation with the board, to promulgate such rules as
are necessary to carry out the provisions of this article.
(b) The commissioner has the authority to issue, deny,
refuse to issue and revoke certificates of authority to managed
care companies and to otherwise enforce the provisions of this
article.
(c) The commissioner may establish reporting requirements in
order to carry out section sixteen of this article.
(d) The commissioner shall promulgate rules to provide the
standards for the imposition of an administrative penalty under
section seventeen of this article.
§33-39-8. Application for certificate; fees; designation.
No person or entity may engage in managed care activities
within this state unless such person or entity first obtains a
certificate of authority from the commissioner. A nonresident
person or entity providing managed care activities for a minimum
of one hundred persons located within the is considered to beproviding managed care services within the state and shall obtain
a certificate of authority and otherwise adhere to the provisions
of this article. An applicant for a certificate shall submit an
application to the commissioner and pay to the commissioner the
application fee established by rule in accordance with this
article. The application shall be accompanied by any supporting
documentation that the commissioner requires and must be signed
and verified by the applicant. All fees collected in accordance
with this article shall be designated to the insurance department
for the execution of this article. The commissioner may waive
such license fee in cases where hardship is substantiated.
§33-39-9. Denial; revocation.
(a) Denial. --
(1) The commissioner shall deny a certificate of authority
to any applicant if, upon review of the application, the
commissioner finds that the applicant proposing to conduct
managed care activities does not:
(A) Have available the services of a sufficient number of
registered nurses, medical records technicians or similarly
qualified persons supported and supervised by appropriate
physicians to carry out its managed care activities; and
(B) Meet any applicable rules the commissioner adopts under
this article relating to the qualifications of managed care
companies or the performance of managed care.
(2) The commissioner shall deny a certificate to any
applicant who does not provide assurances satisfactory to thecommissioner that:
(A) The procedures and policies of the managed care company
will protect the confidentiality of medical records in accordance
with applicable state and federal laws; and
(B) The managed care company will be accessible within this
state to consumers and providers five working days a week during
the hours of eight o'clock a.m. and eight o'clock p.m., eastern
standard time, and that at least one telephone line is designated
and made available on a twenty-four hour basis for emergency
proposes.
(b) Revocation. -- The commissioner may revoke a certificate
of authority if the holder does not comply with performance
assurances under this section, violates any provision of this
article, violates any rule adopted under any provision of this
article or is otherwise found to be transacting business in an
unlawful manner.
§33-39-10. Notice; hearings; review.
(a) Before denying or revoking a certificate of authority in
accordance with the previous section, the commissioner shall
provide the applicant or certificate holder with reasonable time
to supply additional information demonstrating compliance with
the requirements of this article and the opportunity to request
a hearing.
(b) If an applicant or certificate holder disagrees with a
finding or decision rendered by the commissioner, review of such
finding or decision may be held in accordance with sectionstwelve, thirteen and fourteen of article two of this chapter.
§33-39-11. Managed care plan.
In conjunction with the application and other supporting
documentation, the managed care company shall submit to the
commissioner:
(1) A managed care plan that includes:
(A) The specific criteria and standards to be used in
conducting managed care activities or proposed or delivered
services;
(B) The provisions by which consumers and providers may seek
reconsideration of adverse decisions by the managed care company
and the provisions by which consumers and providers will be
informed of such provisions;
(C) A quality assurance program which demonstrates to the
commissioner that the managed care company's activities do not
arbitrarily deny services to enrolled or eligible participants.
(2) The type, qualifications and credentials of the
personnel either employed or under contract to perform managed
care activities;
(3) The procedures and policies to ensure that a
representative of the managed care company is accessible within
this state to consumers and providers five days a week during the
hours of eight o'clock a.m. and eight o'clock p.m., eastern
standard time, and that a telephone line or telephone lines are
designated and made available for emergency use on a twenty-four
hour basis;
(4) The policies and procedures to ensure that all
applicable state and federal laws to protect the confidentiality
of individual medical records are followed;
(5) A copy of the materials designed to inform applicable
consumers and providers of the requirements of the managed care
plan;
(6) A list of the providers and third-party payors for which
the managed care company is performing managed care services in
this state;
(7) The policies and procedures to ensure that the managed
care company has a formal program for the orientation and
training of personnel either employed or under contract to
perform managed care activities;
(8) A list of behavioral health providers involved in
establishing the specific criteria and standards to be used in
conducting managed care activities; and
(9) Certification by the managed care company that the
criteria and standards to be used in conducting managed care
activities are:
(A) Objective;
(B) Clinically valid;
(C) Compatible with established principles of behavioral
health; and
(D) Flexible enough to allow deviations from norms when
justified on a case by case basis.
§33-39-12. Determinations by managed care companies.
(a) Nonemergency courses of treatment. -- Except as provided
in subsection (b) of this section, a managed care company shall:
(1) Make all initial determinations on whether to authorize
or certify a nonemergency course of treatment for a consumer
within two working days of receipt of the information necessary
to make the determination; and
(2) Promptly notify the attending provider and consumer of
the determination.
(b) Extended stays or additional behavioral health services.
-- A managed care company shall:
(1) Make all determinations on whether to authorize or
certify an extended stay in a health care facility or additional
behavioral health services within one working day of receipt of
the information necessary to make the determination; and
(2) Promptly notify the attending provider of the
determination.
(c) Reconsideration. -- If an initial determination is made
by the managed care company not to authorize or certify a course
of treatment, an extended stay in a health care facility, or
additional behavioral health services and the attending provider
believes the determination warrants an immediate reconsideration,
the managed care company shall provide the attending provider an
opportunity to seek a reconsideration of that determination by
telephone on an expedited basis not to exceed twenty-four hours
from the time the provider first sought the reconsideration.
(d) Emergency inpatient admissions. -- For emergencyinpatient admissions, a managed care company may not render an
adverse decision or deny coverage for medically necessary covered
services solely because the hospital did not notify the managed
care company of the emergency admission within twenty-four hours
or other prescribed period of time after that admission or
because the patient's medical condition prevented the hospital
from determining:
(1) The patient's coverage status;
(2) The managed care company's emergency admission
notification requirements.
(e) Managed care activities and utilization review shall not
be used to deny or limit access of consumers to medically
necessary emergency treatment.
§33-39-13. Adverse decisions and preauthorization.
(a) Adverse decisions. -- All adverse decisions shall be
made by a physician or psychiatrist or by a panel of other
appropriate behavioral health providers with at least one
physician or psychiatrist selected by the managed care company
who is:
(1)(A) Board certified or eligible in the same specialty as
the treatment under review; or
(B) Actively practicing, or has demonstrated expertise in
the specific area of behavioral health services or treatment
under review; and
(2) Not compensated by the managed care company in a manner
that provides a financial incentive directly or indirectly todeny or reduce coverage.
(b) Preauthorized or approved courses of treatment. -- If a
course of treatment has been preauthorized or approved for a
consumer, a managed care company may not revise or modify the
specific criteria or standards used in the managed care plan in
order to make an adverse decision regarding the services
delivered to that consumer.
§33-39-14. Reconsideration of adverse decisions.
(a) In the event a consumer or behavioral health provider
seeks reconsideration of an adverse decision by a managed care
company, the final determination of the adverse decision shall be
made based on the professional judgment of a physician, or a
panel of other appropriate behavioral health providers with at
least one physician, selected by the managed care company who is:
(1)(A) Board certified or eligible in the same specialty as
the treatment under review; or
(B) Actively practicing or has demonstrated expertise in the
alcohol, drug abuse or mental health service or treatment under
review; and
(2) Not compensated by the managed care company in a manner
that provides a financial incentive directly or indirectly to
deny or reduce coverage.
(b) Every final determination of reconsideration of an
adverse decision by a managed care company shall be made in
writing and shall reference the specific criteria and standards,
including interpretive guidelines, upon which the denial orreduction in coverage is based.
(c) No managed care company may charge a fee to a consumer
or behavioral health provider for an appeal of an adverse
decision.
(d) No behavioral health provider may charge a fee for
preparation of documents relating to review of an adverse
decision except for reasonable copying charges to the extent
permitted by state law.
§33-39-15. Commissioner review of adverse decisions.
The commissioner may review final determinations of adverse
decisions upon a finding of good cause. If the commissioner
determines that the adverse decision was made in contravention of
acceptable managed care principles, the commissioner may reverse
the decision of the managed care company and reinstate such
action which was the original cause for review.
§33-39-16. Authority of office of consumer protection division
of the attorney general's office.
In addition to all other powers and duties granted to the
office of consumer protection in the attorney general's office in
accordance with state law, it is hereby authorized to institute,
intervene in or otherwise participate in proceedings in state and
federal courts, before administrative agencies, or before the
insurance commissioner, as an advocate for the public interest
and the interests of persons enrolled in or eligible for managed
care programs.
§33-39-17. Reporting requirements.
The commissioner may establish reporting requirements in
order to evaluate the effectiveness of managed care companies and
to determine if the managed care programs are in compliance with
the provisions of this section and applicable rules.
§33-39-18. Criminal penalties.
(a) Any person who violates any provision of this article or
any rule adopted under the provisions of this article is guilty
of a misdemeanor and, upon conviction thereof, shall be fined not
more than one thousand dollars. Each day a criminal violation is
continued constitutes a separate offense.
(b) In addition to the provisions of subsection (a) of this
section, the commissioner may impose an administrative penalty of
up to one thousand dollars for a violation of any provision of
this article.
§33-39-19. Managed care fund.
There is hereby created in the state treasury a special
revenue account, which shall be an interest bearing account,
known as the managed care fund. All fees, penalties and interest
collected in accordance with this article and all interest
deposited into the fund and earned by reason of investment of
fund money shall be used exclusively to carry out the purpose of
this article.
NOTE: The purpose of this bill is to establish a system of
managed care and utilization review for the delivery of
behavioral health services to consumers. The bill is limited in
scope to behavioral health services. Under the bill a managed
care review board is established to assist the insurancecommissioner in developing rules relating to the operation,
powers and duties of managed care companies. The bill prohibits
a managed care company from conducting managed care activities in
this state unless the commissioner has granted the managed care
company a certificate of authority.
The commissioner of insurance is given the authority to
issue, deny, refuse to issue and revoke certificates of authority
to managed care companies and to otherwise enforce the provisions
of the article. The commissioner is authorized to revoke or deny
a certificate of authority if the holder does not comply with
performance assurances. Due process is afforded to aggrieved
parties under the bill.
A managed care company is required to submit to the
commissioner a managed care plan. Managed care companies are
authorized to make determinations regarding course of treatment
and other issues and they may make adverse decisions. The office
of consumer protection in the Attorney General's office is
authorized to intervene in certain actions. The bill also allows
the commissioner to establish reporting requirements in order to
evaluate the effectiveness of managed care companies. Criminal
penalties are provided for violations and a special fund is
established in the state treasury for use in carrying out the
purposes of the article.
This article is new; therefore, strike-throughs and
underscoring have been omitted.