SB1362 - 511R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 20-461, Arizona Revised Statutes, is amended to read:

START_STATUTE20-461. Unfair claim settlement practices

A. A person shall not commit or perform with such a frequency to indicate as a general business practice any of the following:

1. Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue.

2. Failing to acknowledge and act reasonably and promptly upon communications with respect to claims arising under an insurance policy.

3. Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under an insurance policy.

4. Refusing to pay claims without conducting a reasonable investigation based upon all available information.

5. Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed.

6. Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear.

7. As a property or casualty insurer, failing to recognize a valid assignment of a claim. The property or casualty insurer shall have the rights consistent with the provisions of its insurance policy to receive notice of loss or claim and to all defenses it may have to the loss or claim, but not otherwise to restrict an assignment of a loss or claim after a loss has occurred.

8. Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by the insureds.

9. Attempting to settle a claim for less than the amount to which a reasonable person would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application.

10. Attempting to settle claims on the basis of an application which that was altered without notice to, or knowledge or consent of, the insured.

11. Making claims payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which the payments are being made.

12. Making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration.

13. Delaying the investigation or payment of claims by requiring an insured, a claimant or the physician of either to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information.

14. Failing to promptly settle claims if liability has become reasonably clear under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.

15. Failing to promptly provide a reasonable explanation of the basis in the insurance policy relative to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.

16. Attempting to settle claims for the replacement of any nonmechanical sheet metal or plastic part which that generally constitutes the exterior of a motor vehicle, including inner and outer panels, with an aftermarket crash part which that is not made by or for the manufacturer of an insured's motor vehicle unless the part meets the specifications of section 44‑1292 and unless the consumer is advised in a written notice attached to or printed on a repair estimate which that:

(a) Clearly identifies each part.

(b) Contains the following information in ten point or larger type:

This estimate has been prepared based on the use of replacement parts supplied by a source other than the manufacturer of your motor vehicle. Warranties applicable to these replacement parts are provided by the manufacturer or distributor of these parts rather than the manufacturer of your vehicle.

17. As an insurer subject to section 20‑826, 20‑1342, 20‑1402 or 20‑1404, or as an insurer of the same type as those subject to section 20‑826, 20‑1342, 20‑1402 or 20‑1404 that issues policies, contracts, plans, coverages or evidences of coverage for delivery in this state, failing to pay charges for reasonable and necessary services provided by any physician licensed pursuant to title 32, chapter 8, 13 or 17, if the services are within the lawful scope of practice of the physician and the insurance coverage includes diagnosis and treatment of the condition or complaint, regardless of the nomenclature used to describe the condition, complaint or service.

18. Failing to comply with chapter 15 of this title.

19. Denying liability for a claim under a motor vehicle liability policy in effect at the time of an accident without having substantial facts based on reasonable investigation to justify the denial for damages or injuries that are a result of the accident and that were caused by the insured if the denial is based solely on a medical condition that could affect the insured's driving ability.

20. As an insurer subject to section 20‑826, 20‑1342, 20‑1402 or 20‑1404, or as an insurer of the same type as those subject to section 20‑826, 20‑1342, 20‑1402 or 20‑1404 that issues policies, contracts, plans, coverages or evidences of coverage for delivery in this state, applying a higher copayment for a physician licensed pursuant to title 32, chapter 8, 13 or 17 than the insurer requires for a primary care physician if that insurer does not require a referral to that physician from a primary care physician under a plan or policy the insurer offers in this state.

B. Nothing in subsection A, paragraph 17 of this section shall be construed to prohibit the application of deductibles, coinsurance, preferred provider organization requirements, cost containment measures or quality assurance measures if they are equally applied to all types of physicians referred to in this section, and if any limitation or condition placed upon payment to or upon services, diagnosis or treatment by any physician covered by this section is equally applied to all physicians referred to in subsection A, paragraph 16 17 of this section as it pertains to a particular diagnosis or condition, without discrimination to the usual and customary procedures of any type of physician. A determination under this section of discrimination to the usual and customary procedures of any type of physician shall not be based on whether an insurer applies medical necessity review to a particular type of service or treatment if it is applied equally to all physicians as it pertains to a particular diagnosis or condition.

C. In prescribing rules to implement this section, the director shall follow, to the extent appropriate, the national association of insurance commissioners unfair claims settlement practices model regulation.

D. Nothing contained in this section is intended to provide any private right or cause of action to or on behalf of any insured or uninsured resident or nonresident of this state. It is, however, the specific intent of this section to provide solely an administrative remedy to the director for any violation of this section or rule related to this section.

E. The director shall deposit, pursuant to sections 35‑146 and 35‑147, all civil penalties collected pursuant to this article in the state general fund. END_STATUTE

Sec. 2. Section 20-2508, Arizona Revised Statutes, is amended to read:

START_STATUTE20-2508. Denial, suspension or revocation of certificates; hearing; civil penalties

A. The director shall deny a certificate if the director finds that the utilization review agent does not:

1. Have an allopathic or osteopathic physician or a chiropractor available to supervise utilization review activities of any medical, surgical or health care services except that:

(a) A dental service corporation that is licensed pursuant to chapter 4, article 3 of this title and a prepaid dental plan organization that is licensed pursuant to chapter 4, article 7 of this title may have a licensed dentist supervise or conduct utilization review activities for health care services that involve dental care.

(b) An optometric service corporation that is licensed pursuant to chapter 4, article 3 of this title may have a licensed optometrist supervise or conduct utilization review activities for health care services that involve optometric care.

2. Meet all applicable department rules relating to the qualifications of utilization review agents or the performance of utilization review.

3. Provide assurances satisfactory to the director that the procedure and policies of the utilization review agent will protect the confidentiality of medical records and the utilization review agent will be reasonably accessible to patients and providers in this state and the department by a toll free telephone line or by acceptance of long‑distance collect calls for forty hours each week during normal business hours.

B. The director shall deny a certificate to a utilization review agent who has been convicted of a misdemeanor involving moral turpitude or a felony or who employs a person who has been convicted of a felony.

C. The director may suspend, revoke or refuse to renew a certificate issued under this chapter if after giving notice to the utilization review agent, and holding a hearing if demanded by the agent, the director finds that the agent has violated this chapter or a rule adopted under this chapter.

D. If after a hearing the director finds that the agent has violated this chapter or an applicable rule or order adopted under this chapter, the director shall issue an order that specifies the violation and may impose a civil penalty of not more than two hundred fifty dollars for each violation or an aggregate civil penalty of not more than two thousand five hundred dollars. The director may also impose a civil penalty of not more than two thousand five hundred dollars for each knowing violation or an aggregate civil penalty of not more than fifteen thousand dollars. The director shall deposit, pursuant to sections 35‑146 and 35‑147, all monies in the state general fund. A civil penalty is in addition to any other applicable penalty or restraint provided in this chapter and may be recovered in a civil action brought by the director.

E. A certificate does not expire or terminate until a pending department investigation is resolved but is suspended on the date it would otherwise expire or terminate. The utilization review agent shall not transact business in this state until the investigation is completed.

F. When the director suspends or revokes a certificate the director shall immediately notify the utilization review agent either by personal service or by mail addressed to the agent at the agent's address of record. Notice by mail is effective at the time it is mailed.

G. The utilization review agent shall deliver a revoked or suspended certificate to the director on the director's request.

H. The director shall not issue a new certificate earlier than one year after the date of a previous revocation. Agents shall reapply to the director and shall meet all the requirements of this chapter to obtain a new certificate.

I. If the certificate of a firm or corporation is suspended or revoked, no member of that firm or officer or director of the corporation may hold a certificate during the period of the suspension or revocation unless the director determines, based on substantial evidence, that the member, officer or corporation director was not personally at fault. END_STATUTE

Sec. 3. Section 20-2510, Arizona Revised Statutes, is amended to read:

START_STATUTE20-2510. Health care insurers requirements; medical directors

A. A health care insurer that proposes to provide coverage of inpatient hospital and medical benefits, outpatient surgical benefits or any medical, surgical or health care service for residents of this state with utilization review of those benefits shall meet at least one of the following requirements:

1. Have a certificate issued pursuant to this chapter.

2. Be accredited by the utilization review accreditation commission, the national committee for quality assurance or any other nationally recognized accreditation process recognized by the director.

3. Contract with a utilization review agent that has a certificate issued pursuant to this chapter.

4. Contract with a utilization review agent that is accredited by the utilization review accreditation commission, the national committee for quality assurance or any other nationally recognized accreditation process recognized by the director.

5. Provide to the director a signed and notarized statement that the health care insurer has submitted an application for accreditation to the utilization review accreditation commission or the national committee for quality assurance and is awaiting completion of the accreditation review process. On completion of the accreditation review process, the insurer shall provide to the director adequate proof that the insurer has been accredited. If the insurer is denied accreditation, within sixty days after the denial the insurer shall meet at least one of the requirements set forth in paragraph 1, 2, 3 or 4 of this subsection.

B. Except as provided in subsections C, D and E of this section, any direct denial of prior authorization of a service requested by a health care provider on the basis of medical necessity by a health care insurer shall be made in writing by a medical director who holds an active unrestricted license to practice medicine in this state pursuant to title 32, chapter 13 or 17. The written denial shall include an explanation of why the treatment was denied, and the medical director who made the denial shall sign the written denial. The health care insurer shall send a copy of the written denial to the health care provider who requested the treatment. Health care insurers shall maintain copies of all written denials and shall make the copies available to the department for inspection during regular business hours. The medical director is responsible for all direct denials that are made on the basis of medical necessity. Nothing in this section prohibits a health care insurer from consulting with a licensed physician whose scope of practice may provide the health care insurer with a more thorough review of the medical necessity.

C. For determinations made pursuant to subsection B of this section, a dental service corporation as defined in section 20‑822 or a prepaid dental plan organization as defined in section 20‑1001 may use as a medical director either:

1. An individual who holds an active unrestricted license to practice dentistry in this state pursuant to title 32, chapter 11.

2. A physician who holds an active unrestricted license to practice medicine in this state pursuant to title 32, chapter 13 or 17.

D. For determinations made pursuant to subsection B of this section, an optometric service corporation may use as a medical director either:

1. An individual who holds an active unrestricted license to practice optometry in this state pursuant to title 32, chapter 16.

2. A physician who holds an active unrestricted license to practice medicine in this state pursuant to title 32, chapter 13 or 17.

E. For determinations made pursuant to subsection B of this section, a health care insurer may shall use a chiropractor licensed in this state pursuant to title 32, chapter 8 or by any regulatory board in another state to review any direct denial of prior authorization of a chiropractic service requested by a chiropractor on the basis of medical necessity. END_STATUTE