2012 -- H 7621

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LC01418

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO INSURANCE

     Introduced By: Representatives Lally, DaSilva, and Kennedy

     Date Introduced: February 16, 2012

     Referred To: House Labor

It is enacted by the General Assembly as follows:

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     SECTION 1. Title 27 of the General Laws entitled "INSURANCE" is hereby amended

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by adding thereto the following chapter:

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     CHAPTER 76

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HOSPITAL AND INSURER BARGAINING AND ARBITRATION ACT OF 2012

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     27-76.1-1. Short title. – This chapter shall be known and may be cited as the “Hospital

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and Insurer Bargaining and Arbitration Act of 2012” or “HIBAA”.

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     27-76.1-2. Legislative findings. – The general assembly hereby finds and declares as

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follows:

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     (1) As community hospitals bargain with commercial health insurers in an increasingly

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concentrated Rhode Island hospital and health insurance market, the potential for misallocation of

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health care resources from a public health perspective increases;

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     (2) The same potential for misallocation exists as commercial health insurers must

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bargain with increasingly concentrated hospital systems;

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     (3) How Rhode Islanders pay for health care ultimately determines who has access to

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what care. High concentrations of payer and hospital power have the potential to shift limited

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health care resources to entities that have market power, regardless of need, quality or

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affordability;

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     (4) Inequitable reimbursement and other unfair payment terms adversely affect quality

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patient care, access to necessary services and health insurance affordability by concentrating

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resources in entities with bargaining power independent of public health needs;

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     (5) The Legislature recognizes that when the playing field is level, and no one party to a

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health care negotiation can overwhelm the other, markets may work best; while at other times

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regulation is required to achieve fairness and social goals that markets do not value;

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     (6) HIBAA creates a system that allows markets to work if they can, but provides a

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regulatory back-up if they do not.

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     (7) This act is necessary, proper and constitutes an appropriate exercise of the authority

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of this state to regulate the delivery of health care services in order to safeguard the public health

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and safety of Rhode Islanders.

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     27-76.1-3. Definitions. – The following words and phrases when used in this act shall

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have meanings given to them in this section unless the context clearly indicates otherwise:

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     (1) “Health care insurer.” A health care insurer whose premiums are paid in whole or in

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part by employers and as otherwise defined in general laws subdivision 27-20.6-1(1), including

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any health care insurer affiliate or third-party administrator interacting with hospitals and

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enrollees on behalf of such an insurer, but specifically not including the following types of

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insurance policy:

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     (i) Hospital confinement indemnity;

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     (ii) Disability income;

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     (iii) Accident only;

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     (iv) Long-term care;

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     (v) Medicare supplement;

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     (vi) Limited benefit health;

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     (vii) Specified disease indemnity;

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     (viii) Sickness or bodily injury or death by accident or both;

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     (ix) Other limited benefit policies; and

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     (x) Health care insurance issued or administrated by a small health care insurer.

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     (2) “Health care insurer affiliate” means a health care insurer that is affiliated with

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another entity by either the insurer or entity having a five percent (5%) or greater, direct or

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indirect, ownership or investment interest in the other through equity, debt or other means;

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     (3) “Hospital” means an entity licensed as a hospital by the Rhode Island department of

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health pursuant to general laws chapter 23-17;

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     (4) “Hospital/insurer contract” means an agreement between a hospital or hospital

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network, and a health care insurer, that sets forth the terms and conditions under which the

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hospital or hospital network is to deliver covered health care services to enrollees of the health

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care insurer;

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     (5) “Hospital network” means a group of commonly-owned hospitals;

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     (6) “Impasse” means an impasse exists when either party to negotiation of a

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hospital/insurer contract believes in good faith that the parties have reached a point in meetings

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and negotiations regarding the terms of a hospital/insurer contract where their differences in

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position are so substantial or pronounced that future meetings and negotiations would be futile.

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     (7) “Office of health insurance commissioner” means the office of health insurance

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commissioner established by chapter 42-14.5 of the general laws;

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     (8) “Self-funded health benefit plan” means a plan that provides for the assumption of the

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cost of or spreading the risk of loss resulting from health care services of covered lives by an

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employer, union or other sponsor, substantially out of the current revenues, assets or any other

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funds of the sponsor;

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     (9) “Service” means the American health lawyers’ association alternative dispute

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resolution service;

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     (10) “Small health care insurer” means any health care insurer that would otherwise be

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covered under this act, but that insures or administers health care benefits for a total number of

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covered lives that is five percent (5%) or less than the total number of lives covered by all health

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care insurers as of January 1 of each year (including all small health care insurers); and

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     (11) “Third-party administrator” means an entity that provides utilization review,

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provider network credentialing or other administrative services for a health care insurer or a self-

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funded health benefit plan.

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     27-76.1-4. Impasse and arbitration. – (a) Arbitration of contract terms.--Any hospital or

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health care insurer participating in negotiation of a hospital/insurer contract that believes in good

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faith an impasse has been reached shall have the right to have the matter decided by binding

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arbitration in Providence, Rhode Island, in accordance with the service’s rules of procedure for

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arbitration for a single arbitrator. The arbitrator shall apply the criteria set forth in subsection (b)

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below in making his or her decision. The fees of the arbitrator shall be borne equally by the

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parties. The judgment of the arbitrator shall be binding not only on all parties to the arbitration,

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but on any other entity controlled by, in control of or under common control with the party that is

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a hospital, health care insurer, self-funded health benefit plan or third-party administrator, and

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judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction

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thereof. Any arbitration under this chapter shall be completed within one hundred twenty (120)

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days from the date the arbitrator is selected.

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     (b) Arbitration criteria.--The arbitrator shall base his or her decision on the criteria listed

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in this subsection (b) and shall document the arbitrator’s analysis of these criteria in a written

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decision:

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     (1) Patient services come first. Hospital payment rates should be equitable and sufficient

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to ensure appropriate community access to needed services taking into account amounts paid to

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other hospitals for similar services, the unique charitable burden borne by the hospital and the

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reasonableness of the hospital’s expense base;

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     (2) Contractual arrangements should contain incentives to improve the quality and

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efficiency of health care service delivery and outcomes;

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     (3) Contract terms should promote recruitment and retention of providers needed in the

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relevant community;

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     (4) Health insurance should be affordable for consumers;

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     (5) Insurers deserve to remain solvent;

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     (6) Insurers’ operating expenses and returns on investment deserve to be reasonable, but

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determined based on the services they provide and the market they serve, not necessarily

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comparable to expenses and returns that are available in national markets that are stronger and

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larger than Rhode Island; and

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     (7) The health care system is a comprehensive entity and the arbitrator’s decision should

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encourage and direct the parties towards policies that advance the welfare of the public through

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overall efficiency, improved health care quality, and appropriate access.

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     27-76.1-5. Insurer reporting to office of health insurance commissioner. – Each

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health care insurer shall annually report the financial terms and conditions of its hospital/payer

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contracts to the office of health insurance commissioner. Except as specifically provided

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otherwise in this section, such information shall be treated as commercial information of a

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privileged or confidential nature under Rhode Island general laws subparagraph 38-2-2(4)(B).

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Notwithstanding the foregoing, the office of health insurance commissioner shall release such

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financial information to any arbitrator conducting an arbitration under this chapter upon the

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arbitrator’s request. The arbitrator may use such information in making a decision and may refer

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to such information in an way that does not result in the publication or other release of such

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information

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     27-76.1-6. Good faith negotiations. – It shall be unlawful for either party in negotiation

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of a hospital/insurer contract to refuse or fail to meet and negotiate in good faith.

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     27-76.1-7. Construction. – Nothing contained in this chapter shall be construed to

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require approval of hospital/insurer contract terms to the extent that the terms are exempt from

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state regulation under section 514 of the employee retirement income security act of 1974 (public

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law 93-406,88 stat. 829).

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     27-76.1-8. Severability. – If any provision of this chapter or the application thereof to

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any person or circumstances is held invalid, such invalidity shall not affect other provisions or

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applications of the chapter which can be given effect without the invalid provision or application,

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and of this end the provisions of this chapter are declared to be severable.

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     SECTION 2. This act shall take effect on January 1, 2013.

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LC01418

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO INSURANCE

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     This act would authorize hospitals and health insurers to declare an impasse and submit

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to binding arbitration the terms of agreements between hospitals and commercial health insurers.

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     This act would take effect on January 1, 2013.

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LC01418

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