2019 -- S 0440

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LC000813

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2019

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A N   A C T

RELATING TO BUSINESSES AND PROFESSIONS -- INSURANCE

     Introduced By: Senator Erin Lynch Prata

     Date Introduced: February 27, 2019

     Referred To: Senate Health & Human Services

     It is enacted by the General Assembly as follows:

     SECTION 1. Chapter 5-19.1 of the General Laws entitled "Pharmacies" is hereby

amended by adding thereto the following section:

     5-19.1-34. Audits.

     (a) When an on-site audit of the records of a pharmacy is conducted by a pharmacy

benefits manager, the audit must be conducted in accordance with the following criteria:

     (1) A finding of overpayment or underpayment must be based on the actual overpayment

or underpayment, and not a projection based on the number of patients served having a similar

diagnosis, or on the number of similar orders or refills for similar drugs, unless the projected

overpayment or denial is a part of a settlement agreed to by the pharmacy or pharmacist;

     (2) The auditor may not use extrapolation in calculating recoupments or penalties;

     (3) Any audit that involves clinical or professional judgment must be conducted by, or in

consultation with a pharmacist;

     (4) Each entity conducting an audit shall establish an appeals process under which a

pharmacy may appeal an unfavorable preliminary audit report to the entity;

     (5) This section does not apply to any audit, review or investigation that is initiated based

on or involving suspected or alleged fraud, willful misrepresentation or abuse;

     (6) Prior to an audit, the entity conducting an audit shall give the pharmacy thirty (30)

days' advance written notice of the audit, and the range of prescription numbers and the range of

dates included in the audit. Additionally, the number of prescriptions shall not exceed one

hundred (100) selected prescription claims which also includes all associated refills. Time allotted

must be adequate to collect all samples. Signature logs shall not exceed twenty-five (25);

     (7) A pharmacy has the right to request mediation by a private mediator, agreed upon by

the pharmacy and the pharmacy benefits manager, to resolve any disagreements. A request for

mediation does not waive any existing rights of appeal available to a pharmacy under this section;

     (8) A preliminary audit report must be delivered to the pharmacy within fifteen (15) days

after the conclusion of the audit. A pharmacy must be allowed at least thirty (30) days following

receipt of the preliminary audit to provide documentation to address any discrepancy found in the

audit. A final audit report must be delivered to the pharmacy within sixty (60) days after receipt

of the preliminary audit report or final appeal, whichever is later. A charge-back, recoupment or

other penalty may not be assessed until the appeal process provided by the pharmacy benefits

manager has been exhausted and the final report issued. Except as provided by state or federal

law, audit information may not be shared. Auditors may have access only to previous audit

reports on a particular pharmacy conducted by that same entity. Auditors may initiate a desk audit

prior to an on-site audit unless otherwise specified in the law;

     (9) Contracted auditors cannot be paid based on the findings within an audit;

     (10) Scanned images of all prescriptions, including all scheduled controlled substances,

are allowed to be used by the pharmacist for an audit. Verbally received prescriptions must be

accepted and applicable for desk, on-site, and follow up appeal documentation;

     (11) Any clerical error, typographical error, scrivener's error or computer error regarding

a document or record required under the Medicaid program does not constitute a willful violation,

and is not subject to criminal penalties without proof of intent to commit fraud;

     (12) Pharmacists are allowed at minimum one opportunity to reschedule with the auditor

if the scheduled audit presents a scheduling conflict for the pharmacist; and

     (13) The period covered by an audit may not exceed one year.

     SECTION 2. Chapter 42-14.5 of the General Laws entitled "The Rhode Island Health

Care Reform Act of 2004 - Health Insurance Oversight" is hereby amended by adding thereto the

following section:

     42-14.5-5. Pharmacy benefit manager transparency.

     (a) The health insurance commissioner shall require health insurers with a minimum of

two thousand (2,000) Rhode Island lives covered at the end of the preceding year, or who offer

insurance through the Rhode Island health benefit exchange, shall annually report the following

information to the department of health, in plain language, as an addendum to the health insurer's

annual statement:

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     (1) The health insurer's state of domicile and the total number of states in which the

insurer operates;

     (2) The total number of Rhode Island lives covered by the health insurer;

     (3) The total number of claims submitted to the health insurer;

     (4) The total number of claims denied by the health insurer;

     (5) The total number of denials of service by the health insurer at the preauthorization

level, including:

     (i) The total number of denials of service at the preauthorization level appealed to the

health insurer at the first-level grievance and, of those, the total number overturned;

     (ii) The total number of denials of service at the preauthorization level appealed to the

health insurer at any second-level grievance and, of those, the total number overturned; and

     (iii) The total number of denials of service at the preauthorization level for which external

review was sought and, of those, the total number overturned;

     (6) The total number of adverse benefit determinations made by the health insurer,

including:

     (i) The total number of adverse benefit determinations appealed to the health insurer at

the first-level grievance and, of those, the total number overturned;

     (ii) The total number of adverse benefit determinations appealed to the health insurer at

any second-level grievance and, of those, the total number overturned;

     (iii) The total number of adverse benefit determinations for which external review was

sought and, of those, the total number overturned;

     (7) The total number of claims denied by the health insurer because the service was

experimental, investigational, an off-label use of a drug, was not medically necessary, involved

access to a provider that is inconsistent with the limitations imposed by the plan, or was subject to

a preexisting condition exclusion;

     (8) The total number of claims denied by the health insurer as duplicate claims, as coding

errors, or for services or providers not covered;

     (9) The titles and salaries of all corporate officers and board members during the

preceding year, and the bonuses and compensatory benefits of all corporate officers and board

members during the preceding year;

     (10) The health insurer's marketing and advertising expenses during the preceding year;

     (11) The health insurer's federal and Rhode Island-specific lobbying expenses during the

preceding year;

     (12) The amount and recipient of each political contribution made by the health insurer

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during the preceding year;

     (13) The amount and recipient of dues paid during the preceding year by the health

insurer to trade groups that engage in lobbying efforts, or that make political contributions;

     (14) The health insurer's legal expenses related to claims or service denials during the

preceding year; and

     (15) The amount and recipient of charitable contributions made by the health insurer

during the preceding year.

     (b) Health insurers may indicate the extent of overlap or duplication in reporting the

information described in subsection (a) of this section.

     (c) The department of health shall create a standardized form using terms with uniform,

industry-standard meanings for the purpose of collecting the information described in subsection

(a) of this section, and each health insurer shall use the standardized form for reporting the

required information as an addendum to its annual statement. To the extent possible, health

insurers shall report information specific to Rhode Island on the standardized form, and shall

indicate on the form where the reported information is not specific to Rhode Island.

     (d) The department of health shall post on its website the standardized form to be

completed by each health insurer pursuant to this section, and shall post on the Rhode Island

health benefit exchange an electronic link to the standardized forms posted by the department of

health.

     (e) The director of the department of health may issue such rules, regulations, and orders

as shall be necessary to carry out the provisions of this chapter.

     SECTION 3. This act shall take effect upon passage.

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LC000813

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO BUSINESSES AND PROFESSIONS -- INSURANCE

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     This act would establish audit requirements for pharmacy benefit managers, and would

also establish annual reporting requirements for health insurers.

     This act would take effect upon passage.

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