Change of Law: Hospital Action Required
To: Chief Financial Officers, Legal Counsel and Government Affairs Staff
Please forward to Patient Accounts and Utilization Management Staff
From: Andrew Busz, Policy Director, Finance | email@example.com, (206) 216-2533
Subject: Second Substitute Senate Bill 5601 Health Care Benefit Managers
The purpose of this bulletin is to inform members of changes contained in Second Substitute Senate Bill 5601 (2SSB 5601). The bill:
- Defines health care benefit managers and requires them to register and be regulated by the Office of the Insurance Commissioner (OIC).
- Creates additional requirements for pharmacy benefit managers, which are already regulated by OIC.
The changes discussed in this bulletin are effective January 1, 2022.
The effect on hospitals of 2SSB 5601 is primarily changes to OIC oversight of authorization and management of health care services by health care benefit managers. However, the new requirements in the bill may affect a hospital’s employee benefits plan or insurance products offered by a health system, if the hospital or health system contracts with an entity that meets the definition of a health care benefit manager, or if the hospital or health system is contracted to provide services that meet the definition of health care benefit manager for an outside carrier or employee benefits plan.
- 2SSB 5601 is a significant change to the regulatory environment regarding health care benefit managers. We recommend hospital and health system legal staff review 2SSB 5601 in its entirety as well as this bulletin to determine if they either meet the definition of health care benefit manager themselves or contract with entities that meet the definition of health care benefit manager subject to the registration and regulatory provisions of the law. Carriers must file with the OIC copies of all contracts and contract amendments with health care benefit managers.
- We recommend this bulletin be shared with hospital patient accounts and authorization staff who interact with benefit managers and carriers.
- We recommend hospitals that provide pharmacy services become familiar with new provisions relating to pharmacy benefit managers.
The stated intent of 2SSB 5601 is to protect and promote the health, safety, and welfare of Washington residents by establishing standards for regulatory oversight of health care benefit managers. This is in part a recognition that benefit managers often make health care decisions on behalf of carriers. WSHA supports the changes and believes the new law will improve accountability for health care benefits managers and result in improved coordination with the carriers that contract with them for services.
- Definition of Health Care Benefit Manager
Pharmacy benefit managers are already registered and regulated by OIC. 2SSB 5601 creates and defines a broader category of “health care benefit manager” which includes pharmacy benefits managers and other entities that impact determination or utilization of benefits for services.
2SSB 5601 defines health care benefit managers as:
“person or entity providing services to, or acting on behalf of, a health carrier or employee benefits programs, that directly or indirectly impacts the determination or utilization of benefits for, or patient access to, health care services, drugs, and supplies including, but not limited to:
(i) Prior authorization or preauthorization of benefits or care;
(ii) Certification of benefits or care;
(iii) Medical necessity determinations;
(iv) Utilization review;
(v) Benefit determinations;
(vi) Claims processing and repricing for services and procedures;
(vii) Outcome management;
(viii) Provider credentialing and recredentialing;
(ix) Payment or authorization of payment to providers and facilities for services or procedures;
(x) Dispute resolution, grievances, or appeals relating to determinations or utilization of benefits;
(xi) Provider network management; or
(xii) Disease management.
“Health care benefit manager” includes, but is not limited to, health care benefit managers that specialize in specific types of health care benefit management such as pharmacy benefit managers, radiology benefit managers, laboratory benefit managers, and mental health benefit managers.
The following are not included in the definition of health care benefit managers:
“Health care benefit manager” does not include:
(i) Health care service contractors as defined in RCW 48.44.010;
(ii) Health maintenance organizations as defined in RCW 48.46.020;
(iii) Issuers as defined in RCW 48.01.053;
(iv) The public employees’ benefits board established in RCW 41.05.055;
(v) The school employees’ benefits board established in RCW 41.05.740;
(vi) Discount plans as defined in RCW 48.155.010;
(vii) Direct patient-provider primary care practices as defined in RCW 48.150.010;
(viii) An employer administering its employee benefit plan or the employee benefit plan of an affiliated employer under common management and control;
(ix) A union administering a benefit plan on behalf of its members;
(x) An insurance producer selling insurance or engaged in related activities within the scope of the producer’s license;
(xi) A creditor acting on behalf of its debtors with respect to insurance, covering a debt between the creditor and its debtors;
(xii) A behavioral health administrative services organization or other county-managed entity that has been approved by the state health care authority to perform delegated functions on behalf of a carrier;
(xiii) A hospital licensed under chapter 70.41 RCW or ambulatory surgical facility licensed under chapter 70.230 RCW;
(xiv) The Robert Bree collaborative under chapter 70.250 RCW;
(xv) The health technology clinical committee established under RCW 70.14.090; or
(xvi) The prescription drug purchasing consortium established under RCW 70.14.060.
In general, health care benefit manager is defined as entities that are contracted to directly or indirectly impact determination or utilization of benefits on behalf of a carrier or other separate entity.
- Registration of Health Care Benefit Managers
To conduct business in this state, a health care benefit manager must annually register with the Office of the Insurance Commissioner. Registration includes the following information:
- The identity of the health care benefit manager and of persons with any ownership or controlling interest;
- The business name, address, phone number, and contact person for the health care benefit manager;
- Any areas of specialty such as pharmacy benefit management, radiology benefit management, laboratory benefit management, mental health benefit management, or other specialty; and
- Any other information as the commissioner may reasonably require.
The health care benefit manager must pay an initial registration fee and annual renewal registration fee as established in rule by the commissioner. All receipts from fees collected by the commissioner under this section must be deposited into the insurance commissioner’s regulatory account created in RCW 48.02.190.
Every registered health care benefit manager must retain a record of all transactions completed and available to the commissioner for a period of not less than seven years.
A health care benefit manager may not provide health care benefit management services to a health carrier or employee benefits programs without a written agreement and must file each contract with the commissioner. Contracts filed with the commissioner are confidential and not subject to public inspection under RCW 48.02.120(2), or public disclosure under chapter 42.56 RCW.
- OIC Regulation of Health Care Benefit Managers
Under 2SSB 5601, OIC will regulate health care benefit managers much the same as it does other OIC regulated entities.
Handling of Complaints. Upon notifying a carrier or health care benefit manager of an inquiry, the commissioner must provide notice of the inquiry or complaint concurrently to the health care benefit manager and any carrier to which the inquiry or complaint pertains. Upon receipt of an inquiry from the commissioner, a health care benefit manager must provide to the commissioner within fifteen business days, a complete response to that inquiry. Failure to make a complete or timely response constitutes a violation of this chapter.
Possible OIC Actions. If the commissioner finds that a health care benefit manager or any person responsible for the conduct of the health care benefit manager’s affairs has violated insurance law or other infractions, the commissioner may take any combination of the following actions against a health care benefit manager or any person responsible for the conduct of the health care benefit manager’s affairs, other than an employee benefits program:
- Place on probation, suspend, revoke, or refuse to issue or renew the health care benefit manager’s registration;
- Issue a cease and desist order against the health care benefit manager and contracting carrier;
- Fine the health care benefit manager up to five thousand dollars per violation, and the contracting carrier is subject to a fine for acts conducted under the contract;
- Issue an order requiring corrective action against the health care benefit manager, the contracting carrier acting with the health care benefit manager, or both the health care benefit manager and the contracting carrier acting with the health care benefit manager; and
- Temporarily suspend the health care benefit manager’s registration by an order served by mail or by personal service upon the health care benefit manager not less than three days prior to the suspension effective date. The order must contain a notice of revocation and include a finding that the public safety or welfare requires emergency action. A temporary suspension under this subsection (3)(f)(v) continues until proceedings for revocation are concluded.
Responsibility of Carriers and Employee Benefits Programs for Contracted Health Care Benefit Managers. Health carriers and employee benefits programs are responsible for the compliance of any person or organization acting directly or indirectly on behalf of or at the direction of the carrier or program, or acting pursuant to carrier or program standards or requirements concerning the coverage of, payment for, or provision of health care benefits, services, drugs, and supplies. A carrier or program contracting with a health care benefit manager is responsible for the health care benefit manager’s violations of this chapter, including a health care benefit manager’s failure to produce records requested or required by the commissioner. No carrier or program may offer as a defense to a violation of any provision of this chapter that the violation arose from the act or omission of a health care benefit manager, or other person acting on behalf of or at the direction of the carrier or program, rather than from the direct act or omission of the carrier or program.
2SSB 5601 continues what has been the existing OIC policy that carriers and employee benefits programs are responsible for the acts and omissions of health care benefit managers contracted to administer benefits on their behalf.
- Carriers Required to Provide Information to OIC and Enrollees
Carriers must file with the commissioner every contract and contract amendment between the carrier and any registered health care benefit manager within thirty days following the effective date of the contract or contract amendment.
For health plans issued or renewed on or after January 1, 2022, carriers must notify health plan enrollees in writing of each health care benefit manager contracted with the carrier to provide any benefit management services in the administration of the health plan.
- New Requirements for Pharmacy Benefits Managers
Pharmacy benefit managers already must register and are regulated by OIC. 2SSB 5601 adds new requirements that a pharmacy benefit manager:
- May not cause or knowingly permit the use of any advertisement, promotion, solicitation, representation, proposal, or offer that is untrue, deceptive, or misleading;
- May not charge a pharmacy a fee related to the adjudication of a claim, credentialing, participation, certification, accreditation, or enrollment in a network including, but not limited to, a fee for the receipt and processing of a pharmacy claim, for the development or management of claims processing services in a pharmacy benefit manager network, or for participating in a pharmacy benefit manager network;
- May not require accreditation standards inconsistent with or more stringent than accreditation standards established by a national accreditation organization;
- May not reimburse a pharmacy in the state an amount less than the amount the pharmacy benefit manager reimburses an affiliate for providing the same pharmacy services; and
- May not directly or indirectly retroactively deny or reduce a claim or aggregate of claims after the claim or aggregate of claims has been adjudicated, unless:
(i)The original claim was submitted fraudulently; or
(ii) The denial or reduction is the result of a pharmacy audit conducted in accordance with RCW 19.340.040.
- Pharmacy Contract Work Group – Vetoed by Governor Inslee
2SSB 5601 as it passed the legislature included a section establishing a pharmacy work group. The workgroup was intended to review pharmacy fee structures in the delivery of pharmacy benefits, review the use of performance-based contracts in the delivery of pharmacy benefits, and develop recommendations on designs and use of performance-based contracts. This section was vetoed by Governor Inslee as it was subject to appropriation and no appropriation was included in the budget passed by the legislature.
OIC has begun the rulemaking process for 2SSB 5601. Comments on the preproposal statement of inquiry are due July 1, 2020. WSHA will be actively monitoring the rulemaking process.
WSHA’s 2020 New Law Implementation Guide
Please visit WSHA’s 2020 implementation guide online, where you will find a list of the high priority laws that WSHA is preparing resources and information on to help members implement the new laws, as well as links to resources such as this bulletin. In addition, you will find the Government Affairs team’s schedule for release of upcoming resources on other laws and additional resources for implementation.
Background and References
Second Substitute Senate Bill 5601