HF 417

2nd Engrossment - 86th Legislature (2009 - 2010) Posted on 02/09/2010 01:37am

A bill for an act
relating to commerce; prohibiting certain claims processing practices by
third-party administrators of health coverage plans; regulating health claims
clearinghouses; providing recovery of damages and attorney fees for breach of
an insurance policy; permitting a deceased professional's surviving spouse to
retain ownership of a professional firm that was solely owned by the decedent
for up to one year after the death; amending Minnesota Statutes 2008, sections
60A.23, subdivision 8; 319B.02, by adding a subdivision; 319B.07, subdivision
1; 319B.08; 319B.09, subdivision 1; 471.982, subdivision 3; proposing coding
for new law in Minnesota Statutes, chapters 60A; 62Q.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [60A.0811] BREACH OF INSURANCE POLICY; RECOVERY OF
DAMAGES AND ATTORNEY FEES.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin For purposes of this section:
new text end

new text begin (1) "insurance policy" means a commercial or professional insurance policy or
contract other than:
new text end

new text begin (i) a workers' compensation insurance policy or contract;
new text end

new text begin (ii) a health insurance policy or contract issued, executed, renewed, maintained, or
delivered in this state by a health carrier as defined in section 62A.011, subdivision 2;
new text end

new text begin (iii) a life insurance or disability insurance policy or contract; or
new text end

new text begin (iv) a policy or contract issued by a township mutual fire insurance company or
farmers mutual fire insurance company operating under chapter 65A or 67A;
new text end

new text begin (2) "insured" means any named insured, additional insured, or insured under an
insurance policy; and
new text end

new text begin (3) "insurer" means an insurer:
new text end

new text begin (i) incorporated or organized in this state; or
new text end

new text begin (ii) admitted, authorized, or licensed to do business or doing business in this state but
not incorporated or organized in this state. Insurer does not include the joint underwriting
association operating under chapter 62F or 62I; or a township mutual fire insurance
company or farmers mutual fire insurance company operating under chapter 65A or 67A.
new text end

new text begin Subd. 2. new text end

new text begin Damages. new text end

new text begin (a) In addition to breach of insurance contract damages, attorney
fees, costs, or other remedies allowable under law or an insurance policy, an insured
who prevails in any claim against an insurer based on the insurer's breach, repudiation
or denial of, failure to fulfill, or delay in fulfilling, a duty to provide services or make
payments is entitled to recover:
new text end

new text begin (1) 12 percent per annum interest on monetary amounts due under the insurance
policy, calculated from the date the request for payment of those benefits was made to
the insurer; and
new text end

new text begin (2) costs and disbursements plus reasonable attorney fees as provided under this
section.
new text end

new text begin (b) Punitive damages or damages for nonmonetary losses are not recoverable
under this section.
new text end

new text begin Subd. 3. new text end

new text begin Effect of arbitration under section 65B.525. new text end

new text begin If an insurer agrees to
liability for personal injury protection, uninsured, or underinsured benefits under a policy
of private passenger vehicle insurance under chapter 65B and only the amount of benefits
is disputed, the insured is not entitled to recover attorney fees under this section if the
insurer agrees to submit the dispute to binding arbitration or if binding arbitration is
required under section 65B.525.
new text end

new text begin Subd. 4. new text end

new text begin Factors to consider in awarding attorney fees. new text end

new text begin An award of attorney
fees and costs under this section may include consideration of the following factors: the
amount of time reasonably expended before and during the court action or arbitration
proceeding; reasonable hourly rates; the outcome obtained; and the nature and complexity
of the matter.
new text end

new text begin Subd. 5. new text end

new text begin Insurance producers; liability limited. new text end

new text begin Except as otherwise provided
by law, a licensed insurance producer is not liable for damages and attorney fees under
this section for a breach of insurance policy by the insurer that appointed the producer
to transact on its behalf, except to the extent the producer has caused or contributed to
the breach.
new text end

new text begin Subd. 6. new text end

new text begin Application. new text end

new text begin This section applies to a court action or arbitration
proceeding, including an action seeking declaratory judgment.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2009, and applies to a
cause of action existing on or arising on or after that date.
new text end

Sec. 2.

Minnesota Statutes 2008, section 60A.23, subdivision 8, is amended to read:

Subd. 8.

Self-insurance or insurance plan administrators who are vendors
of risk management services.

(1) Scope. This subdivision applies to any vendor of
risk management services and to any entity which administers, for compensation, a
self-insurance or insurance plan. This subdivision does not apply (a) to an insurance
company authorized to transact insurance in this state, as defined by section 60A.06,
subdivision 1, clauses (4) and (5); (b) to a service plan corporation, as defined by section
62C.02, subdivision 6; (c) to a health maintenance organization, as defined by section
62D.02, subdivision 4; (d) to an employer directly operating a self-insurance plan for
its employees' benefits; (e) to an entity which administers a program of health benefits
established pursuant to a collective bargaining agreement between an employer, or group
or association of employers, and a union or unions; or (f) to an entity which administers a
self-insurance or insurance plan if a licensed Minnesota insurer is providing insurance
to the plan and if the licensed insurer has appointed the entity administering the plan as
one of its licensed agents within this state.

(2) Definitions. For purposes of this subdivision the following terms have the
meanings given them.

(a) "Administering a self-insurance or insurance plan" means (i) processing,
reviewing or paying claims, (ii) establishing or operating funds and accounts, or (iii)
otherwise providing necessary administrative services in connection with the operation of
a self-insurance or insurance plan.

(b) "Employer" means an employer, as defined by section 62E.02, subdivision 2.

(c) "Entity" means any association, corporation, partnership, sole proprietorship,
trust, or other business entity engaged in or transacting business in this state.

(d) "Self-insurance or insurance plan" means a plan providing life, medical or
hospital care, accident, sickness or disability insurance for the benefit of employees or
members of an association, or a plan providing liability coverage for any other risk or
hazard, which is or is not directly insured or provided by a licensed insurer, service plan
corporation, or health maintenance organization.

(e) "Vendor of risk management services" means an entity providing for
compensation actuarial, financial management, accounting, legal or other services for the
purpose of designing and establishing a self-insurance or insurance plan for an employer.

(3) License. No vendor of risk management services or entity administering a
self-insurance or insurance plan may transact this business in this state unless it is licensed
to do so by the commissioner. An applicant for a license shall state in writing the type of
activities it seeks authorization to engage in and the type of services it seeks authorization
to provide. The license may be granted only when the commissioner is satisfied that the
entity possesses the necessary organization, background, expertise, and financial integrity
to supply the services sought to be offered. The commissioner may issue a license subject
to restrictions or limitations upon the authorization, including the type of services which
may be supplied or the activities which may be engaged in. The license fee is $1,500
for the initial application and $1,500 for each three-year renewal. All licenses are for
a period of three years.

(4) Regulatory restrictions; powers of the commissioner. To assure that
self-insurance or insurance plans are financially solvent, are administered in a fair and
equitable fashion, and are processing claims and paying benefits in a prompt, fair,
and honest manner, vendors of risk management services and entities administering
insurance or self-insurance plans are subject to the supervision and examination by the
commissioner. Vendors of risk management services, entities administering insurance or
self-insurance plans, and insurance or self-insurance plans established or operated by
them are subject to the trade practice requirements of sections 72A.19 to 72A.30. In lieu
of an unlimited guarantee from a parent corporation for a vendor of risk management
services or an entity administering insurance or self-insurance plans, the commissioner
may accept a surety bond in a form satisfactory to the commissioner in an amount equal to
120 percent of the total amount of claims handled by the applicant in the prior year. If at
any time the total amount of claims handled during a year exceeds the amount upon which
the bond was calculated, the administrator shall immediately notify the commissioner.
The commissioner may require that the bond be increased accordingly.

No contract entered into after July 1, 2001, between a licensed vendor of risk
management services and a group authorized to self-insure for workers' compensation
liabilities under section 79A.03, subdivision 6, may take effect until it has been filed
with the commissioner, and either (1) the commissioner has approved it or (2) 60 days
have elapsed and the commissioner has not disapproved it as misleading or violative of
public policy.

(5) Rulemaking authority. To carry out the purposes of this subdivision, the
commissioner may adopt rules pursuant to sections 14.001 to 14.69. These rules may:

(a) establish reporting requirements for administrators of insurance or self-insurance
plans;

(b) establish standards and guidelines to assure the adequacy of financing, reinsuring,
and administration of insurance or self-insurance plans;

(c) establish bonding requirements or other provisions assuring the financial integrity
of entities administering insurance or self-insurance plans; or

(d) establish other reasonable requirements to further the purposes of this
subdivision.

new text begin (6) Claims processing practices. No entity administering a self-insurance or
insurance plan shall:
new text end

new text begin (a) require a patient to pay for care provided by an in-network provider an amount
that exceeds the fee negotiated between the entity and that provider for the covered service
provided;
new text end

new text begin (b) attempt to recoup from the provider a payment owed to the provider by the
patient for deductibles, co-pays, coinsurance, or other enrollee cost-sharing required under
the plan, unless the administrator has confirmed with the provider that the patient has
paid the cost-sharing amounts in full; or
new text end

new text begin (c) limit the time period for a provider to submit a claim, which may not be less
than 90 days through contract except when otherwise required by state or federal law or
regulation, unless the health care provider knew or was informed of the correct name and
address of the responsible health plan company or third-party administrator. For purposes
of this paragraph, presentation of the health coverage identification card by the patient is
deemed sufficient notification of the correct information.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin Paragraph 6, clause (c) is effective August 1, 2009, and
applies to patient care provided on or after that date. Paragraph 6, clauses (a) and (b), are
effective the day following final enactment.
new text end

Sec. 3.

new text begin [62Q.7375] HEALTH CARE CLEARINGHOUSES.
new text end

new text begin Subdivision 1. new text end

new text begin Definition. new text end

new text begin For the purposes of this section, "health care
clearinghouse" or "clearinghouse" means a public or private entity, including a billing
service, repricing company, community health management information system or
community health information system, and "value-added" networks and switches, that
does either of the following functions:
new text end

new text begin (1) processes or facilitates the processing of health information received from
another entity in a nonstandard format or containing nonstandard data content into
standard data elements or a standard transaction; or
new text end

new text begin (2) receives a standard transaction from another entity and processes or facilitates
the processing of health information into nonstandard format or nonstandard data content
for the receiving entity.
new text end

new text begin Subd. 2. new text end

new text begin Claims submission deadlines and careful handling. new text end

new text begin (a) A health plan or
third-party administrator must not have or enforce a deadline for submission of claims
that is shorter than the period provided in section 60A.23, subdivision 8, paragraph (6),
clause (c).
new text end

new text begin (b) A claim submitted to a health plan or third-party administrator through a health
care clearinghouse or clearinghouse within the time permitted under paragraph (a) must be
treated as timely by the health plan or third-party administrator. This paragraph does not
apply if the provider submitted the claim to a clearinghouse that does not have the ability
or authority to transmit the claim to the relevant health plan company.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2009, and applies to claims
transmitted to a clearinghouse on or after that date.
new text end

Sec. 4.

Minnesota Statutes 2008, section 319B.02, is amended by adding a subdivision
to read:

new text begin Subd. 21a. new text end

new text begin Surviving spouse. new text end

new text begin "Surviving spouse" means a surviving spouse of a
deceased professional as an individual, as the personal representative of the estate of the
decedent, as the trustee of an inter vivos or testamentary trust created by the decedent, or
as the sole heir or beneficiary of an estate or trust of which the personal representative or
trustee is a bank or other institution that has trust powers.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
and applies to surviving spouses of professionals who die on or after that date.
new text end

Sec. 5.

Minnesota Statutes 2008, section 319B.07, subdivision 1, is amended to read:

Subdivision 1.

Ownership of interests restricted.

Ownership interests in a
professional firm may not be owned or held, either directly or indirectly, except by any of
the following:

(1) professionals who, with respect to at least one category of the pertinent
professional services, are licensed and not disqualified;

(2) general partnerships, other than limited liability partnerships, authorized to
furnish at least one category of the professional firm's pertinent professional services;

(3) other professional firms authorized to furnish at least one category of the
professional firm's pertinent professional services;

(4) a voting trust established with respect to some or all of the ownership interests
in the professional firm, if (i) the professional firm's generally applicable governing law
permits the establishment of voting trusts, and (ii) all the voting trustees and all the holders
of beneficial interests in the trust are professionals licensed to furnish at least one category
of the pertinent professional services; deleted text begin and
deleted text end

(5) an employee stock ownership plan as defined in section 4975(e)(7) of the
Internal Revenue Code of 1986, as amended, if (i) all the voting trustees of the plan are
professionals licensed to furnish at least one category of the pertinent professional services,
and (ii) the ownership interests are not directly issued to anyone other than professionals
licensed to furnish at least one category of the pertinent professional services new text begin ; and
new text end

new text begin (6) sole ownership by a surviving spouse of a deceased professional who was the
sole owner of the professional firm at the time of the professional's death, but only during
the period of time ending one year after the death of the professional new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
and applies to surviving spouses of professionals who die on or after that date.
new text end

Sec. 6.

Minnesota Statutes 2008, section 319B.08, is amended to read:

319B.08 EFFECT OF DEATH OR DISQUALIFICATION OF OWNER.

Subdivision 1.

Acquisition of interests or automatic loss of professional
firm status.

(a) If an owner dies or becomes disqualified to practice all the pertinent
professional services, then either:

(1) within 90 days after the death or the beginning of the disqualification, all of
that owner's ownership interest must be acquired by the professional firm, by persons
permitted by section 319B.07 to own the ownership interest, or by some combination; or

(2) at the end of the 90-day period, the firm's election under section 319B.03,
subdivision 2, or 319B.04, subdivision 2, is automatically rescinded, the firm loses
its status as a professional firm, and the authority created by that election and status
terminates.

An acquisition satisfies clause (1) if all right and title to the deceased or disqualified
owner's interest are acquired before the end of the 90-day period, even if some or all of
the consideration is paid after the end of the 90-day period. However, payment cannot be
secured in any way that violates sections 319B.01 to 319B.12.

(b) If automatic rescission does occur under paragraph (a), the firm must immediately
and accordingly update its organizational document, certificate of authority, or statement
of foreign qualification. Even without that updating, however, the rescission, loss of
status, and termination of authority provided by paragraph (a) occur automatically at the
end of the 90-day period.

Subd. 2.

Terms of acquisition.

(a) If:

(1) an owner dies or becomes disqualified to practice all the pertinent professional
services;

(2) the professional firm has in effect a mechanism, valid according to the
professional firm's generally applicable governing law, to effect a purchase of the deceased
or disqualified owner's ownership interest so as to satisfy subdivision 1, paragraph (a),
clause (1); and

(3) the professional firm does not agree with the disqualified owner or the
representative of the deceased owner to set aside the mechanism,

then that mechanism applies.

(b) If:

(1) an owner dies or becomes disqualified to practice all the pertinent professional
services;

(2) the professional firm has in effect no mechanism as described in paragraph (a), or
has agreed as mentioned in paragraph (a), clause (3), to set aside that mechanism; and

(3) consistent with its generally applicable governing law, the professional firm
agrees with the disqualified owner or the representative of the deceased owner, before
the end of the 90-day period, to an arrangement to effect a purchase of the deceased
or disqualified owner's ownership interest so as to satisfy subdivision 1, paragraph (a),
clause (1),

then that arrangement applies.

(c) If:

(1) an owner of a Minnesota professional firm dies or becomes disqualified to
practice all the pertinent professional services;

(2) the Minnesota professional firm does not have in effect a mechanism as described
in paragraph (a);

(3) the Minnesota professional firm does not make an arrangement as described in
paragraph (b); and

(4) no provision or tenet of the Minnesota professional firm's generally applicable
governing law and no provision of any document or agreement authorized by the
Minnesota professional firm's generally applicable governing law expressly precludes an
acquisition under this paragraph,

then the firm may acquire the deceased or disqualified owner's ownership interest as
stated in this paragraph. To act under this paragraph, the Minnesota professional firm
must within 90 days after the death or beginning of the disqualification tender to the
representative of the deceased owner's estate or to the disqualified owner the fair value
of the owner's ownership interest, as determined by the Minnesota professional firm's
governance authority. That price must be at least the book value, as determined in
accordance with the Minnesota professional firm's regular method of accounting, as of the
end of the month immediately preceding the death or loss of license. The tender must be
unconditional and may not attempt to have the recipient waive any rights provided in this
section. If the Minnesota professional firm tenders a price under this paragraph within
the 90-day period, the deceased or disqualified owner's ownership interest immediately
transfers to the Minnesota professional firm regardless of any dispute as to the fairness
of the price. A disqualified owner or representative of the deceased owner's estate who
disputes the fairness of the tendered price may take the tendered price and bring suit
in district court seeking additional payment. The suit must be commenced within one
year after the payment is tendered. A Minnesota professional firm may agree with a
disqualified owner or the representative of a deceased owner's estate to delay all or part
of the payment due under this paragraph, but all right and title to the owner's ownership
interests must be acquired before the end of the 90-day period and payment may not be
secured in any way that violates sections 319B.01 to 319B.12.

Subd. 3.

Expiration of firm-issued option on death or disqualification of holder.

If the holder of an option issued under section 319B.07, subdivision 3, paragraph (a),
clause (1), dies or becomes disqualified, the option automatically expires.

new text begin Subd. 4. new text end

new text begin One-year period for surviving spouse of sole owner. new text end

new text begin For purposes
of this section, each mention of "90 days," "90-day period," or similar term shall be
interpreted as one year after the death of a professional who was the sole owner of the
professional firm if the surviving spouse of the deceased professional owns and controls
the firm after the death.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
and applies to surviving spouses of professionals who die on or after that date.
new text end

Sec. 7.

Minnesota Statutes 2008, section 319B.09, subdivision 1, is amended to read:

Subdivision 1.

Governance authority.

(a) Except as stated in paragraph (b), a
professional firm's governance authority must rest with new text begin :
new text end

new text begin (1) new text end one or more professionals, each of whom is licensed to furnish at least one
category of the pertinent professional services new text begin ; or
new text end

new text begin (2) a surviving spouse of a deceased professional who was the sole owner of the
professional firm, while the surviving spouse owns and controls the firm, but only during
the period of time ending one year after the death of the professional new text end .

(b) In a Minnesota professional firm organized under chapter 317A and in a foreign
professional firm organized under the nonprofit corporation statute of another state, at least
one individual possessing governance authority must be a professional licensed to furnish
at least one category of the pertinent professional services.

(c) Individuals who possess governance authority within a professional firm may
delegate administrative and operational matters to others. No decision entailing the
exercise of professional judgment may be delegated or assigned to anyone who is not a
professional licensed to practice the professional services involved in the decision.

(d) An individual whose license to practice any pertinent professional services is
revoked or suspended may not, during the time the revocation or suspension is in effect,
possess or exercise governance authority, hold a position with governance authority,
or take part in any decision or other action constituting an exercise of governance
authority. Nothing in this chapter prevents a board from further terminating, restricting,
limiting, qualifying, or imposing conditions on an individual's governance role as board
disciplinary action.

new text begin (e) A professional firm owned and controlled by a surviving spouse must comply
with all requirements of this chapter, except those clearly inapplicable to a firm owned
and governed by a surviving spouse who is not a professional of the same type as the
surviving spouse's decedent.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
and applies to surviving spouses of professionals who die on or after that date.
new text end

Sec. 8.

Minnesota Statutes 2008, section 471.982, subdivision 3, is amended to read:

Subd. 3.

Exemptions.

Self-insurance pools established and open for enrollment
on a statewide basis by the Minnesota League of Cities Insurance Trust, the Minnesota
School Boards Association Insurance Trust, the Minnesota Association of Townships
Insurance and Bond Trust, or the Minnesota Association of Counties Insurance Trust
and the political subdivisions that belong to them are exempt from the requirements of
this section and deleted text begin section deleted text end new text begin sections new text end 65B.48, subdivision 3 new text begin , and 60A.0811 new text end . In addition, the
Minnesota Association of Townships Insurance and Bond Trust and the townships that
belong to it are exempt from the requirement to hold the certificate of surety authorization
issued by the commissioner of commerce as provided in section 574.15.