A New Front in Health Care Reform? States Expand Legislative Oversight of Payer Conduct
In another notable development reflecting the rapidly evolving landscape of health care legislation, Pennsylvania lawmakers have introduced House Bill 2611, a bill that would create a new criminal offense applicable to certain adverse benefit determinations issued by payers. Under the proposal, an insurer’s chief executive officer could face criminal liability if an insured receives an adverse benefit determination involving a medically necessary benefit and that determination results in serious bodily injury or death. The proposal remains in committee and has not become law (and, indeed, may never become law). Even so, the bill is significant for reasons extending well beyond its likelihood of enactment – it illustrates an emerging shift in state policymaking: legislatures are increasingly moving beyond regulating health care reimbursement and are beginning to scrutinize payer conduct itself.
A copy of the proposed legislation is available here.
Background: States’ Expanding Oversight of Payer Conduct
For much of the past several years, legislative efforts on both the state and federal level have focused primarily on how payment disputes between payers and providers are resolved. The federal No Surprises Act (“NSA”) reshaped that landscape by prohibiting surprise billing and establishing an Independent Dispute Resolution (“IDR”) process for contested out-of-network payments. Many state legislatures similarly concentrated on implementing surprise billing protections or refining existing arbitration procedures. Increasingly, however, lawmakers appear now to be asking a different question – not merely how payment disputes should be resolved, but whether certain payer practices are themselves driving those disputes? That shift in focus has become increasingly visible over the past year.
That shift has become increasingly visible over the past year. In response to the effects of the NSA, payers began introducing policies that punished network hospitals that worked with out-of-network providers. Earlier this year, Indiana enacted legislation restricting these practices. Louisiana soon followed suit when it enacted its own legislation prohibiting insurers from reducing payments or taking adverse contractual action against participating facilities based solely on the network status of independent clinicians involved in a patient’s care. Taken together, those enactments reflect a growing willingness to regulate payer practices that undermine the balance Congress sought to establish through the NSA. Against that backdrop, Pennsylvania’s proposal (if enacted) represents the most ambitious expansion of legislative effort yet, reaching beyond oversight and into punitive action.
Pennsylvania Pushes Legislative Oversight Even Further
Unlike the recent legislation enacted in Indiana and Louisiana, Pennsylvania’s House Bill 2611 would not regulate reimbursement practices or modify insurance law. Instead, it would amend Pennsylvania’s criminal code by creating a new offense entitled “Aggravated Assault of an Insured.” As currently drafted, the bill would impose criminal liability on a health insurer’s chief executive officer if an insured beneficiary receives an adverse benefit determination involving a medically necessary benefit and that determination results in serious bodily injury or death. The proposal defines “chief executive officer” broadly as the highest-ranking officer or decision-maker with authority over the insurer’s affairs and incorporates existing Pennsylvania insurance-law definitions of “adverse benefit determination” and “medically necessary.” Importantly, the proposal would apply only where a denial of a medically necessary benefit is alleged to have resulted in serious bodily injury or death to the insured. It would not impose criminal liability for every adverse benefit determination.
By tying criminal liability to both coverage determination and the resulting patient harm, House Bill 2611 would create a personal and severe consequence for a narrow category of coverage denials with the most personal and severe alleged outcomes. Notably, that choice reflects a prior doctrinal development that House Bill 2611 would carry into new territory. Indeed, Civil courts have, in the past, recognized that entities making medical necessity determinations owe a duty of care to the patients those determinations affect. House Bill 2611 would carry that principle into the criminal law context – and in doing so, raises questions its text does not answer. In practice, medical necessity determinations are made not by a CEO but by medical directors and utilization reviewers within the insurance company. Whether individual liability could attach to those clinicians – under Pennsylvania's criminal code, its professional licensing framework, or otherwise – is, ultimately, a question the proposal leaves unaddressed, and one that physicians and health system administrators will be watching closely.
Whether House Bill 2611 ultimately becomes law remains uncertain. Yet, in many respects, that question is secondary to the legislative conduct the proposal contemplates. For unlike Indiana and Louisiana, which have now regulated payer conduct through administrative enforcement, Pennsylvania would seek to address certain payer decisions through criminal sanctions. In doing so, House Bill 2611 reflects a potentially significant expansion in the range of legislative tools some policymakers are willing to consider when responding to payer practices perceived as dangerous to patients. When viewed alongside the recent legislation in Indiana and Louisiana, the proposal suggests that state legislatures are no longer asking only how payment disputes should be resolved – they are increasingly asking how payer conduct itself should be regulated.
What’s Up Next? A Changing Legislative Landscape
House Bill 2611 remains pending before the Pennsylvania House Judiciary Committee, and there is no assurance it will advance in its current form (if it advances at all). Nevertheless, the proposal offers an important glimpse into how health care policy may continue to evolve. If the first several years following enactment of the NSA were defined by debates over how payment disputes should be resolved, the emerging legislative trend reflects a broader and more fundamental question – whether payer conduct itself, including coverage and medical necessity determinations far removed from out-of-network billing, should be subject to direct legislative oversight and, potentially, legal consequence. For providers, payers, and policymakers alike, that evolution may prove just as significant as the NSA itself.
HaloMD is closely monitoring developments in this area. For additional insights into this and related regulatory developments, visit our News & Resources page.