South Carolina General Assembly
113th Session, 1999-2000

Download This Bill in Microsoft Word format

Bill 1163


                    Current Status

Bill Number:                      1163
Ratification Number:              411
Act Number:                       380
Type of Legislation:              General Bill GB
Introducing Body:                 Senate
Introduced Date:                  20000217
Primary Sponsor:                  McConnell
All Sponsors:                     McConnell
Drafted Document Number:          l:\council\bills\pt\1803dw00.doc
Date Bill Passed both Bodies:     20000601
Date of Last Amendment:           20000601
Governor's Action:                S
Date of Governor's Action:        20000614
Subject:                          Insurance, public adjusters, licensing 
                                  of; Medical, Health Carrier External Review 
                                  Act, contracts to provide subrogation


                        History

Body    Date      Action Description                     Com     Leg Involved
______  ________  ______________________________________ _______ ____________
------  20000711  Act No. A380
------  20000614  Signed by Governor
------  20000608  Ratified R411
------  20000605  Scrivener's error corrected
House   20000601  Conference Committee Report            98 HCC
                  adopted, enrolled for
                  ratification
Senate  20000601  Conference Committee Report adopted    88 SCC
House   20000601  Conference powers granted,             98 HCC  Cato
                  appointed Reps. to Committee of                Tripp
                  Conference                                     Hawkins
Senate  20000601  Conference powers granted,             88 SCC  Saleeby
                  appointed Senators to Committee                McConnell
                  of Conference                                  Reese
Senate  20000601  Insists upon amendment
House   20000601  Non-concurrence in Senate amendment
Senate  20000531  House amendments amended,
                  returned to House with amendment
House   20000531  Read third time, returned to Senate
                  with amendment
House   20000530  Amended, read second time
------  20000525  Scrivener's error corrected
House   20000524  Committee report: Favorable with       26 HLCI
                  amendment
House   20000425  Introduced, read first time,           26 HLCI
                  referred to Committee
Senate  20000420  Amended, read third time, 
                  sent to House
Senate  20000419  Amended, read second time, 
                  notice of general amendments
------  20000329  Scrivener's error corrected
Senate  20000323  Committee report: Favorable with       02 SBI
                  amendment
Senate  20000217  Introduced, read first time,           02 SBI
                  referred to Committee


              Versions of This Bill
Revised on March 23, 2000 - Word format
Revised on March 29, 2000 - Word format
Revised on April 19, 2000 - Word format
Revised on April 20, 2000 - Word format
Revised on May 24, 2000 - Word format
Revised on May 25, 2000 - Word format
Revised on May 30, 2000 - Word format
Revised on May 31, 2000 - Word format
Revised on June 1, 2000 - Word format
Revised on June 5, 2000 - Word format

View additional legislative information at the LPITS web site.


(Text matches printed bills. Document has been reformatted to meet World Wide Web specifications.)

(A380, R411, S1163)

AN ACT TO AMEND TITLE 38, CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING CHAPTER 48 SO AS TO PROVIDE FOR THE LICENSING OF A PUBLIC INSURANCE ADJUSTER BY THE DIRECTOR OF THE DEPARTMENT OF INSURANCE; TO AMEND SECTION 38-33-50, AS AMENDED, RELATING TO THE POWERS OF HEALTH MAINTENANCE ORGANIZATIONS, SO AS TO PROVIDE THAT A HEALTH MAINTENANCE ORGANIZATION MAY INCLUDE A PROVISION FOR SUBROGATION IN A CONTRACT ISSUED AFTER JANUARY 1, 1988, TO THE ENROLLEE'S RIGHT OF RECOVERY AGAINST A THIRD PARTY FOR NOT MORE THAN THE AMOUNT OF INSURANCE BENEFITS THAT THE HEALTH MAINTENANCE ORGANIZATION HAS PAID PREVIOUSLY IN RELATION TO THE ENROLLEE'S INJURY BY THE LIABLE THIRD PARTY; TO AMEND CHAPTER 71 OF TITLE 38, RELATING TO ACCIDENT AND HEALTH INSURANCE, BY ADDING ARTICLE 19 SO AS TO ENACT THE "HEALTH CARRIER EXTERNAL REVIEW ACT" BY PROVIDING STANDARDS FOR THE ESTABLISHMENT AND MAINTENANCE OF EXTERNAL REVIEW PROCEDURES TO ASSURE THAT COVERED PERSONS HAVE THE OPPORTUNITY FOR AN INDEPENDENT REVIEW OF ADVERSE AND FINAL ADVERSE DETERMINATIONS.

Be it enacted by the General Assembly of the State of South Carolina:

Public insurance adjusters

SECTION 1. Title 38 of the 1976 Code is amended by adding:

"CHAPTER 48

Public Insurance Adjusters

Section 38-48-10. As used in this chapter:

(1) 'Public insurance adjuster' means any individual who, for salary, fee, commission, or other compensation, engages in public adjusting and who is licensed under Section 38-48-20. A public insurance adjuster is not an attorney licensed to practice by the South Carolina Supreme Court who adjusts insurance losses in the course of the practice of law. A public insurance adjuster is not an adjuster representing an insurer and is not licensed in accordance with the provisions of Chapter 47.

(2) 'Public adjusting' means investigating, appraising or evaluating, and reporting to an insured in relation to a first party claim arising under insurance contracts, that insure the real or personal property, or both, of the insured. Public adjusting does not include acting in any manner in relation to claims for damages to or arising out of the operation of a motor vehicle. Public adjusting does not include any activities which may constitute the unauthorized practice of law. Nothing in this chapter shall be construed as permitting the unauthorized practice of law.

Section 38-48-20. Every individual commonly called a public adjuster, adjusting losses for an insured, must be licensed by the director or his designee. These individuals shall apply for a license on a form prescribed by the director or his designee. The written examination for a public adjuster license shall be the same as that prescribed for insurance adjusters. The director or his designee shall satisfy himself that each applicant for a public adjuster's license is an individual of good moral character, has sufficient knowledge of the insurance business and duties as a public adjuster, has not violated the insurance laws of the State, and is a fit and proper individual for the position. No license may be issued pursuant to reciprocal arrangements or agreements as provided in Section 38-48-40 to a nonresident public adjuster who resides in a state which has enacted a statute requiring the licensing of public adjusters and which refuses to license South Carolina public adjusters; however, a license may be issued to such applicants upon a successful completion of the examination for public adjusters prescribed by the director or his designee. Only licensed public adjusters may solicit business from an insured who has sustained an insured loss. Individuals engaged in providing public adjusting services without a license shall be deemed to be engaged in unauthorized transaction of insurance business and subject to the remedies provided in Chapter 25, as well as the disgorgement of fees or restitution to the insured for any fees paid.

Section 38-48-30. When an individual applies for a public adjuster's license, he shall supply the department his business and residence addresses and telephone numbers. The public adjuster shall notify the department within thirty days of any change in these addresses.

Section 38-48-40. The director or his designee may enter into reciprocal agreements with the insurance commissioners or directors of other states in regard to licensing of nonresident public adjusters if in his judgment these arrangements or agreements are in the best interests of the State and if the applicant for a public adjuster's license meets the minimum statutory requirements in this State for the issuance of a license.

Section 38-48-50. The biennial fee for a public adjuster's license is eighty dollars payable in advance and fully earned when received, not refundable, transferable, nor proratable. However, when the laws of another state of the United States required in this State of nonresident public adjusters, the nonresident public adjusters shall pay an amount equal to the amount of charges imposed by the laws of this State upon public adjusters of this State.

Section 38-48-60. A public adjuster's license is for an indefinite term, unless sooner revoked or suspended, if the biennial license fee is paid at the time and in the manner which the department provides by regulation. If the license fee for a public adjuster is not received when due, the license must be canceled. If the license is to be reinstated, an original application must be filed and a reinstatement fee equal to the biennial license fee unpaid must be paid in addition to the regular biennial license fee.

Section 38-48-70. Public insurance adjusters are declared to be acting as the agents of the insureds they represent in the adjustment of any loss. A public insurance adjuster shall:

(a) be honest and fair in all communications with the insured and with the insurer or its representatives;

(b) have no financial interests in any aspect of the insured's claim, other than the salary, fee, commission, or other compensations that may be established in the written contract between the insured and the public insurance adjuster;

(c) not refer or direct any insured needing repairs or other services in connection with a loss to any person with whom the public insurance adjuster has a financial interest; nor to any person who will or is reasonably anticipated to provide the public adjuster any direct or indirect compensation for the referral of any resulting business;

(d) not prevent or attempt to dissuade an insured from communicating with an insurer, the insurer's adjuster, an independent adjuster representing the insurer, an attorney, or any other person regarding the settlement of the insured's claim;

(e) not engage in any conduct which constitutes the unauthorized practice of law;

(f) not acquire any interest in salvage of property subject to his contract, except with the express written permission of the insured, after settlement with the insurer;

(g) not solicit or enter into any agreement for the repair or replacement of damaged property on which the public adjuster has been engaged to adjust or settle claims; and

(h) not offer or provide advice as to whether the insured's claim is covered by the insured's contract with the insurer.

Section 38-48-80. Any agreement between the insured and the public insurance adjuster for the services described in this chapter shall be in writing and signed by both parties. The contract shall:

(a) state the full consideration for the public adjuster's services;

(b) specify in bold and conspicuous language that the consideration, compensation, commission, fee, percentage, or salary due to the public adjuster shall be paid by the insured from any sums the public adjuster assists the insured in recovering and not paid by the insurer;

(c) legibly state the full name and address as specified in the department's record of the licensed public adjuster;

(d) state the insured's full name and street address, the address and description of the loss, and the name of the insured's insurance company and policy number;

(e) disclose to the insured in bold, conspicuous language that (1) it is not necessary for the insured to hire a public adjuster; (2) the insured has the right to communicate directly with the insurer, the insurer's adjuster(s), the insured's counsel, or counsel for the insurer; and (3) the public adjuster is not an agent or employee of the insurer;

(f) show the date on which the contract was signed by both parties;

(g) clearly and conspicuously disclose the insured's right to rescind the contract within five working days or otherwise cancel it as provided by South Carolina law; and

(h) clearly and conspicuously outline the services to be provided by the public adjuster to the insured.

Promptly after the contract of the insured with the public adjuster has been executed, and after the time to rescind has elapsed, the public adjuster shall give written notice to the insurer or its adjuster or representative that the public adjuster has entered into a written contract with the insured.

Section 38-48-90. (A) No public adjuster shall compensate or provide anything of value except as provided in Section 38-57-160 to a person who is not licensed as a public adjuster in return for the referral of a business prospect to the public adjuster; provided, however, a public adjuster may enter into an agreement with another licensed public adjuster for the referral of business and sharing of commissions or compensation. Such an arrangement must be disclosed to the insured in the written agreement.

(B) No public adjuster shall represent or act as an adjuster representing an insurance company, either as an employee of the insurer or as an independent adjuster. No independent adjuster or adjuster licensed in accordance with the provisions of Chapter 47 shall act as a public insurance adjuster.

Section 38-48-100. All advertising by a public adjuster shall fairly and accurately describe the services to be rendered and shall not misrepresent either the public adjuster or the public adjuster's abilities and shall comply with the following requirements:

(a) Advertisements must comply with all the requirements of Title 38 and the Unfair Trade Practices law.

(b) All advertisements must state the full name of the public adjuster and the public adjuster's firm, if applicable, and the complete business address and phone numbers.

(c) Advertisements shall not create an unjust expectation about results the public adjuster can achieve.

Section 38-48-110. The insured shall have until the close of business on the fifth business day after signing the contract to rescind the agreement. The exercise of the right to rescind the agreement must be in writing and delivered to the public adjuster at the address shown on the agreement.

If the insured property that is the subject of the claim is not the primary residence of the insured or used by the insured primarily for personal, family, or household purposes, the insured may waive the right to rescind the agreement. The waiver shall be in writing and signed and dated by the insured.

Section 38-48-120. Every public adjuster shall maintain all records of losses and claims adjusted for three years after the settlement or closing of each claim.

Section 38-48-130. It is unlawful for a person to:

(a) act as a public adjuster on a contract made other than as authorized by the laws of this State or made by an insurer who is not licensed to do business in this State; or

(b) adjust or aid in the adjustment, either directly or indirectly, of a claim arising under a contract of insurance not authorized by the laws of this State; or

(c) engage in the unauthorized transaction of insurance business as defined in this article and Chapter 25; or

(d) act as both a contractor and a public adjuster in the adjustment of a claim for an insured; or

(e) violate any provision of this title.

A person who violates the provisions of this section is guilty of a felony and, upon conviction, must be fined in the discretion of the court or imprisoned not more than two years, or both.

Section 38-48-140. When the director or his designee determines after investigation that there has been a violation of this chapter by a public adjuster, the director or his designee, after providing notice and an opportunity for a hearing in accordance with the Administrative Procedures Act, may impose penalties provided for in Section 38-2-10.

Section 38-48-150. Any provision of this statute that is deemed to be void, unenforceable, unconstitutional, or illegal by any court of competent jurisdiction shall be deemed severable and shall not affect the constitutionality, enforceability, or legality of the remaining provisions. The remaining provisions shall continue in full force and effect.

Section 38-48-160. The Department of Insurance shall promulgate regulations necessary to carry out the provisions of this chapter."

HMO contract may include subrogation clause

SECTION 2. A. Section 38-33-50 of the 1976 Code, as last amended by Act 98 of 1999, is further amended by adding:

"(C) Any contract issued by a Health Maintenance Organization in this State on or after January 1, 1988, may include provision for subrogation by the Health Maintenance Organization to the enrollee's right of recovery against a liable third party for not more than the amount of insurance benefits that the Health Maintenance Organization has paid previously in relation to the enrollee's injury by the liable third party. If the director or his designee, upon being petitioned by the enrollee, determines that the exercise of subrogation by a Health Maintenance Organization is inequitable and commits an injustice to the enrollee, subrogation is not allowed. Attorney's fees and costs must be paid by the Health Maintenance Organization from the amounts recovered. This determination by the director or his designee may be appealed to the Administrative Law Judge Division as provided by law in accordance with Section 38-3-210."

B. This section takes effect upon approval by the Governor.

Health Carrier External Review Act

SECTION 3. A. Chapter 71, Title 38 of the 1976 Code is amended by adding:

"Article 19

Health Carrier External Review Act

Section 38-71-1910. This article may be cited as the 'Health Carrier External Review Act'.

Section 38-71-1920. For purposes of this article:

(1) 'Adverse determination' means a determination by a health carrier or its designee that an admission, availability of care, continued stay, or other health care service that is a covered benefit has been reviewed and, based upon the information provided:

(a) does not meet the health carrier's requirements for medical necessity, appropriateness, health care setting, level of care, or effectiveness; or

(b) is experimental or investigational and involves a condition that is life-threatening or seriously disabling, and the requested service or payment for the service is, therefore, denied, reduced, or terminated.

(2) 'Authorized representative' means:

(a) a person to whom a covered person has given express written consent to represent the covered person in an external review;

(b) a person authorized by law to provide substituted consent for a covered person; or

(c) a family member of the covered person or the covered person's treating health care professional when the covered person is unable to provide consent.

(3) 'Clinical review criteria' means the written screening procedures, decision abstracts, clinical protocols, and practice guidelines used by a health carrier to determine the necessity and appropriateness of health care services.

(4) 'Covered benefits' means those health care services to which a covered person is entitled under the terms of a health benefit plan.

(5) 'Covered person' means an insured, subscriber, enrollee, or other individual entitled to covered benefits under a health benefit plan.

(6) 'Director or his designee' means the Director of the South Carolina Department of Insurance or a person designated by the director.

(7) 'Facility' means an institution providing health care services or a health care setting including, but not limited to, hospitals and other licensed inpatient centers, ambulatory surgical or treatment centers, skilled nursing centers, residential treatment centers, diagnostic, laboratory, and imaging centers, and rehabilitation and other therapeutic health settings.

(8) 'Final adverse determination' means an adverse determination involving a covered benefit that has been upheld by a health carrier, or its designee, at the completion of the health carrier's internal appeal process.

(9) 'Health benefit plan' means a policy, contract, or certificate issued by a health carrier that provides benefits consisting of medical care provided directly, through insurance or reimbursement, or otherwise, and including items and services paid for as medical care under any hospital or medical service policy or certificate, hospital or medical service plan contract, or health maintenance organization contract offered by a health insurance issuer, except:

(a) coverage only for accident or disability income insurance or any combination of accident and disability income insurance;

(b) coverage issued as a supplement to liability insurance;

(c) liability insurance, including general liability insurance and automobile liability insurance;

(d) workers' compensation or similar insurance;

(e) automobile medical payment insurance;

(f) credit-only insurance;

(g) coverage for on-site medical clinics;

(h) other similar insurance coverage specified in regulations under which benefits for medical care are secondary or incidental to other insurance benefits;

(i) if offered separately:

(i) limited scope dental or vision benefits;

(ii) benefits for long-term care, nursing home care, home health care, community-based care, or any combination of these;

(iii) other similar, limited benefits, as are specified in regulations;

(j) if offered as independent, noncoordinated benefits:

(i) coverage only for a specified disease or illness;

(ii) hospital indemnity or other fixed indemnity insurance;

(k) if offered as a separate insurance policy:

(i) Medicare supplemental health insurance, as defined under Section 1882(g)(1) of the Social Security Act;

(ii) coverage supplemental to the coverage provided under Chapter 55, Title 10 of the United States Code; and

(iii) similar supplemental coverage under a group health plan;

(l) any health benefit plan offered or administered by the State Budget and Control Board.

(10) 'Health care professional' means a physician, dentist, or other person properly licensed, where required, to furnish health care services.

(11) 'Health care provider' or 'provider' means a health care professional or a facility.

(12) 'Health care services' means services for the diagnosis, prevention, treatment, cure, or relief of a health condition, illness, injury, or disease.

(13) 'Health carrier' means an entity that provides health insurance coverage in this State and an insurance company, a health maintenance organization, and any other entity providing health insurance coverage which is licensed to engage in the business of insurance in this State and which is subject to state insurance regulation.

(14) 'Independent review organization' means an entity that conducts independent external reviews of adverse determinations and final adverse determinations.

(15) 'Life-threatening condition or disease' means a condition or disease which, according to the current diagnosis by the covered person's treating physician, has a high probability of causing the covered person's death within three years.

(16) 'Medical and scientific evidence' means:

(a) peer-reviewed scientific studies published in, or accepted for publication by, medical journals that meet nationally recognized requirements for scientific manuscripts and that submit most of their published articles for review by experts who are not part of the editorial staff;

(b) peer-reviewed medical literature, including literature relating to therapies reviewed and approved by a qualified institutional review board, biomedical compendia, and other medical literature that meets the criteria of the National Institute of Health's National Library of Medicine for indexing in Index Medicus, Excerpta Medicus, Medline and Medlars database Health Services Technology Assessment Research;

(c) medical journals recognized by the Secretary of Health and Human Services, under Section 1861 (t)(2) of the federal Social Security Act;

(d) these standard reference compendia: the American Hospital Formulary Service - Drug Information; the American Medical Association Drug Evaluation; the American Dental Association Accepted Dental Therapeutics; and the United States Pharmacopoeia - Drug Information;

(e) findings, studies, or research conducted by or under the auspices of federal government agencies and nationally recognized federal research institutes, including the federal Agency for Health Care Policy and Research, National Institutes of Health, National Cancer Institute, National Academy of Sciences, Health Care Financing Administration, Congressional Office of Technology Assessment, and any national board recognized by the National Institutes of Health for the purpose of evaluating the medical value of health services.

(17) 'Person' means a corporation, partnership, association, voluntary organization, individual, or any other entity, organization, or aggregation of individuals.

(18) 'Retrospective review' means a review of medical necessity conducted after services have been provided to a patient; this term does not include the review of a claim that is limited to an evaluation of reimbursement levels, veracity of documentation, accuracy of coding, or adjudication for payment.

(19) 'Serious medical condition' means a health condition or illness that requires immediate medical attention, where failure to provide immediate medical attention would result in a serious impairment to bodily functions, serious dysfunction of a bodily organ or part, or would place the person's health in serious jeopardy.

(20) 'Seriously disabling' means a health condition or illness that involves a serious impairment to bodily functions or serious dysfunction of a bodily organ or part.

(21) 'Utilization review' means a system for reviewing the necessary, appropriate, and efficient allocation of health care resources and services given or proposed to be given to a patient or a group of patients.

Section 38-71-1930. (A) Except as provided in subsection (B), this article applies to all health carriers that provide or perform utilization review, including those plans subject to regulation under Chapter 33.

(B) This article does not apply to the administrative services performed on behalf of a self-funded plan subject to the Employee Retirement Income Security Act (ERISA) of 1974.

(C) For purposes of this article, notice to the subscriber or insured entitled to covered benefits under a health benefit plan shall constitute notice to the covered person. This subsection does not affect the health plan's obligations under a court order requiring a parent to provide health coverage pursuant to Section 20-7-1200, et seq.

Section 38-71-1940. (A) A health carrier shall notify the covered person in writing of the right to request an external review and include the appropriate statements and information set forth in subsection (B) at the time the health carrier sends written notice of either an adverse determination or a final adverse determination.

(B)(1) The health carrier shall include in the notice required under subsection (A) a clear and concise description of the right of the covered person to request a standard external review pursuant to Section 38-71-1970 or an expedited external review pursuant to Section 38-71-1980 upon receipt of an adverse determination or a final adverse determination and the circumstances under which the covered person is not required to exhaust the health carrier's internal appeal process or is considered to have exhausted the health carrier's internal appeal process pursuant to Section 38-71-1960.

(2) In addition to the information to be provided pursuant to subsection (B)(1), the health carrier shall include a brief description of both the standard and expedited external review procedures.

(3) As part of any forms provided under subsection (B)(2), the health carrier shall include an authorization form, or other document promulgated or approved by the director or his designee, by which the covered person, for purposes of conducting an external review under this article, authorizes the health carrier to disclose protected health information, including medical records, concerning the covered person that are pertinent to the external review.

(C) A notice, statement, or form required by this section must achieve a score of no lower than 70 on the Flesch Reading East Test and must be printed in no smaller than 12 point type. No part of the notice, statement, or form may be printed in all capitals. A notice, statement, or form required by this section must include a statement of the right of the covered person to contact the director or his designee for assistance. The statement must include the telephone number and address of the director or his designee.

(D) A notice, statement, or form required by this section must be approved by the Department of Insurance. The director or his designee shall promulgate standard language, in a specified font size and type for any notice, statement, or form required by this section. Use of the standard language in the specified font size and type promulgated by the department pursuant to this section shall constitute compliance with the notice requirements of this section.

Section 38-71-1950. (A) All requests for external review must be made in writing to the health carrier.

(B) A covered person or his authorized representative may make a request for an external review of an adverse determination or final adverse determination only when the amount payable for covered benefits is at least five hundred dollars.

(C) A covered person is not entitled to an external review of a retrospective review determination unless the covered person has exhausted the health carrier's internal appeal process and may be held financially responsible for the covered benefits.

Section 38-71-1960. (A)(1) Except in cases where the covered person's treating physician has certified in writing that the covered person has a serious medical condition, or where the denial of coverage is based on a determination that the health care service or treatment recommended or requested is experimental or investigational and the covered person's treating physician has provided the certifications required pursuant to Section 38-71-1980, a request for a standard or expedited external review may not be made until the covered person has exhausted the health carrier's internal appeal process.

(2) A covered person is considered to have exhausted the health carrier's internal appeal process for purposes of this section, if the covered person or his authorized representative:

(a) has filed an appeal involving an adverse determination pursuant to the health carrier's internal appeal process; and

(b) the health carrier has not issued a written decision within the time frames set forth in the health carrier's internal appeals process after receipt of all information necessary to complete the appeal and the covered person or his authorized representative has not agreed to a delay.

(B) A request for an external review of an adverse determination may be made before the covered person has exhausted the health carrier's internal appeal process whenever the health carrier agrees to waive the exhaustion requirement.

(C) If the requirement to exhaust the health carrier's internal appeal process is waived under subsection (B), the covered person or his authorized representative may file a request in writing for an external review.

Section 38-71-1970. (A)(1) Within sixty days after the date of receipt of a notice of an adverse determination or final adverse determination pursuant to Section 38-71-1940, a covered person or his authorized representative may file a request for an external review with the health carrier.

(2) If the denial of coverage is based on a determination that the health care service or treatment recommended or requested is experimental or investigational, the request for review must include a certification from the covered person's treating physician who must be a licensed physician qualified to practice in the area of medicine appropriate to treat the covered person's condition that:

(a) the covered person has a life-threatening disease or seriously disabling condition; and

(b) at least one of the following situations is applicable:

(i) standard health care services or treatments have not been effective in improving the condition of the covered person;

(ii) standard health care services or treatments are not medically appropriate for the covered person; or

(iii) the recommended or requested service or treatment is more beneficial than the standard health care service or treatment covered by the health carrier; and

(c) medical and scientific evidence using accepted protocols demonstrate that the health care service or treatment requested by the covered person that is the subject of the adverse determination or final adverse determination is more beneficial to the covered person than available standard health care services or treatments and the adverse risks of the recommended or requested health care service or treatment would not be substantially increased over those of the standard services or treatments.

(B)(1) Within five business days from the date the health carrier receives a request for an external review, the health carrier or its designee shall:

(a) assign an independent review organization from the list of approved independent review organizations compiled and maintained pursuant to Section 38-71-2000 to conduct an external review; and

(b) send the documents and any information considered in making the adverse determination or final adverse determination to the independent review organization; or

(c) inform the covered person or his authorized representative in writing that the request does not meet the criteria for external review pursuant to this article and include a statement explaining the reason for nonacceptance and the right of the covered person to contact the director or his designee for assistance. The statement shall include the telephone number and address of the director or his designee;

(2) Except as provided in subsection (B)(3), failure by the health carrier or its designee to send the documents and information within the time specified in subsection (B)(1) may not delay the conduct of the external review.

(3)(a) If the health carrier or its designee fails to send the documents and information within the time specified in subsection (B)(1), the independent review organization may terminate the external review and make a decision to reverse the adverse determination or final adverse determination.

(b) Immediately upon making the decision under subsection (B)(3)(a), the independent review organization shall notify the covered person or his authorized representative and the health carrier.

(C)(1) Within five business days after receipt of the request for external review from the health carrier, the independent review organization shall determine whether all the information, certifications, and forms required to process an external review, including the release form provided under Section 38-71-1940B(3) have been provided. The independent review organization shall immediately notify the covered person or his authorized representative in writing if additional information is required.

(2) The independent review organization shall include in the notice provided pursuant to subsection (C)(1) a clear statement that the covered person or his authorized representative may submit in writing to the independent review organization within seven business days following the date of receipt of the notice additional information and supporting documentation that the independent review organization shall consider when conducting the external review.

(3) If the request is not:

(a) complete, the independent review organization shall inform the covered person or his authorized representative what information or materials are needed to make the request complete; or

(b) accepted for external review, the independent review organization shall inform the covered person or his authorized representative and the health carrier in writing of the reasons for its nonacceptance.

(D)(1) If a request for external review is accepted for external review, the independent review organization shall notify the health carrier and the covered person or his authorized representative.

(2) In reaching a decision, the independent review organization is not bound by any decisions or conclusions reached during the health carrier's utilization review process, as set forth in Chapter 70, or the health carrier's internal appeal process.

(3) If the denial of coverage is based on a determination that the health care service or treatment recommended or requested is experimental or investigational, at the time a request is accepted for external review pursuant to subsection (C)(3),

(a) the independent review organization shall:

(i) immediately select a clinical peer review panel pursuant to subsection (D)(3)(b) to conduct the external review; and

(ii) based on the opinions of the clinical peer reviewers on the panel, make a decision to uphold or reverse the adverse determination or final adverse determination.

(b)(i) Notwithstanding the provisions of subsection (D)(3)(b)(ii), the panel shall consist of the number of physicians or other health care professionals considered appropriate by the independent review organization who meet the minimum qualifications described in Section 38-71-2010 and, through clinical experience in the past three years, are experts in the treatment of the covered person's condition and knowledgeable about the recommended or requested health care service or treatment.

(ii) The health carrier may require that the panel consist of at least three physicians or other health care professionals who meet the minimum qualifications described in Section 38-71-2010 and, through clinical experience in the past three years, are experts in the treatment of the covered person's condition and knowledgeable about the recommended or requested health care service or treatment.

(iii) Neither the covered person nor his authorized representative, if applicable, nor the health carrier shall choose or control the choice of the physicians or other health care professionals to be selected for the clinical peer review panel.

(c) Each member of the clinical peer review panel shall provide a written opinion to the independent review organization on whether to uphold or reverse the adverse determination or the final adverse determination. Each clinical peer reviewer's opinion shall include a description:

(i) of the covered person's medical condition, which is the subject of the adverse determination or final adverse determination;

(ii) of the indicators relevant to determining whether there is sufficient evidence to demonstrate that the recommended or requested health care service or treatment is more beneficial to the covered person than standard services or treatments and that the adverse risks of the recommended or requested health care service or treatment would not be substantially increased over those of the standard services or treatment; and

(iii) analysis of the medical and scientific evidence used in making the determination.

(E)(1) The independent review organization shall review all of the information and documents received from the health carrier and any other information submitted in writing to the independent review organization by the covered person or his authorized representative.

(2) Upon receipt of any information submitted by the covered person or his authorized representative pursuant to subsection (C)(2), the independent review organization immediately shall forward the information to the health carrier.

(F)(1) The health carrier may reconsider its adverse determination or final adverse determination at any time.

(2) Reconsideration by the health carrier may not delay or terminate the external review.

(3) The health carrier may terminate the external review only if the health carrier reverses its adverse determination or final adverse determination.

(4)(a) within five business days of making the decision to reverse its adverse determination or final adverse determination, as provided in subsection (F)(3), the health carrier shall send written notice to the covered person or his authorized representative and the independent review organization.

(b) the independent review organization shall terminate the external review upon receipt of the notice from the health carrier sent pursuant to subsection (F)(4)(a).

(G) In addition to the documents and information provided or transmitted pursuant to this section, the independent review organization, to the extent the information or documents are available and the independent review organization considers them appropriate, shall consider the following in reaching a decision:

(1) the covered person's relevant medical records;

(2) the treating health care provider's recommendation;

(3) consulting reports from appropriate health care professionals and other documents submitted by the health carrier, covered person, his authorized representative, or the covered person's treating provider;

(4) the most appropriate practice guidelines, which may include generally accepted practice guidelines, evidence-based practice guidelines, or any other practice guidelines developed by the federal government or national or professional medical societies, boards, and associations;

(5) any applicable clinical review criteria developed and used by the health carrier or its designee; and

(6) If adverse determination or final adverse determination involves a denial of coverage based on a determination that the health care service or treatment recommended or requested is experimental or investigational, whether:

(a) the recommended or requested health care service or treatment has been approved by the Federal Food and Drug Administration; or

(b) medical and scientific evidence demonstrates that the expected benefits of the recommended or requested health care service or treatment would be greater than the benefits of any available standard service or treatment and the adverse risks of the recommended or requested health care service or treatment would not be substantially increased over those of standard services or treatments.

(H)(1) Within forty-five days after the date of receipt of the request for an external review by the health carrier, the independent review organization shall provide written notice of its decision to uphold or reverse the adverse determination or the final adverse determination to the covered person or his authorized representative and the health carrier.

(2) If adverse determination or final adverse determination involves a denial of coverage based on a determination that the health care service or treatment recommended or requested is experimental or investigational, the independent review organization shall make a decision to uphold or reverse the health carrier's adverse determination or final adverse determination based upon the recommendation of a majority of the clinical peer review panel, if more than one physician or other health care professional serves on the panel.

(3) The independent review organization shall include in the notice sent pursuant to subsection (H)(1):

(a) a general description of the reason for the request for external review;

(b) the date the independent review organization received the assignment from the health carrier;

(c) the date the external review was conducted, if appropriate;

(d) the date of its decision;

(e) the principal reason or reasons for its decision;

(f) the rationale for its decision;

(g) references to the evidence or documentation, including the practice guidelines, considered in reaching its decision; and

(h) the written opinions of the clinical peer review panel, if any.

(4) Within five business days of receipt of a notice of a decision pursuant to subsection (H)(1) reversing the adverse determination or final adverse determination, the health carrier shall approve the covered benefit that was the subject of the adverse determination or final adverse determination, subject to applicable contract exclusions, limitations, or other provisions.

(I) The assignment by a health carrier of an approved independent review organization to conduct an external review in accordance with this section must be fair and impartial. The health carrier and the independent review organization shall comply with standards promulgated by the director or his designee by regulation or bulletin to ensure fairness and impartiality in the assignment by health carriers of approved independent review organizations to conduct external reviews, including its term, its termination, and payment arrangement.

Section 38-71-1980. (A)(1) Within fifteen days after the date of receipt of a notice of an adverse determination or final adverse determination pursuant to Section 38-71-1940, a covered person or his authorized representative may file a request for an expedited external review with the health carrier at the time the covered person receives:

(a) an adverse determination if the covered person's treating physician has certified that the covered person has a serious medical condition;

(b) a final adverse determination if:

(i) the covered person's treating physician has certified that the covered person has a serious medical condition; or

(ii) the final adverse determination concerns an admission, availability of care, continued stay, or health care service for which the covered person received emergency medical care, as defined in Section 38-71-1520(2), but has not been discharged from a facility, if the covered person may be held financially responsible for the emergency medical care.

(2) If the denial of coverage is based on a determination that the health care service or treatment recommended or requested is experimental or investigational, the request for review must include a certification from the covered person's treating physician who must be a licensed physician qualified to practice in the area of medicine appropriate to treat the covered person's condition that:

(a) the covered person has a life-threatening disease or seriously disabling condition; and

(b) at least one of the following situations is applicable:

(i) standard health care services or treatments have not been effective in improving the condition of the covered person;

(ii) standard health care services or treatments are not medically appropriate for the covered person; or

(iii) the recommended or requested service or treatment is more beneficial than the standard health care service or treatment covered by the health carrier; and

(c) medical and scientific evidence using accepted protocols demonstrate that the health care service or treatment requested by the covered person that is the subject of the adverse determination or final adverse determination is more beneficial to the covered person than available standard health care services or treatments and the adverse risks of the recommended or requested health care service or treatment would not be substantially increased over those of the standard services or treatments.

(B)(1) At the time the health carrier receives a request for an expedited external review, the health carrier or its designee as expeditiously as reasonably possible shall:

(a) assign an independent review organization from the list of approved independent review organizations compiled and maintained pursuant to Section 38-71-2000 to conduct the expedited external review; and

(b) send all the documents and any information considered in making the adverse determination or final adverse determination to the independent review organization by overnight delivery service or any other reasonably available expeditious method; or

(c) inform the covered person or his authorized representative that the request does not meet the criteria for external review pursuant to this article and include a statement of the right of the covered person to contact the director or his designee for assistance. The statement shall include the telephone number and address of the director or his designee.

(2) Except as provided in subsection (B)(3), failure by the health carrier or its designee to send the documents and information within the time specified in subsection (B)(1) may not delay the conduct of the external review.

(3)(a) If the health carrier or its designee fails to send the documents and information within the time specified in subsection (B)(1), the independent review organization may terminate the external review and make a decision to reverse the adverse determination or final adverse determination.

(b) Immediately upon making the decision under subsection (B)(3)(a), the independent review organization shall notify the covered person or his authorized representative and the health carrier.

(C)(1) In reaching a decision, the independent review organization is not bound by any decisions or conclusions reached during the health carrier's utilization review process, as set forth in Chapter 70, or the health carrier's internal appeal process.

(2) If the denial of coverage is based on a determination that the health care service or treatment recommended or requested is experimental or investigational,

(a) the independent review organization shall:

(i) immediately select a clinical peer review panel pursuant to subsection (C)(2)(b) to conduct the external review; and

(ii) based on the opinions of the clinical peer reviewers on the panel, make a decision to uphold or reverse the adverse determination or final adverse determination.

(b)(i) notwithstanding the provisions of subsection (C)(2)(b)(ii), the panel shall consist of the number of physicians or other health care professionals, considered appropriate by the independent review organization, who meet the minimum qualifications described in Section 38-71-2010 and, through clinical experience in the past three years, are experts in the treatment of the covered person's condition and knowledgeable about the recommended or requested health care service or treatment.

(ii) The health carrier may require that the panel consist of at least three physicians or other health care professionals who meet the minimum qualifications described in Section 38-71-2010 and, through clinical experience in the past three years, are experts in the treatment of the covered person's condition and knowledgeable about the recommended or requested health care service or treatment.

(iii) Neither the covered person nor his authorized representative, if applicable, nor the health carrier shall choose or control the choice of the physicians or other health care professionals to be selected for the clinical peer review panel.

(c) Each member of the clinical peer review panel shall provide an opinion to the independent review organization on whether to uphold or reverse the adverse determination or the final adverse determination. Each clinical peer reviewer's opinion shall include a description:

(i) of the covered person's medical condition, which is the subject of the adverse determination or final adverse determination;

(ii) of the indicators relevant to determining whether there is sufficient evidence to demonstrate that the recommended or requested health care service or treatment is more beneficial to the covered person than standard services or treatments and that the adverse risks of the recommended or requested health care service or treatment would not be substantially increased over those of the standard services or treatment; and

(iii) analysis of the medical and scientific evidence used in making the determination.

(D) In addition to the documents and information provided or transmitted pursuant to this section, the independent review organization, to the extent the information or documents are available and the independent review organization considers them appropriate, shall consider the following in reaching a decision:

(1) the covered person's relevant medical records;

(2) the treating health care provider's recommendation;

(3) consulting reports from appropriate health care professionals and other documents submitted by the health carrier, covered person, his authorized representative, or the covered person's treating provider;

(4) the most appropriate practice guidelines, which may include generally accepted practice guidelines, evidence-based practice guidelines, or any other practice guidelines developed by the federal government or national or professional medical societies, boards, and associations;

(5) any applicable clinical review criteria developed and used by the health carrier or its designee; and

(6) if adverse determination or final adverse determination involves a denial of coverage based on a determination that the health care service or treatment recommended or requested is experimental or investigational, whether:

(a) the recommended or requested health care service or treatment has been approved by the federal Food and Drug Administration; or

(b) medical and scientific evidence demonstrates that the expected benefits of the recommended or requested health care service or treatment would be greater than the benefits of any available standard service or treatment and the adverse risks of the recommended or requested health care service or treatment would not be substantially increased over those of standard services or treatments.

(E)(1) The health carrier may reconsider its adverse determination or final adverse determination at any time.

(2) Reconsideration by the health carrier may not delay or terminate the external review.

(3) The health carrier may terminate the external review only if the health carrier reverses its adverse determination or final adverse determination.

(4)(a) As expeditiously as reasonably possible upon making the decision to reverse its adverse determination or final adverse determination, as provided in subsection (E)(3), the health carrier shall send notice to the covered person or his authorized representative and the independent review organization.

(b) The independent review organization shall terminate the external review upon receipt of the notice from the health carrier sent pursuant to subsection (E)(4)(a).

(F)(1) As expeditiously as reasonably possible, but in no event more than three business days after the date of receipt of the request for an expedited external review by the health carrier, the independent review organization shall provide notice of its decision to uphold or reverse the adverse determination or the final adverse determination to the:

(a) covered person or his authorized representative; and

(b) health carrier.

(2) If adverse determination or final adverse determination involves a denial of coverage based on a determination that the health care service or treatment recommended or requested is experimental or investigational, the independent review organization shall make a decision to uphold or reverse the health carrier's adverse determination or final adverse determination based upon the recommendation of a majority of the clinical peer review panel, if more than one physician or other health care professional serves on the panel.

(3) If the notice provided pursuant to subsection (H)(1) was not in writing, within two days after the date of providing that notice, the independent review organization shall:

(a) provide written confirmation of the decision to the covered person or his authorized representative and the health carrier; and

(b) include the information set forth in Section 38-71-1970(H)(3).

(4) As expeditiously as reasonably possible after receipt of the notice of a decision pursuant to subsection (H)(1) reversing the adverse determination or final adverse determination, the health carrier shall approve the covered benefit that was the subject of the adverse determination or final adverse determination, subject to applicable contract exclusions, limitations, or other provisions.

(G) The assignment by a health carrier of an approved independent review organization to conduct an external review in accordance with this section must be fair and impartial. The health carrier and the independent review organization shall comply with standards promulgated by the director or his designee by regulation or bulletin to ensure fairness and impartiality in the assignment by health carriers of approved independent review organizations to conduct external reviews, including its term, its termination, and payment arrangement.

Section 38-71-1990. (A) An external review decision is binding on the health carrier.

(B) An external review decision is binding on the covered person except to the extent the covered person has other remedies available under applicable federal or state law. If such other remedies are available, the covered person or his authorized representative may not, in these proceedings, utilize, disclose, or introduce in evidence information generated during or findings reached by the independent review organization.

(C) A covered person or his authorized representative may not file a subsequent request for external review involving the same adverse determination or final adverse determination.

Section 38-71-2000. (A) The director or his designee shall approve independent review organizations eligible to be assigned to conduct external reviews to ensure that an independent review organization satisfies the minimum qualifications established under Section 38-71-2010.

(B) The director or his designee shall develop an application form for initially approving and for reapproving independent review organizations to conduct external reviews and may establish an advisory committee with appropriate representation to review the applications. No member of the advisory committee may be liable to any person for any acts or omissions arising out of or related to the approval or reapproval of independent review organizations pursuant to this act.

(C)(1) An independent review organization wishing to be approved to conduct external reviews under this article shall submit the application form and include with the form all documentation and information necessary for the director or his designee to determine if the independent review organization satisfies the minimum qualifications established under Section 38-71-2010.

(2) The director or his designee may charge an application fee that independent review organizations shall submit to the director or his designee with an application for approval and reapproval.

(D)(1) Except as provided in subsection (D)(2), an approval is effective for two years.

(2) The independent review organization must notify the director or his designee of any material changes in qualifications, including removal or loss of accreditation by a nationally recognized private accrediting entity, approved by the director or his designee pursuant to subsection (E). Whenever the director or his designee determines that an independent review organization no longer satisfies the minimum requirements established under Section 38-71-2010 or has violated a provision of this article, the director or his designee shall terminate the approval of the independent review organization and remove the independent review organization from the list of independent review organizations approved to conduct external reviews under this article that is maintained by the director or his designee pursuant to subsection (F).

(E) An independent review organization accredited by a nationally recognized private accrediting entity with established and maintained standards for independent review organizations that meet the minimum qualifications established pursuant to Section 38-71-2010, which accrediting entity has been approved by the director or his designee, may be deemed to meet the minimum qualification requirements set forth in Section 38-71-2010.

(F) The director or his designee shall maintain and periodically update a list of approved independent review organizations and approved nationally recognized private accrediting entities.

(G) The director or his designee may promulgate regulations or bulletins to carry out the provisions of this section.

Section 38-71-2010. (A) To be approved under Section 38-71-2000 to conduct external reviews, an independent review organization shall have and maintain written policies and procedures that govern all aspects of both the standard external review process and the expedited external review process set forth in Sections 38-71-1970 and 38-71-1980 that include, at a minimum:

(1) a quality assurance mechanism in place that ensures:

(a) that external reviews are conducted within the specified time frames and required notices are provided in a timely manner;

(b) the selection of qualified and impartial clinical peer reviewers to conduct external reviews on behalf of the independent review organization and suitable matching of reviewers to specific cases;

(c) the confidentiality of medical and treatment records and clinical review criteria; and

(d) that any person employed by or under contract with the independent review organization adheres to the requirements of this article;

(2) a toll-free telephone service to receive information on a 24-hour-day, 7-day-a-week basis related to external reviews that is capable of accepting, recording, or providing appropriate instruction to incoming telephone callers during other than normal business hours; and

(3) agree to maintain and provide to the director or his designee the information set out in Section 38-71-2030.

(B) All clinical peer reviewers assigned by an independent review organization to conduct external reviews must be physicians or other appropriate health care providers who:

(1) are knowledgeable about the recommended health care service or treatment through recent or current actual clinical experience treating patients with the same or similar medical condition of the covered person; and

(2) hold a nonrestricted license in a state of the United States and, for physicians, a current certification by a recognized American medical specialty board in the area or areas appropriate to the subject of the external review.

(C) In addition to the requirements set forth in subsection (A), an independent review organization may not own or control, be a subsidiary of or in any way be owned or controlled by, or exercise control with a health benefit plan, a national, state, or local trade association of health benefit plans, or a national, state, or local trade association of health care providers.

(D)(1) In addition to the requirements set forth in subsections (A), (B), and (C), to be approved pursuant to Section 38-71-2000 to conduct an external review of a specified case, neither the independent review organization selected to conduct the external review nor any clinical peer reviewer assigned by the independent review organization to conduct the external review may have a material professional, familial, or financial conflict of interest with:

(a) the health carrier that is the subject of the external review;

(b) the covered person whose treatment is the subject of the external review or his authorized representative;

(c) any officer, director, or management employee of the health carrier that is the subject of the external review;

(d) the health care provider or the health care provider's medical group or independent practice association recommending the health care service or treatment that is the subject of the external review;

(e) the facility at which the recommended health care service or treatment would be provided; or

(f) the developer or manufacturer of the principal drug, device, procedure, or other therapy being recommended for the covered person whose treatment is the subject of the external review.

Section 38-71-2020. No independent review organization, or employee, officer, or director of an independent review organization or health care professional who furnishes services to an independent review organization is liable to any person for any acts or omissions arising out of or related to an external review conducted pursuant to this article, except for cases of wilful and intentional misconduct.

Section 38-71-2030. (A)(1) An independent review organization assigned pursuant to Section 38-71-1970 or Section 38-71-1980 to conduct an external review shall maintain written records in the aggregate and by health carrier on all requests for external review for which it conducted an external review during a calendar year and submit a report to the director or his designee, as required under subsection (A)(2).

(2) Each independent review organization required to maintain written records on all requests for external review pursuant to subsection (A)(1) for which it was assigned to conduct an external review shall submit to the director or his designee, no later than March first of each year and upon request by the director or his designee, a report in the format specified by the director or his designee.

(3) The report shall include in the aggregate and for each health carrier:

(a) the total number of requests for external review and the manner in which they were resolved;

(b) the average length of time for resolution;

(c) a summary of the types of coverages or cases for which an external review was sought, as provided in the format required by the director or his designee; and

(d) any other information the director or his designee may request or require.

(4) The independent review organization shall retain the written records required pursuant to this subsection for at least three years. (B)(1) Each health carrier shall maintain written records in the aggregate and for each general type of health benefit plan offered by the health carrier on all requests for external review that are filed with the health carrier during a calendar year.

(2) Each health carrier required to maintain written records on all requests for external review pursuant to subsection (B)(1) shall submit to the director or his designee, no later than March first of each year and upon request by the director or his designee, a report in the format specified by the director or his designee.

(3) The report shall include in the aggregate and by type of health benefit plan:

(a) the total number of requests for external review and the manner in which they were resolved;

(b) the average length of time for resolution;

(c) a summary of the types of coverages or cases for which an external review was sought, as provided in the format required by the director or his designee; and

(d) any other information the director or his designee may request or require.

(4) The health carrier shall retain the written records required pursuant to this subsection for at least three years.

(C) The director or his designee shall make the reports required in this section available to any person for inspection and copying upon request.

Section 38-71-2040. The health carrier shall pay for the external review.

Section 38-71-2050. (A) Each health carrier shall include a description of the external review procedures in either the policy, certificate, membership booklet, outline of coverage, or other evidence of coverage it provides to covered persons.

(B) The description required under subsection (A) shall include a statement of the right of the covered person to contact the director or his designee for assistance. The statement shall include the telephone number and address of the director or his designee.

(C) In addition to subsection (B), the statement shall inform the covered person that, when filing a request for an external review, the covered person will be required to authorize the release of any medical records of the covered person that may be required to be reviewed for the purpose of reaching a decision on the external review.

Section 38-71-2060. The director or his designee may, after notice, promulgate reasonable regulations or bulletins to carry out the provisions of this article."

B. For individual health benefit plans, this section is effective January 1, 2002. For group health benefit plans, this section is effective for plan years beginning after December 31, 2001. Sections 38-71-2000, 38-71-2010, and 38-71-2060 of the 1976 Code are effective upon approval by the Governor. The South Carolina Department of Insurance may, prior to the effective date of this act, review any policies and filings necessary to implement the provisions of this section in order to transition into any additional or altered requirement provided by this section. Any action of the South Carolina Department of Insurance to implement this section before January 1, 2002, is subject to the provisions, requirements, and laws of this section effective on January 1, 2002.

Severability

SECTION 4. If any provision of this act or the application of the provision to any person or circumstance is held invalid, the remainder of the act, and the application of the provision to persons or circumstances other than those to which it is held invalid, shall not be affected.

Time effective

SECTION 5. Except as otherwise provided, this act takes effect ninety days after approval by the Governor.

Ratified the 8th day of June, 2000.

Approved the 14th day of June, 2000.

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