HB6775 93RD GENERAL ASSEMBLY

LRB093 15100 WGH 47080 b

93RD GENERAL ASSEMBLY
State of Illinois
2003 and 2004
HB6775

Introduced 02/09/04, by Steve Davis

SYNOPSIS AS INTRODUCED:

New Act

Creates the Illinois Common Sense Medical Malpractice Insurance Reform Act. Provides that: for any liability policy for healthcare providers issued or renewed on or after January 1, 2004, every insurer shall reduce its rates and premiums to no more than 80% of the rate and premium for the same coverage that was in effect on January 1, 2003; between January 1, 2004 and January 1, 2005, rates and premiums may be increased if the Director of Insurance finds that an insurer is substantially threatened with insolvency; beginning January 1, 2004, rates and premiums may be increased if approved in accordance with specified conditions; a healthcare provider applying for a policy for the first time on or after January 1, 2004 shall not be charged more than 80% of the rate and premium that was being charged by that insurer on January 1, 2003 for similarly situated risks; and any separate affiliate of a healthcare provider liability insurer established on or after January 1, 2003 shall reduce its rates and premiums to no more than 80% at the insurer's rates and premiums in effect on January 1, 2003. Sets forth factors to be used in determining rates and premiums for liability insurance policies for healthcare providers. Contains provisions concerning: applicability of other laws; permitted activities; cancellation or non-renewal of insurance; disclosure of premiums; approval of rate changes; hearings; rules; establishment of a joint underwriting authority under specified circumstances; group insurance; enforcement and penalties; filing fees to cover administrative or operational costs; construction; and severability. Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning insurance.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Illinois Common Sense Medical Malpractice Insurance Reform Act.

Section 5. Findings and Declaration. The General Assembly of the State of Illinois finds and declares as follows:

Excessive, unjustified, and arbitrary increases in the cost of liability insurance have made it both unaffordable and unavailable to many Illinois physicians, hospitals, and other healthcare entities (hereinafter "healthcare providers").

The existing laws inadequately protect healthcare providers and allow insurance companies to charge excessive, unjustified and arbitrary rates.

Therefore, the General Assembly of the State of Illinois declares that healthcare provider liability insurance reform is necessary. First, liability insurance rates for all healthcare providers shall be immediately rolled back to those existing on January 1, 2003, and reduced no less than an additional 20%. Second, liability insurance rates for healthcare providers shall be determined primarily by the healthcare provider's claims record. Third, healthcare provider liability insurance rates shall be maintained at fair levels by requiring insurers to justify all future increases. Finally, insurance companies writing policies for liability insurance for healthcare providers shall pay a fee to cover the costs of administering these new laws so that this reform will cost taxpayers nothing.

Section 10. Purpose. The purpose of this Act is to protect healthcare providers from arbitrary insurance rates and practices, to encourage a competitive insurance marketplace, and to ensure that liability insurance is fair, available, and affordable for all Illinois healthcare providers.

Section 15. Reduction and Control of Insurance Rates.

(a) Insurance Rate Rollback.

(1) For any liability policy for healthcare providers issued or renewed on or after January 1, 2004, every insurer shall reduce its rates and premiums to no more than 80% of the rate and premium for the same coverage which was in effect on January 1, 2003.

(2) Between January 1, 2004, and January 1, 2005, rates and premiums (after reduction pursuant to subdivision (a)) may be increased if the Director of Insurance finds, after a hearing, that an insurer is substantially threatened with insolvency.

(3) Commencing January 1, 2004, healthcare provider liability insurance rates and premiums may be increased pursuant to Section 30.

(4) A healthcare provider applying for a healthcare providers liability insurance policy for the first time on or after January 1, 2004, shall not be charged more than 80% of the rate and premium which was being charged by that insurer on January 1, 2003, for similarly situated risks.

(5) Any separate affiliate of a healthcare provider liability insurer established on or after January 1, 2003, shall be subject to the provisions of this Section and shall reduce its rates and premiums to no more than 80% at the insurer's rates and premiums in effect on January 1, 2003.

(b) Insurance Rates and Premiums for Healthcare Providers. Rates and premiums for liability insurance policies for healthcare providers shall be determined by application of the following factors in decreasing order of importance:

(1) The insured's claims record.

(2) If a licensed practitioner, the specialty or subspecialty, if any.

(3) If a licensed practitioner, the number of years of practice experience the insured has had

(4) If a licensed practitioner, the number of patients he or she sees annually.

(5) Such other factors as the Director of Insurance may adopt by rule that have a substantial relationship to the risk of loss. The rules shall set forth the respective weight to be given each factor in determining rates and premiums. Notwithstanding any other provision of law, the use of any criterion without such approval shall constitute unfair discrimination.

(c) The fact that a healthcare provider has had no prior liability insurance coverage, in and of itself, shall not be used as criteria for rates, premiums, or insurability.

(d) This Section shall become operative on January 1, 2004. The Director of Insurance shall adopt rules implementing this Section and insurers may submit applications for rate and premium approval pursuant to this Act which comply with those rules prior to that date, provided that no such application shall be approved prior to that date.

Section 20. Prohibition of Unfair Insurance Practices.

(a) The business of insurance shall be subject to the laws of Illinois applicable to any other business, including, but not limited to the antitrust and unfair business practices laws.

(b) Nothing in this Section shall be construed to prohibit (1) any agreement to collect, compile, and disseminate historical data on paid claims or reserves for reported claims, provided such data is contemporaneously transmitted to the Director of Insurance, (2) participation in any joint arrangement established by statute or the Director of Insurance to assure availability of insurance, (3) any agent or broker, representing one or more insurers, from obtaining from any insurer it represents information relative to the premium for any policy or risk to be underwritten by that insurer, (4) any agent or broker from disclosing to an insurer it represents any quoted rate or charge offered by another insurer represented by that agent or broker for the purpose of negotiating a lower rate, charge, or term from the insurer to whom the disclosure is made, or (5) any agents, brokers, or insurers from utilizing or participating with multiple insurers or reinsurers for underwriting a single risk or group of risks.

(c) Notwithstanding any other provision of law, a notice of cancellation or non-renewal of a policy of liability insurance for healthcare providers shall be effective only if it is based upon one or more of the following:

(1) non-payment of premium;

(2) fraud or material misrepresentation affecting the policy or insured;

(3) a substantial and verifiable increase in the hazard insured against.

Section 25. Full Disclosure of Insurance Information. Upon request, and for a reasonable fee to cover costs, the Director of Insurance shall provide healthcare providers with a comparison of the existing premium for each insurer who provides a similar line of liability insurance for healthcare providers.

Section 30. Approval of Insurance Rates and Premiums.

(a) No rate or premium shall remain in effect which is excessive, unjustified, arbitrary, unfairly discriminatory, or otherwise in violation of this Act. In considering whether a rate or premium is excessive, unjustified, arbitrary, or unfairly discriminatory, no consideration shall be given to the degree of competition. The Director of Insurance shall also consider whether the rate mathematically reflects the insurance company's investment income.

(b) Every insurer which desires to change any rate or premium shall file a complete rate application with the Director of Insurance. A complete rate application shall include all data supporting the change and such other information as the Director of Insurance may require. The applicant shall have the burden of proving that the requested rate or premium change is justified and meets the requirements of this Act.

(c) The Director of Insurance shall notify the public of any application for a rate change by a liability insurer for healthcare providers. The application shall be deemed approved 60 days after public notice unless (1) a healthcare provider or his or her representative requests a hearing within 45 days of public notice and the Director of Insurance grants the hearing, or determines not to grant the hearing and issues written findings in support of that decision, or (2) the Director of Insurance on his or her own motion determines to hold a hearing, or (3) the proposed rate adjustment exceeds 9% of the then applicable rate for that insurer's healthcare providers liability lines, in which case the Director of Insurance must hold a hearing upon a timely request. In any event, a rate change application shall be deemed approved 180 days after the rate application is received by the Director of Insurance unless (A) that application has been disapproved by a final order of the Director of Insurance subsequent to a hearing, or (B) extraordinary circumstances exist. For purposes of this Section, "received" means the date delivered to the Department of Insurance.

(d) For purposes of this Section, extraordinary circumstances include the following:

(1) Rate change application hearings commenced during the 180-day period provided by subdivision (c). If a hearing is commenced during the 180-day period, the rate change application shall be deemed approved upon expiration of the 180-day period or 60 days after the close of the record of the hearing, whichever is later, unless disapproved prior to that date.

(2) Rate change applications that are not approved or disapproved within the 180-day period provided by subdivision (c) as a result of a judicial proceeding directly involving the application and initiated by the applicant or an intervenor. During the pendency of the judicial proceedings, the 180-day period is tolled, except that in no event shall the Director of Insurance have less than 30 days after conclusion of the judicial proceedings to approve or disapprove the application. Notwithstanding any other provision of law, nothing shall preclude the Director of Insurance from disapproving an application without a hearing if a stay is in effect barring the Director from holding a hearing within the 180-day period.

(3) The hearing has been continued. The 180-day period provided by subdivision (c) shall be tolled during any period in which a hearing is continued. A continuance shall be decided on a case by case basis. If the hearing is commenced or continued during the 180-day period, the rate change application shall be deemed approved upon the expiration of the 180-day period or 100 days after the case is submitted, whichever is later, unless disapproved prior to that date

Section 35. Rules Pertaining to Hearings by Director of Insurance.

(a) The Director of Insurance shall adopt rules governing hearings required by subdivision (c) of Section 30 on or before 120 days after the enactment of this Section. Those rules shall, at the minimum, include timelines for scheduling and commencing hearings, and procedures to prevent delays in commencing or continuing hearings without good cause.

(b) The sole remedy for failure by the Director of Insurance to adopt the rules required by subdivision (a) within the prescribed period or to abide by those rules once adopted shall be a writ of mandate by any aggrieved party in a court of competent jurisdiction to compel the Director of Insurance to adopt those rules, or commence or resume hearings.

(c) Nothing in this Section shall preclude the Director of Insurance from commencing hearings required by subdivision (c) of Section 30 prior to adopting the rules required by this Section.

(d) The Director of Insurance (or administrative law judge or judges) shall render a decision within 30 days of the closing of the record in the proceeding

Section 40. Public Notice of Hearings. Public notice required by this Act shall be made through distribution to the news media and to any member of the public who requests placement on a mailing list for that purpose.

Section 45. Public Records. All information provided to the Director of Insurance pursuant to this Act shall be available for public inspection.

Section 50. Manner of Hearings.

(a) Hearings shall be conducted by the Director of Insurance or at his or her discretion, administrative law judges appointed by the Director of Insurance

(b) Hearings are commenced by a filing of a Notice.

(c) If the hearing is conducted by an administrative law judge or judges, the Director of Insurance shall adopt, amend or reject the decision of the judge or judges.

(d) Discovery shall be liberally construed and disputes determined by the Director of Insurance or the administrative law judge or judges.

(e) Hearings shall be open to the public.

Section 55. Initiation of Proceeding.

(a) Any person may initiate or intervene in any proceeding permitted or established pursuant to this Act, challenge any action of the Director of Insurance under this Act, and enforce any provision of this Act

(b) The Director of Insurance or a court shall award reasonable advocacy and witness fees and expenses to any person who demonstrates that (1) the person represents the interests of healthcare providers or consumers, and (2) he or she has made a substantial contribution to the adoption of any order, regulation or decision by the Director of Insurance or a court. Where such advocacy occurs in response to a rate application, the award shall be paid by the applicant.

Section 60. Emergency Authority. In the event that the Director of Insurance finds that (a) insurers have substantially withdrawn from any insurance market covered by this Act and (b) a market assistance plan would not be sufficient to make insurance available, the Director of Insurance shall establish a joint underwriting authority, without the prior creation of a market assistance plan.

Section 65. Group Insurance Plans. Any insurer may issue any insurance coverage on a group plan, without restriction as to the purpose of the group, occupation or type of group. Group insurance rates shall not be considered to be unfairly discriminatory, if they are averaged broadly among persons insured under the group plan.

Section 70. Application. This Act shall apply to all liability insurance policies for healthcare providers in this State.

Section 75. Enforcement and Penalties. Violations of this Act shall be subject to the penalties provided for in the Illinois Insurance Code. In addition to those penalties, the Director of Insurance may suspend or revoke, in whole or in part, the certificate of authority of any insurer which fails to comply with the provisions of this Act.

Section 80. Insurance Company Filing Fees. The Director of Insurance shall establish a schedule of filing fees to be paid by each healthcare liability insurer, in proportion to its share of the market, to cover any administrative or operational costs arising from the provisions of this Act.

Section 85. Interpretation of this Act.

(a) This Act shall be liberally construed and applied in order to fully promote its underlying purposes.

(b) If any provision of this Act or the application thereof to any person or circumstances is held invalid, that invalidity shall not affect other provisions or applications of this Act which can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

Section 999. Effective date. This Act takes effect upon becoming law.