TWENTY-SIXTH LEGISLATURE, 2012
STATE OF HAWAII
A BILL FOR AN ACT
relating to medical Torts.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that medical tort insurance premiums pose a significant challenge to the delivery of health care services if left unchecked. Increased insurance costs are passed on to patients in the form of higher charges for health care services and facilities. Furthermore, the inability to obtain, and the high cost of obtaining, liability insurance may discourage health care providers from offering services and restrict the overall availability of medical and hospital services.
One way of controlling medical tort insurance premiums is by creating a secondary source for the payment of a portion of the tort claim. In conjunction with requiring health care providers to maintain a minimum level of liability insurance coverage, this approach would help limit insurer costs for each claim paid. In addition, claimants would have another means of obtaining full compensation for their injuries.
The purpose of this Act is to promote affordable liability insurance coverage for health care providers, ensure that injured patients and their families receive reasonable monetary compensation, and reduce overall health care costs, by establishing a fund to pay the portion of a medical tort claim that exceeds the liability limit of a health care provider's insurance coverage. This Act also requires participating health care providers to have a minimum level of insurance coverage, assesses fees for deposit into the fund, and creates a peer review council to evaluate payments made from the fund and to recommend corresponding adjustments to fund fees or insurance premiums assessed against the health care provider.
SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to title 24 to be appropriately designated and to read as follows:
INjured patients AND FAMILIES compensation fund
PART I. GENERAL PROVISIONS
§ -1 Definitions. As used in this chapter, unless the context clearly requires otherwise:
"Commissioner" means the insurance commissioner of the State.
"Council" means the injured patients and families compensation fund peer review council established by this chapter.
"Fund" means the injured patients and families compensation fund established by this chapter.
"Health care provider" has the same meaning as in section 671-1.
"Liability limit" means insurance coverage of at least $1,000,000 for each occurrence and at least $3,000,000 for all occurrences in any one policy year, for the payment of medical tort claims.
"Medical tort" has the same meaning as in section 671-1.
§ -2 Injured patients and families compensation fund; established. There is established the injured patients and families compensation fund, which shall be expended to pay the portion of a medical tort claim that is in excess of the liability limit for which the health care provider is insured. The fund shall provide occurrence coverage for claims against health care providers or employees of the health care providers, and for reasonable and necessary expenses incurred in the payment of claims and the administrative expenses of the fund. The coverage provided by the fund shall begin on July 1, 2013.
The fund shall not be liable for damages for injury or death caused by an intentional crime committed by a health care provider or an employee of a health care provider, whether or not the criminal conduct is the basis for a medical tort claim. For the purposes of this section, "crime" means conduct prohibited by law and punishable by fine or imprisonment or both, and does not include conduct punishable only by a forfeiture.
§ -3 Purpose and integrity of fund. The purpose of the fund shall be to curb the rising costs of health care by financing part of the liability incurred by health care providers as a result of medical tort claims and to ensure that proper claims are satisfied. The fund, including any net worth of the fund, shall be held in irrevocable trust for the sole benefit of health care providers participating in the fund and proper claimants. Moneys in the fund shall not be used for any other purpose.
§ -4 Peer review activities; fund coverage. A health care provider who is found to be liable in a medical tort claim relating to peer review activities conducted under chapter 671D shall be liable for not more than the liability limit for which the health care provider is insured, and the fund shall pay the excess amount, unless the health care provider is found not to have acted in good faith during those activities and the failure to act in good faith is found by the trier of fact, by clear and convincing evidence, to be both malicious and intentional.
§ -5 Board of governors. (a) There is established within the insurance division a board of governors for the purpose of administering the fund. The board shall be composed of the commissioner and the following members to be nominated and, by and with the advice and consent of the senate, appointed by the governor in accordance with section 26-34:
(1) Three representatives from the insurance industry;
(2) A representative from the Hawaii State Bar Association;
(3) Two representatives from the Hawaii Medical Association;
(4) Two representatives from the Healthcare Association of Hawaii; and
(5) Four representatives from the public, at least two of whom are not attorneys or physicians and are not professionally affiliated with any hospital or insurance company.
(b) Board members shall serve without compensation, but shall be reimbursed for actual expenses, including travel expenses, necessary for the performance of their duties.
(c) The board shall elect its chairperson and vice chairperson annually. The board shall meet at its discretion but not less than quarterly.
§ -6 Fund administration and operation. Management of the fund shall be vested with the board of governors. The commissioner shall either provide staff services necessary for the operation of the fund or, with the approval of the board of governors, contract for all or a portion of the services. The commissioner shall adopt rules pursuant to chapter 91 for the purpose of effectuating this chapter. At least annually, the contractor shall report to the commissioner and to the board of governors regarding all expenses incurred and subcontracting arrangements. If the board of governors approves, the contractor may hire legal counsel as needed to provide staff services. The cost of contracting for staff services shall be paid from the fund.
§ -7 Health care provider fees. (a) Each health care provider shall pay an annual fee for deposit into the fund, which fee shall be based on the following considerations:
(1) The past and prospective loss and expense experience in different types of practice;
(2) The past and prospective loss and expense experience of the fund;
(3) The loss and expense experience of the individual health care provider that resulted in the payment of money, from the fund or other sources, for damages arising out of the rendering of medical care by the health care provider or an employee of the health care provider, except that an adjustment to a health care provider's fees may not be made under this paragraph prior to the receipt of the recommendation of the council under section -12(a) and the expiration of the time period provided under section -14 for the health care provider to comment or prior to the expiration of the time period under section -12(a);
(4) Risk factors for persons who are semiretired or part-time professionals; and
(5) For health care providers that are organizations, risk factors and past and prospective loss and expense experience attributable to employees of the health care provider other than employees licensed as a physician.
(b) The commissioner, after approval by the board of governors, shall adopt rules establishing the fees set forth in subsection (a). The fees may be paid annually or in semiannual or quarterly installments. In addition to the prorated portion of the annual fee, semiannual and quarterly installments shall include an amount sufficient to cover interest not earned and administrative costs incurred because the fees were not paid on an annual basis. This subsection does not impose liability on the board of governors for payment of any part of a fund deficit.
(c) With respect to fees paid by physicians, the rule shall provide for not more than four payment classifications, based upon the amount of surgery performed and the risk of diagnostic and therapeutic services provided or procedures performed.
(d) The board of governors shall adopt rules providing for an automatic increase in the fees under this section, if the loss and expense experience of the fund and other sources with respect to the health care provider or an employee of the health care provider exceeds either a number of claims paid threshold or a dollar volume of claims paid threshold, as established by the rules of the board of governors. The rules shall specify applicable amounts of increase corresponding to the number of claims paid and the dollar volume of awards in excess of the respective thresholds.
The automatic increase of fees under this subsection shall not apply if the board of governors determines that the performance of the council in making recommendations under section -12(a) adequately addresses the consideration set forth in subsection (a)(3).
(e) The fees assessed under this section for any fiscal year shall not exceed the greatest of the following:
(1) The estimated total dollar amount of claims to be paid during that fiscal year;
(2) The fees assessed for the fiscal year preceding that fiscal year, adjusted by the commissioner to reflect changes in the consumer price index for all urban consumers, United States city average, for the medical care group, as determined by the United States Department of Labor; or
(3) Two hundred per cent of the total dollar amount disbursed for claims during the calendar year preceding that fiscal year.
(f) The fees under this section shall be collected by the commissioner for deposit into the fund in a manner prescribed by the commissioner.
(g) If the rules establishing fees under this section do not take effect prior to June 2 of any fiscal year, the commissioner may elect to collect fees as established for the previous fiscal year. If the commissioner so elects and the rules subsequently take effect, the balance for the fiscal year shall be collected or refunded or the remaining semiannual or quarterly installment payments shall be adjusted, except the commissioner may elect not to collect, refund, or adjust for minimal amounts.
§ -8 Fund accounting and audit. (a) Moneys shall be withdrawn from the fund by the commissioner only upon vouchers approved and authorized by the board of governors.
(b) All books, records, and audits of the fund shall be government records as defined by section 92F-3, with the exception of confidential claims information, which shall be exempt from disclosure pursuant to section 92F-13.
(c) Persons authorized to deposit, withdraw, issue vouchers for, or otherwise disburse any fund moneys shall post a blanket fidelity bond in an amount reasonably sufficient to protect fund assets. The cost of the bond shall be paid from the fund.
(d) Annually, after the close of a fiscal year, the board of governors shall furnish a financial report to the commissioner and to the legislature. The report shall be prepared in accordance with accepted accounting procedures and shall include the present value of all claims reserves, including those for incurred but unreported claims as determined by accepted actuarial principles, and any other information as may be required by the commissioner. The board of governors shall furnish a summary of the report to all fund participants.
(e) The board of governors shall submit a quarterly report to the commissioner and the director of finance projecting the future cash flow needs of the fund. The director of finance shall invest moneys held in the fund in investments with maturities and liquidity that are appropriate for the needs of the fund as reported by the board of governors in its quarterly reports under this subsection. All income derived from the investments shall be credited to the fund.
(f) The board of governors shall submit a progress report on its activities to the chief clerk of each house of the legislature, for distribution to the appropriate standing committees as determined by the president of the senate and the speaker of the house of representatives, on or before January 1 of each year.
(g) The board of governors may cede reinsurance to an insurer authorized to do business in this State or pursue other loss funding management to preserve the solvency and integrity of the fund, subject to the commissioner's approval. The commissioner may prescribe controls over or other conditions on the use of reinsurance or other loss-funding management mechanisms.
§ -9 Claims procedures. (a) Claims may be filed against the fund as follows:
(1) Any person may file a claim for damages arising out of the rendering of medical care or services or participation in peer review activities under chapter 671D within this State against a health care provider or an employee of a health care provider. A person filing a claim may recover from the fund only if the health care provider or the employee of the health care provider has coverage under the fund, the fund is named as a party in the action, and the action against the fund is commenced within the same time limitation within which the action against the health care provider or employee of the health care provider must be commenced; or
(2) Any person may file an action for damages arising out of the rendering of medical care or services or participation in medical peer review activities outside this State against a health care provider or an employee of a health care provider. A person filing an action may recover from the fund only if the health care provider or the employee of the health care provider has coverage under the fund, the fund is named as a party in the action, and the action against the fund is commenced within the same time limitation within which the action against the health care provider or employee of the health care provider must be commenced. If the rules of procedure of the jurisdiction in which the action is brought do not permit naming the fund as a party, the person filing the action may recover from the fund only if the health care provider or the employee of the health care provider has coverage under the fund and the fund is notified of the action within sixty days of service of process on the health care provider or the employee of the health care provider. The board of governors may extend the time limit if it finds that enforcement of the time limit would be prejudicial to the purposes of the fund and would benefit neither insureds nor claimants.
(b) If, after reviewing the facts upon which the claim or action is based, it appears reasonably probable that damages paid will exceed the liability limit for which the health care provider is insured, the fund may appear and actively defend itself when named as a party in an action against a health care provider, or an employee of a health care provider, that has coverage under the fund. In such action, the fund may retain counsel and pay out of the fund attorney fees and expenses including court costs incurred in defending the fund. The attorney or law firm retained to defend the fund shall not be retained or employed by the board of governors to perform legal services for the board of governors other than those directly connected with the fund. Any judgment affecting the fund may be appealed as provided by law. The fund may not be required to file any undertaking in any judicial action, proceeding or appeal.
(c) It shall be the responsibility of the insurer or self-insurer providing insurance or self-insurance for a health care provider who is also covered by the fund to provide an adequate defense of the fund on any claim filed that may potentially affect the fund with respect to the insurance contract or self-insurance contract. The insurer or self-insurer shall act in good faith and in a fiduciary relationship with respect to any claim affecting the fund. No settlement that could require payment by the fund may be agreed to unless approved by the board of governors.
(d) It shall be the responsibility of any health care provider with a cash or surety bond in effect to provide an adequate defense of the fund on any medical tort claim that may potentially affect the fund. The health care provider shall act in good faith and in a fiduciary relationship with respect to any claim affecting the fund. No settlement that could require payment by the fund may be agreed to unless approved by the board of governors.
(e) A person who has recovered a final judgment or a settlement approved by the board of governors against a health care provider, or an employee of a health care provider, that has coverage under the fund may file a claim with the board of governors to recover that portion of the judgment or settlement that is in excess of the liability limit for which the health care provider is insured. If the fund incurs liability for future payments exceeding $1,000,000 to any person under a single claim as the result of a settlement or judgment that is entered into or rendered for an act or omission that occurred on or after the effective date of this chapter, the fund shall pay, after deducting the reasonable costs of collection attributable to the remaining liability, including attorney's fees reduced to present value, the full medical expenses each year, plus an amount not to exceed $500,000 per year that will pay the remaining liability over the person's anticipated lifetime, or until the liability is paid in full. If the remaining liability is not paid before the person dies, the fund may pay the remaining liability in a lump sum. Payments shall be made from moneys collected and paid into the fund under section -7 and from interest earned thereon. For claims subject to a periodic payment made under this paragraph, payments shall be made until the claim has been paid in full. Periodic payments made under this section include direct or indirect payment or commitment of moneys to or on behalf of any person under a single claim by any funding mechanism. No interest may be paid by the fund on the unpaid portion of any claim filed under this section.
(f) Claims filed against the fund shall be paid in the order received within ninety days after filing unless appealed by the fund.
§ -10 Actions against insurers, self-insurers, or providers. The board of governors may bring an action against an insurer, self-insurer, or health care provider for failure to act in good faith or breach of fiduciary responsibility under section -9(c) or (d).
PART II. INJURED PATIENTS AND FAMILIES COMPENSATION FUND
PEER REVIEW COUNCIL
§ -11 Council established. (a) There is established the injured patients and families compensation fund peer review council whose members shall be appointed by the board of governors. The board of governors shall designate the chairperson, vice chairperson, and secretary of the council and the terms to be served by council members. The council shall consist of five persons, not more than three of whom shall be physicians who are actively engaged in the practice of medicine in this State. The chairperson shall be a physician and shall serve as an ex officio nonvoting member of the Hawaii medical board.
(b) The council shall meet at the call of the chairperson of the board of governors or the chairperson of the council. The council shall meet at the location determined by the person calling the meeting.
(c) The council shall submit to the chairperson of the board of governors, upon request of the chairperson but not more often than annually, a report on the operation of the council.
§ -12 Council duties. (a) The council shall review, within one year of the date of the first payment on the claim, each claim that is paid by the fund, by a private health care liability insurer, or by a self-insurer for damages arising out of the rendering of medical care by a health care provider or an employee of the health care provider, and shall make recommendations to all of the following:
(1) The commissioner and the board of governors regarding any adjustments to be made under section -7(a)(3) to fund fees assessed against the health care provider, based on the paid claim; and
(2) A private health care liability insurer regarding adjustments to premiums assessed against a physician covered by private insurance, based on the paid claim, if requested by the private insurer.
(b) In developing recommendations under subsection (a), the council may consult with any person and shall consult with the following:
(1) If a claim was paid for damages arising out of the rendering of care by a physician, with at least one physician who practices in the area of medical specialty as the physician who rendered the care and with at least one physician who practices in the area of medical specialty as the medical procedure involved, if the specialty area of the procedure is different from the specialty area of the physician who rendered the care; and
(2) If a claim was paid for damages arising out of the rendering of care by a nurse anesthetist, with at least one nurse anesthetist.
§ -13 Council fees. The fund and all private health care liability insurers shall be assessed, as appropriate, fees sufficient to cover the costs of the council, including costs of administration, for reviewing claims pursuant to section -12. The fees shall be established by the commissioner, with the approval of the board of governors, and shall be collected by the commissioner for deposit into the fund.
§ -14 Notice of recommendation. The council shall notify the affected health care provider in writing of its recommendations to the commissioner, the board of governors or a private insurer, as applicable. The notice shall inform the health care provider that the health care provider may submit written comments on the council's recommendations to the commissioner, the board of governors or the private insurer within a reasonable period of time specified in the notice.
§ -15 Patient records. The council may obtain any information relating to any claim it reviews under section -12 that is in the possession of the commissioner or the board of governors. The council shall keep patient health care records confidential.
§ -16 Immunity. Members of the council and persons consulting with the council under section -12(b) shall be immune from civil liability for acts or omissions while performing their duties under this part.
§ -17 Members' and consultants' expenses. Any person serving on the council and any person consulting with the council under section -12(b) shall be paid at a rate established by the commissioner."
SECTION 3. This Act shall take effect upon its approval.
Medical Torts; Medical Malpractice Insurance; Claims in Excess of Liability Limits
Establishes the injured patients and families compensation fund to pay the portion of a medical tort claim that exceeds the liability limit of a health care provider's insurance coverage. Requires participating health care providers to have a minimum level of insurance coverage. Provides for assessment of fees and peer council review of claims paid.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.