OLR Bill Analysis

SB 249

AN ACT CONCERNING DISPUTES BETWEEN HOSPITALS OR HOSPITAL SYSTEMS AND HEALTH INSURERS.

SUMMARY:

This bill establishes a binding arbitration process for contract disputes between hospitals or hospital systems and health insurers about network participation.

Specifically, if a hospital or hospital system fails to reach an agreement with an insurer to continue participating in the insurer's network for at least one additional year, the bill allows either party to submit the issue to binding arbitration, at least 120 days before the existing contract is set to expire. If neither party submits the issue to arbitration at least 90 days before the contract expires, the contract is extended for a year.

The bill sets conditions governing the arbitration process, including the factors the arbitrator must consider in coming to a decision. It requires the parties to share the costs of arbitration. Arbitrations under the bill are subject to the same limited court review as generally applies to arbitrations.

The bill applies to contracts entered into, renewed, or amended on or after July 1, 2015.

Under the bill and existing law, a “hospital system” is a (1) parent corporation of one or more hospitals and any entity affiliated with that corporation through ownership, governance, or membership or (2) hospital and any entity affiliated with it through these means.

EFFECTIVE DATE: July 1, 2015

BINDING ARBITRATION

Selection of Arbitrator

Under the bill, after the issue is submitted to arbitration, the parties must jointly select an arbitrator with experience in impartial arbitration of commercial disputes. If the parties cannot agree on an arbitrator within five days, the bill requires the selection of an arbitrator using the American Arbitration Association's rules for large, complex commercial disputes. Under those rules, if the parties are unable to agree, the association selects arbitrators from a panel.

Arbitration Process

Once an arbitrator is chosen, each party must submit written briefs to the arbitrator and opposing party, setting forth its proposal on each unresolved issue. The arbitrator must hold a hearing to allow them to provide evidence and arguments. The arbitration record is closed at the end of the hearing or once the arbitrator receives the briefs, whichever is later.

The bill requires the arbitrator to issue a decision within 45 days of the record's closure. If the arbitrator has not issued a decision when the parties' contract expires, the contract is extended until he or she issues the decision.

The arbitrator's authority is limited to selecting either party's proposal in its entirety, on each unresolved issue. The arbitrator must consider:

1. the needs and welfare of patients receiving or eligible for in-network services under the contract;

2. the parties' needs and interests, including their proposals outlined in their written briefs;

3. the history of the parties' negotiations, including those leading up to arbitration;

4. any other network participation contracts between the hospital or hospital system and another insurer or between the insurer and another hospital or hospital system;

5. the current conditions and changes in the health care market and the community where the hospital or hospital system is located; and

6. the interests and welfare of the hospital's or hospital system's employees.

The parties must split equally any fees associated with the arbitration.

Finality of Arbitration Award

Under the bill, the arbitration award is final and binding, unless otherwise vacated or modified under existing law's procedures. By law, either party to an arbitration can apply to Superior Court to vacate or modify an arbitration award, for limited reasons. Either party can appeal from the court's order as in other civil cases (CGS 52-418, -419, and -423).

EXTENSION OF CONTRACT IN ABSENCE OF ARBITRATION

Under the bill, if neither party submits the issue of network participation to binding arbitration at least 90 days before the contract expires, it is extended for one year. The parties can agree to modify the contract terms during this period, but the bill prohibits them from reducing the one-year extension period or limiting the hospital's or hospital system's participation in the network.

After this one-year period, the bill does not require binding arbitration or another extension, as long as the party seeking to terminate the contract during this period gives at least six months' public notice.

COMMITTEE ACTION

Public Health Committee

Joint Favorable

Yea

19

Nay

8

(03/27/2015)