January 25, 2010 11:38 PM UTC

Sen. Carroll's "Bad Faith Bonus" Bill Returns

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• by: Colorado Pols

Last legislative session, state Sen. Morgan Carroll introduced a bill to ban the practice of insurance companies paying out bonuses to employees based on claims they deny, delay, or policies they cancel or rescind–otherwise known as the “bad faith bonus” bill.

An idea that, if properly promoted, we think could gain a great deal of support, the bill nevertheless died last session by a single vote in the House Health and Human Services Committee.

This year the bill is back as SB10-076, sponsored by Carroll and Rep. Dianne Primavera. Fact sheet after the jump–Says Sen. Carroll, “Colorado consumers should get what they pay for and carriers who comply with good faith standards should not be penalized for competing with those who do not.” What say you? The right kind of popular-interest bill for Democrats to show off to voters this fall?

SB 10 – 076 Unreasonable Denial of Insurance Claims

(M. Carroll – Primavera)

NO BONUSES TO DELAY, DENY, RESCIND OR CANCEL COVERAGE

PRINCIPLE:  When a patient pays for insurance coverage or is entitled to certain basic health care under statute, they should get what they paid for without added red tape or the need for litigation.

PROBLEM:  It is an inherent conflict of interest for an insurance company to pay a claims adjuster any financial incentive or bonus to induce a decision to deny or delay a claim or medical care.

WHAT IS INSURANCE “BAD FAITH”?  When an insurance company puts its profits or interests above or in conflict with those of the insured, they are in bad faith.  US Legal Definitions.

PROBLEM:  When medical care recommended by a qualified treating provider is denied it risks the health of the patient and drives up costs by leaving conditions untreated or delayed increasing risk of deterioration or emergency service utilization.

THE BILL:  It is an unfair claim practice to be

” (XVIII) PROVIDING COMPENSATION IN ANY FORM TO INDUCE OR ENCOURAGE THE DECISION TO DENY, OR DELAY THE RESOLUTION OF, A CLAIM OR TO CANCEL OR RESCIND AN INSURANCE POLICY.”

o The bill stops financial incentives designed to induce denials, delays, cancellations or rescissions.

o The bill allows salaries, company benefits, stock options, bonuses or financial incentives for other reasons.

Colorado consumers should get what they pay for and carriers who comply with good faith standards should not be penalized for competing with those who do not.