Bulletin 2016-15: Compliance with SC Code Ann. Section 38-71-242

TO: South Carolina Department of Insurance Capilol Center 1101 Main Street, Suite I 000 Columbia, South Carollnal9101 Mailing Address: P.O. Box 100105, Columbia, S.C.l9101-3105 Telephone: (803) 737-6160 BULLETIN 2016-15 NIKKI R. HALEY Governor RAYMOND G. FARMER Director All Life, Accident and Health Insurers Writing Supplemental Cancer and Other Specified Disease Policies in South Carolina FROM: RE: DATE: I. Compliance with S.C. Code Ann. Section 3 8-71-242 after South Carolina Supreme Court's decision in Kirven v. Central States December 22, 2016 PURPOSE This Bulletin withdraws, supersedes and replaces Bulletin 2008-15. It is intended to provide guidance on the applicability of Section 3 8-71-242 to supplemental or other specified disease health insurance policies following the South Carolina Supreme Court's decision referenced above. II. DISCUSSION South Carolina Department of Insurance Bulletin 2008-15 was issued after the enactment of 2008 S.C. Act No. 265 which codified the definition of the term actual charges. Section 3 8-71-242 reads as follows: (A)(l) When used in any individual or group specified disease insurance policy in connection with the benefits payable for goods or services provided by any health care provider or other designated person or entity, the terms "actual charge", "actual charges", "actual fee", or "actual fees" shall mean the amount that the health care provider or other designated person or entity: (a) agreed to accept, pursuant to a network or other agreement with a health insurer, third-party administrator, or other third-party payor, as payment in full for the goods or services provided to the insured; (b) agreed or is obligated by operation of law to accept as payment in full for the goods or services provided to the insured pursuant to a provider, participation agreement, or supplier agreement under Medicare, Medicaid, or any other government administered health care program, where the insured is covered or reimbursed by such program; or (c) if both subitems (a) and (b) of this subsection apply, the lowest amount determined under these two subitems ... ; (B) This section applies to any individual or group specified disease insurance policy issued to any resident of this State that contains the terms "actual charge", "actual charges", "actual fee", or ''actual fees" and does not contain an express definition for the terms "actual charge", "actual charges", "actual fee", or "actual fees". (C) Notwithstanding any other provision of law, after the effective date of this section, an insurer or issuer of any individual or group specified disease insurance policy shall not pay any claim or benefits based upon an actual charge, actual charges, actual fee, or actual fees under the applicable policy in an amount in excess of the "actual charge", "actual charges", "actual fee", or "aclllal fees" as defined in this section. See S.C. Code Ann.§ 38-71-242 (2015}. According to the language of the statute, insurers ... shall not pay any claim or benefits based upon an actual charge, actual charges, actual fee or actual fees under the applicable policy in an amount in excess ofthe actual charge, actual charges, actual fee or actual fees as defined in Section 38-71-242. The South Carolina Supreme Court opined in Kirven v. Central States Health and Life Company of Ohio, 409 S.C. 30, 760 S.E.2d 794 {2014} (hereinafter Kirven v. Central States) that despite the temporal (retroactive) language in Section 38-71-242 (C) that the definition of actual charges cannot be applied to insurance contracts that were entered into prior to the statute's effective date because that constituted an impairment of contract in violation of the state and federal constitutions. Please note that the Court did not find that statute unconstitutional. However, this decision prohibits the statute's application to those insurance contracts that existed prior to the statute's effective date. Section 38-71-242 applies to insurance contracts issued after June 4, 2008 (i.e., the statute's effective date). See S.C. Code Ann. § 38- 71- 242 (2015). III. QUESTIONS Questions concerning this bulletin should be submitted via email to lahmail@doi.sc.gov and include the company name and primary point of contact (with phone number and email address) for follow up. Bulletins arc the method by which the Director of Insurance formally communicates with persons and entities regulated by the Department. Bulletins arc departmental interpretations of South Carolina insurance Jaws and regulations and provide guidance on the Department's enforcement upproach. Bulletins do not provide legal advice. Readers should consult applicable statutes and regulations or contact an atlorney for legal advice or for additional information on the impact of that legislation on their specific situation.