H 3566

South Carolina General Assembly
126th Session, 2025-2026
Bill 3566
Indicates Matter Stricken
Indicates New Matter
(Text matches printed bills. Document has been reformatted to meet World Wide Web specifications.)
A bill
TO AMEND THE SOUTH CAROLINA CODE OF LAWS by ENACTing THE
"FAIR CLAIMS ACCOUNTABILITY ACT" BY ADDING SECTION 37-4-305 SO AS TO ESTABLISH
THE HEALTHCARE CLAIMS CONSUMER ASSISTANCE PROGRAM ("H-CAP") AND TO PROVIDE THAT
A HEALTH PLAN OR INSURER IN THIS STATE MAY NOT WRONGFULLY DENY OR
INSUFFICIENTLY COVER A VALID CONSUMER INSURANCE CLAIM.
Be it enacted by the
General Assembly of the State of South Carolina:
SECTION 1.  This act may be cited as the "Fair Claims Accountability Act."
SECTION 2.  Chapter 4, Title 37 of the S.C. Code is amended by
adding:
    Section
37-4-305.  (A)(1) The Healthcare
Claims Consumer Assistance Program ("H-CAP") is established within the
Department of Consumer Affairs to provide support for consumers, including
prospective consumers, of health insurance and to customer assistance programs
and public and private health insurance assistance programs.
       (2)
The services provided by H-CAP may include:
  (a)
assisting consumers with filing complaints and appeals with a group health
plan, health insurance carrier, or independent review organization and
providing information about the internal and external appeal and grievance
processes of a group health plan, health insurance carrier, or independent
review organization;
  (b)
assisting consumers and health plans or insurers to settle health insurance
conflicts, disputed claims, and claim denials;
  (c)
collecting, tracking, and quantifying inquiries regarding health insurance and
problems encountered by consumers;
  (d)
educating consumers on their rights and responsibilities with respect to health
insurance coverage;
  (e)
assisting consumers with obtaining health insurance coverage by providing
information, referrals, or other assistance;
  (f)
assisting with obtaining federal health insurance premium tax credits under
Section 368 of the United States Internal Revenue Code of 1986, as amended; and
  (g)
providing information to the public about the services of H-CAP through a
comprehensive outreach program and a toll-free telephone number.
    (B) All
health plans and insurers in this State are required to place a prominent,
plain-language notice about H-CAP assistance on the front page of all health
insurance explanation of benefits, denials, or other plan-related
communications.
    (C)
The Department of Consumer Affairs is authorized to contract with a nonprofit,
independent health insurance consumer assistance entity, which may not be a
health plan or insurer or affiliate thereof, to operate the consumer assistance
program.
    (D)
The H-CAP shall work with the department to fulfill the data collection and
reporting requirements set forth in this section.
    (E) It
is unlawful for a health plan or insurer in this State to wrongfully deny or
insufficiently cover a valid consumer insurance claim. The department is
authorized to take disciplinary measures, including the imposition of civil
penalties and awarding of damages against injured consumers, against a licensee
when the department determines that the licensee has committed an act or
omission constituting grounds for disciplinary action, as specified. The department
also may refer violations to the Attorney General for civil enforcement under South
Carolina consumer protection and insurance laws.
    (F) In
the event that the department or a court finds that a health plan or insurer
has wrongfully denied or insufficiently covered a valid consumer insurance
claim:
       (1)
The health plan or insurer is automatically liable to pay the policyholder
double the amount it is found to have wrongfully denied or insufficiently
covered plus all reasonable attorney's fees incurred to pursue a regulatory
complaint or litigation for the pursuit of action against the health plan or
insurer.
       (2)
The department or a court may assess an additional amount in damages to the
health plan or insurer, the entirety of which must be paid to the policyholder,
if the department or a court assesses that the harm to the policyholder caused
by the wrongful claim denial is severe. When assessing an additional amount in
damages against a health plan or insurer, the department or a court shall
determine the appropriate amount in damages payable to the policyholder based
on one or more factors, as applicable, including:
  (a)
the nature, scope, and gravity of the violation;
  (b)
the severity of the potential harm to the policyholder in terms of loss of
life, loss of health, emotional distress, or financial harm;
  (c)
the nature and extent to which the plan cooperated with the department;
  (d)
the nature and extent to which the plan aggravated or mitigated any injury or damage
caused by the violation; and
  (e)
the nature and extent to which the plan has taken corrective action to ensure
the violation will not recur.
    (G)(1) The department, after appropriate
notice and opportunity to remedy violations, is authorized to issue a civil
penalty of up to twenty-five thousand dollars for each violation to a health
plan or insurer in this State, who wrongfully denied a valid consumer insurance
claim or insufficiently covers a valid consumer insurance claim.
       (2)
The department is authorized to issue additional penalties to the health plan
or insurer if it is found to be continuously violating coverage laws in this State.
       (3)
When assessing penalties against a health plan or insurer, the department shall
determine the appropriate amount of the penalty for each violation of this
section based upon one or more factors including, but not limited to, the
following:
  (a)
the nature, scope, and gravity of the violation;
  (b)
the good or bad faith of the health plan or insurer;
  (c)
the health plan or insurer's history of violations;
  (d)
the wilfulness of the violation;
  (e)
whether the violation is an isolated incident;
  (f)
the nature and extent to which the health plan or insurer cooperated with the
department;
  (g)
the nature and extent to which the health plan or insurer aggravated or
mitigated any injury or damage caused by the violation;
  (h)
the nature and extent to which the health plan or insurer has taken corrective
action to ensure the violation will not recur;
  (i)
the financial status of the health plan or insurer including reserves,
financial solvency, revenues in excess of expenditures and other factors
relating to the financial status of the domestic corporation and any parent
company, subsidiary, affiliate, or other financially connected entity, if any;
  (j)
the financial cost of the health care service that was denied, delayed, or
modified, including whether the penalty is commensurate with or exceeds the
avoided cost based on the number of enrollees estimated to be affected;
  (k)
the number of enrollees estimated to be affected;
  (l)
the frequency of the violation based on the number of days for a continuous
violation or the estimated number of incidents with potential harm to
enrollees;
  (m)
the severity of the potential harm in terms of loss of life, loss of health,
emotional distress, or financial harm to the enrollee; and
  (n)
the amount of the penalty necessary to deter similar violations in the future.
    (H)
The department, after appropriate notice and opportunity to remedy violations,
by order, may suspend or revoke any license issued to a health plan or insurer,
or assess administrative penalties if the department determines that the
licensee has committed any of the acts or omissions constituting a violation of
this section.
    (I)
Beginning January 1, 2026, and every year thereafter, the penalty amounts
specified in this section must be adjusted based on whichever is the higher of:
       (1)
the average rate of change in premium rates for the individual and small group
markets, weighted by enrollment since the previous adjustment; or
       (2)
adjustment based on inflation.
    (J)(1) The department shall keep records
of wrongful claim denials brought to H-CAP and require private health plans and
insurers to disclose data on denied claims to the department including, but not
limited to:
  (a)
number, percentage, and type of denied claims; and
  (b)
number, percentage, and type of wrongfully denied claims.
       (2)
The department shall require private health plans and insurers to provide
required data in a machine-readable file.
       (3)
The department is authorized to investigate health plans and insurers for
violations of coverage laws.
       (4)
If upon review a health plan or insurer is found to be in violation of coverage
laws in more than the median percentage of wrongful denials in the previous
year, the department shall review violations considering one or more factors
enumerated in subsection (G)(3). The department shall report these violations
to the Attorney General, Governor, and the majority and minority leaders of
both chambers of the General Assembly.
    (K)(1) Beginning on January 1, 2026, and
every year thereafter, the department is required to report to the state
Attorney General, Governor, and minority and majority leaders in both chambers
of the General Assembly, and publish a report to its public website, with data
on:
  (a)
number and type of denied claims, including raw numbers and numbers as a
percent of total claims;
  (b)
number and type of wrongfully denied claims, including raw numbers and numbers
as a percent of total claims;
  (c)
number and type of denied claim appeals reported to H-CAP;
  (d)
of denied claims appeals brought to H-CAP, the number, type, and percentage of
denied claims that are found to be wrongful by each health plan or insurer;
  (e)
information and outcomes of any investigations conducted by the department for
health plan or insurer violations of coverage laws; and
  (f)
the department shall post the report on their website in a machine-readable
format.
       (2)
The department annually shall assess data reporting requirements and update
health plan and insurer data reporting requirements based on the department's
needs to fulfill the requirements of this section.
    (L)
This State has a compelling interest in protecting privacy and the protection
of personal information. In administering this section, state and local
agencies, businesses, and any other entity, may only request data necessary to
administer this section and retain it only as required to administer and
achieve the purposes of this section. Any personal information or data
collected or obtained in the course of administering this section may be shared
only in a manner that has been deidentified and aggregated to the greatest
extent allowable while still in compliance with federal eligibility
requirements and every allowable effort must be made to revoke access to such
data should programs be eliminated or should there be an ineligibility
determination. Personal information or data collected or obtained in the course
of administering this section may not be otherwise disclosed without the
informed consent of the individual, a warrant signed by a state judge or
federal judge, lawful court order administered within South Carolina or a
lawful federal court order, or subpoena administered within South Carolina or
federal subpoena, or unless otherwise required by federal or state statute.
Personal information or data may be considered deidentified if it cannot reasonably
be used to infer information about, or otherwise be linked to, a particular
individual or household.
    (M) The
department shall promulgate rules and regulations to meet the requirements of
this section.
SECTION 3.  If any section, subsection,
paragraph, subparagraph, sentence, clause, phrase, or word of this act is for
any reason held to be unconstitutional or invalid, such holding shall not
affect the constitutionality or validity of the remaining portions of this act,
the General Assembly hereby declaring that it would have passed this act, and
each and every section, subsection, paragraph, subparagraph, sentence, clause,
phrase, and word thereof, irrespective of the fact that any one or more other
sections, subsections, paragraphs, subparagraphs, sentences, clauses, phrases,
or words hereof may be declared to be unconstitutional, invalid, or otherwise
ineffective.
SECTION 4.  This act takes effect upon approval
by the Governor.
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This web page was last updated on February 05, 2025 at 01:31 PM