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Texas Department of Insurance Takes Action Against Companies For Utilization Review Non-Compliance

In 2015, the Texas Department of Insurance (“TDI”) took action against a number of companies for their failure to be properly licensed as a utilization review agent in Texas, as well as for their failure to comply with other Texas utilization review requirements. The details of these actions are summarized below.

These regulatory actions against unlicensed utilization review activity demonstrate the importance for utilization review organizations to be properly licensed in Texas and in other states requiring utilization review licensure, as well as for insurance companies to confirm that the utilization review entities they are contracted with are duly licensed as utilization review agents in Texas and in other required states.

  • Pursuant to a Consent Order dated January 15, 2015, the TDI found that a company that had held a utilization review certificate in Texas had allowed its utilization review agent certificate to expire and yet the company continued to perform utilization review for various insurers in Texas. The TDI also found these insurers delegated utilization review to the company even when it did not hold an active utilization review agent certificate in violation of Texas law.

The TDI also determined that the insurer failed to:

  • Issue initial adverse determinations within the required timeframes

  • Afford the provider with a reasonable opportunity to discuss the requested health care services prior to issuing an adverse determination

  • Include in its initial adverse determination letters a description of the source of the screening criteria it used to make the determination

  • Include in its appeal acknowledgement letter:

    • The date that the URA received the appeal

    • A list of the documents that the appealing party must submit for review when the approved template included this notice element

As a result, the TDI ordered the insurer to pay an administrative penalty of $30,000.

  • Pursuant to a Consent Order dated July 2, 2015, the TDI found that a third party administrator (“TPA”) licensed by the TDI failed to hold a utilization review agent Certificate of Registration in Texas.

In addition to finding that the TPA conducted utilization review without a utilization review agent Certificate of Registration, the TDI also found that the TPA:

  • Violated Texas Ins. Code § 4201.152 and 28 Texas Admin. Code § 19.2015 because the utilization review was not conducted under the direction of a licensed physician

  • Denied medical doctor office visits on the grounds that the visits were not medically necessary, which violated Texas Ins. Code § 4201.153(d) and 28 Texas Admin. Code § 19.2005 because the adverse determinations were not made by a medical doctor or chiropractor, as applicable

  • Violated Texas Ins. Code § 4201.252, Texas Lab. Code §§ 408.0043 and 408.0045, and 28 Texas Admin. Code §§ 19.2006 and 180.22(g) because the adjuster who performed the retrospective review of the medical doctor office visits was not appropriately licensed, trained, and qualified to make adverse determinations

  • Violated Texas Ins. Code § 4201.206 and 28 Texas Admin. Code § 19.2011 because the TPA issued medical necessity denials without first giving providers a reasonable opportunity to discuss with a medical doctor the clinical bases for the denials

Consequently, the TDI ordered the TPA to cease and desist from performing utilization review without a utilization review agent certificate of registration and to pay an administrative penalty of $18,000.

  • Pursuant to a Consent Order dated February 5, 2015, the TDI reviewed an insurance company’s utilization review agent registration renewal application and found deficiencies in the insurer’s utilization review policies and adverse determination templates.

As a result, the TDI ordered the company and these insurers to immediately comply with Texas utilization review laws and found the company and the insurers jointly and severally liable to pay an administrative penalty of $60,000.

© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume VI, Number 7


About this Author

Steven L. Imber, Polsinelli PC, Insurance Regulatory Attorney, Enforcement Actions Lawyer,

Steve Imber chairs Polsinelli's Insurance Business and Regulatory group.  As a former General Counsel at a state insurance department, Steve Imber has the knowledge and experience to provide quality counsel to insurers, third party administrators, insurance agencies, medical discount plans and other insurance regulated entities. His practice includes representing and assisting clients on multi-state and national licensing projects, research projects, enforcement actions, market conduct examinations, audits and compliance programs and various other regulatory and...


Jennifer Osborn Nix works diligently for insurance companies, third-party administrators, and other regulated entities to further their goals and help them remain compliant within the 50-state regulatory scheme. She focuses on insurance regulatory and compliance issues, with a primary emphasis on life and health insurance matters.

Jennifer works with many regulated entities, including many in the health care sector, who rely on her for research, advice, strategic counsel, and licensing.