Michigan Bill Could Add TPA Requirements, Code of Conduct
May 20, 2011

The Michigan State Senate currently is reviewing a bill that would place several requirements on third-party administrators.

Under the text of S.B. 0306, insurers would be prohibited from permitting a TPA to also provide auto glass services for the insurer “unless the third party biller adopts and follows … a code of conduct” that complies with other provisions in the bill. Among these provisions are requirements that, if an insured states a preference of auto glass shop and that shop is listed on the insurer’s network, no other facility shall be suggested.

Likewise, if an insured does not have a preference or if the insured’s preference is not on the network, the TPA would be required to suggest at least three auto glass repair or replacement facilities; the three shops provided would be suggested on an “objective basis that alternates between all automobile glass repair and replacement facilities in the network and that is designed to not give a preference to glass repair or replacement facilities that are related to or affiliated with … the third-party biller that has responsibility for suggesting the glass repair or replacement facility to the insured.”

Additionally, the code of conduct would include provisions that the TPA not promote or otherwise discuss its own or any affiliated auto glass facilities, “including, but not limited to, discussions concerning national warranties, deductibles, waivers or cash pricing offered by those facilities.”

Finally, such TPAs also would be required, under the possible legislation, to file a copy of several documents with the insurance commissioner on a monthly basis, including: the script used for auto glass repair and replacement claims; statements of ownership and all TPA contracts with insurers; total number of auto glass repair or replacement claims for each insurer that were processed, administered or monitored in the preceding month; details on the claims such as whether they were repairs or replacements; and the names of the shops that received referrals during the month.

If passed, the bill would take effect July 1. S.B. 0306 was introduced by Sen. Joseph Hune, and currently is under the review the state’s Senate Insurance Committee.

At press time, Sen. Hune had not yet responded to requests for comment on the bill’s origins.

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