This amendment completely rewrites the bill from defining terms related to adverse determinations and utilization review into requiring utilization review organizations and health carriers to submit annual reports to the Division of Insurance containing specific data on prior authorization approval rates, denial rates, and processing times. The change REDIRECTS the bill from establishing definitional framework to creating transparency and accountability reporting requirements.
26.648.16 26.648.17 101st Legislative Session 1199 2026 South Dakota Legislature House Bill 1199 HOUSE HEALTH AND HUMAN SERVICES ENGROSSED This bill has been extensively amended (hoghoused) and may no longer be consistent with the original intention of the sponsor. Introduced by: Representative Rehfeldt Underscores indicate new language. Overstrikes indicate deleted language. An Act to address preauthorization prior authorization and reporting requirements for certain by utilization 1 review organizations and health care services 1 and utilization review requirements for certain health benefit plans. carriers. 2 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA: 3 Section 1. That § 58-17H-1 a NEW SECTION be AMENDED: added to chapter 58-17H: 4 58-17H-1. Terms used in this chapter mean: 5 (1) "Adverse determination," any of the following: 6 (a) A determination by a health carrier, or the carrier's designee utilization 7 review organization, that, based upon the information provided, a request 8 by a covered person for a benefit under the health carrier's health benefit 9 plan, upon application of any utilization review technique, does not meet 10 organization or health carrier shall conduct an annual review 5 and submit the health carrier's requirements findings in a report to the Division of Insurance, at the time and in the 6 manner directed by the division. 7 The report must contain the following information for medical necessity, appropriateness, 11 the previous calendar year, 8 aggregated for all health care setting, level services or items: 9 (1) The number and percentage of care, urgent prior authorization requests that the 10 utilization review organization or effectiveness, health carrier approved; 11 (2) The number and percentage of urgent prior authorization requests that the 12 utilization review organization or is determined to be 12 experimental health carrier denied; 13 (3) The number and percentage of nonurgent prior authorization requests that the 14 utilization review organization or investigational, health carrier approved; 15 (4) The number and percentage of nonurgent prior authorization requests that the requested benefit is, therefore, 13 denied, reduced, 16 utilization review organization or terminated, or payment is not provided or made, in 14 whole or in part, for health carrier denied; 17 (5) The average and median time that elapsed between the benefit; 15 (b) The denial, reduction, termination, or failure to provide or make payment 16 in whole or in part, for submission of a benefit, based on prior 18 authorization request and a determination by a health 17 carrier, or the carrier's designee utilization review organization, organization or 19 health carrier; and 20 (6) The average and median time that elapsed between the submission of a covered 18 person's eligibility to participate in the health carrier's health benefit plan; 19 (c) Any prospective review or retrospective review determination that denies, 20 reduces, terminates, or fails to provide or make payment, in whole or in 21 part, for a benefit; or 22 (d) A rescission of coverage determination; 23 (2) "Ambulatory review," utilization review of health care services performed or 24 provided in an outpatient setting; 25 (3) "Authorized representative," a one of the following: 26 26.648.16 2 1199 Underscores indicate new language. Overstrikes indicate deleted language. (a) A person to whom a covered person has given express written consent to 1 represent the covered person for purposes of this chapter, a; 2 (b) A person authorized by law to provide substituted consent for a covered 3 person, a; 4 (c) A family member of the covered person or the covered person's treating 5 health care professional, if the covered person is unable to provide consent, 6 or a; 7 (d) A health care professional, if the covered person's health benefit plan 8 requires that a request for a benefit under the plan be initiated by the health 9 care professional.; and 10 (e) For any an urgent care request, the term includes a health care professional 11 with knowledge of the covered person's medical condition; 12 (4) "Case management," a coordinated set of activities conducted for individual patient 13 management of serious, complicated, protracted, or other health conditions; 14 (5) "Certification," 21 prior authorization request and a determination by a health carrier or the carrier's designee 15 utilization review 22 organization that a request for a benefit under or health carrier. 23 The division shall publish the health carrier's 16 health benefit plan has been reviewed and, based report required by this section, on the information provided, 17 satisfies division's 24 website, within sixty days after receiving the health carrier's requirements for medical necessity, appropriateness, 18 health care setting, level of care, and effectiveness; 19 (6) "Clinical practice guidelines," a systematically developed statement to assist 20 decision making by health care professionals and patient decisions about 21 appropriate health care for specific clinical circumstances and conditions; 22 (7) "Clinical peer," a physician or other health care professional who holds a 23 nonrestricted license in a state of the United States and in the same or similar 24 specialty as typically manages the medical condition, procedure, or treatment report. 25 under review; 26 (8) "Clinical review criteria," the written screening procedures, decision abstracts, 27 clinical protocols, and practice guidelines used by the health carrier to determine 28 the medical necessity and appropriateness of health care services; 29 (9) "Concurrent review," utilization review conducted during a patient's hospital stay 30 or course of treatment in a facility or other inpatient or outpatient health care 31 setting; 32 (10) "Covered benefits" or "benefits," those health care services to which a covered 33 person is entitled under the terms of a health benefit plan; 34 26.648.16 3 1199 Underscores indicate new language. Overstrikes indicate deleted language. (11) "Covered person," a policyholder, subscriber, enrollee, or other individual 1 participating in a health benefit plan; 2 (12) "Director," the director of the Division of Insurance; 3 (13) "Discharge planning," the formal process for determining, prior to discharge from 4 a facility, the coordination and management of the care that a patient receives 5 following discharge from a facility; 6 (14) "Emergency medical condition," a medical condition manifesting itself manifested 7 by acute symptoms of sufficient severity, including severe pain, such that a prudent 8 layperson, who possesses an average knowledge of health and medicine, could 9 reasonably expect that the absence of immediate medical attention, would result 10 in serious impairment to bodily functions or serious dysfunction of a bodily organ 11 or part, or would place the person's health or, with respect to a pregnant woman, 12 the health of the woman or her unborn child, in serious jeopardy; 13 (15) "Emergency services," with respect to an emergency medical condition: 14 (a) A medical screening examination that is within the capability of the 15 emergency department of a hospital, including and ancillary services 16 routinely available to the emergency department to evaluate such the 17 emergency condition; and 18 (b) Such further Further medical examination and treatment, to the extent they 19 are that is within the capability of the staff and facilities at a hospital to 20 stabilize a patient; 21 (16) "Facility," an institution providing health care services, or a health care setting, 22 including hospitals and other licensed inpatient centers, ambulatory surgical or 23 treatment centers, skilled nursing centers, residential treatment centers, 24 diagnostic, laboratory, and imaging centers, and rehabilitation, and other 25 therapeutic health settings;: 26 (a) Ambulatory surgical or treatment centers; 27 (b) Diagnostic, laboratory, and imaging centers; 28 (c) Hospitals and other licensed inpatient centers; 29 (d) Rehabilitation and other therapeutic health settings; 30 (e) Residential treatment centers; and 31 (f) Skilled nursing centers; 32 (17) "Health care professional," a physician or other health care practitioner licensed, 33 accredited, or certified to perform specified health services consistent with state 34 law; 35 26.648.16 4 1199 Underscores indicate new language. Overstrikes indicate deleted language. (18) "Health care provider" or "provider," a health care professional or a facility; 1 (19) "Health care services," services for the diagnosis, prevention, treatment, cure, or 2 relief of a health condition, illness, injury, or disease; 3 (20) "Health carrier," an entity subject to the insurance laws and regulations of this 4 state, or subject to the jurisdiction of the director, that contracts or offers to 5 contract, or enters into an agreement to provide, deliver, arrange for, pay for, or 6 reimburse any of the costs of health care services, including: a sickness and 7 accident insurance company, a health maintenance organization, a nonprofit 8 hospital and health service corporation, or any other entity providing a plan of 9 health insurance, health benefits, or health services; 10 (a) A health maintenance organization; 11 (b) A nonprofit hospital and health service corporation; 12 (c) A sickness and accident insurance company; and 13 (d) Any other entity providing a plan of health insurance, health benefits, or 14 health services; 15 (21) "Managed care contractor," a person who establishes, operates, or maintains a 16 network of participating providers; or contracts with an insurance company, a 17 hospital or medical service plan, an employer, an employee organization, or any 18 other entity providing coverage for health care services to operate a managed care 19 plan or health carrier; 20 (22) "Managed care entity," a licensed insurance company, hospital or medical service 21 plan, health maintenance organization, or an employer or employee organization, 22 that operates a managed care plan or a managed care contractor. The term does 23 not include a licensed insurance company unless it the company contracts with 24 other entities to provide a network of participating providers; 25 (23) "Managed care plan," a plan operated by a managed care entity that provides for 26 the financing or delivery of health care services, or both, to persons enrolled in the 27 plan through any of the following: 28 (a) Arrangements with selected providers to furnish health care services; 29 (b) Explicit standards for the selection of participating providers; or 30 (c) Financial incentives for persons enrolled in the plan to use the participating 31 providers and procedures provided for by the plan; 32 (24) "Network," the group of participating providers providing services to a health 33 carrier; 34 26.648.16 5 1199 Underscores indicate new language. Overstrikes indicate deleted language. (25) "Participating provider," a provider who, under a contract with the a health carrier 1 or with its the health carrier's contractor or subcontractor, has agreed to provide 2 health care services to covered persons with an expectation of receiving payment, 3 other than coinsurance, copayments, or deductibles, directly or indirectly, from the 4 health carrier; 5 (26) "Pharmaceutical sample," a unit of a prescription drug that is not intended to be 6 sold and is intended to promote the sale of the drug; 7 (27) "Preauthorization," a determination by a health carrier that the health care services 8 proposed to be provided to a patient are medically necessary and appropriate; 9 (28) "Prospective review," a utilization review conducted prior to an admission, or the 10 provision of a health care service or a course of treatment in accordance with a 11 health carrier's requirement that the health care service or course of treatment, in 12 whole or in part, be approved prior to its provision; 13 (28)(29) "Rescission," a cancellation or discontinuance of coverage under a health 14 benefit plan that has a retroactive effect. The term does not include a cancellation 15 or discontinuance of coverage under a health benefit plan if: 16 (a) The cancellation or discontinuance of coverage has only a prospective 17 effect; or 18 (b) The cancellation or discontinuance of coverage is effective retroactively to 19 the extent it is attributable to a failure to timely pay required premiums or 20 contributions towards the cost of coverage; 21 (29)(30) "Retrospective review," any a review of a request for a benefit that is not a 22 prospective review request, which and does not include the review of a claim that 23 is limited to veracity of documentation, or accuracy of coding, or adjudication for 24 payment the: 25 (a) Accuracy of coding; 26 (b) Adjudication for payment; or 27 (c) Veracity of documentation; 28 (30)(31) "Second opinion," an opportunity or requirement to obtain a clinical evaluation 29 by a provider other than the one originally making a recommendation for a 30 proposed health care service to assess the medical necessity and appropriateness 31 of the initial proposed health care service; 32 (31)(32) "Secretary," the secretary of the Department of Health; 33 (32)(33) "Stabilized," with respect to an emergency medical condition, that no material 34 deterioration of the condition is likely, with reasonable medical probability, to result 35 26.648.16 6 1199 Underscores indicate new language. Overstrikes indicate deleted language. from, or occur during, the transfer of the individual from a facility or, with respect 1 to a pregnant woman, the woman has delivered, including the placenta; 2 (33) "Utilization review," a set of formal techniques used by a managed care plan or 3 utilization review organization to monitor and evaluate the medical necessity, 4 appropriateness, and efficiency of health care services and procedures including 5 techniques such as ambulatory review, prospective review, second opinion, 6 certification, concurrent review, case management, discharge planning, and 7 retrospective review; 8 (34) "Step therapy override exception," a step therapy protocol should be overridden in 9 favor of coverage of the prescription drug selected by a health care professional 10 within the applicable time frames in § 58-17H-55 and in compliance with chapter 11 58-17H. This determination is based on a review of the covered person's or health 12 care professional's request for an override, along with supporting rationale and 13 documentation; 14 (35) "Step therapy protocol," a protocol or program that establishes a specific sequence 15 in which prescription drugs, either self-administered or administered by a health 16 care provider, are covered under a pharmacy or medical benefit by a health carrier, 17 a health benefit plan, or a utilization review organization for a specified medical 18 condition and medically appropriate for a health carrier, a health benefit plan, or 19 utilization review organization, including self-administered drugs and drugs 20 administered by a health care professional; and; 21 (36) "Utilization review," a set of formal techniques used by a managed care plan or 22 utilization review organization to monitor and evaluate the medical necessity, 23 appropriateness, and efficiency of health care services and procedures, which 24 includes techniques such as ambulatory review, prospective review, second 25 opinion, certification, concurrent review, case management, discharge planning, 26 and retrospective review; and 27 (37) "Utilization review organization," an entity that conducts utilization review other 28 than a health carrier performing utilization review for its own health benefit plans. 29 Section 2. That a NEW SECTION be added to chapter 58-17H: 30 Before an adverse determination is issued, by a utilization review organization that 31 questions the medical necessity, appropriateness, or experimental or investigational 32 nature of a health care service, the organization shall provide to the health care 33 professional who ordered, requested, provided, or is to provide the service, a reasonable 34 26.648.16 7 26 26.648.17 2 1199 Underscores indicate new language. Overstrikes indicate deleted language. opportunity to discuss the covered person's treatment plan and the clinical basis A utilization review organization or health carrier shall annually review each health 1 care service for the 1 organization's determination with which a health benefit plan requires prior authorization and shall eliminate 2 the prior authorization requirement for any health care professional employed by service if prior authorization 3 requests are routinely approved with such frequency as to demonstrate that the organization. 2 If the service was ordered, requested, provided, prior 4 authorization requirement does not promote health care quality or is to be provided by a physician, the 3 opportunity to discuss the treatment plan and the clinical basis must be with another 4 physician who is licensed to practice medicine in this state and has the same or a similar reduce health care 5 specialty. 6 This section applies only spending, to a utilization review requested on or after July 1, 2026. degree that justifies the plan's administrative costs associated with the 6 prior authorization requirement. 7 Section 3. That a NEW SECTION be added to chapter 58-17H: 8 A preauthorization process used utilization review organization or health carrier shall submit an annual report to 9 the Division of Insurance, at the time and in the manner requested by the division, 10 regarding the review required in accordance with section 2 of this Act. The report must 11 set forth: 12 (1) The number of prior authorizations evaluated in accordance with the review; 13 (2) The number of prior authorizations eliminated as a result of the review, and the 14 reason for the elimination; 15 (3) The list of prior authorizations that had at least eighty percent of all requests 16 approved, during the preceding calendar year, for a specific health care service 17 covered by the health benefit plan, pursuant but for which the prior authorization 18 requirement was retained due to sections 3 medical or scientific evidence that justified 19 continuation of the requirement; and 20 (4) The number of prior authorization requests that were submitted in the preceding 21 calendar year for each eliminated prior authorization and the number of health care 22 providers that had submitted a request for each eliminated prior authorization 23 requirement. 24 With respect to 9 17, inclusive, each health care service for which prior authorization was 25 eliminated under section 2 of this Act, is subject the report must provide data regarding any increase 26 or decrease of ten percent or more, in the average number of claims submitted per health 27 care provider, for that service, compared to the same limitations and requirements provided calendar year preceding the elimination. 28 The division shall publish the report required by 10 this title for a preauthorization used by an insurer. 11 section on the division's 29 website within sixty days after receiving the report. 30 Section 4. That a NEW SECTION be added to chapter 58-17H: 12 Sections 31 26.648.17 3 to 17, inclusive, of this Act, apply only to: 13 (1) A health benefit plan offered by a health carrier; 14 (2) A person who contracts with a health carrier to issue preauthorizations; and 15 (3) A preferred provider benefit plan or an exclusive benefit plan offered by a health 16 carrier licensed pursuant to chapter 58-6. 17 Sections 2 to 17, inclusive, of this Act do not apply to the state medicaid program, 18 as provided for in chapter 28-6. 19 Section 5. That a NEW SECTION be added to chapter 58-17H: 20 Except as otherwise provided, once every twelve months, a health carrier shall 21 evaluate whether a health care provider qualifies for an exemption from preauthorization. 22 A health carrier that uses a preauthorization process for a health care service may 23 not require a health care provider to obtain preauthorization for a particular health care 24 service if, in the most recent twelve-month evaluation period, the health carrier approved 25 or would have approved at least ninety percent of the preauthorization requests submitted 26 by the health care provider for the particular health care service. 27 If compliance with a health benefit plan subject to this chapter is an additional 28 coverage requirement, the compliance may not be considered in determining whether the 29 preauthorization exemption is met. 30 26.648.16 8 1199 Underscores indicate new language. Overstrikes indicate deleted language. A health carrier may continue an exemption under this section without evaluating For purposes of sections 1 whether the health care provider qualifies for the exemption for a particular evaluation 2 period. to 3 A health care provider is not required to request an exemption under this section 4 to qualify for the exemption. 5 Section 6. That a NEW SECTION be added to chapter 58-17H: 6 An exemption from preauthorization requirements given to a health care provider 7 under section 5 of this Act remains in effect until: 8 (1) The thirtieth day after the date the health carrier notifies the health care provider 9 of the determination to withdraw the exemption under section 7 of this Act, if the 10 health inclusive, “health care provider does services” do not appeal the determination; 1 include dental services, pharmaceutical services, or 11 (2) The fifth day after the date the independent review organization affirms the health 12 carrier's determination to withdraw the exemption, if the health care provider 13 appeals the determination. 14 If a health carrier does not finalize an exemption withdrawal determination as 15 provided for in this section, the health care provider is considered to have met the criteria 16 of section 5 of this Act to continue to qualify for the exemption. 17 Section 7. That a NEW SECTION be added to chapter 58-17H: 18 A health carrier may only withdraw an exemption from the preauthorization 19 requirement under section 5 of this Act if the health carrier: 20 (1) Makes a determination, on the basis of a historical review of a random sample 21 consisting of no fewer than five nor more than twenty claims submitted by the 22 health care provider during the most recent evaluation period described in section 23 5 of this Act, that less than ninety percent of the claims for the particular health 24 care service met the medical necessity criteria that would have been used by the 25 health carrier when conducting preauthorization review for the particular health 26 care service during the relevant evaluation period; and 27 (2) Notifies the health care provider at least thirty days before the proposed exemption 28 withdrawal is to take effect and provides notice containing: 29 (a) The sample information used to make the determination under subdivision 30 (1) of this section; and 31 (b) A plain language explanation of how the health care provider may appeal 32 and seek an independent review of the determination. 33 26.648.16 9 1199 Underscores indicate new language. Overstrikes indicate deleted language. A determination under subdivision (1) must be made by an individual licensed to 1 practice medicine in this state. If the determination under subdivision (1) pertains to 2 claims submitted by a physician, the determination must be made by an individual who is 3 licensed to practice medicine in this state and has the same or a similar specialty as that 4 of the physician. 5 A health carrier may only rescind an exemption from the preauthorization 6 requirement under section 5 of this Act during January or July of each year. 7 Section 8. That a NEW SECTION be added to chapter 58-17H: 8 A health carrier may deny an exemption from the preauthorization requirement 9 under section 5 of this Act only if: 10 (1) The health care provider does not have the exemption at the time of the relevant 11 preauthorization request evaluation period; and 12 (2) The health carrier provides the health care provider with statistics and data for the 13 relevant preauthorization request evaluation period and detailed information 14 sufficient to demonstrate that the health care provider does not meet the criteria 15 for an exemption from the preauthorization requirement for the particular health 16 care service under section 5 of this Act. 17 Section 9. That a NEW SECTION be added to chapter 58-17H: 18 A health care provider may request a review of an adverse exemption 19 determination by an independent review organization. A health carrier may not require a 20 health care provider to engage in an internal appeal process before requesting a review 21 by an independent review organization. 22 A health carrier must pay: 23 (1) For any appeal or independent review of an adverse exemption determination 24 regarding a preauthorization exemption requested under this section; and 25 (2) The recordholder's customary costs for any copies of medical records or other 26 documents requested from a health care provider during an exemption withdrawal 27 review under this section. 28 An independent review organization must complete an expedited review of an 29 adverse exemption determination regarding a preauthorization exemption no later than 30 thirty days after the date on which a health care provider files the request for a review 31 under this section. 32 26.648.16 10 1199 Underscores indicate new language. Overstrikes indicate deleted language. A health care provider may request that the independent review organization 1 consider another random sample of at least five and no more than twenty claims submitted 2 to the health carrier by the health care provider during the relevant evaluation period, for 3 the relevant health care service, as part of the review. The independent review 4 organization must base the determination on the medical necessity of the claims reviewed 5 by the health carrier under section 7 of this Act and reviewed as provided for in this 6 section. 7 Section 10. That a NEW SECTION be added to chapter 58-17H: 8 A health carrier is bound by an appeal or independent review determination that 9 does not affirm the determination made by the health carrier to withdraw a 10 preauthorization exemption. 11 A health carrier may not deny a health care service solely on the basis of a denial 12 or carrier withdrawal of an exemption, even if the health carrier's determination to 13 withdraw the preauthorization exemption is affirmed by an independent review 14 organization. 15 If a determination of a preauthorization exemption made by the health carrier is 16 overturned on review by an independent review organization, the health carrier: 17 (1) May not attempt to withdraw the exemption before the end of the next evaluation 18 period that occurs; and 19 (2) May withdraw the exemption only after the health carrier complies with sections 7 20 and 9 of this Act. 21 Section 11. That a NEW SECTION be added to chapter 58-17H: 22 After a final determination or review affirming the exemption withdrawal or denial 23 of an exemption for a specific health care service under section 5 of this Act, a health care 24 provider is eligible for consideration of an exemption for the same health care service after 25 the twelve-month evaluation period following the period that formed the basis of the 26 carrier withdrawal or denial of an exemption. 27 Section 12. That a NEW SECTION be added to chapter 58-17H: 28 A health carrier may not deny or reduce payment to a health care provider for a 29 health care service that the health care provider has qualified for an exemption from the 30 26.648.16 11 1199 Underscores indicate new language. Overstrikes indicate deleted language. preauthorization requirement under section 5 of this Act, based on medical necessity or 1 appropriateness of care, unless the health care provider: 2 (1) Knowingly and materially misrepresented the health care service in a request for 3 payment submitted to the health carrier with the specific intent to deceive and 4 obtain an unlawful payment from the health carrier; or 5 (2) Failed to substantially perform the health care service. 6 Section 13. That a NEW SECTION be added to chapter 58-17H: 7 A health carrier may not conduct a historical review of a health care service subject 8 to an exemption except: 9 (1) To determine if the health care provider qualifies for an exemption; or 10 (2) If the health carrier has a reasonable cause to suspect a basis for denial exists 11 under section 12 of this Act. 12 Section 14. That a NEW SECTION be added to chapter 58-17H: 13 No later than five days after qualifying for an exemption from the preauthorization 14 requirements under section 5 of this Act, a health carrier must provide to the health care 15 provider notice that: 16 (1) States the health care provider qualifies for an exemption from the 17 preauthorization requirements under section 5 of this Act; 18 (2) Lists the health care services and health benefit plans to which the exemption 19 applies; and 20 (3) States the duration of the exemption. 21 Section 15. That a NEW SECTION be added to chapter 58-17H: 22 If a health care provider submits a preauthorization request regarding a health 23 care service for which the health care provider qualifies for an exemption from the 24 preauthorization requirements under section 5 of this Act, the health carrier must provide 25 a notice to the health care provider that: 26 (1) Contains the information set forth in section 5 of this Act; 27 (2) Details the impediments to coverage, if any; and 28 (3) Sets forth the payment requirements of the health carrier. 29 Section 16. That a NEW SECTION be added to chapter 58-17H: 30 26.648.16 12 1199 Underscores indicate new language. Overstrikes indicate deleted language. Nothing in sections 3 to 17, inclusive, of this Act may be construed to: 1 (1) Authorize the provision of a health care service that is outside the scope of the prescription drug 2 health care provider's licensure; products or supplies. 3 (2) Require a health carrier to pay for a health care service that falls outside the scope 4 of licensure and is performed in violation of the law. 5 Section 17. That a NEW SECTION be added to chapter 58-17H: 6 Sections 3 to 17, inclusive, of this Act apply to requests for the preauthorization of 7 health care services and requests for utilization reviews made on or after July 1, 2026. 8