What if Someone Mediates in ‘Bad Faith’?


In 2009, the Texas Legislature signed into law Texas House Bill 2256. The bill provides a procedure for mediation of out-of-network health benefit claim disputes. The law now gives patients the option to mediate when they are “balance-billed” by their insurance company for services provided by out-of-network facility-based physicians like radiologists, pathologists, and neonatologists. Balance billing occurs when a physician bills a patient for the difference between what the physician charges for a service and what an insurer pays the physician for that service. When a physician is not in-network for an insurer, there is no contracted payment rate that the physician has agreed to accept from the insurer so the insurer can pay what is deemed appropriate and the patient is billed for the difference. Read more.

Texas HB 2256, however, requires the mediator to report “bad faith” mediation to the Insurance Commissioner or the Texas Medical Board. Under the statute, “bad faith” mediation means: failing to participate in the mediation; failing to provide information the mediator believes is necessary to facilitate an agreement; or failing to designate a representative participating in the mediation with full authority to enter into any mediated agreement. Read more.

This reporting provision has not been well received by mediation commentators. Susan Schultz, Program Director of the Center for Public Policy Dispute Resolution at the University of Texas School of Law has stated,

According to this section, the mediator will need to evaluate whether a party has engaged in “bad faithmediation” and, if so, to report the conduct to the appropriate state agency for the imposition of an administrative penalty. For mediators, this requirement is bad news with alarming consequences. Let’s look for example at two tenets of mediator conduct: impartiality and confidentiality. As the mediator is weighing (role more often associated with decision-maker) whether one party is engaging in bad faithmediation, how is that affecting the mediator’s impartiality? How can the mediator report bad faithmediation without breaching confidentiality?

Susan Schultz, Bad Faith Mediation; Bad News for Mediators, Texas Mediator (Winter 2009).

It is too early to know the implications of HB 2256 “bad faith” provisions in the mediation case law in Texas. The bill, intended to solve the “balance billing” issue, in practice seems to conflict with the well-established mediation principles of impartiality and confidentiality , which goes against the spirit of the Texas ADR Act.

We welcome your comments about “bad faith” mediation.

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