PRINTER'S NO. 1831
No. 1508 Session of 1997
INTRODUCED BY WALKO, VEON, SURRA, THOMAS, MANDERINO, GEORGE,
BELARDI, SATHER, MUNDY, ROONEY, HALUSKA, McCALL, CAPPABIANCA,
YOUNGBLOOD, CASORIO, BLAUM, CURRY, ITKIN, BEBKO-JONES,
SHANER, MELIO, OLASZ, LAUGHLIN, DeLUCA, SCRIMENTI, PRESTON,
JOSEPHS, MIHALICH, PETRARCA, BOSCOLA, WASHINGTON, GIGLIOTTI,
STEELMAN, TRICH, A. H. WILLIAMS AND M. COHEN, MAY 14, 1997
REFERRED TO COMMITTEE ON INSURANCE, MAY 14, 1997
AN ACT
1 Amending the act of December 29, 1972 (P.L.1701, No.364),
2 entitled "An act providing for the establishment of nonprofit
3 corporations having the purpose of establishing, maintaining
4 and operating a health service plan; providing for
5 supervision and certain regulations by the Insurance
6 Department and the Department of Health; giving the Insurance
7 Commissioner and the Secretary of Health certain powers and
8 duties; exempting the nonprofit corporations from certain
9 taxes and providing penalties," further providing for
10 definitions; providing for a managed care consumer advocate
11 program; and making editorial changes.
12 The General Assembly of the Commonwealth of Pennsylvania
13 hereby enacts as follows:
14 Section 1. Sections 1 and 2 of the act of December 29, 1972
15 (P.L.1701, No.364), known as the Health Maintenance Organization
16 Act, amended December 19, 1980 (P.L.1300, No.234), are amended
17 to read:
18 Section 1. Short Title.--This act shall be known and may be
19 cited as the "[Health Maintenance Organization] Managed Care
20 Plan Act."
1 Section 2. Purpose.--The purpose of this act is to permit
2 and encourage the formation and regulation of [health
3 maintenance organizations] managed care plans and to authorize
4 the Secretary of Health to provide technical advice and
5 assistance to corporations desiring to establish, operate and
6 maintain [a health maintenance organization] managed care plans
7 to the end that increased competition and consumer choice
8 offered by diverse [health maintenance organizations] managed
9 care plans can constructively serve to advance the purposes of
10 quality assurance, cost-effectiveness and access.
11 Section 2. The definition of "direct provider" in section 3
12 of the act, amended December 19, 1980 (P.L.1300, No.234), is
13 amended and the section is amended by adding definitions to
14 read:
15 Section 3. Definitions.--As used in this act:
16 * * *
17 "Department" means the Department of Health of the
18 Commonwealth.
19 "Direct provider" means an individual who is a direct
20 provider of health care services under a benefit plan of a
21 [health maintenance organization] managed care plan or an
22 individual whose primary current activity is the administration
23 of health facilities in which such care is provided. An
24 individual shall not be considered a direct provider of health
25 care solely because the individual is a member of the governing
26 body of a health-related organization.
27 "Enrollee" or "subscriber" means a person covered by a health
28 insurance policy or managed care plan including a person who is
29 covered as an eligible dependent of another person.
30 * * *
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1 "Managed care plan" or "plan" means a system pursuant to
2 which health care, related equipment or services are provided
3 for members or subscribers whose access to other health care
4 must be approved by a primary care practitioner selected by or
5 for such member or subscriber from a panel of participating
6 practitioners. The term includes, but is not limited to, health
7 maintenance organizations and preferred provider organizations.
8 "Preferred provider organization" means a health care benefit
9 arrangement designed to supply services at a reasonable cost
10 through incentives for enrollees to use designated health care
11 providers, and in which:
12 (1) patients pay more to use services rendered by health
13 care providers who are not part of the organization's network;
14 and
15 (2) health care providers expect to benefit through
16 increased patient volume and prompt payment, in return for the
17 health care providers' agreement to abide by a fee schedule and
18 follow utilization management procedures.
19 * * *
20 Section 3. Sections 4, 5.1, 6.1, 7, 8 and 9 of the act,
21 amended or added December 19, 1980 (P.L.1300, No.234), are
22 amended to read:
23 Section 4. Services Which Shall be Provided.--(a) Any law
24 to the contrary notwithstanding, any corporation may establish,
25 maintain and operate a [health maintenance organization] managed
26 care plan upon receipt of a certificate of authority to do so in
27 accordance with this act.
28 (b) Such [health maintenance organizations] managed care
29 plans shall:
30 (1) Provide either directly or through arrangements with
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1 others, basic health services to individuals enrolled;
2 (2) Provide either directly or through arrangements with
3 other persons, corporations, institutions, associations or
4 entities, basic health services; and
5 (3) Provide physicians' services (i) directly through
6 physicians who are employes of such organization, (ii) under
7 arrangements with one or more groups of physicians (organized on
8 a group practice or individual practice basis) under which each
9 such group is reimbursed for its services primarily on the basis
10 of an aggregate fixed sum or on a per capita basis, regardless
11 of whether the individual physician members of any such group
12 are paid on a fee-for-service or other basis or (iii) under
13 similar arrangements which are found by the secretary to provide
14 adequate financial incentives for the provision of quality and
15 cost-effective care.
16 Section 5.1. Certificate of Authority.--(a) Every
17 application for a certificate of authority under this act shall
18 be made to the commissioner and secretary in writing and shall
19 be in such form and contain such information as the regulations
20 of the Departments of Insurance and Health may require.
21 (b) A certificate of authority shall be jointly issued by
22 order of the commissioner and secretary when:
23 (1) The secretary has found and determined that the
24 applicant:
25 (i) has demonstrated the potential ability to assure both
26 availability and accessibility of adequate personnel and
27 facilities in a manner enhancing availability, accessibility and
28 continuity of services;
29 (ii) has arrangements for an ongoing quality of health care
30 assurance program; and
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1 (iii) has appropriate mechanisms whereby the [health
2 maintenance organization] managed care plan will effectively
3 provide or arrange for the provision of basic health care
4 services on a prepaid basis; and
5 (2) The commissioner has found and determined that the
6 applicant has a reasonable plan to operate the [health
7 maintenance organization] managed care plan in a financially
8 sound manner and is reasonably expected to meet its obligations
9 to enrollees and prospective enrollees. In making this
10 determination, the commissioner may consider:
11 (i) The adequacy of working capital and funding sources.
12 (ii) Arrangements for insuring the payment of the cost of
13 health care services or the provision for automatic
14 applicability of an alternative coverage in the event of
15 discontinuance of the [health maintenance organization] managed
16 care plan.
17 (iii) Any agreement with providers of health care services
18 whereby they assume financial risk for the provision of services
19 to subscribers.
20 (iv) Any deposit of cash, or guaranty or maintenance or
21 minimum restricted reserves which the commissioner, by
22 regulation, may adopt to assure that the obligations to
23 subscribers will be performed.
24 (c) Within ninety days of receipt of a completed application
25 for a certificate of authority, the commissioner and secretary
26 shall jointly either:
27 (1) approve the application and issue a certificate of
28 authority; or
29 (2) disapprove the application [specifying] and specify in
30 writing the reasons for such disapproval. Any disapproval of an
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1 application may be appealed in accordance with Title 2 of the
2 Pennsylvania Consolidated Statutes (relating to administrative
3 law and procedure).
4 Section 6.1. Foreign [Health Maintenance Organizations]
5 Managed Care Plans.--(a) A [health maintenance organization]
6 managed care plan approved and regulated under the laws of
7 another state may be authorized by issuance of a certificate of
8 authority to operate or do business in this Commonwealth by
9 satisfying the commissioner and the secretary that it is fully
10 and legally organized under the laws of [its] the other state,
11 and that it complies with all requirements for [health
12 maintenance organizations] managed care plans organized within
13 the Commonwealth.
14 (b) The commissioner and the secretary may waive or modify
15 the provisions of this act under which they have the authority
16 to act if they determine that the same are not appropriate to a
17 particular [health maintenance organization] managed care plan
18 of another state, that such waiver or modification will be
19 consistent with the purposes and provisions of this act, and
20 that it will not result in unfair discrimination in favor of the
21 [health maintenance organization] managed care plan of another
22 state.
23 (c) The commissioner and the secretary are hereby authorized
24 and directed to develop with other states reciprocal licensing
25 agreements concerning the licensure of [health maintenance
26 organizations] managed care plans which permit the commissioner
27 and the secretary to accept audits, inspections and reviews of
28 agencies from other states to determine whether [health
29 maintenance organizations] managed care plans licensed in other
30 states meet Commonwealth requirements.
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1 Section 7. Board of Directors.--A corporation receiving a
2 certificate of authority to operate a [health maintenance
3 organization] managed care plan under the provisions of this act
4 shall be organized in such a manner that assures that at least
5 one-third of the membership of the board of directors of the
6 [health maintenance organization] managed care plan will be
7 subscribers of the [organization] plan. The board of directors
8 shall be elected in the manner stated in the corporation's
9 charter or bylaws.
10 Section 8. Contracts with Practitioners, Hospitals,
11 Insurance Companies, Etc.--(a) Contracts enabling [the] a
12 corporation to provide the services authorized under section 4
13 of this act made with hospitals and practitioners of medical,
14 dental and related services shall be filed with the secretary.
15 The secretary shall have power to require immediate
16 renegotiation of such contracts whenever he determines that they
17 provide for excessive payments, or that they fail to include
18 reasonable incentives for cost control, or that they otherwise
19 substantially and unreasonably contribute to escalation of the
20 costs of providing health care services to subscribers, or that
21 they are otherwise inconsistent with the purposes of this act.
22 (b) A [health maintenance organization] managed care plan
23 may reasonably contract with any individual, partnership,
24 association, corporation or organization for the performance on
25 its behalf of other necessary functions including, but not
26 limited to, marketing, enrollment, and administration, and may
27 contract with an insurance company authorized to do an accident
28 and health business in this State or a hospital plan corporation
29 or a professional health service corporation for the provision
30 of insurance or indemnity or reimbursement against the cost of
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1 health care services provided by the [health maintenance
2 organization] managed care plan as it deems to be necessary.
3 Such contracts shall be filed with the commissioner.
4 Section 9. Right to Serve or Benefits When Outside the
5 State.--If a subscriber entitled to services provided by the
6 corporation necessarily incurs expenses for such services while
7 outside the service area, the [health maintenance organization]
8 managed care plan to which the person is a subscriber may, in
9 its discretion and if satisfied both as to the necessity for
10 such services and that it was such as the subscriber would have
11 been entitled to under similar circumstances in the service
12 area, reimburse the subscriber or pay on his behalf all or part
13 of the reasonable expenses incurred for such services. Such
14 decision for reimbursement shall be subject to review by the
15 commissioner at the request of a subscriber.
16 Section 4. The act is amended by adding a section to read:
17 Section 9.1. Managed Care Consumer Advocate Program.--(a) A
18 managed care consumer advocate program shall be established
19 within the department to perform the following functions on
20 behalf of enrollees of managed care plans:
21 (1) Assist consumers in receiving a timely response from
22 managed care plan representatives.
23 (2) Assist consumers by providing information, referral and
24 assistance to individuals about means of obtaining health
25 coverage and services appropriate to the consumers' needs.
26 (3) Educate and train consumers in the use of available
27 resources concerning managed care plans.
28 (4) Assist enrollees to understand their rights and
29 responsibilities under their managed care plan. This clause
30 includes accessing appropriate levels of care and specialty
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1 providers.
2 (5) Identify, investigate and resolve enrollee complaints
3 about health care services and assist enrollees with filing
4 complaints and appeals.
5 (6) Advocate policies and programs that protect consumer
6 interests and rights under managed care plans.
7 (7) Prepare an annual consumer satisfaction survey for
8 distribution to the public.
9 (b) The consumer advocate shall be accessible through a
10 toll-free telephone number and shall ensure that individuals
11 receive timely responses to their inquiries.
12 (c) The consumer advocate shall be immune from civil
13 liability for good faith performance of official duties.
14 (d) Each managed care plan shall advise enrollees of the
15 role of the consumer advocate and how to contact the consumer
16 advocate.
17 (e) The consumer advocate shall report to the General
18 Assembly on the types of assistance, provided by category and
19 frequency of assistance provided by each managed care plan.
20 Section 5. Section 10 of the act, amended December 19, 1980
21 (P.L.1300, No.234) and repealed in part December 18, 1996
22 (P.L.1066, No.159), is amended to read:
23 Section 10. Supervision.--(a) Except as otherwise provided
24 in this act, a [health maintenance organization] managed care
25 plan operating under the provisions of this act shall not be
26 subject to the laws of this State now in force relating to
27 insurance corporations engaged in the business of insurance nor
28 to any law hereafter enacted relating to the business of
29 insurance unless such law specifically and in exact terms
30 applies to such [health maintenance organization] plan. For a
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1 [health maintenance organization] managed care plan established,
2 operated and maintained by a corporation, this exemption shall
3 apply only to the operations and subscribers of the [health
4 maintenance organization] plan.
5 (b) All [health maintenance organizations] managed care
6 plans shall be subject to the following insurance laws:
7 (1) The act of July 22, 1974 (P.L.589, No.205), known as the
8 "Unfair Insurance Practices Act."
9 (2) Any rehabilitation, liquidation or conservation of a
10 [health maintenance organization] managed care plan shall be
11 deemed to be the rehabilitation, liquidation or conservation of
12 an insurance company and shall be conducted under the
13 supervision of the commissioner pursuant to the law governing
14 the rehabilitation, liquidation, or conservation of insurance
15 companies.
16 (c) (1) All rates charged subscribers or groups of
17 subscribers by a [health maintenance organization] managed care
18 plan and the form and content of all contracts between a [health
19 maintenance organization] plan and its subscribers or groups of
20 subscribers, all rates of payment to hospitals made by a [health
21 maintenance organization] plan pursuant to contracts provided
22 for in this act, budgeted acquisition costs in connection with
23 the solicitation of subscribers, and the certificates issued by
24 a [health maintenance organization] plan representing its
25 agreements with subscribers shall, at all times, be on file with
26 the commissioner and be deemed approved unless explicitly
27 rejected within sixty days of filing.
28 (2) Filings under this subsection shall be [made] submitted
29 to the commissioner in such form, and shall set forth such
30 information as the commissioner may require to carry out the
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1 provisions of this act. Any disapproval of a filing by the
2 commissioner may be appealed in accordance with Title 2 of the
3 Pennsylvania Consolidated Statutes (relating to administrative
4 law and procedure).
5 (d) Solicitors or agents compensated directly or indirectly
6 by any corporation subject to the provisions of this act shall
7 meet such prerequisites as the commissioner by regulation shall
8 require.
9 (e) A [health maintenance organization] managed care plan
10 shall establish and maintain a grievance resolution system
11 satisfactory to the secretary, whereby the complaints of its
12 subscribers may be acted upon promptly and satisfactorily.
13 (f) If a [health maintenance organization] managed care plan
14 offers eye care which is within the scope of the practice of
15 optometry, it shall make optometric care available to its
16 subscribers, and shall make the same reimbursement whether the
17 service is provided by an optometrist or a physician.
18 Section 6. Sections 11, 12, 13, 15, 16 and 17 of the act,
19 amended December 19, 1980 (P.L.1300, No.234), are amended to
20 read:
21 Section 11. Reports and Examinations.--(a) (1) [The] A
22 corporation that has a certificate of authority under section 4
23 of this act shall, on or before the first of March of every
24 year, file with the commissioner a statement verified by at
25 least two of the principal officers of the corporation
26 summarizing its financial activities during the calendar or
27 fiscal year immediately preceding, and showing its financial
28 condition at the close of business on December 31 of that year,
29 or the corporation's fiscal year. [Such] The statement shall be
30 in such form and shall contain such matter as the commissioner
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1 prescribes.
2 (2) The financial affairs and status of [every such
3 corporation] each corporation that has a certificate of
4 authority under section 4 of this act shall be examined by the
5 commissioner or [his] the commissioner's agents not less
6 frequently than once in every three years [and for]. For this
7 purpose, the commissioner and [his] the commissioner's agents
8 shall be entitled to:
9 (i) the aid and cooperation of the officers and employes of
10 the corporation [and shall have convenient];
11 (ii) access to all books, records, papers, and documents that
12 relate to the financial affairs of the corporation[. They shall
13 have authority to]; and
14 (iii) examine under oath or affirmation the officers, agents,
15 employes and subscribers for the health services of the
16 corporation, and all other persons having or having had
17 substantial part in the work of the corporation in relation to
18 its affairs, transactions and financial condition.
19 (3) The [Insurance Commissioner] commissioner may at any
20 time, without making such examination, call on any such
21 corporation for a written report authenticated by at least two
22 of its principal officers concerning the financial affairs and
23 status of the corporation.
24 (b) A corporation that has a certificate of authority under
25 section 4 of this act shall maintain its financial records in
26 such manner that the revenues and expenses associated with the
27 establishment, maintenance and operation of its prepaid health
28 care delivery system under this act are identifiable and
29 distinct from other activities it may engage in which are not
30 directly related to the establishment, maintenance and operation
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1 of its prepaid health care delivery system under this act.
2 (c) The secretary or [his] the secretary's agents shall have
3 free access to all the books, records, papers and documents that
4 relate to the business of the corporation, other than financial.
5 Section 12. Contracts to Provide Medical Care.--A [health
6 maintenance organization] managed care plan established pursuant
7 to this act may receive and accept from governmental or private
8 agencies payments covering all or part of the cost of
9 subscriptions to provide its services, facilities, appliances,
10 medicines or supplies.
11 Section 13. Exemption from Taxation.--Every [health
12 maintenance organization] managed care plan established,
13 maintained and operated by a corporation not-for-profit is
14 hereby declared to be a charitable and benevolent institution
15 and all its income, funds, investments and property shall be
16 exempt from all taxation of the State or its political
17 subdivisions.
18 Section 15. Penalty.--(a) The commissioner and secretary
19 may suspend or revoke any certificate of authority issued to a
20 [health maintenance organization] managed care plan under this
21 act, or, in their discretion, impose a penalty of not more than
22 one thousand dollars ($1,000) for each and every unlawful act
23 committed, if they find that any of the following conditions
24 exist:
25 (1) that the [health maintenance organization] managed care
26 plan is providing inadequate or poor quality care, thereby
27 creating a threat to the health and safety of its subscribers;
28 (2) that the [health maintenance organization] managed care
29 plan is unable to fulfill its contractual obligations to its
30 subscribers;
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1 (3) that the [health maintenance organization] managed care
2 plan or any person on its behalf has advertised its services in
3 an untrue, misrepresentative, misleading, deceptive or unfair
4 manner; or
5 (4) that the [health maintenance organization] managed care
6 plan has otherwise failed to substantially comply with this act.
7 (b) Before the commissioner or secretary, whichever is
8 appropriate, shall take any action as above set forth, [he] the
9 commissioner or secretary shall give written notice to the
10 [health maintenance organization,] managed care plan accused of
11 violating the law, stating specifically the nature of [such] the
12 alleged violation and fixing a time and place, at least ten days
13 thereafter, when a hearing of the matter shall be held. Hearing
14 procedure and appeals from decisions of the commissioner or
15 secretary shall be as provided in Title 2 of the Pennsylvania
16 Consolidated Statutes (relating to administrative law and
17 procedure).
18 Section 16. Exclusions.--[Certificates] No certificates of
19 authority shall [not] be required of:
20 (1) [Health maintenance organizations] Managed care plans
21 offered by employers for the exclusive enrollment of their own
22 employes, or by unions for the sole use of their members.
23 (2) Any plan, program or service offered by an employer for
24 the prevention of disease among his employes.
25 Section 17. Effect of Act on Other Plans.--(a) Any
26 requirements or privileges granted under this act shall apply
27 exclusively to that portion of business or activities which
28 reasonably relates to the establishment, maintenance and
29 operation of a [health maintenance organization] managed care
30 plan pursuant to the provisions of this act.
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1 (b) [Any health maintenance organization program] A managed
2 care plan approved by the commissioner or secretary and
3 operating under the provisions of 40 Pa.C.S. Ch.61 (relating to
4 hospital plan corporations) or 40 Pa.C.S. Ch.63 (relating to
5 professional health services plan corporations) or under any
6 statute superseded by either of such statutes, prior to the
7 effective date of this act, may continue to operate under the
8 provisions of such authority or successor provisions, if any.
9 Section 7. This act shall take effect in 60 days.
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