1Amending the act of December 29, 1972 (P.L.1701, No.364),
2entitled "An act providing for the establishment of nonprofit
3corporations having the purpose of establishing, maintaining
4and operating a health service plan; providing for
5supervision and certain regulations by the Insurance
6Department and the Department of Health; giving the Insurance
7Commissioner and the Secretary of Health certain powers and
8duties; exempting the nonprofit corporations from certain
9taxes and providing penalties," further providing for
10purpose, for definitions, for required services, for board of
11directors, for contracts with practitioners, hospitals and
12insurance companies, for right to serve or benefits when
13outside the state, for supervision and for reports and
14examinations; and providing for applicability to limited 
15liability companies.

16The General Assembly of the Commonwealth of Pennsylvania
17hereby enacts as follows:

18Section 1. Section 2 of the act of December 29, 1972
19(P.L.1701, No.364), known as the Health Maintenance Organization
20Act, amended December 19, 1980 (P.L.1300, No.234), is amended to
21read:

22Section 2. Purpose.--The purpose of this act is to permit
23and encourage the formation and regulation of health maintenance
24organizations and to authorize the Secretary of Health to

1provide technical advice and assistance to corporations and
2limited liability companies desiring to establish, operate and
3maintain a health maintenance organization to the end that
4increased competition and consumer choice offered by diverse
5health maintenance organizations can constructively serve to
6advance the purposes of quality assurance, cost-effectiveness
7and access.

8Section 2. Section 3 of the act, amended December 19, 1980
9(P.L.1300, No.234) and repealed in part December 20, 1982
10(P.L.1409, No.326), is amended to read:

11Section 3. Definitions.--As used in this act:

12"Basic health services" means those health services,
13including as a minimum, but not limited to, emergency care,
14inpatient hospital and physician care, ambulatory physician
15care, and outpatient and preventive medical services.

16"Commissioner" means the Insurance Commissioner of the
17Commonwealth of Pennsylvania.

18"Direct provider" means an individual who is a direct
19provider of health care services under a benefit plan of a
20health maintenance organization or an individual whose primary
21current activity is the administration of health facilities in
22which such care is provided. An individual shall not be
23considered a direct provider of health care solely because the
24individual is a member of the governing body of a health-related
25organization.

26"Health maintenance organization" means an organized system
27which combines the delivery and financing of health care and
28which provides basic health services to voluntarily enrolled
29subscribers for a fixed prepaid fee.

30"Limited liability company" means a limited liability company
 

1listed under 15 Pa.C.S. § 8911(a)(3) (relating to limited 
2liability companies)

3"Secretary" means the Secretary of Health of the Commonwealth
4of Pennsylvania.

5Section 3. Sections 4, 7, 8, 9, 10 and 11 of the act,
6amended December 19, 1980 (P.L.1300, No.234), are amended to
7read:

8Section 4. Services Which Shall be Provided.--(a) Any law
9to the contrary notwithstanding, any corporation or limited 
10liability company may establish, maintain and operate a health
11maintenance organization upon receipt of a certificate of
12authority to do so in accordance with this act.

13(b) Such health maintenance organizations shall:

14(1) Provide either directly or through arrangements with
15others, basic health services to individuals enrolled;

16(2) Provide either directly or through arrangements with
17other persons, corporations, institutions, associations or
18entities, basic health services; and

19(3) Provide physicians' services (i) directly through
20physicians who are employes of such organization, (ii) under
21arrangements with one or more groups of physicians (organized on
22a group practice or individual practice basis) under which each
23such group is reimbursed for its services primarily on the basis
24of an aggregate fixed sum or on a per capita basis, regardless
25of whether the individual physician members of any such group
26are paid on a fee-for-service or other basis or (iii) under
27similar arrangements which are found by the secretary to provide
28adequate financial incentives for the provision of quality and
29cost-effective care.

30Section 7. Board of Directors.--A corporation or limited
 

1liability company receiving a certificate of authority to
2operate a health maintenance organization under the provisions
3of this act shall be organized in such a manner that assures
4that at least one-third of the membership of the board of
5directors or board of managers of the health maintenance
6organization will be subscribers of the organization. The board
7of directors or board of managers shall be elected in the manner
8stated in the corporation's charter or bylaws or in the limited 
9liability company's operating agreement.

10Section 8. Contracts with Practitioners, Hospitals,
11Insurance Companies, Etc.--(a) Contracts enabling the
12[corporation] health maintenance organization to provide the
13services authorized under section 4 of this act made with
14hospitals and practitioners of medical, dental and related
15services shall be filed with the secretary. The secretary shall
16have power to require immediate renegotiation of such contracts
17whenever he determines that they provide for excessive payments,
18or that they fail to include reasonable incentives for cost
19control, or that they otherwise substantially and unreasonably
20contribute to escalation of the costs of providing health care
21services to subscribers, or that they are otherwise inconsistent
22with the purposes of this act.

23(b) A health maintenance organization may reasonably
24contract with any individual, partnership, association,
25corporation or organization for the performance on its behalf of
26other necessary functions including, but not limited to,
27marketing, enrollment, and administration, and may contract with
28an insurance company authorized to do an accident and health
29business in this State or a hospital plan corporation or a
30professional health service corporation for the provision of

1insurance or indemnity or reimbursement against the cost of
2health care services provided by the health maintenance
3organization as it deems to be necessary. Such contracts shall
4be filed with the commissioner.

5Section 9. Right to Serve or Benefits When Outside the
6State.--If a subscriber entitled to services provided by [the
7corporation] a health maintenance organization necessarily
8incurs expenses for such services while outside the service
9area, the health maintenance organization to which the person is
10a subscriber may, in its discretion and if satisfied both as to
11the necessity for such services and that it was such as the
12subscriber would have been entitled to under similar
13circumstances in the service area, reimburse the subscriber or
14pay on his behalf all or part of the reasonable expenses
15incurred for such services. Such decision for reimbursement
16shall be subject to review by the commissioner at the request of
17a subscriber.

18Section 10. Supervision.--(a) Except as otherwise provided
19in this act, a health maintenance organization operating under
20the provisions of this act shall not be subject to the laws of
21this State now in force relating to insurance corporations
22engaged in the business of insurance nor to any law hereafter
23enacted relating to the business of insurance unless such law
24specifically and in exact terms applies to such health
25maintenance organization. For a health maintenance organization
26established, operated and maintained by a corporation or limited 
27liability company, this exemption shall apply only to the
28operations and subscribers of the health maintenance
29organization.

30(b) All health maintenance organizations shall be subject to

1the following insurance laws:

2(1) The act of July 22, 1974 (P.L.589, No.205), known as the
3"Unfair Insurance Practices Act."

4(2) Any rehabilitation, liquidation or conservation of a
5health maintenance organization shall be deemed to be the
6rehabilitation, liquidation or conservation of an insurance
7company and shall be conducted under the supervision of the
8commissioner pursuant to the law governing the rehabilitation,
9liquidation, or conservation of insurance companies.

10(c) All rates charged subscribers or groups of subscribers
11by a health maintenance organization and the form and content of
12all contracts between a health maintenance organization and its
13subscribers or groups of subscribers, all rates of payment to
14hospitals made by a health maintenance organization pursuant to
15contracts provided for in this act, budgeted acquisition costs
16in connection with the solicitation of subscribers, and the
17certificates issued by a health maintenance organization
18representing its agreements with subscribers shall, at all
19times, be on file with the commissioner and be deemed approved
20unless explicitly rejected within sixty days of filing. Filings
21shall be made to the commissioner in such form, and shall set
22forth such information as the commissioner may require to carry
23out the provisions of this act. Any disapproval of a filing by
24the commissioner may be appealed in accordance with Title 2 of
25the Pennsylvania Consolidated Statutes (relating to
26administrative law and procedure).

27(d) Solicitors or agents compensated directly or indirectly
28by [any corporation] a health maintenance organization subject
29to the provisions of this act shall meet such prerequisites as
30the commissioner by regulation shall require.

1(e) A health maintenance organization shall establish and
2maintain a grievance resolution system satisfactory to the
3secretary, whereby the complaints of its subscribers may be
4acted upon promptly and satisfactorily.

5(f) If a health maintenance organization offers eye care
6which is within the scope of the practice of optometry, it shall
7make optometric care available to its subscribers, and shall
8make the same reimbursement whether the service is provided by
9an optometrist or a physician.

10Section 11. Reports and Examinations.--(a) The
11[corporation] health maintenance organization shall, on or
12before the first of March of every year, file with the
13commissioner a statement verified by at least two of the
14principal officers of the [corporation] health maintenance 
15organization summarizing its financial activities during the
16calendar or fiscal year immediately preceding, and showing its
17financial condition at the close of business on December 31 of
18that year, or the [corporation's] health maintenance 
19organization's fiscal year. Such statement shall be in such form
20and shall contain such matter as the commissioner prescribes.
21The financial affairs and status of every [such corporation]
22health maintenance organization shall be examined by the
23commissioner or his agents not less frequently than once in
24every three years and for this purpose the commissioner and his
25agents shall be entitled to the aid and cooperation of the
26officers and employes of the [corporation] health maintenance 
27organization and shall have convenient access to all books,
28records, papers, and documents that relate to the financial
29affairs of the [corporation] health maintenance organization.
30They shall have authority to examine under oath or affirmation

1the officers, agents, employes and subscribers for the health
2services of the [corporation] health maintenance organization,
3and all other persons having or having had substantial part in
4the work of the [corporation] health maintenance organization in
5relation to its affairs, transactions and financial condition.
6The Insurance Commissioner may at any time, without making such
7examination, call on [any such corporation] a health maintenance 
8organization for a written report authenticated by at least two
9of its principal officers concerning the financial affairs and
10status of the [corporation] health maintenance organization.

11(b) A [corporation] health maintenance organization shall
12maintain its financial records in such manner that the revenues
13and expenses associated with the establishment, maintenance and
14operation of its prepaid health care delivery system under this
15act are identifiable and distinct from other activities it may
16engage in which are not directly related to the establishment,
17maintenance and operation of its prepaid health care delivery
18system under this act.

19(c) The secretary or his agents shall have free access to 
20all the books, records, papers and documents that relate to the 
21business of the [corporation] health maintenance organization, 
22other than financial.

23Section 4. The act is amended by adding a section to read:

24Section 14.1. Applicability to Limited Liability
25Companies.--This act and regulations promulgated under this act
26shall apply to a limited liability company as follows:

27(1) The board of managers of a limited liability company
28shall be treated in the same manner as the board of directors of
29a corporation.

30(2) The members of a limited liability company shall be
 

1treated in the same manner as the shareholders of a corporation.

2Section 5. This act shall take effect in 60 days.