THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY BARBIN, DeLUCA, KORTZ, MURPHY, MATZIE, PASHINSKI, SIPTROTH, STABACK, HANNA, BURNS, KOTIK, CARROLL, BELFANTI, BRADFORD AND SOLOBAY, JUNE 10, 2010

REFERRED TO COMMITTEE ON INSURANCE, JUNE 10, 2010  

AN ACT

Providing for registration of discount plan organizations; and

imposing penalties.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Table of Contents

Section 1.  Short title.

Section 2.  Purpose.

Section 3.  Definitions.

Section 4.  Scope and applicability.

Section 5.  Registration requirements.

Section 6.  Minimum capital requirements.

Section 7.  Surety bond or deposit requirements.

Section 8.  Examinations and investigations.

Section 9.  Charges and fees, refund requirements and bundling

of services.

Section 10.  Charge and form filing requirements.

Section 11.  Provider agreements and provider listing

requirements.

Section 12.  Marketing requirements.

Section 13.  Marketing restrictions and disclosure requirements.

Section 14.  Notice of change in name or address.

Section 15.  Annual reports.

Section 16.  Compliance officer.

Section 17.  Penalties.

Section 18.  Injunctions.

Section 19.  Regulations.

Section 20.  Applicability.

Section 21.  Effective date.

Section 1.  Short title.

This act shall be known and may be cited as the Discount Plan

Organization Act.

Section 2.  Purpose.

The purpose of this act is to promote the public interest by

establishing standards for discount medical plan and discount

prescription drug plan organizations to protect consumers from

unfair or deceptive marketing, sales or enrollment practices and

to facilitate consumer understanding of the role and function of

discount medical plan organizations in providing access to

medical or ancillary services and the role and function of

discount prescription drug plan organizations in providing

access to pharmacy services.

Section 3.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Affiliate."  A person that directly or indirectly, through

one or more intermediaries, controls, is controlled by or is

under common control with the person specified.

"Ancillary services."  Services that include, but are not

limited to, audiology, dental, vision, mental health, substance

abuse, chiropractic and podiatry services. The term does not

include pharmacy services.

"Applicant."  A person or entity applying to do business in

this State as a discount plan organization.

"Commissioner."  The Insurance Commissioner of the

Commonwealth.

"Control," "controlled by" or "under common control with."

The terms shall have the meanings given in section 1401 of the

act of May 17, 1921 (P.L.682, No.284), known as The Insurance

Company Law of 1921.

"Department."  The Insurance Department of the Commonwealth.

"Discount medical plan."  A business arrangement or contract

in which a person, in exchange for fees, dues, charges or other

consideration, offers or purports to offer access for plan

members to providers of medical or ancillary services and the

right to receive discounts on medical or ancillary services from

those providers. The term does not include:

(1)  a plan that does not charge a membership or other

fee to use the plan's discount medical card; or

(2)  any product otherwise regulated under the laws of

this Commonwealth regulating health insurers.

"Discount medical plan organization."  An entity that, in

exchange for fees, dues, charges or other consideration, offers

or purports to offer a discount medical plan to plan members and

that contracts with a provider, a provider network or another

discount medical plan organization to offer the discount medical

plan and determines the charge to plan members.

"Discount plan."  A discount medical plan or a discount

prescription drug plan.

"Discount plan organization."  A discount medical plan

organization or a discount prescription drug plan organization.

"Discount prescription drug plan."  A business arrangement or

contract in which a person, in exchange for fees, dues, charges

or other consideration, offers or purports to offer access for

plan members to providers of pharmacy services and the right to

receive discounts on pharmacy services from those providers. 

The term does not include:

(1)  a plan that does not charge a membership or other

fee to use the plan's discount prescription drug card;

(2)  a patient access program; or

(3)  a Medicare prescription drug plan or the PACE and

PACENET program established under Chapters 5 and 7 of the act

of August 26, 1971 (P.L.351, No.91), known as the State

Lottery Law.

"Discount prescription drug plan organization."  An entity

that, in exchange for fees, dues, charges or other

consideration, offers or purports to offer access for plan

members to providers of pharmacy services and the right to

receive pharmacy services from those providers at a discount and

that contracts with a provider, a pharmacy network or another

discount prescription drug plan organization to offer the

discount prescription drug plan and determines the charge to

plan members.

"Facility."  An institution providing medical or ancillary

services in a health care setting. The term includes, but is not

limited to:

(1)  a hospital or other licensed inpatient center;

(2)  an ambulatory surgical or treatment center;

(3)  a skilled nursing center;

(4)  a residential treatment center;

(5)  a rehabilitation center; and

(6)  a diagnostic, laboratory or imaging center.

"Health care professional."  A physician, pharmacist or other

health care practitioner who is licensed, accredited or

certified to perform specified medical or ancillary services or

pharmacy services within the scope of his or her license,

accreditation, certification or other appropriate authority and

consistent with State law.

"Health insurer."  A company or health insurance entity

licensed in this Commonwealth to issue an individual or group

health, sickness or accident policy or subscriber contract or

certificate or plan that provides medical or health care

coverage by a health care facility or licensed health care

provider that is offered or governed under any of the following:

(1)   The act of May 17, 1921, (P.L.682, No.284), known

as The Insurance Company Law of 1921.

(2)  The act of December 29, 1972 (P.L.1701, No.364),

known as the Health Maintenance Organization Act.

(3)  The act of May 18, 1976 (P.L.123, No.54), known as

the Individual Accident and Sickness Insurance Minimum

Standards Act.

(4)  40 Pa.C.S. Ch. 61 (relating to hospital plan

corporations) or Ch. 63 (relating to professional health

services plan corporations).

"Marketer."  A person or entity that markets, promotes, sells

or distributes a discount plan, including a private label entity

that places its name on and markets or distributes a discount

plan pursuant to a marketing agreement with a discount plan

organization.

"Medical services."  Maintenance care of or preventive care

for the human body or care, service or treatment of an illness

or dysfunction of or injury to the human body. The term

includes, but is not limited to, physician care, inpatient care,

hospital surgical services, emergency services, ambulance

services, laboratory services and medical equipment and

supplies. The term does not include pharmacy services or

ancillary services.

"Medicare prescription drug plan."  A plan that provides a

Medicare Part D prescription drug benefit in accordance with the

requirements of the Medicare Prescription Drug, Improvement, and

Modernization Act of 2003 (Public Law 108-172, 117 Stat. 2066)

and the Medicare Improvements for Patients and Providers Act of

2008 (Public Law 110-275, 122 Stat. 2494).

"Member."  An individual who pays fees, dues, charges or

other consideration in exchange for the right to receive the

benefits of a discount plan. The term does not include any

individual who enrolls in a patient access program.

"Patient access program."  A voluntary program sponsored by a

pharmaceutical manufacturer, or a consortium of pharmaceutical

manufacturers, that provides free or discounted health care

products directly to low-income or uninsured individuals either

through a discount card or direct shipment.

"Person."  An individual, a corporation, a partnership, an

association, a joint venture, a joint stock company, a trust, an

unincorporated organization, any similar entity or any

combination of the foregoing.

"Pharmacy services."  Pharmaceutical supplies and

prescription drugs.

"Provider."  A health care professional or facility that has

contracted, directly or indirectly, with a discount medical plan

organization to provide medical or ancillary services to members

or with a discount prescription drug plan organization to

provide pharmacy services to members.

"Provider network."  An entity that negotiates directly or

indirectly with a discount medical plan organization on behalf

of more than one provider to provide medical or ancillary

services to members or with a discount prescription drug plan

organization on behalf of more than one provider to provide

pharmacy services to members.

Section 4.  Scope and applicability.

(a)  Scope.--This act applies to all discount plan

organizations doing business in this Commonwealth.

(b)  Applicability.--A discount plan organization that is a

health insurer:

(1)  is not required to obtain a certificate of

registration under section 5, except that it or any of its

subsidiaries or affiliates that operate as a discount plan

organization in this State shall obtain a certificate of

registration under section 5 and comply with all other

provisions of this act; but

(2)  is required to comply with sections 9, 10, 11, 12

and 13 and report, in the form and manner the department may

require, any of the information described in section 15(b)

(2), (3) or (4) that is not otherwise already reported.

Section 5.  Registration requirements.

(a)  General rule.--Before doing business in this

Commonwealth as a discount plan organization, a person shall:

(1)  be authorized to transact business in this

Commonwealth under this act; and

(2)  obtain a certificate of registration from the

department to operate as a discount plan organization.

(b)  Application.--An application or renewal application for

a certificate of registration to operate as a discount plan

organization shall:

(1)  be in a form prescribed by the department and

published in the Pennsylvania Bulletin;

(2)  be verified by an officer or authorized

representative of the applicant;

(3)  be accompanied by a fee in an amount equal to that

required for a license or annual renewal for a manager or

exclusive general agent for a domestic insurance company, as

specified in section 612-A(4) of the act of April 9, 1929

(P.L.177, No.175), known as The Administrative Code of 1929;

(4)  include information on whether:

(i)  a previous application for a certificate of

registration or licensure has been denied, revoked,

suspended or terminated for cause;

(ii)  the applicant is under investigation for or the

subject of any pending action or has been found in

violation of any statute or regulation in any

jurisdiction within the previous five years;

(iii)  the applicant has established an Internet

website to conform to the requirements of section 11(b);

and

(5)  include information, as the department may require,

that permits the department, after reviewing all of the

information submitted pursuant to this subsection, to make a

determination that the applicant:

(i)  is financially responsible;

(ii)  has adequate expertise or experience to operate

a discount plan organization; and

(iii)  is of good character.

(c)  Review of application.--After the receipt of an

application filed under subsection (b), the department shall

review the application and notify the applicant of any

deficiencies in the application.

(d)  Decision on application.--Within 90 days after the date

of receipt of a completed application, the department shall:

(1)  issue a certificate of registration if the

department is satisfied that the applicant:

(i)  met the requirements of subsection (b); and

(ii)  has the required minimum capital in accordance

with section 6; or

(2)  disapprove the application and state the grounds for

disapproval.

(e)  Internet website.--Prior to issuance of a certificate of

registration by the department, a discount plan organization

shall establish an Internet website in order to conform to the

requirements of section 11(b).

(f)  Certificate of registration.--

(1)  A certificate of registration is effective for one

year, unless, prior to its expiration, it is renewed in

accordance with this subsection or suspended or revoked in

accordance with subsection (g).

(2)  At least 90 days before a certificate of

registration expires, a discount plan organization shall

submit:

(i)  renewal application form; and

(ii)  the renewal fee.

(3)  The department shall renew the certificate of

registration of each holder that meets the requirements of

this act and pays the appropriate renewal fee required by

this act.

(g)  Suspension, nonrenewal and revocation.--

(1)  The commissioner may suspend the authority of a

discount plan organization to enroll new members or refuse to

renew or revoke a discount plan organization's certificate of

registration if the commissioner finds that any of the

following conditions exist:

(i)  the discount plan organization is not operating

in compliance with this act;

(ii)  the discount plan organization does not have

the minimum net worth as required under section 6;

(iii)  the discount plan organization has advertised,

merchandised or attempted to merchandise its services in

such a manner as to misrepresent its services or capacity

for service or has engaged in deceptive, misleading or

unfair practices with respect to advertising or

merchandising; or

(iv)  the continued operation of the discount plan

organization would be hazardous to its members.

(2)  If the department has cause to believe that grounds

for the nonrenewal, suspension or revocation of a certificate

of registration exists, the department shall notify the

discount plan organization in writing, specifically stating

the grounds for the refusal to renew or suspension or

revocation and informing the discount plan organization that

it may pursue a hearing on the matter in accordance with the

provisions of 2 Pa.C.S. Ch. 5 Subch. A (relating to practice

and procedure of Commonwealth agencies).

(3)  When the certificate of registration of a discount

plan organization is suspended, revoked or not renewed, the

discount plan organization shall proceed, immediately

following the effective date of the order of revocation or,

in the case of a nonrenewal, the date of expiration of the

certificate of registration, to wind up its affairs

transacted under the certificate of registration. The

discount plan organization shall not engage in any further

advertising, solicitation, collecting of fees or renewal of

contracts.

(4)  (i)  The commissioner shall, in his order suspending

the authority of the discount plan organization to enroll

new members, specify the period during which the

suspension is to be in effect and the conditions, if any,

that must be met by the discount plan organization prior

to reinstatement of its certificate of registration to

enroll members.

(ii)  The commissioner may rescind or modify the

order of suspension prior to the expiration of the

suspension period.

(iii)  The certificate of registration of a discount

plan organization shall not be reinstated unless

requested by the discount plan organization. The

commissioner shall not grant the request for

reinstatement if the commissioner finds that the

circumstances for which the suspension occurred still

exist or are likely to recur.

(h)  Penalty.--In lieu of suspending or revoking a discount

plan organization's certificate of registration under subsection

(g), whenever the discount plan organization has been found to

have violated any provision of this act, the commissioner may:

(1)  issue and cause to be served upon the organization

charged with the violation a copy of the findings and an

order requiring the organization to cease and desist from

engaging in the act or practice that constitutes the

violation; and

(2)  impose a monetary penalty of not more than $5,000

for each violation.

(i)  Notice of action in other jurisdiction.--A discount plan

organization shall notify the department within ten days

whenever the discount plan organization's certificate of

registration, or other form of authority, to operate as a

discount plan organization in another jurisdiction is suspended,

revoked or nonrenewed in that jurisdiction.

(j)  Exemption.--A provider who provides discounts to his or

her own patients without any cost or fee of any kind to the

patient for medical services or ancillary services the provider

directly provides is not required to obtain and maintain a

certificate of registration under this act as a discount medical

plan organization.

Section 6.  Minimum capital requirements.

(a)  Minimum capital requirement for applicant.--Before the

department issues a certificate of registration to any person

required to obtain a certificate of registration under section

5, the person seeking to operate a discount plan organization

shall have a net worth of at least $150,000.

(b)  Minimum capital requirement for registrant.--A discount

plan organization shall at all times maintain a net worth of at

least $150,000.

(c)  Adjustment.--At the commissioner's discretion, the

amounts in subsections (a) and (b) may be adjusted annually for

inflation.

Section 7.  Surety bond or deposit requirements.

(a)  Surety bond.--A registered discount plan organization

shall maintain in force a surety bond in its own name in an

amount not less than $35,000 to be used in the discretion of the

commissioner to protect the financial interest of members. The

bond shall be issued by an insurance company licensed to do

business in this Commonwealth.

(b)  Deposit.--In lieu of the bond specified in subsection

(a), a registered discount plan organization may deposit and

maintain deposited with the department, or at the discretion of

the commissioner, with any organization or trustee acceptable to

the commissioner through which a custodial or controlled account

is utilized, cash, securities or any combination of these or

other measures that are acceptable to the commissioner with at

all times having a market value of not less than $35,000.

(c)  Income on deposit.--All income from a deposit made under

subsection (b) shall be an asset of the discount plan

organization.

(d)  Exemption from levy.--Except for the commissioner, the

assets or securities held in this Commonwealth as a deposit

under subsection (a) or (b) shall not be subject to levy by a

judgment creditor or other claimant of the discount plan

organization.

(e)  Regulation.--The bond and deposit requirements shall

remain in effect unless modified by the department by

regulation.

Section 8.  Examinations and investigations.

(a)  General rule.--The department and any of its examiners

may examine or investigate the business and affairs of any

discount plan organization to protect the interests of the

residents of this State based on the following reasons,

including, but not limited to, complaint indices, recent

complaints, information from other states or as the commissioner

deems necessary.

(b)  Conduct of examinations.--An examination or

investigation conducted as provided in subsection (a) shall be

performed in accordance with the provisions of Article IX of the

act of May 17, 1921 (P.L.789, No.285), known as The Insurance

Department Act of 1921.

(c)  Discovery.--The department or any of its examiners may:

(1)  order any discount plan organization or applicant

that operates or any applicant that anticipates operating a

discount plan organization to produce any records, books,

files, advertising and solicitation materials or other

information; and

(2)  take statements under oath to determine whether the

discount plan organization or applicant is in violation of

the law or is acting contrary to the public interest.

(d)  Expenses.--A discount plan organization or applicant

that is the subject of the examination or investigation shall

pay the expenses incurred in conducting the examination or

investigation. Failure by the discount plan organization or

applicant to pay the expenses is grounds for denial of a

certificate of registration to operate as a discount plan

organization or revocation of a certificate of registration to

operate as a discount plan organization.

Section 9.  Charges and fees, refund requirements and bundling

of services.

(a)  Charges and fees.--A discount plan organization may

charge a periodic charge as well as a reasonable one-time

processing fee for a discount plan.

(b)  Refund requirements.--

(1)  (i)  If a member cancels his or her membership in a

discount plan organization within the first 30 days after

the date of receipt of the written document for the

discount plan described in section 13(d), the member

shall receive a reimbursement of all periodic charges and

the amount of any one-time processing fee that exceeds

$30 upon return of the discount plan card to the discount

plan organization.

(ii)  Cancellation occurs when notice of cancellation

is given to the discount plan organization. Notice of

cancellation is deemed given when delivered by hand or

deposited in a mailbox, properly addressed and postage

prepaid to the mailing address of the discount plan

organization or e-mailed to the e-mail address of the

discount plan organization.

(iii)  A discount plan organization shall return any

periodic charge charged or collected after the member has

returned the discount plan card or given the discount

plan organization notice of cancellation.

(2)  If the discount plan organization cancels a

membership for any reason other than nonpayment of charges by

the member, the discount plan organization shall make a pro

rata reimbursement of all periodic charges to the member.

(c)  Bundling of services.--When a marketer or discount plan

organization sells a discount plan in conjunction with any other

products, the marketer or discount plan organization shall:

(1)  provide the charges for each discount plan in

writing to the member; or

(2)  reimburse the member for all periodic charges for

the discount plan and all periodic charges for any other

product if the member cancels his or her membership in

accordance with subsection (b)(1).

(d)  Exemption.--Any discount plan organization that is a

health insurer that provides a discount plan product that is

incidental to an insurance product offered by the health insurer

is not subject to this section.

Section 10.  Charge and form filing requirements.

(a)  List of fees and charges.--A discount plan organization

shall file with the department a list of all prospective member

fees and charges associated with the discount plan.

(b)  Forms.--In addition to the information required under

subsection (a), a discount plan organization shall file all

forms, including the form for the written document described

under section 13(d), to be used by a discount plan organization

with the department prior to use. Each form filed shall be

identified in the manner as may be required by the department.

Section 11.  Provider agreements and provider listing

requirements.

(a)  Provider agreements.--

(1)  A discount medical plan organization shall have a

written provider agreement with all providers offering

medical or ancillary services to its members. A discount

prescription drug plan organization shall have a written

provider agreement with all providers offering pharmacy

services to its members. The written provider agreement may

be entered into directly with the provider or indirectly with

a provider network to which the provider belongs.

(2)  A provider agreement between a discount plan

organization and a provider shall provide the following:

(i)  a list of the services to be provided at a

discount;

(ii)  the amount or amounts of the discounts or,

alternatively, a fee schedule that reflects the

provider's discounted rates; and

(iii)  that the provider will not charge members more

than the discounted rates.

(3)  A provider agreement between a discount plan

organization and a provider network shall require that the

provider network have written agreements with its providers

that:

(i)  contain the provisions described in paragraph

(2);

(ii)  authorize the provider network to contract with

the discount plan organization on behalf of the provider;

and

(iii)  require the provider network to maintain an

up-to-date list of its contracted providers and to

provide the list on a monthly basis to the discount plan

organization.

(4)  A provider agreement between a discount plan

organization and an entity that contracts with a provider

network shall require that the entity, in its contract with

the provider network, require the provider network to have

written agreements with its providers that comply with

paragraph (3).

(5)  The discount plan organization shall maintain a copy

of each active provider agreement into which it has entered.

(b)  Provider listing requirements.--

(1)  A discount plan organization shall maintain on an

Internet website an up-to-date list of the names and

addresses of the providers with which it has contracted

directly or through a provider network. The Internet website

address shall be prominently displayed on all of its

advertisements, marketing materials, brochures and discount

plan cards.

(2)  This subsection applies to providers that the

discount plan organization has contracted with directly as

well as providers that are members of a provider network with

which the discount plan organization has contracted.

Section 12.  Marketing requirements.

(a)  General rule.--A discount plan organization may market

directly or contract with other marketers for the distribution

of its product.

(b)  Marketing agreement.--

(1)  A discount plan organization shall have an executed

written agreement with a marketer prior to the marketer's

marketing, promoting, selling or distributing the discount

plan.

(2)  An agreement between a discount plan organization

and the marketer shall prohibit a marketer from using

advertising, marketing materials, brochures and discount plan

cards without the discount plan organization's approval in

writing.

(3)  A discount plan organization shall be bound by and

responsible for the activities of a marketer that are within

the scope of the marketer's agency relationship with the

organization.

(c)  Approval of marketing materials.--A discount plan

organization shall approve in writing all advertisements,

marketing materials, brochures and discount cards used by

marketers to market, promote, sell or distribute the discount

plan prior to their use.

(d)  Filing requirement.--Upon request, a discount plan

organization shall submit to the commissioner all advertising,

marketing materials and brochures regarding a discount plan.

Section 13.  Marketing restrictions and disclosure requirements.

(a)  General rule.--

(1)  All advertisements, marketing materials, brochures,

discount plan cards and any other communications of a

discount plan organization provided to prospective members

and members shall be truthful and not misleading in fact or

in implication.

(2)  An advertisement, any marketing material, brochure,

discount plan card or other communication is misleading in

fact or in implication if it has a capacity or tendency to

mislead or deceive based on the overall impression that it is

reasonably expected to create within the segment of the

public to which it is directed.

(b)  Restrictions.--A discount plan organization shall not:

(1)  except as otherwise provided in this act or as a

disclaimer of any relationship between discount plan benefits

and insurance, or as a description of an insurance product

connected with a discount plan, use in its advertisements,

marketing material, brochures and discount plan cards the

term "insurance";

(2)  except as otherwise provided under State law,

describe or characterize the discount plan as being insurance

whenever a discount plan is bundled with an insurance product

and the insurance benefits are incidental to the discount

plan benefits;

(3)  use in its advertisements, marketing material,

brochures or discount plan cards the terms "health plan,"

"coverage," "copay," "copayments," "deductible," "preexisting

conditions," "guaranteed issue," "premium," "PPO," "preferred

provider organization" or other terms in a manner that could

reasonably mislead an individual into believing that the

discount plan is health insurance;

(4)  use language in its advertisements, marketing

material, brochures and discount plan cards with respect to

being registered by the department in a manner that could

reasonably mislead an individual into believing that the

discount plan is insurance or has been endorsed by the

Commonwealth;

(5)  make misleading, deceptive or fraudulent

representations regarding the discount or range of discounts

offered by the discount plan card or the access to any range

of discounts offered by the discount plan card;

(6)  have restrictions on access to discount plan

providers, including, except for hospital services, waiting

periods and notification periods; or

(7)  pay providers any fees for services or collect or

accept money from a member to pay a provider for services

provided under the discount plan, unless the discount plan

organization has an active certificate of authority to act as

a third party administrator under Article VIII of the act of

May 17, 1921 (P.L.789, No. 285), known as The Insurance

Department Act of 1921.

(c)  General disclosures.--

(1)  A discount plan organization shall make the

following general disclosures along with any enrollment forms

given to a prospective member:

(i)  that the plan is a discount plan and is not

insurance coverage;

(ii)  that the range of discounts for services

provided under the plan will vary depending on the type

of provider and service received;

(iii)  unless the discount plan organization has an

active certificate of authority to act as a third party

administrator as described in subsection (b)(7), that the

plan does not make payments to providers for the services

received under the discount plan;

(iv)  that the plan member is obligated to pay for

all services, but will receive a discount from those

providers that have contracted with the discount plan

organization; and

(v)  the toll-free telephone number and Internet

website address for the registered discount plan

organization for prospective members and members to

obtain additional information about and assistance on the

discount plan and up-to-date lists of providers

participating in the discount plan.

The disclosures shall be made in writing in not less than 12-

point font and shall appear on the first content page of any

advertisements, marketing materials or brochures made

available to the public relating to a discount plan.

(2)  If the initial contact with a prospective member is

by telephone, the disclosures required under paragraph (1)

shall be made orally and included in the initial written

materials that describe the benefits under the discount plan

provided to the prospective or new member.

(d)  Additional disclosures.--

(1)  In addition to the general disclosures required

under subsection (c), each discount plan organization shall

provide to:

(i)  each prospective member, at a time not later

than the enrollment application form is executed by the

prospective member, information that describes the terms

and conditions of the discount plan, including any

limitations or restrictions on the refund of any

processing fees or periodic charges associated with the

discount plan; and

(ii)  each new member a written document that

contains the terms and conditions of the discount plan.

(2)  The document required under paragraph (1)(ii) shall

be written in simple words and with sentences as short as

possible and shall include the following information:

(i)  the name of the member;

(ii)  the benefits to be provided under the discount

plan;

(iii)  any processing fees and periodic charges

associated with the discount plan, including any

limitations or restrictions on the refund of any

processing fees and periodic charges;

(iv)  the mode of payment of any processing fees and

periodic charges, such as monthly, quarterly, etc., and

procedures for changing the mode of payment;

(v)  any limitations, exclusions or exceptions

regarding the receipt of discount plan benefits;

(vi)  any waiting periods for certain services under

the discount plan;

(vii)  procedures for obtaining discounts under the

discount plan, such as requiring members to contact the

discount plan organization to make an appointment with a

provider on the member's behalf or to order pharmacy

services on the member's behalf;

(viii)  cancellation procedures, including

information on the member's 30-day cancellation rights

and refund requirements and procedures for obtaining

refunds;

(ix)  renewal, termination and cancellation terms and

conditions;

(x)  procedures for adding new members to a family

discount plan, if applicable;

(xi)  procedures for filing complaints under the

discount plan organization's complaint system and

information that, if the member remains dissatisfied

after completing the organization's complaint system, the

plan member may contact the department; and

(xii)  the name and mailing address of the registered

discount plan organization or other entity where the

member may make inquiries about the plan, send

cancellation notices and file complaints.

Section 14.  Notice of change in name or address.

A discount plan organization shall provide the department at

least 30 days' advance notice of any change in the discount plan

organization's name, address, principal business address or

mailing address or Internet website address.

Section 15.  Annual reports.

(a)  Requirements.--If the information required under

subsection (b) is not provided at the time of renewal of a

certificate of registration under section 5, a discount plan

organization shall file an annual report with the department in

the form prescribed by the department within three months after

the end of each calendar year.

(b)  Contents.--The report shall include:

(1)  audited financial statements prepared in accordance

with generally accepted accounting principles certified by an

independent certified public accountant, including the

organization's balance sheet, income statement and statement

of changes in cash flow for the preceding year, except that,

subject to the approval of the department, an organization

that is an affiliate of a parent entity that is publicly

traded and that prepares audited financial statements

reflecting the consolidated operations of the parent entity

may submit the audited financial statement of the parent

entity and a written guaranty that the minimum capital

requirements required under section 6 will be met by the

parent entity instead of the audited financial statement of

the organization;

(2)  if different from the initial application for a

certificate of registration or at the time of renewal of a

certificate of registration or the last annual report, as

appropriate, a list of the names and residence addresses of

all persons responsible for the conduct of the organization's

affairs, together with a disclosure of the extent and nature

of any contracts or arrangements with these persons and the

discount plan organization, including any possible conflicts

of interest;

(3)  the number of discount plan members in this

Commonwealth; and

(4)  any other information relating to the performance of

the discount plan organization that may be required by the

department.

(c)  Penalty.--A discount plan organization that fails to

file an annual report in the form and within the time required

by this section shall:

(1)  pay a penalty of up to $500 each day for the first

ten days during which the violation continues;

(2)  pay a penalty of up to $1,000 each day after the

first ten days during which the violation continues; and

(3)  upon notice by the commissioner, lose its authority

to enroll new members or to do business in this Commonwealth

while the violation continues.

Section 16.  Compliance officer.

A discount plan organization shall designate and provide the

department with the name, address and telephone number of a

discount plan compliance officer responsible for ensuring

compliance with the provisions of this act.

Section 17.  Penalties.

(a)  Civil penalties.--In addition to the penalties and other

enforcement provisions of this act, any person who willfully

violates this act is subject to a civil penalty of not more than

$10,000 for each violation. Penalties imposed against an

individual discount plan organization under this act shall not

exceed $500,000 in the aggregate in any single calendar year.

(b)  Insurance fraud.--A person that willfully operates as or

aids and abets another operating as a discount plan organization

in violation of section 5(a) commits insurance fraud and shall

be subject to the penalties applicable to offenses under 18

Pa.C.S. § 4117 (relating to insurance fraud), as if the

unregistered discount plan organization were an unauthorized

insurer, and the fees, dues, charges or other consideration

collected from the members by the unregistered discount plan

organization or marketer were insurance premiums.

(c)  Theft.--A person that collects fees for purported

membership in a discount plan, but purposefully fails to provide

the promised benefits, commits a theft and upon conviction is

subject to the penalties applicable to offenses under 18 Pa.C.S.

Ch. 39 (relating to theft and related offenses). In addition,

upon conviction, the person shall be ordered to pay restitution

to persons aggrieved by the violation of this act. Restitution

shall be ordered in addition to a fine or imprisonment, but not

in lieu of a fine or imprisonment.

Section 18.  Injunctions.

(a)  Injunctive relief.--In addition to the penalties and

other enforcement provisions of this act, the commissioner may

seek both temporary and permanent injunctive relief when:

(1)  a discount plan is being operated by a person or

entity that is not registered pursuant to this act; or

(2)  a person, entity, discount medical plan organization

or discount prescription drug plan organization has engaged

in any activity prohibited by this act or any regulation

adopted pursuant to this act.

(b)  Venue.--The venue for any proceeding brought under this

section shall be in the Commonwealth Court.

(c)  Procedure.--The commissioner's authority to seek

injunctive relief is not conditioned on having conducted any

proceeding pursuant to the provisions of the 2 Pa.C.S. (relating

to administrative law and procedure).

Section 19.  Regulations.

The department may promulgate rules and regulations to

administer and enforce this act.

Section 20.  Applicability.

A person doing business in this Commonwealth as a discount

medical plan organization or a discount prescription drug plan

organization on or before the effective date of this act shall

have six months following the effective date of this act to come

into compliance with the requirements of this act.

Section 21.  Effective date.

This act shall take effect immediately.