THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY D. WHITE, COSTA, BROWNE, ORIE, WARD, FONTANA, SOLOBAY, BREWSTER, RAFFERTY, PIPPY, ALLOWAY, HUGHES AND VANCE, DECEMBER 12, 2011

REFERRED TO BANKING AND INSURANCE, DECEMBER 12, 2011  

AN ACT

Amending Title 40 (Insurance) of the Pennsylvania Consolidated

Statutes, further providing for definitions and for rates and

contracts.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  The definition of "nonprofit hospital plan" in

section 6101 of Title 40 of the Pennsylvania Consolidated

Statutes is amended and the section is amended by adding

definitions to read:

§ 6101.  Definitions.

The following words and phrases when used in this chapter

shall have, unless the context clearly indicates otherwise, the

meanings given to them in this section:

"Health care provider."  A person, corporation, facility,

institution or other entity licensed, certified or approved by

the Commonwealth to provide health care or professional medical

services. The term includes, but is not limited to, doctors of

dental surgery, doctors of medicine, doctors of optometry,

doctors of osteopathy, doctors of podiatry, doctors of

chiropractic, licensed physical therapists, licensed clinical

social workers, licensed occupational therapists, certified

registered nurse anesthetists, certified registered nurse

practitioners, licensed psychologists, licensed speech language

pathologists, licensed audiologists, other professional nurses,

certified nurse midwives, hospitals, nursing homes, ambulatory

surgical centers or birth centers.

* * *

"Hospital-provider contract."  An agreement made between a

hospital plan corporation or a professional health service

corporation and a health care provider who is under contract or

otherwise affiliated with a hospital, either directly or

indirectly, to provide related health benefits at the hospital.

"Hospital service area."  One of the eight areas of this

Commonwealth that is composed of the following counties or as

determined by the Insurance Commissioner and published in the

Pennsylvania Bulletin:

(1)  Area 1: Erie, Crawford, Mercer, Lawrence, Venango,

Clarion, Forest, Warren, McKean, Elk, Cameron, Clearfield and

Jefferson.

(2)  Area 2: Potter, Tioga, Bradford, Sullivan, Lycoming,

Clinton, Centre, Union, Snyder, Montour, Columbia and

Northumberland.

(3)  Area 3: Susquehanna, Wyoming, Wayne, Lackawanna,

Pike, Monroe, Northampton, Lehigh, Carbon and Luzerne.

(4)  Area 4: Schuylkill, Berks, Bucks, Montgomery,

Chester, Lancaster and Delaware.

(5)  Area 5: York, Adams, Franklin, Dauphin, Cumberland,

Perry, Lebanon, Juniata, Mifflin, Huntington, Blair, Bedford

and Fulton.

(6)  Area 6: Somerset, Cambria, Indiana, Beaver, Butler,

Armstrong, Westmoreland, Washington, Green and Fayette.

(7)  Area 7: Philadelphia.

(8)  Area 8: Allegheny.

"Nonprofit hospital plan."  A plan whereby for prepayment,

periodical or lump sum payment hospitalization or related health

benefits or the administration of hospitalization or other

health benefits may be provided to subscribers to such plan.

"Professional health service corporation."  A general medical

service corporation. The term does not include a corporation

that is primarily a nonprofit dental service plan corporation or

a nonprofit optometric service plan corporation.

"Termination."  Includes any conclusion of a contract,

including the natural conclusion of a contract at the end of a

time period set by the contract.

Section 2.  Section 6124 of Title 40 is amended to read:

§ 6124.  Rates and contracts.

(a)  General rule.--The rates charged to subscribers by

hospital plan corporations, all rates of payments to hospitals

made by such corporations pursuant to the contracts provided for

in this chapter, all acquisition costs in connection with the

solicitation of subscribers to such hospital plans, the reserves

to be maintained by such corporations, the certificates issued

by such corporations representing their agreements with

subscribers, and any and all contracts entered into by any such

corporation with any hospital, shall, at all times, be subject

to the prior approval of the department.

(b)  Procedure.--Every application for such approval shall be

made to the department in writing and shall be subject to the

provisions of subsections (c) through (f) of section 6102 of

this title (relating to certification of hospital plan

corporations) except that the department may substitute

publication in the Pennsylvania Bulletin of notice of reasonable

opportunity to submit written comments for publication of

opportunity for hearing in any case where the right to an oral

hearing is not conferred by the Constitution of the United

States or the Constitution of Pennsylvania. Within 60 days after

the filing of the application the department shall approve or

refuse such application.

(c)  Maintenance of contractual relationships.--

(1)  Declaration of necessity.--It is hereby found that

many subscribers to nonprofit hospital plans make payments

over long periods of time prior to becoming entitled to

benefits under such a plan and that it is important in the

public interest that the reasonable expectations of such

subscribers as to coverage should be fulfilled if possible.

It is hereby declared to be essential for the maintenance of

the health of the residents of this Commonwealth that

subscribers to nonprofit hospital plans be assured receipt of

the hospitalization and related health benefits prepaid by

them through payment of the rates approved under this chapter

and charged by a hospital plan corporation and that to

accomplish this essential purpose termination of contracts

between hospital plan corporations and hospitals entered into

pursuant to section 6121 (relating to eligible hospitals) and

this section and hospital-provider contracts be subject to

prior approval by the department as provided in this

subsection.

(2)  Notification period.--No contract between a hospital

plan corporation, including any of its affiliates or for-

profit subsidiaries, and any hospital providing for the

rendering of hospitalization to subscribers to the hospital

plan shall be terminated unless the party seeking such

termination gives 90 days advance written notice to the other

party to the contract and to the department of the proposed

termination. No hospital-provider contract shall be

terminated unless the party seeking the termination gives 90

days' advance notice to the other party and the department of

the proposed termination. A hospital plan corporation shall

forward copies of any affected hospital or hospital-provider

contract upon the department's request.

(3)  Hearing period.--Whenever a termination subject to

paragraph (2) involves contracts with hospitals having more

than 5% of the beds in [the area served by a hospital plan

corporation] one or more hospital service areas, the

department shall hold public hearings on at least 15 days

notice for the purpose of investigating the reasons for the

termination. For the purpose of determining the percentage of

affected beds, terminations of the contract of more than one

hospital, including any affiliate, shall be considered in the

aggregate. Pending completion of said investigation by the

department, termination of the hospital contracts and

hospital-provider contracts shall be suspended for a period

not to exceed [six] nine months from the expiration of the

period provided for in paragraph (2). All terms and

conditions of the [contract between the hospital plan

corporation and the hospital or hospitals] contracts shall

continue in full force and effect during said investigation

by the department. Based on the record made during the

hearings, the department shall make specific findings as to

the facts of the dispute and shall either approve termination

of the contracts or recommend such terms for continuation of

the contract as are in the public interest, based upon the

facts, the right of a hospital to be paid its costs for

hospitalization services to subscribers and the need of

subscribers for efficient, reliable hospitalization at a

reasonable cost.

(4)  Negotiation period.--If the department recommends

terms for continuation of the contract, the hospital plan

corporation and the hospitals involved shall renew their

negotiations in order to determine whether a new agreement

can be reached substantially on the basis of the terms for

continuation recommended by the department and pending such

negotiations, the termination of the hospital and hospital-

provider contracts shall be suspended for a further period

[not to exceed 90 days from the date of the decision of the

department] of up to an additional 24 months as established

by the department. In setting this negotiation period, the

department shall take into consideration the impact of the

termination on consumers, the size of hospital system

involved and number of patients impacted, any social mission

or charitable obligations of the hospital plan corporation or

hospital and the adequacy of the hospital plan corporation's

provider network. If the hospital plan corporation and the

hospitals are unable to consummate a new contract within said

[further period of 90 days] negotiation period, they shall so

advise the department. The department shall in that event

approve termination of the contracts effective at the end of

a further period of [30] 60 days and shall prescribe the form

and extent of notice which the hospital plan corporation

shall use in advising its subscribers that hospitalization in

the hospitals and related health benefits provided involved

[is] are not covered by a contract between the hospital plan

corporation and such hospitals. All terms and conditions of

the contracts shall continue in full force and effect during

the periods provided for in this paragraph. 

(5)  Retroactivity.--Upon the settlement of any dispute

between a hospital plan corporation and any hospital pursuant

to paragraphs (2) and (4), the terms and conditions of any

new contract shall be retroactive to the date of expiration

of the contract previously in effect between the parties.

(6)  Good faith.--The failure of any party to negotiate a

contract in good faith subject to the requirements of this

section shall be deemed a violation of the act of July 22,

1974 (P.L.589, No.205), known as the Unfair Insurance

Practices Act.

(d)  Expert.--The department may retain, at the parties'

expense, any qualified expert not otherwise a part of the

department's staff to assist it in its review under this

section.

Section 3.  This act shall take effect in 60 days.