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                                                        PRINTER'S NO. 76

THE GENERAL ASSEMBLY OF PENNSYLVANIA


SENATE BILL

No. 85 Session of 2005


        INTRODUCED BY GREENLEAF, RAFFERTY, O'PAKE, COSTA, GORDNER,
           PIPPY, ORIE AND BOSCOLA, JANUARY 31, 2005

        REFERRED TO BANKING AND INSURANCE, JANUARY 31, 2005

                                     AN ACT

     1  Authorizing privately established and operated health insurance
     2     purchasing cooperatives; and providing for the regulation of
     3     health insurance purchasing cooperatives by the Insurance
     4     Department.

     5                         TABLE OF CONTENTS
     6  Section 1.  Short title.
     7  Section 2.  Statement of purpose.
     8  Section 3.  Definitions.
     9  Section 4.  Exemption.
    10  Section 5.  Department duties.
    11  Section 6.  Business plan.
    12  Section 7.  Membership.
    13  Section 8.  Health care benefits.
    14  Section 9.  Insurance risk.
    15  Section 10.  Disclosure and confidentiality.
    16  Section 11.  Merger and consolidation.
    17  Section 12.  Conflict of interest.
    18  Section 13.  Grounds for denial, nonrenewal, suspension or


     1                 revocation.
     2  Section 14.  Hearing and appeal.
     3  Section 15.  Solvency.
     4  Section 16.  Annual report.
     5  Section 17.  Rules and regulations.
     6  Section 18.  Effective date.
     7     The General Assembly of the Commonwealth of Pennsylvania
     8  hereby enacts as follows:
     9  Section 1.  Short title.
    10     This act shall be known and may be cited as the Pennsylvania
    11  Health Insurance Purchasing Cooperative Act.
    12  Section 2.  Statement of purpose.
    13     The General Assembly recognizes that small employers are
    14  unable to negotiate health insurance benefits at the same cost
    15  as larger employers which makes it unaffordable for them to
    16  offer it to their employees. Therefore, the General Assembly
    17  seeks to increase the availability, accessibility and
    18  affordability of health insurance coverage by allowing small
    19  employers to join together through a health insurance purchasing
    20  cooperative so that they gain the same administrative
    21  efficiencies and purchasing strength as larger employers.
    22  Section 3.  Definitions.
    23     The following words and phrases when used in this act shall
    24  have the meanings given to them in this section unless the
    25  context clearly indicates otherwise:
    26     "Business plan."  The plan of operation of a health insurance
    27  purchasing cooperative.
    28     "Commissioner."  The Insurance Commissioner of the
    29  Commonwealth.
    30     "Department."  The Insurance Department of the Commonwealth.
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     1     "Dependent child."  A natural or adopted child of an
     2  employee. The term includes a stepchild who resides in an
     3  employee's household if the employee has assumed the financial
     4  responsibility for the child and another parent is not legally
     5  responsible for support for and medical expenses of the child.
     6     "Eligible dependent."  A spouse of an employee and a
     7  dependent child who is under 19 years of age.
     8     "Eligible employee."  An employee or individual who is a
     9  full-time employee of an eligible employer and qualified to
    10  enroll in a health benefit plan offered through a health
    11  insurance purchasing cooperative or eligible dependent.
    12     "Full-time."  The status of working at least 30 hours per
    13  week for an eligible employer.
    14     "Health insurance purchasing cooperative" or "cooperative."
    15  A group of small employers and eligible employees who join
    16  together to purchase health insurance or health care benefits.
    17     "Insurer."  An insurer, health maintenance organization,
    18  fraternal benefit society, hospital plan or health services plan
    19  corporation that offers basic small group insurance plans to
    20  small employers.
    21     "Small employer."  A person, firm, corporation, partnership
    22  or association that employed, on at least 50% of its working
    23  days during the preceding year, at least two but not more than
    24  50 employees.
    25  Section 4.  Exemption.
    26     A health insurance purchasing cooperative shall be exempt
    27  from any law in this Commonwealth relating to the establishment
    28  of groups for the purchase of insurance.
    29  Section 5.  Department duties.
    30     (a)  General rules.--The department shall regulate the
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     1  establishment and conduct of health insurance purchasing
     2  cooperatives.
     3     (b)  Application procedure.--
     4         (1)  A health insurance purchasing cooperative may not
     5     operate in this Commonwealth without an approved business
     6     plan and without obtaining a license from the department.
     7         (2)  An application for a license must be completed and
     8     signed by an authorized representative of the cooperative
     9     sponsor and proposed health insurance purchasing cooperative
    10     administrator, if applicable. The completed application for a
    11     license must be verified and filed with the department.
    12         (3)  An application shall not be deemed to be filed until
    13     all information necessary to properly process the application
    14     has been received by the commissioner. Upon filing, the
    15     department shall make its determination concerning the
    16     application and shall provide notice of the determination to
    17     the cooperative.
    18         (4)  If the application is approved, a copy of the
    19     approved license shall be provided to the sponsor of the
    20     cooperative. The license shall serve as the cooperative's
    21     authorization to operate until the yearly renewal date.
    22         (5)  Any request for an amendment to the license shall be
    23     filed in the same manner as the application and approved by
    24     the commissioner before the change proposed by the amendment
    25     is effective.
    26     (c)  Application.--A health insurance purchasing cooperative
    27  applying for a license or a renewal of a license or operating in
    28  this Commonwealth shall file with the department all of the
    29  following information or documents:
    30         (1)  A business plan for approval by the commissioner.
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     1         (2)  Quarterly financial statements and annual reports on
     2     forms approved by the commissioner. Financial statements and
     3     annual reports submitted shall provide evidence that allows
     4     the commissioner to ensure that the health insurance
     5     purchasing cooperative:
     6             (i)  Is operating in a fiscally sound fashion.
     7             (ii)  Is not a risk-bearing entity.
     8             (iii) Has sound financial controls and money
     9         management.
    10             (iv)  Has procedures in place to prevent
    11         mismanagement or misappropriation of funds either through
    12         neglect or malfeasance.
    13         (3)  Reports of any proposed changes in policy or
    14     operations that constitute material changes in the business
    15     plan that was the basis of licensure or a renewal of
    16     licensure.
    17         (4)  Any other information deemed relevant by the
    18     commissioner.
    19     (d)  License revocation.--Failure to provide requested
    20  information shall be a basis for denial, suspension or
    21  revocation of a license issued under this act.
    22     (e)  Audits.--Financial and performance audits or
    23  examinations of the health insurance purchasing cooperative
    24  shall be conducted on a regular basis by the commissioner.
    25  Failure by a cooperative to meet minimum standards in a
    26  financial or performance audit or examination shall be the basis
    27  for license denial, suspension or revocation or other action to
    28  protect consumers. The commissioner may impose conditions on
    29  licensure, including, but not limited to, the removal and
    30  replacement of managerial or marketing staff or contractors to
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     1  remedy compliance or performance problems.
     2     (f)  Compliance with business plan.--Failure of a health
     3  insurance purchasing cooperative to comply with the business
     4  plan approved by the commissioner may constitute a basis for
     5  suspension or revocation of the cooperative's license.
     6  Section 6.  Business plan.
     7     A health insurance purchasing cooperative shall not receive a
     8  license unless the business plan of the cooperative has been
     9  reviewed and approved by the commissioner. The business plan
    10  submitted for approval shall include the following information:
    11         (1)  The steps the sponsor of the cooperative plans to
    12     take to advance cost control and quality improvement and to
    13     improve access to health insurance or health care services.
    14     The business plan shall demonstrate that the cooperative will
    15     reduce cost, improve quality and improve access to health
    16     insurance or health care services.
    17         (2)  The scope of cooperative services that will be
    18     offered in the service territory and the resources and
    19     expertise that will be used by the sponsor of the cooperative
    20     to implement and administer the plan.
    21         (3)  The corporate charter, bylaws and other business
    22     operation documents of the cooperative. As a condition of
    23     licensure, the cooperative must demonstrate to the
    24     satisfaction of the commissioner that its corporate
    25     governance makes it an appropriate and effective
    26     representative of the buyers' interests within the service
    27     territory. A cooperative shall, whenever feasible, contract
    28     with multiple, unaffiliated insurers to offer health benefit
    29     plans and other insurance to its members. A cooperative may
    30     selectively contract with insurers based on the quality and
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     1     cost-effectiveness of services and other factors deemed to be
     2     relevant by the cooperative.
     3         (4)  A list of officers and directors of the cooperative
     4     and of the contract administrator, if one is employed, and
     5     personal biographical information or firm descriptions for
     6     each person named. The officers, directors or contract
     7     administrator of a cooperative may not have a prior record of
     8     administrative, civil or criminal violation within any
     9     financial service industry. The personal biographical
    10     information and firm descriptions submitted shall demonstrate
    11     by clear and convincing evidence that the persons involved in
    12     the cooperative have the expertise, experience and character
    13     to effectively and professionally represent buyers in a
    14     fiduciary capacity.
    15         (5)  Information concerning procedures for accounting,
    16     deposit, collection, handling and transfer of moneys. Because
    17     the cooperative may handle payments or accounting, the
    18     cooperative shall demonstrate the presence of adequate
    19     financial controls to the satisfaction of the commissioner as
    20     a condition of licensure. Failure to have adequate controls
    21     or to follow approved procedures may constitute a basis for
    22     denial, suspension or revocation of licensure.
    23         (6)  The market segments and participants to which the
    24     cooperative will be marketing. The cooperative shall
    25     demonstrate to the satisfaction of the commissioner that the
    26     cooperative will extend health insurance purchasing services
    27     to a group of buyers not currently served by a cooperative.
    28     Failure to achieve this result may constitute a basis for
    29     denial of an application to renew a license.
    30         (7)  Any other information required by the commissioner
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     1     to verify that the cooperative is qualified to operate in
     2     this Commonwealth.
     3  Section 7.  Membership.
     4     (a)  No capital stock.--A health insurance purchasing
     5  cooperative shall be organized on a membership basis with no
     6  capital stock.
     7     (b)  Voluntary.--Membership in a health insurance purchasing
     8  cooperative shall be voluntary.
     9     (c)  Eligibility.--A health insurance purchasing cooperative
    10  shall accept for membership in the cooperative any small
    11  employers and eligible employees or dependents which agree to
    12  pay the membership fee and any premium for coverage through the
    13  cooperative and which abide by the bylaws and rules of the
    14  cooperative.
    15     (d)  Additional membership.--A health insurance purchasing
    16  cooperative may, at its option, accept for membership in the
    17  cooperative any otherwise eligible employer that does not
    18  qualify as a small employer because it employed more than 50
    19  eligible employees during 50% or more of its working days during
    20  the previous calendar quarter.
    21     (e)  Sole proprietor.--A health insurance purchasing
    22  cooperative may, at its option, accept for membership in the
    23  cooperative any otherwise eligible employer that does not
    24  qualify as a small employer because it is an individual or sole
    25  proprietor. If a cooperative chooses to accept such employers,
    26  the cooperative may not discriminate in the acceptance process
    27  based on health status.
    28  Section 8.  Health care benefits.
    29     (a)  Benefit plans.--A health insurance purchasing
    30  cooperative shall provide to its members clear, standardized
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     1  information on each health care benefit plan or other coverage
     2  offered by insurers through the cooperative to its members,
     3  including information on price, enrollee costs, quality, patient
     4  satisfaction, enrollment and enrollee responsibility and
     5  obligations and shall provide health benefit plan and other
     6  insurance comparison sheets as may be required by the
     7  department.
     8     (b)  Discrimination.--A health insurance purchasing
     9  cooperative may not:
    10         (1)  Vary conditions of eligibility, including premium
    11     rates and membership fees, for any employer meeting the
    12     membership requirements of the cooperative.
    13         (2)  Vary conditions of eligibility for any eligible
    14     employee to qualify for a health benefit plan offered by the
    15     cooperative to eligible employers and their employees.
    16     (c)  Open enrollment.--A health insurance purchasing
    17  cooperative shall provide for an annual open enrollment period
    18  of 30 calendar days during which members of the cooperative may
    19  change the coverage option in which members are enrolled. A
    20  cooperative shall, whenever feasible, contract with multiple,
    21  unaffiliated insurers to offer health benefit plans and other
    22  insurance to its members. A cooperative may selectively contract
    23  with insurers based on quality and cost-effectiveness of
    24  services and other factors deemed to be relevant by the
    25  cooperative.
    26     (d)  Waiver of State mandates.--A health insurance purchasing
    27  cooperative may provide a health benefit plan in whole or in
    28  part that does not offer or provide State-mandated health
    29  benefits. A cooperative that offers a health benefit plan
    30  without such mandates must also offer at least one benefit plan
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     1  that includes coverage for all State-mandated health benefits.
     2     (e)  Notice requirements.--In each sale of a health benefit
     3  plan to a proposed eligible employer through a health insurance
     4  purchasing cooperative in which the cooperative offers an option
     5  to an eligible employer to obtain a health benefit plan that,
     6  either in whole or in part, does not provide State-mandated
     7  health benefits, the cooperative, after the employer has
     8  selected its health benefit plan, shall provide to each eligible
     9  employee of the employer a written notice, in a form and manner
    10  prescribed by rule or regulation promulgated by the
    11  commissioner, that one or more mandated benefits are not
    12  included in the health benefit plan.
    13     (f)  Licensed insurers.--A health benefit plan offered
    14  through a health insurance purchasing cooperative shall be
    15  underwritten by an insurer that is licensed or otherwise
    16  regulated under State law and meets all applicable State
    17  standards relating to consumer protection, including, but not
    18  limited to, State solvency and market conduct.
    19  Section 9.  Insurance risk.
    20     A health insurance purchasing cooperative shall not bear
    21  insurance risk. The cooperative shall facilitate the purchase of
    22  insurance and health care services.
    23  Section 10.  Disclosure and confidentiality.
    24     (a)  General rule.--A health insurance purchasing cooperative
    25  may elect to preclude a participant who leaves the cooperative
    26  from returning to the cooperative to purchase health insurance
    27  or health care benefits for a period of time. This subsection
    28  shall not be construed to authorize discrimination against high-
    29  risk participants.
    30     (b)  Access to information.--
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     1         (1)  Except as provided in paragraph (2), and subject to
     2     review and approval by the commissioner, a health insurance
     3     purchasing cooperative may restrict access to information in
     4     its possession that is essential to the operation of the
     5     cooperative.
     6         (2)  Restriction of access to information shall be
     7     allowed for the following reasons:
     8             (i)  To induce voluntary participation in the
     9         cooperative.
    10             (ii)  To protect the privacy of participants.
    11             (iii)  To protect the negotiating strategy of the
    12         cooperative from disclosure to contractors or
    13         competitors.
    14             (iv)  To protect proprietary information in like
    15         circumstances as those that are applicable to insurers.
    16  Section 11.  Merger and consolidation.
    17     (a)  Legal entity.--A health insurance purchasing cooperative
    18  shall be a legal entity that operates on behalf of its sponsor
    19  or participants.
    20     (b)  Disclosure.--A health insurance purchasing cooperative
    21  shall disclose its total administrative cost in its annual
    22  report to the commissioner in the same manner and on the same
    23  basis as insurers.
    24     (c)  Prior approval.--A change in control, a merger or an
    25  acquisition of a health insurance purchasing cooperative is
    26  subject to the prior review and approval of the commissioner on
    27  the same terms as a change in control, a merger or an
    28  acquisition of a Pennsylvania domestic insurance company.
    29  Section 12.  Conflict of interest.
    30     (a)  Sponsors.--Health care providers or insurers that offer
    20050S0085B0076                 - 11 -     

     1  competing products within the same service territory may not
     2  participate in a health insurance purchasing cooperative as
     3  sponsors.
     4     (b)  Affiliations.--A sponsor of a health insurance
     5  purchasing cooperative may not be an employee of, be affiliated
     6  with or be a subsidiary of a health care provider or insurer
     7  that offers competing products within the same service
     8  territory.
     9  Section 13.  Grounds for denial, nonrenewal, suspension or
    10                 revocation.
    11     The following grounds constitute a basis for denial,
    12  nonrenewal, suspension or revocation of an application or
    13  existing license, following notice and an opportunity for
    14  hearing:
    15         (1)  Failure to comply with any provisions of this act or
    16     rules or regulations adopted pursuant to this act.
    17         (2)  Failure to disclose preexisting oral or written
    18     agreement during the cooperative application process.
    19         (3)  Failure to fairly offer, market and sell all of the
    20     health benefit plan designs offered through a cooperative
    21     that are sold or offered to small employers to all
    22     participants.
    23         (4)  Failure to comply with a lawful order of the
    24     commissioner.
    25         (5)  Committing an unfair or deceptive act or practice as
    26     defined under section 5 of the act of July 22, 1974 (P.L.589,
    27     No.205), known as the Unfair Insurance Practices Act.
    28         (6)  Filing any necessary form with the department which
    29     contains fraudulent information or omission.
    30         (7)  Misappropriating, converting, illegally withholding
    20050S0085B0076                 - 12 -     

     1     or refusing to pay over on proper demand any moneys that
     2     belong to a person or health care insurer or any organized
     3     delivery system or to which the cooperative is otherwise not
     4     entitled and that have been entrusted to the cooperative in
     5     its fiduciary capacity.
     6  Section 14.  Hearing and appeal.
     7     Prior to denying an application for a license or an
     8  application for renewal of a license or suspending or revoking a
     9  license issued under this act, a license holder shall be
    10  provided with written notice of the commissioner's decision and
    11  provided an opportunity for a hearing and a right to appeal.
    12  Section 15.  Solvency.
    13     If a health insurance purchasing cooperative becomes
    14  insolvent, the commissioner shall maintain jurisdiction of the
    15  cooperative for the purposes of protecting the interests of the
    16  health insurance purchasing cooperative's participants and
    17  health insurance carriers and health benefit plans.
    18  Section 16.  Annual report.
    19     The commissioner shall submit an annual report to the General
    20  Assembly no later than February 1 of each year. The report shall
    21  include a description of the operations of all health insurance
    22  purchasing cooperatives and a review of the success of
    23  cooperatives in improving the quality, access or affordability
    24  of health insurance. The commissioner may require cooperatives
    25  to provide information in a uniform format for use in preparing
    26  this report and for other public purposes.
    27  Section 17.  Rules and regulations.
    28     The commissioner may promulgate any rules or regulations
    29  necessary to implement the provisions of this act.
    30  Section 18.  Effective date.
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     1     This act shall take effect in 60 days.




















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