THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY COSTA, FONTANA, FERLO AND SOLOBAY, NOVEMBER 10, 2011

REFERRED TO BANKING AND INSURANCE, NOVEMBER 10, 2011  

AN ACT

Amending Title 40 (Insurance) of the Pennsylvania Consolidated

Statutes, in hospital plan corporations, further providing

for rates and contracts.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 6124(c) of Title 40 of the Pennsylvania

Consolidated Statutes is amended to read:

§ 6124.  Rates and contracts.

* * *

(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 be subject to prior approval by the department

as provided in this subsection.

(2)  Notification period.--

(i)  No contract between a hospital plan corporation

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.

(ii)  A hospital plan corporation that has entered

into a contract with a hospital providing for the

rendering of hospitalization to subscribers to the

hospital plan corporation shall give the department at

least 90 days' advance written notice of the expiration

date provided for in the contract.

(3)  Hearing period.--Whenever a termination or

expiration subject to paragraph (2) involves contracts with

hospitals having more than 5% of the beds in the area served

by a hospital plan corporation, the department shall hold

public hearings on at least 15 days notice for the purpose of

investigating the reasons for the termination or whether the

pending expiration is in the public interest. Pending

completion of said investigation by the department,

termination or expiration of the hospital contracts shall be

suspended for a period not to exceed six months from the

expiration of the period provided for in paragraph (2). All

terms and conditions of the [contract] contracts between the

hospital plan corporation and the hospital or hospitals 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] of facts [of the dispute] and shall either approve

termination or expiration of the contracts or recommend such

terms for continuation of the [contract] contracts 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.--

(i)  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 or

expiration of the hospital contracts shall be suspended

for a further period not to exceed 90 days from the date

of the decision of the department. If the hospital plan

corporation and the hospitals are unable to consummate a

new contract within said further period of 90 days, they

shall so advise the department. The department shall [in

that event] not approve termination or expiration of the

contracts effective at the end of a further period of 30

days until the department has given notice to the

Department of State, the Department of Revenue and all

applicable assessment boards that the hospital plan

corporation and hospital are unable to consummate a new

contract. After such notice, the hospitals involved and

any hospital acquired by a hospital plan corporation

during the negotiation period shall reapply for their

charitable status under:

(A)  The provisions of 53 Pa.C.S. Ch. 88

(relating to consolidated county assessment).

(B)  The act of May 22, 1933 (P.L.853, No.155),

known as The General County Assessment Law.

(C)  The act of June 27, 1939 (P.L.1199, No.404),

entitled "An act relating to the assessment of real

and personal property and other subjects of taxation

in counties of the first class; providing for the

appointment of members of the board of revision of

taxes by the judges of the courts of common pleas;

providing for the appointment, by the board, of

personal property assessors, real estate assessors

and assistant real estate assessors, clerks and other

employes; fixing the salaries of members of the

board, assessors and assistant assessors, and

providing for the payment of salaries and expenses

from the county treasury; prescribing the powers and

duties of the board and of the assessors, the time

and manner of making assessments, of the revision and

notice of assessments and of appeals therefrom;

prescribing the records of assessments; and repealing

existing laws.

(D)  The act of November 26, 1997 (P.L.508,

No.55), known as the Institutions of Purely Public

Charity Act.

(ii)  Notwithstanding the presumption under section 6

of the Institutions of Purely Public Charity Act, the

hospitals under this section must provide information and

supporting documentation to support continued tax exempt

status under applicable law. In addition, the hospitals,

including any hospital acquired by a hospital plan

corporation during the negotiation period, shall submit

information on the number of persons who will be impacted

by the termination or expiration of this contract.

(iii)  During the review of the charitable status,

the department shall suspend approval of the termination

or expiration of the contract until reapplication for

purely public charity status is completed by the

hospitals involved and any hospital acquired by a

hospital plan corporation and a written determination by

the Department of State, the Department of Revenue or

applicable assessment board has been received by the

department or for a period of 18 months, whichever is

later. At the end of this time period, the department

shall move forward with the process of termination or

expiration of the contract 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 involved is not covered

by a contract between the hospital plan corporation and

such hospitals.

(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 termination

or expiration of the contract previously in effect between

the parties.

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