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

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

1organizations and to authorize the Secretary of Health to
2provide technical advice and assistance to corporations and
3limited liability companies desiring to establish, operate and
4maintain a health maintenance organization to the end that
5increased competition and consumer choice offered by diverse
6health maintenance organizations can constructively serve to
7advance the purposes of quality assurance, cost-effectiveness
8and access.

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10(P.L.1300, No.234) and repealed in part December 20, 1982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

12Section 3. Definitions.--As used in this act:

13"Basic health services" means those health services,
14including as a minimum, but not limited to, emergency care,
15inpatient hospital and physician care, ambulatory physician
16care, and outpatient and preventive medical services.

17"Commissioner" means the Insurance Commissioner of the
18Commonwealth of Pennsylvania.

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

27"Health maintenance organization" means an organized system
28which combines the delivery and financing of health care and
29which provides basic health services to voluntarily enrolled
30subscribers for a fixed prepaid fee.

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

4"Secretary" means the Secretary of Health of the Commonwealth
5of Pennsylvania.

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

9Section 4. Services Which Shall be Provided.--(a) Any law
10to the contrary notwithstanding, any corporation or limited 
11liability company may establish, maintain and operate a health
12maintenance organization upon receipt of a certificate of
13authority to do so in accordance with this act.

14(b) Such health maintenance organizations shall:

15(1) Provide either directly or through arrangements with
16others, basic health services to individuals enrolled;

17(2) Provide either directly or through arrangements with
18other persons, corporations, institutions, associations or
19entities, basic health services; and

20(3) Provide physicians' services (i) directly through
21physicians who are employes of such organization, (ii) under
22arrangements with one or more groups of physicians (organized on
23a group practice or individual practice basis) under which each
24such group is reimbursed for its services primarily on the basis
25of an aggregate fixed sum or on a per capita basis, regardless
26of whether the individual physician members of any such group
27are paid on a fee-for-service or other basis or (iii) under
28similar arrangements which are found by the secretary to provide
29adequate financial incentives for the provision of quality and
30cost-effective care.

1Section 7. Board of Directors.--A corporation or limited 
2liability company receiving a certificate of authority to
3operate a health maintenance organization under the provisions
4of this act shall be organized in such a manner that assures
5that at least one-third of the membership of the board of
6directors or board of managers of the health maintenance
7organization will be subscribers of the organization. The board
8of directors or board of managers shall be elected in the manner
9stated in the corporation's charter or bylaws or in the limited 
10liability company's operating agreement.

11Section 8. Contracts with Practitioners, Hospitals,
12Insurance Companies, Etc.--(a) Contracts enabling the
13[corporation] health maintenance organization to provide the
14services authorized under section 4 of this act made with
15hospitals and practitioners of medical, dental and related
16services shall be filed with the secretary. The secretary shall
17have power to require immediate renegotiation of such contracts
18whenever he determines that they provide for excessive payments,
19or that they fail to include reasonable incentives for cost
20control, or that they otherwise substantially and unreasonably
21contribute to escalation of the costs of providing health care
22services to subscribers, or that they are otherwise inconsistent
23with the purposes of this act.

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

1professional health service corporation for the provision of
2insurance or indemnity or reimbursement against the cost of
3health care services provided by the health maintenance
4organization as it deems to be necessary. Such contracts shall
5be filed with the commissioner.

6Section 9. Right to Serve or Benefits When Outside the
7State.--If a subscriber entitled to services provided by [the
8corporation] a health maintenance organization necessarily
9incurs expenses for such services while outside the service
10area, the health maintenance organization to which the person is
11a subscriber may, in its discretion and if satisfied both as to
12the necessity for such services and that it was such as the
13subscriber would have been entitled to under similar
14circumstances in the service area, reimburse the subscriber or
15pay on his behalf all or part of the reasonable expenses
16incurred for such services. Such decision for reimbursement
17shall be subject to review by the commissioner at the request of
18a subscriber.

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

1(b) All health maintenance organizations shall be subject to
2the following insurance laws:

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

5(2) Any rehabilitation, liquidation or conservation of a
6health maintenance organization shall be deemed to be the
7rehabilitation, liquidation or conservation of an insurance
8company and shall be conducted under the supervision of the
9commissioner pursuant to the law governing the rehabilitation,
10liquidation, or conservation of insurance companies.

11(c) All rates charged subscribers or groups of subscribers
12by a health maintenance organization and the form and content of
13all contracts between a health maintenance organization and its
14subscribers or groups of subscribers, all rates of payment to
15hospitals made by a health maintenance organization pursuant to
16contracts provided for in this act, budgeted acquisition costs
17in connection with the solicitation of subscribers, and the
18certificates issued by a health maintenance organization
19representing its agreements with subscribers shall, at all
20times, be on file with the commissioner and be deemed approved
21unless explicitly rejected within sixty days of filing. Filings
22shall be made to the commissioner in such form, and shall set
23forth such information as the commissioner may require to carry
24out the provisions of this act. Any disapproval of a filing by
25the commissioner may be appealed in accordance with Title 2 of
26the Pennsylvania Consolidated Statutes (relating to
27administrative law and procedure).

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

1the commissioner by regulation shall require.

2(e) A health maintenance organization shall establish and
3maintain a grievance resolution system satisfactory to the
4secretary, whereby the complaints of its subscribers may be
5acted upon promptly and satisfactorily.

6(f) If a health maintenance organization offers eye care
7which is within the scope of the practice of optometry, it shall
8make optometric care available to its subscribers, and shall
9make the same reimbursement whether the service is provided by
10an optometrist or a physician.

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

1They shall have authority to examine under oath or affirmation
2the officers, agents, employes and subscribers for the health
3services of the [corporation] health maintenance organization,
4and all other persons having or having had substantial part in
5the work of the [corporation] health maintenance organization in
6relation to its affairs, transactions and financial condition.
7The Insurance Commissioner may at any time, without making such
8examination, call on [any such corporation] a health maintenance 
9organization for a written report authenticated by at least two
10of its principal officers concerning the financial affairs and
11status of the [corporation] health maintenance organization.

12(b) A [corporation] health maintenance organization shall
13maintain its financial records in such manner that the revenues
14and expenses associated with the establishment, maintenance and
15operation of its prepaid health care delivery system under this
16act are identifiable and distinct from other activities it may
17engage in which are not directly related to the establishment,
18maintenance and operation of its prepaid health care delivery
19system under this act.

20(c) The secretary or his agents shall have free access to 
21all the books, records, papers and documents that relate to the 
22business of the [corporation] health maintenance organization, 
23other than financial.

24Section 4. The act is amended by adding a section to read:

25Section 14.1. Applicability to Limited Liability
26Companies.--This act and regulations promulgated under this act
27shall apply to a limited liability company as follows:

28(1) The board of managers of a limited liability company
29shall be treated in the same manner as the board of directors of
30a corporation.

1(2) The members of a limited liability company shall be 
2treated in the same manner as the shareholders of a corporation.

<-3(3) No limited liability company that is a health
4maintenance organization shall be treated differently from a
5corporation that is a health maintenance organization with
6respect to any of its liabilities.

7Section 5. This act shall take effect in 60 days.