HOUSE BILL No. 5241 October 7, 1997, Introduced by Reps. Llewellyn, Law, Gire, London and Johnson and referred to the Committee on Insurance. A bill to amend 1980 PA 350, entitled "The nonprofit health care corporation reform act," by amending sections 207, 402b, and 502 (MCL 550.1207, 550.1402b, and 550.1502), section 207 as amended by 1993 PA 201, section 402b as added by 1996 PA 516, and section 502 as amended by 1994 PA 440. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 207. (1) A health care corporation, subject to any 2 limitation provided in this act, in any other statute of this 3 state, or in its articles of incorporation, may do any or all of 4 the following: 5 (a) Contract to provide computer services and other adminis- 6 trative consulting services to 1 or more providers or groups of 7 providers, if the services are primarily designed to result in 8 cost savings to subscribers. 03144'97 DKH 2 1 (b) Engage in experimental health care projects to explore 2 more efficient and economical means of implementing the 3 corporation's programs, or the corporation's goals as prescribed 4 in section 504 and the purposes of this act, to develop incen- 5 tives to promote alternative methods and alternative providers, 6 including nurse midwives, nurse anesthetists, and nurse practi- 7 tioners, for delivering health care, including preventive care 8 and home health care. 9 (c) For the purpose of providing health care services to 10 employees of this state, the United States, or an agency, instru- 11 mentality, or political subdivision of this state or the United 12 States, or for the purpose of providing all or part of the costs 13 of health care services to disabled, aged, or needy persons, con- 14 tract with this state, the United States, or an agency, instru- 15 mentality, or political subdivision of this state or the United 16 States. 17 (d) For the purpose of administering any publicly supported 18 health benefit plan, accept and administer funds, directly or 19 indirectly, made available by a contract authorized under subdi- 20 vision (c), or made available by or received from any private 21 entity. 22 (e) For the purpose of administering any publicly supported 23 health benefit plan, subcontract with any organization that has 24 contracted with this state, the United States, or an agency, 25 instrumentality, or political subdivision of this state or the 26 United States, for the administration or furnishing of health 27 services or any publicly supported health benefit plan. 03144'97 3 1 (f) Provide administrative services only and cost-plus 2 arrangements for the federal medicare program established by 3 parts A and B of title XVIII of the social security act, chapter 4 531, 49 Stat. 620, 42 U.S.C. 1395c to 1395i, 1395i-2 to 1395i-4, 5 1395j to 1395t, 1395u to 1395w-2, and 1395w-4; for the federal 6 medicaid program established under title XIX of the social secur- 7 ity act, chapter 531, 49 Stat. 620, 42 U.S.C. 1396 to 1396f and 81396i to 1396u1396g-1 TO 1396v; for title V of the social 9 security act, chapter 531, 49 Stat. 620, 42 U.S.C. 701 to 704 and 10 705 to709710; for the program of medical and dental care 11 established by the military medical benefits amendments of 1966, 12 Public Law 85-861, 80 Stat. 862; for the Detroit maternity and 13 infant care--preschool, school, and adolescent project; and for 14 any other health benefit program established under state or fed- 15 eral law. 16 (g) Provide administrative services only and cost-plus 17 arrangements for any noninsured health benefit plan, subject to 18 the requirements of sections 211 and 211a. 19 (h) Establish, own, and operate a health maintenance organi- 20 zation, subject to the requirements of the public health code, 21Act No. 368 of the Public Acts of 1978, as amended, being22sections 333.1101 to 333.25211 of the Michigan Compiled Laws23 1978 PA 368, MCL 333.1101 TO 333.25211. 24 (i) Guarantee loans for the education of persons who are 25 planning to enter or have entered a profession that is licensed, 26 certified, or registered under parts 161 to 182 ofAct No. 36827of the Public Acts of 1978, as amended, being sections 333.1610103144'97 4 1to 333.18237 of the Michigan Compiled LawsTHE PUBLIC HEALTH 2 CODE, 1978 PA 368, MCL 333.16101 TO 333.18237, and has been iden- 3 tified by the commissioner, with the consultation of the office 4 of health and medical affairs in the department of management and 5 budget, as a profession whose practitioners are in insufficient 6 supply in this state or specified areas of this state and who 7 agree, as a condition of receiving a guarantee of a loan, to work 8 in this state, or an area of this state specified in a listing of 9 shortage areas for the profession issued by the commissioner, for 10 a period of time determined by the commissioner. 11 (j) Receive donations to assist or enable the corporation to 12 carry out its purposes, as provided in this act. 13 (k) Bring an action against an officer or director of the 14 corporation. 15 (l) Designate and maintain a registered office and a resi- 16 dent agent in that office upon whom service of process may be 17 made. 18 (m) Sue and be sued in all courts and participate in actions 19 and proceedings, judicial, administrative, arbitrative, or other- 20 wise, in the same cases as natural persons. 21 (n) Have a corporate seal, alter the seal, and use it by 22 causing the seal or a facsimile to be affixed, impressed, or 23 reproduced in any other manner. 24 (o)Invest and reinvest its funds and, for investment pur-25poses only, purchasePURCHASE, take, receive, subscribe for, or 26 otherwise acquire, own, hold, vote, employ, sell, lend, lease, 27 exchange, transfer, or otherwise dispose of, mortgage, pledge, 03144'97 5 1 use, and otherwise deal in and with, bonds and other obligations, 2 shares, or other securities or interests issued by OTHER entities 3other than domestic, foreign, or alien insurers, as defined in4sections 106 and 110 of the insurance code of 1956, Act No. 2185of the Public Acts of 1956, being sections 500.106 and 500.110 of6the Michigan Compiled Laws,whether engaged in a similar or dif- 7 ferent business, or governmental or other activity, including 8 banking corporations or trust companies.However, a health care9corporation may purchase, take, receive, subscribe for, or other-10wise acquire, own, hold, vote, employ, sell, lend, lease,11exchange, transfer, or otherwise dispose of bonds or other obli-12gations, shares, or other securities or interests issued by a13domestic, foreign, or alien insurer, so long as the activity14meets all of the following:15(i) Is determined by the attorney general to be lawful under16section 202.17(ii) Is approved in writing by the commissioner as being in18the best interests of the health care corporation and its19subscribers.20(iii) Will not result in the health care corporation owning21or controlling 10% or more of the voting securities of the22insurer. Nothing in this subdivision shall be interpreted as23expanding the lawful purposes of a health care corporation under24this act. Except where expressly authorized by statute, a health25care corporation shall not indirectly engage in any investment26activity that it may not engage in directly. AHOWEVER, A 27 health care corporation shall not guarantee or become surety upon 03144'97 6 1 a bond or other undertaking securing the deposit of public 2 money. 3 (p) Purchase, receive, take by grant, gift, devise, bequest 4 or otherwise, lease, or otherwise acquire, own, hold, improve, 5 employ, use and otherwise deal in and with, real or personal 6 property, or an interest therein, wherever situated. 7 (q) Sell, convey, lease, exchange, transfer or otherwise 8 dispose of, or mortgage or pledge, or create a security interest 9 in, any of its property, or an interest therein, wherever 10 situated. 11 (r) Borrow money and issue its promissory note or bond for 12 the repayment of the borrowed money with interest. 13 (s) Make donations for the public welfare, including hospi- 14 tal, charitable, or educational contributions that do not signif- 15 icantly affect rates charged to subscribers. 16 (t) Participate with others in any joint venture with 17 respect to any transaction that the health care corporation would 18 have the power to conduct by itself. 19 (u) Cease its activities and dissolve, subject to the 20 commissioner's authority under section 606(2). 21 (v) Make contracts, transact business, carry on its opera- 22 tions, have offices, and exercise the powers granted by this act 23 in any jurisdiction, to the extent necessary to carry out its 24 purposes under this act. 25 (w) Have and exercise all powers necessary or convenient to 26 effect any purpose for which the corporation was formed. 03144'97 7 1 (x) Notwithstanding subdivision (o) or any other provision 2 of this act, establish, own, and operate a domestic stock 3 insurance company only for the purpose of acquiring, owning, and 4 operating the state accident fund pursuant to chapter 51 of the 5 insurance code of 1956,Act No. 218 of the Public Acts of 1956,6being sections 500.5100 to 500.5114 of the Michigan Compiled7Laws1956 PA 218, MCL 500.5100 TO 500.5114, so long as all of 8 the following are met: 9 (i) The insurer transacts only worker's compensation insur- 10 ance and employer's liability insurance and acts as an adminis- 11 trative services organization for an approved self-insured 12 worker's compensation plan and does not transact any other type 13 of insurance notwithstanding the authorization in chapter 51 of 14Act No. 218 of the Public Acts of 1956THE INSURANCE CODE OF 15 1956, 1956 PA 218, MCL 500.5100 TO 500.5114. 16 (ii) The activity is determined by the attorney general to 17 be lawful under section 202. 18 (iii) The health care corporation does not directly or indi- 19 rectly subsidize the use of any provider or subscriber informa- 20 tion, loss data, contract, agreement, reimbursement mechanism or 21 arrangement, computer system, or health care provider discount to 22 the insurer. 23 (iv) Members of the board of directors, employees, and offi- 24 cers of the health care corporation are not, directly or indi- 25 rectly, employed by the insurer unless the health care corpora- 26 tion is fairly and reasonably compensated for the services 03144'97 8 1 rendered to the insurer if those services were paid for by the 2 health care corporation. 3 (v) Health care corporation and subscriber funds are used 4 only for the acquisition from the state of Michigan of the assets 5 and liabilities of the state accident fund. 6 (vi) Health care corporation and subscriber funds are not 7 used to operate or subsidize in any way the insurer including the 8 use of such funds to subsidize contracts for goods and services. 9 This subparagraph does not prohibit joint undertakings between 10 the health care corporation and the insurer to take advantage of 11 economies of scale or arm's-length loans or other financial 12 transactions between the health care corporation and the 13 insurer. 14 (2) In order to ascertain the interests of senior citizens 15 regarding the provision of medicare supplemental coverage, as 16 described in section 202(1)(d)(v), and to ascertain the interests 17 of senior citizens regarding the administration of the federal 18 medicare program when acting as fiscal intermediary in this 19 state, as described in section 202(1)(d)(vi), a health care cor- 20 poration shall consult with the office of services to the aging 21 and with senior citizens' organizations in this state. 22 (3) An act of a health care corporation, otherwise lawful, 23 is not invalid because the corporation was without capacity or 24 power to do the act. However, the lack of capacity or power may 25 be asserted: 26 (a) In an action by a director or a member of the corporate 27 body against the corporation to enjoin the doing of an act. 03144'97 9 1 (b) In an action by or in the right of the corporation to 2 procure a judgment in its favor against an incumbent or former 3 officer or director of the corporation for loss or damage due to 4 an unauthorized act of that officer or director. 5 (c) In an action or special proceeding by the attorney gen- 6 eral to enjoin the corporation from the transacting of unautho- 7 rized business, to set aside an unauthorized transaction, or to 8 obtain other equitable relief. 9 Sec. 402b. (1) For an individual covered under a nongroup 10 certificate or under a certificate not covered under subsection 11 (2), a health care corporation may exclude or limit coverage for 12 a condition only if the exclusion or limitation relates to a con- 13 dition for which medical advice, diagnosis, care, or treatment 14 was recommended or received within 6 months before enrollment and 15 the exclusion or limitation does not extend for more than 6 16 months after the effective date of the certificate. 17 (2) A health care corporation shall not exclude or limit 18 coverage for a preexisting condition for an individual covered 19 under a group certificate. 20 (3) The commissioner and the director of community health 21 shall examine the issue of crediting prior continuous health care 22 coverage to reduce the period of time imposed by a preexisting 23 condition limitation or exclusion under subsection (1) and shall 24 report to the governor and the senate and the house of represen- 25 tatives standing committees on insurance and health policy issues 26 by May 15, 1997. The report shall include the commissioner's and 27 director's findings and shall propose alternative mechanisms or a 03144'97 10 1 combination of mechanisms to credit prior continuous health care 2 coverage towards the period of time imposed by a preexisting con- 3 dition limitation or exclusion. The report shall address at a 4 minimum all of the following: 5 (a) Cost of crediting prior continuous health care 6 coverages. 7 (b) Period of lapse or break in coverage, if any, permitted 8 in a prior health care coverage. 9 (c) Types and scope of prior health care coverages that are 10 permitted to be credited. 11 (d) Any exceptions or exclusions to crediting prior health 12 care coverage. 13 (e) Uniform method of certifying periods of prior creditable 14 coverage. 15 (4) NOTWITHSTANDING SUBSECTION (1), A HEALTH CARE CORPORA- 16 TION SHALL NOT ISSUE A CERTIFICATE TO A PERSON ELIGIBLE FOR NON- 17 GROUP COVERAGE OR ELIGIBLE FOR A CERTIFICATE NOT COVERED UNDER 18 SUBSECTION (2) THAT EXCLUDES OR LIMITS COVERAGE FOR A PREEXISTING 19 CONDITION OR PROVIDES A WAITING PERIOD IF ALL OF THE FOLLOWING 20 APPLY: 21 (A) THE PERSON'S MOST RECENT HEALTH COVERAGE PRIOR TO APPLY- 22 ING FOR COVERAGE WITH THE HEALTH CARE CORPORATION WAS UNDER A 23 GROUP HEALTH PLAN. 24 (B) THE PERSON WAS CONTINUOUSLY COVERED PRIOR TO THE APPLI- 25 CATION FOR COVERAGE WITH THE HEALTH CARE CORPORATION UNDER 1 OR 26 MORE HEALTH PLANS FOR AN AGGREGATE OF AT LEAST 18 MONTHS WITH NO 27 BREAK IN COVERAGE THAT EXCEEDED 62 DAYS. 03144'97 11 1 (C) THE PERSON IS NO LONGER ELIGIBLE FOR GROUP COVERAGE. 2 (D) THE PERSON DID NOT LOSE ELIGIBILITY FOR COVERAGE FOR 3 FAILURE TO PAY ANY REQUIRED CONTRIBUTION OR FOR AN ACT TO DEFRAUD 4 THE HEALTH CARE CORPORATION. 5 (5)(4)As used in this section, "group" means a group of 6 2 or more subscribers. 7 Sec. 502. (1) A health care corporation may enter into par- 8 ticipating contracts for reimbursement with professional health 9 care providers practicing legally in this state OR ANY OTHER 10 STATE OR COUNTRY for health care services that the professional 11 health care providers may legally perform. A participating con- 12 tract may cover all members or may be a separate and individual 13 contract on a per claim basis, as set forth in the provider class 14 plan, if, in entering into a separate and individual contract on 15 a per claim basis, the participating provider certifies to the 16 health care corporation: 17 (a) That the provider will accept payment from the corpora- 18 tion as payment in full for services rendered for the specified 19 claim for the member indicated. 20 (b) That the provider will accept payment from the corpora- 21 tion as payment in full for all cases involving the procedure 22 specified, for the duration of the calendar year. Until January 23 1, 1998, as used in this subdivision, provider does not include a 24 person licensed as a dentist under part 166 of the public health 25 code,Act No. 368 of the Public Acts of 1978, being sections26333.16601 to 333.16648 of the Michigan Compiled Laws1978 PA 27 368, MCL 333.16601 TO 333.16648. 03144'97 12 1 (c) That the provider will not determine whether to 2 participate on a claim on the basis of the race, color, creed, 3 marital status, sex, national origin, residence, age, handicap, 4 or lawful occupation of the member entitled to health care 5 benefits. 6 (2) A contract entered into pursuant to subsection (1) shall 7 provide that the private provider-patient relationship shall be 8 maintained to the extent provided for by law. A health care cor- 9 poration shall continue to offer a reimbursement arrangement to 10 any class of providers with which it has contracted prior to 11 August 27, 1985 and that continues to meet the standards set by 12 the corporation for that class of providers. 13 (3) A health care corporation shall not restrict the methods 14 of diagnosis or treatment of professional health care providers 15 who treat members. Except as otherwise provided in section 502a, 16 each member of the health care corporation shall at all times 17 have a choice of professional health care providers. This sub- 18 section does not apply to limitations in benefits contained in 19 certificates, to the reimbursement provisions of a provider con- 20 tract or reimbursement arrangement, or to standards set by the 21 corporation for all contracting providers. A health care corpo- 22 ration may refuse to reimburse a health care provider for health 23 care services that are overutilized, including those services 24 rendered, ordered, or prescribed to an extent that is greater 25 than reasonably necessary. 26 (4) A health care corporation may provide to a member, upon 27 request, a list of providers with whom the corporation contracts, 03144'97 13 1 for the purpose of assisting a member in obtaining a type of 2 health care service. However, except as otherwise provided in 3 section 502a, an employee, agent, or officer of the corporation, 4 or an individual on the board of directors of the corporation, 5 shall not make recommendations on behalf of the corporation with 6 respect to the choice of a specific health care provider. Except 7 as otherwise provided in section 502a, an employee, agent, or 8 officer of the corporation, or a person on the board of directors 9 of the corporation who influences or attempts to influence a 10 person in the choice or selection of a specific professional 11 health care provider on behalf of the corporation, is guilty of a 12 misdemeanor. 13 (5) A health care corporation shall provide a symbol of par- 14 ticipation, which can be publicly displayed, to providers who 15 participate on all claims for covered health care services 16 rendered to subscribers. 17 (6) This section does not impede the lawful operation of, or 18 lawful promotion of, a health maintenance organization owned by a 19 health care corporation. 20 (7) Contracts entered into under this section shall be 21 subject to the provisions of sections 504 to 518. 22 (8) A health care corporation shall not deny participation 23 to a freestanding medical or surgical outpatient facility on the 24 basis of ownership if the facility meets the reasonable standards 25 set by the health care corporation for similar facilities, is 26 licensed under part 208 of the public health code,Act No. 36827of the Public Acts of 1978, being sections 333.20801 to 333.2082103144'97 14 1of the Michigan Compiled Laws1978 PA 368, MCL 333.20801 TO 2 333.20821, and complies with part 222 of the public health code, 3Act No. 368 of the Public Acts of 1978, as amended, being sec-4tions 333.22201 to 333.22260 of the Michigan Compiled Laws1978 5 PA 368, MCL 333.22201 TO 333.22260. 6 (9) Notwithstanding any other provision of this act, if a 7 certificate provides for benefits for services that are within 8 the scope of practice of optometry, a health care corporation is 9 not required to provide benefits or reimburse for a practice of 10 optometric service unless that service was included in the defi- 11 nition of practice of optometry under section 17401 of the public 12 health code,Act No. 368 of the Public Acts of 1978, being sec-13tion 333.17401 of the Michigan Compiled Laws1978 PA 368, MCL 14 333.17401, as of May 20, 1992. 15(10) Notwithstanding any other provision of this act, if a16certificate provides for benefits for services that are within17the scope of practice of chiropractic, a health care corporation18is not required to provide benefits or reimburse for the use of19therapeutic sound or electricity, or both, for the reduction or20correction of spinal subluxations in a chiropractic service.21This subsection shall not take effect unless Senate Bill No. 49322or House Bill No. 4494 of the 87th Legislature is enacted into23law.24 Enacting section 1. Section 402b(1) and (2) of the non- 25 profit health care corporation reform act, 1980 PA 350, MCL 26 550.1402b, is effective October 1, 1997. Section 402b(4) of the 03144'97 15 1 nonprofit health care corporation reform act, 1980 PA 350, MCL 2 550.1402b, is effective January 1, 1998. 03144'97 Final page. DKH