Senate Introduced Bill B01209

SENATE BILL No. 1209

April 12, 2000, Introduced by Senator HAMMERSTROM and referred to the Committee on

Health Policy.

A bill to amend 1956 PA 218, entitled

"The insurance code of 1956,"

by amending sections 102, 224, 240, and 2213 (MCL 500.102,

500.224, 500.240, and 500.2213), section 224 as amended by 1998

PA 121, section 240 as amended by 1987 PA 261, and section 2213

as added by 1996 PA 517, and by adding chapter 35; and to repeal

acts and parts of acts.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

1 Sec. 102. (1) "Commissioner" as used in this ~~code~~ ACT

2 means the commissioner of ~~insurance of this state~~ THE OFFICE OF

3 FINANCIAL AND INSURANCE SERVICES.

4 (2) "Department" as used in this ~~code~~ ACT means the

5 ~~insurance department of this state~~ OFFICE OF FINANCIAL AND

6 INSURANCE SERVICES.

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1 Sec. 224. (1) All actual and necessary expenses incurred in

2 connection with the examination or other investigation of an

3 insurer or other person regulated under the commissioner's

4 authority shall be certified by the commissioner, together with a

5 statement of the work performed including the number of days

6 spent by the commissioner and each of the commissioner's depu-

7 ties, assistants, employees, and others acting under the

8 commissioner's authority. If correct, the expenses shall be paid

9 to the persons by whom they were incurred, upon the warrant of

10 the state treasurer payable from appropriations made by the leg-

11 islature for this purpose.

12 (2) Except as otherwise provided in subsection (4), the com-

13 missioner shall prepare and present to the insurer or other

14 person examined or investigated a statement of the expenses and

15 reasonable cost incurred for each person engaged upon the exami-

16 nation or investigation, including amounts necessary to cover the

17 pay and allowances granted to the persons by the Michigan civil

18 service commission, and the administration and supervisory

19 expense including an amount necessary to cover fringe benefits in

20 conjunction with the examination or investigation. Except as

21 otherwise provided in subsection (4), the insurer or other

22 person, upon receiving the statement, shall pay to the commis-

23 sioner the stated amount. The commissioner shall deposit the

24 funds with the state treasurer as provided in section 225.

25 (3) The commissioner may employ attorneys, actuaries,

26 accountants, investment advisers, and other expert personnel not

27 otherwise employees of this state reasonably necessary to assist

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1 in the conduct of the examination or investigation or proceeding

2 with respect to an insurer or other person regulated under the

3 commissioner's authority at the insurer's or other person's

4 expense except as otherwise provided in subsection (4). Except

5 as otherwise provided in subsection (4), upon certification by

6 the commissioner of the reasonable expenses incurred under this

7 section, the insurer or other person examined or investigated

8 shall pay those expenses directly to the person or firm rendering

9 assistance to the commissioner. Expenses paid directly to such

10 person or firm and the regulatory fees imposed by this section

11 shall be examination expenses under section 22e of the single

12 business tax act, 1975 PA 228, MCL 208.22e.

13 (4) An insurer is AND A HEALTH MAINTENANCE ORGANIZATION

14 ARE subject to a regulatory fee instead of the costs and expenses

15 provided for in subsections (2) and (3). By June 30 of each year

16 or within 30 days after the enactment into law of any appropria-

17 tion for the insurance bureau's operation, the commissioner shall

18 impose upon all insurers AND HEALTH MAINTENANCE ORGANIZATIONS

19 authorized to do business in this state a regulatory fee calcu-

20 lated as follows:

21 (a) As used in this subsection:

22 (i) "A" means total annuity considerations written in this

23 state in the immediately preceding year.

24 (ii) "B" means base assessment rate. The base assessment

25 rate shall not exceed .00038 and shall be a fraction the numera-

26 tor of which is the total regulatory fee and the denominator of

27 which is the total amount of direct underwritten premiums written

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1 in this state by all insurers for the immediately preceding

2 calendar year as reported to the commissioner on the insurer's

3 annual statements filed with the commissioner.

4 (iii) "I" means all direct underwritten premiums other than

5 life insurance premiums and annuity considerations written in

6 this state in the immediately preceding year by all insurers.

7 (iv) "L" means all direct underwritten life insurance premi-

8 ums written in this state in the immediately preceding year by

9 all life insurers.

10 (v) Total regulatory fee shall not exceed 80% of the gross

11 appropriations for the insurance bureau's operation for a fiscal

12 year and shall be the difference between the gross appropriations

13 for the insurance bureau's operation for that current fiscal year

14 and any restricted revenues, other than the regulatory fee

15 itself, as identified in the gross appropriation for the insur-

16 ance bureau's operation.

17 (vi) Direct premiums written in this state do not include

18 any amounts that represent claims payments that are made on

19 behalf of, or administrative fees that are paid in connection

20 with, any administrative service contract, cost-plus arrangement,

21 or any other noninsured or self-insured business.

22 (b) Two actual assessment rates shall be calculated so as to

23 distribute 75% of the burden of the regulatory fee shortfall cre-

24 ated by the exclusion of annuity considerations from the assess-

25 ment base to life insurance and 25% to all other insurance. The

26 2 actual assessment rates shall be determined as follows:

27 (i) L x B + .75 x B x A = assessment rate for life

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1 L insurance.

2 (ii) I x B + .25 x B x A = assessment rate for insurance

3 I other than life insurance.

4 (c) ~~Except as otherwise provided in subdivision (d), each~~

5 EACH insurer's regulatory fee shall be a minimum fee of $250.00

6 and shall be determined by multiplying the actual assessment rate

7 by the assessment base of that insurer as determined by the com-

8 missioner from the insurer's annual statement for the immediately

9 preceding calendar year filed with the commissioner.

10 ~~(d) The total regulatory fee for all health maintenance~~

11 ~~organizations in this state shall be determined by multiplying~~

12 ~~the actual assessment rate by 70% of direct underwritten premiums~~

13 ~~written by all health maintenance organizations in this state for~~

14 ~~the immediately preceding calendar year as reported to the com-~~

15 ~~missioner in the health maintenance organization's annual state-~~

16 ~~ments filed with the commissioner. Each health maintenance~~

17 ~~organization's regulatory fee shall be a minimum fee of $250.00~~

18 ~~and shall be determined by taking the total regulatory fee for~~

19 ~~all health maintenance organizations divided by the total number~~

20 ~~of members of all health maintenance organizations and multiply-~~

21 ~~ing this quotient by the number of members in the individual~~

22 ~~health maintenance organization.~~

23 (5) Not less than 67% of the revenue derived from the regu-

24 latory fee under subsection (4) shall be used for the regulation

25 of financial conduct of persons regulated under the

26 commissioner's authority and for the regulation of persons

27 regulated under the commissioner's authority engaged in the

28 business of health care and health insurance in this state.

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1 (6) The amount, if any, by which amounts credited to the

2 commissioner pursuant to section 225 exceed actual expenditures

3 pursuant to appropriations for the insurance bureau's operation

4 for a fiscal year shall be credited toward the appropriation for

5 the insurance bureau in the next fiscal year.

6 (7) All money paid into the state treasury by an insurer

7 under this section shall be credited as provided under section

8 225.

9 (8) A regulatory fee under this section shall not be treated

10 by an insurer as a levy or excise upon premium but as a regula-

11 tory burden that is apportioned in relation to insurance activity

12 in this state and reflects the insurance regulatory burden on

13 this state as a result of this insurance activity. A foreign or

14 alien insurer authorized to do business in this state may con-

15 sider the liability required under this section as a burden

16 imposed by the state of Michigan in the calculation of the

17 insurer's liability required under section 476a.

18 (9) An insurer may file with the commissioner a protest to

19 the regulatory fee imposed not later than 15 days after receipt

20 of the regulatory fee. The commissioner shall review the grounds

21 for the protest and shall hold a conference with the insurer at

22 the insurer's request. The commissioner shall transmit his or

23 her findings to the insurer with a restatement of the regulatory

24 fee based upon the findings. Statements of regulatory fees to

25 which protests have not been made and restatements of regulatory

26 fees are due and shall be paid not later than 30 days after their

27 receipt. Regulatory fees that are not paid when due bear

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1 interest on the unpaid fee which shall be calculated at 6-month

2 intervals from the date the fee was due at a rate of interest

3 equal to 1% plus the average interest rate paid at auctions of

4 5-year United States treasury notes during the 6 months immedi-

5 ately preceding July 1 and January 1, as certified by the state

6 treasurer, and compounded annually, until the assessment is paid

7 in full. An insurer who fails to pay its regulatory fee within

8 the prescribed time limits may have its certificate of authority

9 or license suspended, limited, or revoked as the commissioner

10 considers warranted until the regulatory fee is paid. If the

11 commissioner determines that a regulatory fee or a part of a

12 regulatory fee paid by an insurer is in excess of the amount

13 legally due and payable, the amount of the excess shall be

14 refunded or, at the insurer's option, be applied as a credit

15 against the regulatory fee for the next fiscal year. An overpay-

16 ment of $100.00 or less shall be applied as a credit against the

17 insurer's regulatory fee for the next fiscal year unless the

18 insurer had a $100.00 or less overpayment in the immediately pre-

19 ceding fiscal year. If the insurer had a $100.00 or less over-

20 payment in the immediately preceding fiscal year, at the

21 insurer's option, the current fiscal year overpayment of $100.00

22 or less shall be refunded.

23 (10) Any amounts stated and presented to or certified,

24 assessed, or imposed upon an insurer as provided in

25 subsections (2), (3), and (4) that are unpaid as of the date that

26 the insurer is subjected to a delinquency proceeding pursuant to

27 chapter 81 shall be regarded as an expense of administering the

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1 delinquency proceeding and shall be payable as such from the

2 general assets of the insurer.

3 ~~(11) Any statements presented to insurers pursuant to sub-~~

4 ~~sections (2) and (3) for examinations or investigations conducted~~

5 ~~since October 1, 1993 shall be cancelled as of June 30, 1994.~~

6 ~~Amounts actually paid by an insurer because of those statements~~

7 ~~shall be credited against the regulatory fee levied for the~~

8 ~~1993-94 fiscal year and any excess amounts shall be refunded.~~

9 (11) ~~(12)~~ In addition to the regulatory fee provided in

10 subsection (4), each insurer that locates records or personnel

11 knowledgeable about those records outside this state pursuant to

12 section 476a(3) or section 5256 shall reimburse the insurance

13 bureau for expenses and reasonable costs incurred by the insur-

14 ance bureau as a result of travel and other costs related to

15 examinations or investigations of those records or personnel.

16 The reimbursement shall not include any costs that the insurance

17 bureau would have incurred if the examination had taken place in

18 this state.

19 (12) ~~(13)~~ As used in this section:

20 (a) "Annuity considerations" means receipts on the sale of

21 annuities as used in section 22a of the single business tax act,

22 1975 PA 228, MCL 208.22a.

23 (b) "Insurer" means an insurer authorized to do business in

24 this state and includes nonprofit health care corporations,

25 dental care corporations, and health maintenance organizations.

26 (13) ~~(14)~~ All fees added by ~~the amendatory act that added~~

27 ~~this subsection~~ 1994 PA 228 shall not apply on and after

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1 January 1, 1996, unless by September 1, 1995, and annually

2 thereafter, the commissioner submits a report to the senate and

3 house of representatives standing committees on insurance issues

4 and to the senate and house of representatives appropriations

5 regulatory subcommittees on all receivership activities of the

6 commissioner and the insurance bureau pertaining to the liquida-

7 tion of insolvent insurers for the immediately preceding calendar

8 year. The report shall include all of the following:

9 (a) A summary schedule of all insurance bureau expenditures

10 for legal, accounting, and administrative expenditures made or

11 incurred for the liquidation of all insurers in receivership,

12 including, but not limited to, alien insurers described in

13 section 431a, and paid for out of the insurer's assets during the

14 calendar year being reported on.

15 (b) A detailed schedule of all insurance bureau contractual

16 expenditures for legal, accounting, and administrative expendi-

17 tures made or incurred for the liquidation of all insurers in

18 receivership, including, but not limited to, alien insurers

19 described in section 431a, and paid for out of the insurer's

20 assets during the calendar year being reported on including, but

21 not limited to, itemization of legal billings, criminal investi-

22 gation expenses, travel, meals, and general office expenses.

23 (c) A statement of the net changes in assets and liabilities

24 of each insurer in receivership, including, but not limited to,

25 an alien insurer described in section 431a. This statement shall

26 include changes due to interest rate changes, real estate values,

27 and other investment activities, including a detailed statement

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1 of the sale of assets and the net loss or gain on those assets

2 and a statement of the amount of assets preserved, gained, or

3 recovered by the receiver.

4 Sec. 240. (1) The commissioner shall collect, and the

5 person affected shall pay to the commissioner, the following

6 fees:

7 (a) Filing fee for original authorization to

8 transact insurance OR HEALTH MAINTENANCE ORGANIZATION

9 BUSINESS in this state, for each domestic, ~~insurer,~~

10 ~~and each~~ foreign, and alien insurer, AND EACH HEALTH

11 MAINTENANCE ORGANIZATION............................... $ 25.00.

12 (b) Filing fee for annual statement of foreign and

13 alien insurers, each year, subject to section 476a.... $ 25.00.

14 (c) Agent's appointment fee, resident or nonresi-

15 dent, payable by insurer OR HEALTH MAINTENANCE

16 ORGANIZATION so represented, for each agent, each year. $ 5.00.

17 (d) Application fee payable by each initial appli-

18 cant for license as resident agent, nonresident agent,

19 surplus lines agent, solicitor, counselor, or adjuster,

20 not transferable or refundable......................... $ 10.00.

21 (e) Solicitor's license, each year................ $ 10.00.

22 (f) Insurance counselor license, each year........ $ 10.00.

23 (g) Adjuster's license, each year................. $ 5.00.

24 (h) License examination fee, payable by applicant

25 for all subjects covered in any 1 examination, or por-

26 tion of an examination, for license as resident agent,

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1 surplus lines agent, solicitor, counselor, or adjuster,

2 each examination, not transferable or refundable....... $ 10.00.

3 (i) Surplus lines agent license each year......... $100.00.

4 ~~(j) Certification of records..................... $ 2.00.~~

5 (2) Each incorporated domestic insurer shall pay to the

6 attorney general, for the examination of the insurer's articles

7 of incorporation or any amendments to the articles of incorpora-

8 tion, the sum of $25.00.

9 (3) The fees and charges for official services performed by

10 the commissioner or the commissioner's deputies or employees,

11 when collected, shall be turned over to the state treasurer and a

12 receipt taken. The fees and charges provided for in this section

13 shall be deposited in the state treasury to the credit of the

14 general fund.

15 (4) The provisions of subsection (1)(h), insofar as they

16 provide for examination fees, are applicable only if the examina-

17 tions are administered by the commissioner. If the examinations

18 are administered by some designated authority other than the com-

19 missioner, appropriate examination fees shall be payable directly

20 to the designated authority.

21 Sec. 2213. (1) ~~By October 1, 1997, an~~ EACH insurer AND

22 HEALTH MAINTENANCE ORGANIZATION shall establish an internal

23 formal grievance procedure for approval by the ~~insurance bureau~~

24 COMMISSIONER for persons covered under a policy, or

25 certificate, OR CONTRACT issued under chapter 34, 35, or 36 that

26 includes all of the following:

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1 (a) Provides for a designated person responsible for

2 administering the grievance system.

3 (b) Provides a designated person or telephone number for

4 receiving complaints.

5 (c) Ensures full investigation of a complaint.

6 (d) Provides for timely notification to the insured OR

7 ENROLLEE as to the progress of an investigation.

8 (e) Provides an insured OR ENROLLEE the right to appear

9 before the board of directors or designated committee or the

10 right to a managerial-level conference to present a grievance.

11 (f) Provides for notification to the insured OR ENROLLEE of

12 the results of the insurer's OR HEALTH MAINTENANCE ORGANIZATION'S

13 investigation and for advisement of the insured's OR ENROLLEE'S

14 right to review the grievance by the commissioner THROUGH

15 SEPTEMBER 30, 2000 AND BEGINNING OCTOBER 1, 2000 BY AN INDEPEN-

16 DENT REVIEW ORGANIZATION UNDER THE PATIENT'S RIGHT TO INDEPENDENT

17 REVIEW ACT.

18 (g) Provides summary data on the number and types of com-

19 plaints AND GRIEVANCES filed. BEGINNING APRIL 15, 2001, THIS

20 SUMMARY DATA FOR THE PRIOR CALENDAR YEAR SHALL BE FILED ANNUALLY

21 WITH THE COMMISSIONER ON FORMS PROVIDED BY THE COMMISSIONER.

22 (h) Provides for periodic management and governing body

23 review of the data to assure that appropriate actions have been

24 taken.

25 (i) Provides for copies of all complaints and responses to

26 be available at the principal office of the insurer OR HEALTH

27 MAINTENANCE ORGANIZATION for inspection by the ~~insurance bureau~~

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1 COMMISSIONER for 2 years following the year the complaint was

2 filed.

3 (j) That when an adverse determination is made, a written

4 statement containing the reasons for the adverse determination

5 ~~will be~~ IS provided to the insured ~~person. (k) That~~ OR

6 ENROLLEE ALONG WITH a written notification IN PLAIN ENGLISH of

7 the ~~grievance procedures will be provided to the insured person~~

8 ~~when the insured person contests an adverse determination~~ RIGHT

9 TO A REVIEW BY THE COMMISSIONER THROUGH SEPTEMBER 30, 2000 AND

10 BEGINNING OCTOBER 1, 2000 BY AN INDEPENDENT REVIEW ORGANIZATION

11 UNDER THE PATIENT'S RIGHT TO INDEPENDENT REVIEW ACT.

12 (K) (l) That a final determination will be made in writing

13 by the insurer OR HEALTH MAINTENANCE ORGANIZATION not later than

14 90 45 calendar days after a formal grievance is submitted in

15 writing by the insured ~~person~~ OR ENROLLEE. The timing for the

16 ~~90-calendar-day~~ 45-CALENDAR-DAY period may be tolled, however,

17 for any period of time the insured ~~person~~ OR ENROLLEE is per-

18 mitted to take under the grievance procedure.

19 (l) ~~(m)~~ That an initial determination will be made by the

20 insurer OR HEALTH MAINTENANCE ORGANIZATION not later than 72

21 hours after receipt of an expedited grievance. Within 3 business

22 days after the initial determination by the insurer OR HEALTH

23 MAINTENANCE ORGANIZATION, the insured or ~~a person, including,~~

24 ~~but not limited to, a physician, authorized in writing to act on~~

25 ~~behalf of the insured~~ ENROLLEE may request further review by the

26 insurer OR HEALTH MAINTENANCE ORGANIZATION or for a determination

27 of the matter by the commissioner or his or her designee THROUGH

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1 SEPTEMBER 30, 2000 AND BEGINNING OCTOBER 1, 2000 BY AN

2 INDEPENDENT REVIEW ORGANIZATION UNDER THE PATIENT'S RIGHT TO

3 INDEPENDENT REVIEW ACT. If further review is requested, a final

4 determination by the insurer OR HEALTH MAINTENANCE ORGANIZATION

5 shall be made not later than 30 days after receipt of the request

6 for further review. Within 10 days after receipt of a final

7 determination, the insured or ~~a person, including, but not~~

8 ~~limited to, a physician, authorized in writing to act on behalf~~

9 ~~of the insured~~ ENROLLEE may request a determination of the

10 matter by the commissioner or his or her designee THROUGH

11 SEPTEMBER 30, 2000 AND BEGINNING OCTOBER 1, 2000 BY AN INDEPEN-

12 DENT REVIEW ORGANIZATION UNDER THE PATIENT'S RIGHT TO INDEPENDENT

13 REVIEW ACT. If the initial or final determination by the insurer

14 OR HEALTH MAINTENANCE ORGANIZATION is made orally, the insurer OR

15 HEALTH MAINTENANCE ORGANIZATION shall provide a written confirma-

16 tion of the determination to the insured OR ENROLLEE not later

17 than 2 business days after the oral determination. An expedited

18 grievance under this subdivision applies if a grievance is sub-

19 mitted and a physician, orally or in writing, substantiates that

20 the time frame for a grievance under subdivision (l) (K) would

21 acutely jeopardize the life of the insured OR ENROLLEE.

22 (M) ~~(n)~~ That the insured ~~person~~ OR ENROLLEE has the

23 right to a determination of the matter by the commissioner or his

24 or her designee THROUGH SEPTEMBER 30, 2000 AND BEGINNING OCTOBER

25 1, 2000 BY AN INDEPENDENT REVIEW ORGANIZATION UNDER THE PATIENT'S

26 RIGHT TO INDEPENDENT REVIEW ACT.

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1 ~~(2) The commissioner shall establish a procedure for a~~

2 ~~determination of a grievance under this section which shall be~~

3 ~~reasonably calculated to resolve these matters informally and as~~

4 ~~rapidly as possible, while protecting the interests of both the~~

5 ~~insured and the insurer. This procedure is not a contested case~~

6 ~~under the administrative procedures act of 1969, Act No. 306 of~~

7 ~~the Public Acts of 1969, being sections 24.201 to 24.328 of the~~

8 ~~Michigan Compiled Laws, and is not appealable under Act No. 306~~

9 ~~of the Public Acts of 1969.~~

10 (2) AN INSURED OR ENROLLEE MAY AUTHORIZE IN WRITING ANY

11 PERSON, INCLUDING, BUT NOT LIMITED TO, A PHYSICIAN, TO ACT ON HIS

12 OR HER BEHALF AT ANY STAGE IN A GRIEVANCE PROCEEDING UNDER THIS

13 SECTION.

14 (3) This section does not apply to a provider's complaint

15 concerning claims payment, handling, or reimbursement for health

16 care services.

17 (4) As used in this section:

18 (a) "Adverse determination" means a determination that an

19 admission, availability of care, continued stay, or other health

20 care service has been reviewed and denied. Failure to respond in

21 a timely manner to a request for a determination constitutes an

22 adverse determination.

23 (b) "Grievance" means a complaint on behalf of an insured

24 ~~person~~ OR ENROLLEE submitted by an insured ~~person or a person,~~

25 ~~including, but not limited to, a physician, authorized in writing~~

26 ~~to act on behalf of the insured person regarding~~ OR ENROLLEE

27 CONCERNING ANY OF THE FOLLOWING:

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1 (i) The availability, delivery, or quality of health care

2 services, including a complaint regarding an adverse determina-

3 tion made pursuant to utilization review.

4 (ii) Benefits or claims payment, handling, or reimbursement

5 for health care services.

6 (iii) Matters pertaining to the contractual relationship

7 between an insured OR ENROLLEE and the insurer OR HEALTH MAINTE-

8 NANCE ORGANIZATION.

9 CHAPTER 35

10 HEALTH MAINTENANCE ORGANIZATIONS

11 SEC. 3501. AS USED IN THIS CHAPTER:

12 (A) "AFFILIATED PROVIDER" MEANS A HEALTH PROFESSIONAL,

13 LICENSED HOSPITAL, LICENSED PHARMACY, OR ANY OTHER INSTITUTION,

14 ORGANIZATION, OR PERSON HAVING A CONTRACT WITH A HEALTH MAINTE-

15 NANCE ORGANIZATION TO RENDER 1 OR MORE HEALTH MAINTENANCE SERV-

16 ICES TO AN ENROLLEE.

17 (B) "BASIC HEALTH SERVICES" MEANS:

18 (i) PHYSICIAN SERVICES INCLUDING CONSULTANT AND REFERRAL

19 SERVICES BY A PHYSICIAN, BUT NOT INCLUDING PSYCHIATRIC SERVICES.

20 (ii) AMBULATORY SERVICES.

21 (iii) INPATIENT HOSPITAL SERVICES, OTHER THAN THOSE FOR THE

22 TREATMENT OF MENTAL ILLNESS.

23 (iv) EMERGENCY HEALTH SERVICES.

24 (v) OUTPATIENT MENTAL HEALTH SERVICES, NOT FEWER THAN 20

25 VISITS PER YEAR.

26 (vi) INTERMEDIATE AND OUTPATIENT CARE FOR SUBSTANCE ABUSE AS

27 FOLLOWS:

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1 (A) FOR GROUP CONTRACTS, IF THE FEES FOR A GROUP CONTRACT

2 WOULD BE INCREASED BY 3% OR MORE BECAUSE OF THE PROVISION OF

3 SERVICES UNDER THIS SUBPARAGRAPH, THE GROUP SUBSCRIBER MAY

4 DECLINE THE SERVICES. FOR INDIVIDUAL CONTRACTS, IF THE TOTAL

5 FEES FOR ALL INDIVIDUAL CONTRACTS WOULD BE INCREASED BY 3% OR

6 MORE BECAUSE OF THE PROVISION OF THE SERVICES REQUIRED UNDER THIS

7 SUBPARAGRAPH IN ALL OF THOSE CONTRACTS, THE NAMED SUBSCRIBER OF

8 EACH CONTRACT MAY DECLINE THE SERVICES.

9 (B) CHARGES, TERMS, AND CONDITIONS FOR THE SERVICES REQUIRED

10 TO BE PROVIDED UNDER THIS SUBPARAGRAPH SHALL NOT BE LESS FAVOR-

11 ABLE THAN THE MAXIMUM PRESCRIBED FOR ANY OTHER COMPARABLE

12 SERVICE.

13 (C) THE SERVICES REQUIRED TO BE PROVIDED UNDER THIS SUBPARA-

14 GRAPH SHALL NOT BE REDUCED BY TERMS OR CONDITIONS THAT APPLY TO

15 OTHER SERVICES IN A GROUP OR INDIVIDUAL CONTRACT. THIS

16 SUB-SUBPARAGRAPH SHALL NOT BE CONSTRUED TO PROHIBIT CONTRACTS

17 THAT PROVIDE FOR DEDUCTIBLES AND COPAYMENT PROVISIONS FOR SERV-

18 ICES FOR INTERMEDIATE AND OUTPATIENT CARE FOR SUBSTANCE ABUSE.

19 (D) THE SERVICES REQUIRED TO BE PROVIDED UNDER THIS SUBPARA-

20 GRAPH SHALL, AT A MINIMUM, PROVIDE FOR UP TO $2,968.00 IN SERV-

21 ICES FOR INTERMEDIATE AND OUTPATIENT CARE FOR SUBSTANCE ABUSE PER

22 INDIVIDUAL PER YEAR. THIS MINIMUM SHALL BE ADJUSTED ANNUALLY BY

23 MARCH 31 EACH YEAR IN ACCORDANCE WITH THE ANNUAL AVERAGE PERCEN-

24 TAGE INCREASE OR DECREASE IN THE UNITED STATES CONSUMER PRICE

25 INDEX FOR THE 12-MONTH PERIOD ENDING THE PRECEDING DECEMBER 31.

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1 (E) AS USED IN THIS SUBPARAGRAPH, "INTERMEDIATE CARE",

2 "OUTPATIENT CARE", AND "SUBSTANCE ABUSE" HAVE THOSE MEANINGS

3 ASCRIBED TO THEM IN SECTION 3425.

4 (vii) DIAGNOSTIC LABORATORY AND DIAGNOSTIC AND THERAPEUTIC

5 RADIOLOGICAL SERVICES.

6 (viii) HOME HEALTH SERVICES.

7 (ix) PREVENTIVE HEALTH SERVICES.

8 (C) "ENROLLEE" MEANS AN INDIVIDUAL WHO IS ENTITLED TO

9 RECEIVE HEALTH MAINTENANCE SERVICES UNDER A HEALTH MAINTENANCE

10 CONTRACT.

11 (D) "HEALTH MAINTENANCE CONTRACT" MEANS A CONTRACT BETWEEN A

12 HEALTH MAINTENANCE ORGANIZATION AND A SUBSCRIBER OR GROUP OF SUB-

13 SCRIBERS, TO PROVIDE, WHEN MEDICALLY INDICATED, DESIGNATED HEALTH

14 MAINTENANCE SERVICES, AS DESCRIBED IN AND PURSUANT TO THE TERMS

15 OF THE CONTRACT, INCLUDING, AT A MINIMUM, BASIC HEALTH MAINTE-

16 NANCE SERVICES. HEALTH MAINTENANCE CONTRACT INCLUDES A PRUDENT

17 PURCHASER CONTRACT.

18 (E) "HEALTH MAINTENANCE ORGANIZATION" MEANS AN ENTITY THAT

19 DOES THE FOLLOWING:

20 (i) DELIVERS HEALTH MAINTENANCE SERVICES THAT ARE MEDICALLY

21 INDICATED TO ENROLLEES UNDER THE TERMS OF ITS HEALTH MAINTENANCE

22 CONTRACT, DIRECTLY OR THROUGH CONTRACTS WITH AFFILIATED PROVID-

23 ERS, IN EXCHANGE FOR A FIXED PREPAID SUM OR PER CAPITA PREPAY-

24 MENT, WITHOUT REGARD TO THE FREQUENCY, EXTENT, OR KIND OF HEALTH

25 SERVICES.

26 (ii) IS RESPONSIBLE FOR THE AVAILABILITY, ACCESSIBILITY, AND

27 QUALITY OF THE HEALTH MAINTENANCE SERVICES PROVIDED.

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1 (F) "HEALTH MAINTENANCE SERVICES" MEANS SERVICES PROVIDED TO

2 ENROLLEES OF A HEALTH MAINTENANCE ORGANIZATION UNDER THEIR HEALTH

3 MAINTENANCE CONTRACT.

4 (G) "HEALTH PROFESSIONAL" MEANS AN INDIVIDUAL LICENSED, CER-

5 TIFIED, OR AUTHORIZED IN ACCORDANCE WITH STATE LAW TO PRACTICE A

6 HEALTH PROFESSION IN HIS OR HER RESPECTIVE STATE.

7 (H) "PRUDENT PURCHASER CONTRACT" MEANS A CONTRACT OFFERED BY

8 A HEALTH MAINTENANCE ORGANIZATION TO GROUPS OR TO INDIVIDUALS

9 UNDER WHICH ENROLLEES WHO SELECT TO OBTAIN HEALTH CARE SERVICES

10 DIRECTLY FROM THE ORGANIZATION OR THROUGH ITS AFFILIATED PROVID-

11 ERS RECEIVE A FINANCIAL ADVANTAGE OR OTHER ADVANTAGE BY SELECTING

12 THOSE PROVIDERS.

13 (I) "SERVICE AREA" MEANS A DEFINED GEOGRAPHICAL AREA IN

14 WHICH HEALTH MAINTENANCE SERVICES ARE GENERALLY AVAILABLE AND

15 READILY ACCESSIBLE TO ENROLLEES AND WHERE HEALTH MAINTENANCE

16 ORGANIZATIONS MAY MARKET THEIR CONTRACTS.

17 (J) "SUBSCRIBER" MEANS AN INDIVIDUAL WHO ENTERS INTO A

18 HEALTH MAINTENANCE CONTRACT, OR ON WHOSE BEHALF A HEALTH MAINTE-

19 NANCE CONTRACT IS ENTERED INTO, WITH A HEALTH MAINTENANCE ORGANI-

20 ZATION THAT HAS RECEIVED A CERTIFICATE OF AUTHORITY UNDER THIS

21 CHAPTER AND TO WHOM A HEALTH MAINTENANCE CONTRACT IS ISSUED.

22 SEC. 3503. (1) ALL OF THE PROVISIONS OF THIS ACT THAT APPLY

23 TO A DOMESTIC INSURER AUTHORIZED TO ISSUE AN EXPENSE-INCURRED

24 HOSPITAL, MEDICAL, OR SURGICAL POLICY OR CERTIFICATE, INCLUDING,

25 BUT NOT LIMITED TO, SECTION 223 AND CHAPTERS 34 AND 36, APPLY TO

26 A HEALTH MAINTENANCE ORGANIZATION UNDER THIS CHAPTER UNLESS

05036'99

1 SPECIFICALLY EXCLUDED, OR OTHERWISE SPECIFICALLY PROVIDED FOR IN

2 THIS CHAPTER.

3 (2) SECTIONS 408, 410, 411, 901, AND 5208 AND CHAPTERS 77

4 AND 79 DO NOT APPLY TO A HEALTH MAINTENANCE ORGANIZATION.

5 SEC. 3505. (1) A HEALTH MAINTENANCE ORGANIZATION SHALL

6 RECEIVE A CERTIFICATE OF AUTHORITY UNDER THIS CHAPTER BEFORE

7 ISSUING HEALTH MAINTENANCE CONTRACTS. A HEALTH MAINTENANCE

8 ORGANIZATION LICENSE ISSUED UNDER FORMER PART 210 OF THE PUBLIC

9 HEALTH CODE, 1978 PA 368, AUTOMATICALLY BECOMES A CERTIFICATE OF

10 AUTHORITY UNDER THIS CHAPTER ON THE EFFECTIVE DATE OF THIS

11 CHAPTER.

12 (2) "HEALTH MAINTENANCE ORGANIZATION" SHALL NOT BE USED TO

13 DESCRIBE OR REFER TO ANY ENTITY OR PERSON AND AN ENTITY OR PERSON

14 SHALL NOT USE ANY OTHER DESCRIPTIVE WORDS THAT MAY MISLEAD,

15 DECEIVE, OR IMPLY THAT IT IS A HEALTH MAINTENANCE ORGANIZATION,

16 UNLESS THE ENTITY OR PERSON HAS A CERTIFICATE OF AUTHORITY AS A

17 HEALTH MAINTENANCE ORGANIZATION UNDER THIS CHAPTER.

18 (3) A HEALTH MAINTENANCE ORGANIZATION SHALL NOT USE IN ITS

19 NAME, CONTRACTS, OR LITERATURE THE WORDS "INSURANCE", "CASUALTY",

20 "SURETY", "MUTUAL", OR ANY OTHER WORDS DESCRIPTIVE OF AN INSUR-

21 ANCE, CASUALTY, OR SURETY BUSINESS OR DECEPTIVELY SIMILAR TO THE

22 NAME OR DESCRIPTION OF AN INSURANCE OR SURETY CORPORATION DOING

23 BUSINESS IN THIS STATE.

24 SEC. 3507. THE COMMISSIONER SHALL ESTABLISH A SYSTEM OF

25 AUTHORIZING AND REGULATING HEALTH MAINTENANCE ORGANIZATIONS IN

26 THIS STATE TO PROTECT AND PROMOTE THE PUBLIC HEALTH THROUGH THE

27 ASSURANCE THAT THE ORGANIZATIONS PROVIDE:

05036'99

1 (A) AN ACCEPTABLE QUALITY OF HEALTH CARE BY QUALIFIED

2 PERSONNEL.

3 (B) HEALTH CARE FACILITIES, EQUIPMENT, AND PERSONNEL THAT

4 MAY REASONABLY BE REQUIRED TO ECONOMICALLY PROVIDE HEALTH MAINTE-

5 NANCE SERVICES.

6 (C) OPERATIONAL ARRANGEMENTS THAT INTEGRATE THE DELIVERY OF

7 VARIOUS SERVICES.

8 (D) A FINANCIALLY SOUND PREPAYMENT PLAN FOR MEETING HEALTH

9 CARE COSTS.

10 SEC. 3508. (1) A HEALTH MAINTENANCE ORGANIZATION SHALL

11 DEVELOP AND MAINTAIN A QUALITY ASSESSMENT PROGRAM TO ASSESS THE

12 QUALITY OF HEALTH CARE PROVIDED TO ENROLLEES THAT INCLUDES, AT A

13 MINIMUM, SYSTEMATIC COLLECTION, ANALYSIS, AND REPORTING OF RELE-

14 VANT DATA IN ACCORDANCE WITH STATUTORY AND REGULATORY

15 REQUIREMENTS. A HEALTH MAINTENANCE ORGANIZATION SHALL FILE ITS

16 QUALITY ASSESSMENT PROGRAM AS PRESCRIBED BY THE COMMISSIONER.

17 (2) A HEALTH MAINTENANCE ORGANIZATION SHALL ESTABLISH AND

18 MAINTAIN A QUALITY IMPROVEMENT PROGRAM TO DESIGN, MEASURE,

19 ASSESS, AND IMPROVE THE PROCESSES AND OUTCOMES OF HEALTH CARE AS

20 IDENTIFIED IN THE PROGRAM. A HEALTH MAINTENANCE ORGANIZATION

21 SHALL FILE ITS QUALITY IMPROVEMENT PROGRAM AS PRESCRIBED BY THE

22 COMMISSIONER. THE QUALITY IMPROVEMENT PROGRAM SHALL BE UNDER THE

23 DIRECTION OF THE HEALTH MAINTENANCE ORGANIZATION'S MEDICAL DIREC-

24 TOR AND SHALL INCLUDE:

25 (A) A WRITTEN STATEMENT OF THE PROGRAM'S OBJECTIVES, LINES

26 OF AUTHORITY AND ACCOUNTABILITY, EVALUATION TOOLS, INCLUDING DATA

05036'99

1 COLLECTION RESPONSIBILITIES, AND PERFORMANCE IMPROVEMENT

2 ACTIVITIES.

3 (B) AN ANNUAL EFFECTIVENESS REVIEW OF THE PROGRAM.

4 (C) A WRITTEN QUALITY IMPROVEMENT PLAN THAT, AT A MINIMUM,

5 DESCRIBES HOW THE HEALTH MAINTENANCE ORGANIZATION ANALYZES BOTH

6 THE PROCESSES AND OUTCOMES OF CARE, IDENTIFIES THE TARGETED DIAG-

7 NOSES AND TREATMENTS TO BE REVIEWED EACH YEAR, USES A RANGE OF

8 APPROPRIATE METHODS TO ANALYZE QUALITY, COMPARES PROGRAM FINDINGS

9 WITH PAST PERFORMANCE AND INTERNAL GOALS AND EXTERNAL STANDARDS,

10 MEASURES THE PERFORMANCE OF AFFILIATED PROVIDERS, AND CONDUCTS

11 PEER REVIEW ACTIVITIES.

12 SEC. 3509. (1) AN APPLICATION TO THE COMMISSIONER FOR A

13 CERTIFICATE OF AUTHORITY SHALL BE ON A FORM PRESCRIBED AND PRO-

14 VIDED BY THE COMMISSIONER.

15 (2) A CERTIFICATE OF AUTHORITY ISSUED UNDER THIS CHAPTER IS

16 LIMITED TO THE SERVICE AREA DESCRIBED IN THE APPLICATION UPON

17 WHICH THE CERTIFICATE OF AUTHORITY WAS ISSUED.

18 (3) A HEALTH MAINTENANCE ORGANIZATION SEEKING TO CHANGE THE

19 APPROVED SERVICE AREA SHALL SUBMIT AN APPLICATION TO CHANGE SERV-

20 ICE AREA TO THE COMMISSIONER AND SHALL NOT CHANGE THE SERVICE

21 AREA UNTIL APPROVAL IS RECEIVED. THE COMMISSIONER SHALL SPECIFY

22 THE INFORMATION REQUIRED TO BE IN THE APPLICATION UNDER THIS

23 SUBSECTION.

24 SEC. 3511. (1) BY THE END OF THE FIRST 12 MONTHS OF OPERA-

25 TION, A HEALTH MAINTENANCE ORGANIZATION'S GOVERNING BODY SHALL

26 HAVE A MINIMUM OF 1/3 OF ITS MEMBERSHIP CONSISTING OF ADULT

27 ENROLLEES OF THE ORGANIZATION WHO ARE NOT COMPENSATED OFFICERS,

05036'99

1 EMPLOYEES, STOCKHOLDERS WHO OWN MORE THAN 5% OF THE

2 ORGANIZATION'S SHARES, OR OTHER INDIVIDUALS RESPONSIBLE FOR THE

3 CONDUCT OF, OR FINANCIALLY INTERESTED IN, THE ORGANIZATION'S

4 AFFAIRS. THE ENROLLEE BOARD MEMBERS SHALL BE ELECTED BY A SIMPLE

5 PLURALITY OF THE VOTING SUBSCRIBERS. EACH SUBSCRIBER SHALL HAVE

6 1 VOTE. THE ENROLLEE BOARD MEMBERS SHALL HOLD OFFICE FOR 3 YEARS

7 AFTER THEIR ELECTION, EXCEPT THAT THE TERMS OF OFFICE FOLLOWING

8 THE FIRST ENROLLEE ELECTION MAY BE ADJUSTED TO ALLOW THE TERMS OF

9 ENROLLEE BOARD MEMBERS TO EXPIRE ON A STAGGERED BASIS. A VACANCY

10 AMONG ENROLLEE BOARD MEMBERS SHALL BE FILLED BY APPOINTMENT BY A

11 SIMPLE MAJORITY OF THE REMAINING ENROLLEE MEMBERS OF THE BOARD

12 FROM INDIVIDUALS MEETING THE QUALIFICATIONS OF THIS SECTION. A

13 VACANCY SHALL BE FILLED ONLY FOR THE UNEXPIRED PORTION OF THE

14 ORIGINAL TERM, AT WHICH TIME THE ENROLLEE MEMBER SHALL BE ELECTED

15 IN THE MANNER PRESCRIBED BY THIS CHAPTER.

16 (2) A HEALTH MAINTENANCE ORGANIZATION'S GOVERNING BODY SHALL

17 MEET AT LEAST QUARTERLY UNLESS SPECIFICALLY EXEMPTED FROM THIS

18 REQUIREMENT BY THE COMMISSIONER.

19 SEC. 3513. (1) THE COMMISSIONER SHALL REGULATE HEALTH

20 DELIVERY ASPECTS OF HEALTH MAINTENANCE ORGANIZATION OPERATIONS

21 FOR THE PURPOSE OF ASSURING THAT HEALTH MAINTENANCE ORGANIZATIONS

22 ARE CAPABLE OF PROVIDING CARE AND SERVICES PROMPTLY, APPROPRIATE-

23 LY, AND IN A MANNER THAT ASSURES CONTINUITY AND ACCEPTABLE QUAL-

24 ITY OF HEALTH CARE. THE COMMISSIONER SHALL ENCOURAGE HEALTH

25 MAINTENANCE ORGANIZATIONS TO UTILIZE A WIDE VARIETY OF

26 HEALTH-RELATED DISCIPLINES AND FACILITIES AND TO DEVELOP SERVICES

05036'99

1 THAT CONTRIBUTE TO THE PREVENTION OF DISEASE AND DISABILITY AND

2 TO THE RESTORATION OF HEALTH.

3 (2) THE COMMISSIONER SHALL REGULATE THE BUSINESS AND FINAN-

4 CIAL ASPECTS OF HEALTH MAINTENANCE ORGANIZATION OPERATIONS FOR

5 THE PURPOSE OF ASSURING THAT THE ORGANIZATIONS ARE FINANCIALLY

6 SOUND AND FOLLOW ACCEPTABLE BUSINESS PRACTICES. THE COMMISSIONER

7 SHALL ASSURE THAT THE ORGANIZATIONS OPERATE IN THE INTEREST OF

8 ENROLLEES CONSISTENT WITH OVERALL HEALTH CARE COST CONTAINMENT

9 WHILE DELIVERING ACCEPTABLE QUALITY OF CARE AND SERVICES THAT ARE

10 AVAILABLE AND ACCESSIBLE TO ENROLLEES WITH APPROPRIATE ADMINIS-

11 TRATIVE COSTS AND HEALTH CARE PROVIDER INCENTIVES. A HEALTH

12 MAINTENANCE ORGANIZATION SHALL DO ALL OF THE FOLLOWING:

13 (A) PROVIDE, AS PROMPTLY AS APPROPRIATE, HEALTH MAINTENANCE

14 SERVICES IN A MANNER THAT ASSURES CONTINUITY AND IMPARTS QUALITY

15 HEALTH CARE UNDER CONDITIONS THE COMMISSIONER CONSIDERS TO BE IN

16 THE PUBLIC INTEREST.

17 (B) PROVIDE, WITHIN THE GEOGRAPHIC AREA SERVED BY THE HEALTH

18 MAINTENANCE ORGANIZATION, HEALTH MAINTENANCE SERVICES THAT ARE

19 AVAILABLE, ACCESSIBLE, AND PROVIDED AS PROMPTLY AS APPROPRIATE TO

20 EACH OF ITS ENROLLEES IN A MANNER THAT ASSURES CONTINUITY, AND

21 ARE AVAILABLE AND ACCESSIBLE TO ENROLLEES 24 HOURS A DAY AND 7

22 DAYS A WEEK FOR THE TREATMENT OF EMERGENCY EPISODES OF ILLNESS OR

23 INJURY.

24 (C) PROVIDE ADEQUATE ARRANGEMENTS FOR A CONTINUOUS EVALU-

25 ATION OF THE QUALITY OF HEALTH CARE.

26 (D) PROVIDE THAT REASONABLE PROVISIONS EXIST FOR AN ENROLLEE

27 TO OBTAIN EMERGENCY HEALTH SERVICES BOTH WITHIN AND OUTSIDE OF

05036'99

1 THE GEOGRAPHIC AREA SERVED BY THE HEALTH MAINTENANCE

2 ORGANIZATION.

3 (E) PROVIDE THAT REASONABLE PROCEDURES EXIST FOR RESOLVING

4 ENROLLEE GRIEVANCES AS REQUIRED BY THIS CHAPTER OR AS OTHERWISE

5 PROVIDED BY LAW.

6 (F) BE INCORPORATED AS A DISTINCT LEGAL ENTITY UNDER THE

7 BUSINESS CORPORATION ACT, 1972 PA 284, MCL 450.1101 TO 450.2098,

8 THE NONPROFIT CORPORATION ACT, 1982 PA 162, MCL 450.2101 TO

9 450.3192, OR THE MICHIGAN LIMITED LIABILITY COMPANY ACT, 1993 PA

10 23, MCL 450.4101 TO 450.5200.

11 (G) HAVE A GOVERNING BODY THAT MEETS THE REQUIREMENTS OF

12 THIS CHAPTER.

13 SEC. 3515. (1) A HEALTH MAINTENANCE ORGANIZATION MAY PRO-

14 VIDE ADDITIONAL HEALTH MAINTENANCE SERVICES OR ANY OTHER RELATED

15 HEALTH CARE SERVICE OR TREATMENT NOT REQUIRED UNDER THIS

16 CHAPTER.

17 (2) A HEALTH MAINTENANCE ORGANIZATION MAY HAVE HEALTH MAIN-

18 TENANCE CONTRACTS WITH NOMINAL COPAYMENTS THAT ARE REQUIRED FOR

19 SPECIFIC HEALTH MAINTENANCE SERVICES. COPAYMENTS SHALL NOT

20 EXCEED 50% OF A HEALTH MAINTENANCE ORGANIZATION'S REIMBURSEMENT

21 TO AN AFFILIATED PROVIDER FOR PROVIDING THE SERVICE TO AN

22 ENROLLEE AND SHALL NOT BE BASED ON THE PROVIDER'S STANDARD CHARGE

23 FOR THE SERVICE.

24 (3) A HEALTH MAINTENANCE ORGANIZATION MAY ACCEPT FROM GOV-

25 ERNMENTAL AGENCIES AND FROM PRIVATE PERSONS PAYMENTS COVERING ANY

26 PART OF THE COST OF HEALTH MAINTENANCE CONTRACTS.

05036'99

1 SEC. 3517. (1) A HEALTH MAINTENANCE CONTRACT SHALL NOT

2 PROVIDE FOR PAYMENT OF CASH OR OTHER MATERIAL BENEFIT TO AN

3 ENROLLEE, EXCEPT AS STATED IN THIS CHAPTER.

4 (2) FOR AN EMERGENCY EPISODE OF ILLNESS OR INJURY THAT

5 REQUIRES IMMEDIATE TREATMENT BEFORE IT CAN BE SECURED THROUGH THE

6 HEALTH MAINTENANCE ORGANIZATION, OR FOR AN OUT-OF-AREA SERVICE

7 SPECIFICALLY AUTHORIZED BY THE HEALTH MAINTENANCE ORGANIZATION,

8 AN ENROLLEE MAY UTILIZE A PROVIDER WITHIN OR WITHOUT THIS STATE

9 NOT NORMALLY ENGAGED BY THE HEALTH MAINTENANCE ORGANIZATION TO

10 RENDER SERVICE TO ITS ENROLLEES. THE ORGANIZATION SHALL PAY REA-

11 SONABLE EXPENSES OR FEES TO THE PROVIDER OR ENROLLEE AS APPROPRI-

12 ATE IN AN INDIVIDUAL CASE. THESE TRANSACTIONS ARE NOT CONSIDERED

13 ACTS OF INSURANCE AND, EXCEPT AS PROVIDED IN THIS CHAPTER AND

14 SECTION 3406K, ARE NOT OTHERWISE SUBJECT TO THIS ACT.

15 SEC. 3519. (1) A HEALTH MAINTENANCE ORGANIZATION CONTRACT

16 AND THE CONTRACT'S RATES, INCLUDING ANY NOMINAL COPAYMENTS,

17 BETWEEN THE ORGANIZATION AND ITS SUBSCRIBERS SHALL BE FAIR,

18 SOUND, AND REASONABLE IN RELATION TO THE SERVICES PROVIDED, AND

19 THE PROCEDURES FOR OFFERING AND TERMINATING CONTRACTS SHALL NOT

20 BE UNFAIRLY DISCRIMINATORY.

21 (2) A HEALTH MAINTENANCE ORGANIZATION CONTRACT AND THE

22 CONTRACT'S RATES SHALL NOT DISCRIMINATE ON THE BASIS OF RACE,

23 COLOR, CREED, NATIONAL ORIGIN, RESIDENCE WITHIN THE APPROVED

24 SERVICE AREA OF THE HEALTH MAINTENANCE ORGANIZATION, LAWFUL OCCU-

25 PATION, SEX, HANDICAP, OR MARITAL STATUS, EXCEPT THAT MARITAL

26 STATUS MAY BE USED TO CLASSIFY INDIVIDUALS OR RISKS FOR THE

27 PURPOSE OF INSURING FAMILY UNITS. THE COMMISSIONER MAY APPROVE A

05036'99

1 RATE DIFFERENTIAL BASED ON SEX, AGE, RESIDENCE, DISABILITY,

2 MARITAL STATUS, OR LAWFUL OCCUPATION, IF THE DIFFERENTIAL IS SUP-

3 PORTED BY SOUND ACTUARIAL PRINCIPLES, A REASONABLE CLASSIFICATION

4 SYSTEM, AND IS RELATED TO THE ACTUAL AND CREDIBLE LOSS STATISTICS

5 OR REASONABLY ANTICIPATED EXPERIENCE FOR NEW COVERAGES.

6 (3) ALL HEALTH MAINTENANCE ORGANIZATION CONTRACTS SHALL

7 INCLUDE, AT A MINIMUM, BASIC HEALTH SERVICES.

8 SEC. 3521. (1) THE METHODOLOGY USED TO DETERMINE PREPAYMENT

9 RATES BY CATEGORY RATES CHARGED BY THE HEALTH MAINTENANCE ORGANI-

10 ZATION AND ANY CHANGES TO EITHER THE METHODOLOGY OR THE RATES

11 SHALL BE FILED WITH AND APPROVED BY THE COMMISSIONER BEFORE

12 BECOMING EFFECTIVE.

13 (2) A HEALTH MAINTENANCE ORGANIZATION SHALL SUBMIT SUPPORT-

14 ING DATA USED IN THE DEVELOPMENT OF A PREPAYMENT RATE OR RATING

15 METHODOLOGY AND ALL OTHER DATA SUFFICIENT TO ESTABLISH THE FINAN-

16 CIAL SOUNDNESS OF THE PREPAYMENT PLAN OR RATING METHODOLOGY.

17 (3) THE COMMISSIONER MAY ANNUALLY REQUIRE A SCHEDULE OF

18 RATES FOR ALL SUBSCRIBER CONTRACTS AND RIDERS. ALL SUBMISSIONS

19 SHALL NOTE CHANGES OF RATES PREVIOUSLY FILED OR APPROVED.

20 SEC. 3523. (1) A HEALTH MAINTENANCE CONTRACT SHALL BE FILED

21 WITH AND APPROVED BY THE COMMISSIONER.

22 (2) A HEALTH MAINTENANCE CONTRACT SHALL INCLUDE ANY APPROVED

23 RIDERS, AMENDMENTS, AND THE ENROLLMENT APPLICATION.

24 (3) IN ADDITION TO THE PROVISIONS OF THIS ACT THAT APPLY TO

25 AN EXPENSE-INCURRED HOSPITAL, MEDICAL, OR SURGICAL POLICY OR CER-

26 TIFICATE, A HEALTH MAINTENANCE CONTRACT SHALL INCLUDE ALL OF THE

27 FOLLOWING:

05036'99

1 (A) NAME AND ADDRESS OF THE ORGANIZATION.

2 (B) DEFINITIONS OF TERMS SUBJECT TO INTERPRETATION.

3 (C) THE EFFECTIVE DATE AND DURATION OF COVERAGE.

4 (D) THE CONDITIONS OF ELIGIBILITY.

5 (E) A STATEMENT OF RESPONSIBILITY FOR PAYMENTS.

6 (F) A DESCRIPTION OF SPECIFIC BENEFITS AND SERVICES AVAIL-

7 ABLE UNDER THE CONTRACT WITHIN THE SERVICE AREA, WITH RESPECTIVE

8 COPAYMENTS.

9 (G) A DESCRIPTION OF EMERGENCY AND OUT-OF-AREA SERVICES.

10 (H) A SPECIFIC DESCRIPTION OF ANY LIMITATION, EXCLUSION, AND

11 EXCEPTION, INCLUDING ANY PREEXISTING CONDITION LIMITATION,

12 GROUPED TOGETHER WITH CAPTIONS IN BOLDFACED TYPE.

13 (I) COVENANTS WHICH ADDRESS CONFIDENTIALITY, AN ENROLLEE'S

14 RIGHT TO CHOOSE OR CHANGE THE PRIMARY CARE PHYSICIAN OR OTHER

15 PROVIDERS, AVAILABILITY AND ACCESSIBILITY OF SERVICES, AND ANY

16 RIGHTS OF THE ENROLLEE TO INSPECT AND REVIEW HIS OR HER MEDICAL

17 RECORDS.

18 (J) COVENANTS OF THE SUBSCRIBER SHALL ADDRESS ALL OF THE

19 FOLLOWING SUBJECTS:

20 (i) TIMELY PAYMENT.

21 (ii) NONASSIGNMENT OF BENEFITS.

22 (iii) TRUTH IN APPLICATION AND STATEMENTS.

23 (iv) NOTIFICATION OF CHANGE IN ADDRESS.

24 (v) THEFT OF MEMBERSHIP IDENTIFICATION.

25 (K) A STATEMENT OF RESPONSIBILITIES AND RIGHTS REGARDING THE

26 GRIEVANCE PROCEDURE.

05036'99

1 (l) A STATEMENT REGARDING SUBROGATION AND COORDINATION OF

2 BENEFITS PROVISIONS, INCLUDING ANY RESPONSIBILITY OF THE ENROLLEE

3 TO COOPERATE.

4 (M) A STATEMENT REGARDING CONVERSION RIGHTS.

5 (N) PROVISIONS FOR ADDING NEW FAMILY MEMBERS OR OTHER

6 ACQUIRED DEPENDENTS, INCLUDING CONVERSION OF INDIVIDUAL CONTRACTS

7 TO FAMILY CONTRACTS AND FAMILY CONTRACTS TO INDIVIDUAL CONTRACTS,

8 AND THE TIME CONSTRAINTS IMPOSED.

9 (O) PROVISIONS FOR GRACE PERIODS FOR LATE PAYMENT.

10 (P) A DESCRIPTION OF ANY SPECIFIC TERMS UNDER WHICH THE

11 HEALTH MAINTENANCE ORGANIZATION OR THE SUBSCRIBER CAN TERMINATE

12 THE CONTRACT.

13 (Q) A STATEMENT OF THE NONASSIGNABILITY OF THE CONTRACT.

14 SEC. 3525. (1) EXCEPT AS OTHERWISE PROVIDED IN SUBSECTION

15 (2), IF A HEALTH MAINTENANCE ORGANIZATION DESIRES TO CHANGE A

16 CONTRACT IT OFFERS TO ENROLLEES OR DESIRES TO CHANGE A RATE

17 CHARGED, A COPY OF THE PROPOSED REVISED CONTRACT OR RATE SHALL BE

18 FILED WITH THE COMMISSIONER AND SHALL NOT TAKE EFFECT UNTIL 60

19 DAYS AFTER THE FILING, UNLESS THE COMMISSIONER APPROVES THE

20 CHANGE IN WRITING BEFORE THE EXPIRATION OF 60 DAYS AFTER THE

21 FILING. IF THE COMMISSIONER CONSIDERS THAT THE PROPOSED REVISED

22 CONTRACT OR RATE IS ILLEGAL OR UNREASONABLE IN RELATION TO THE

23 SERVICES PROVIDED, THE COMMISSIONER, NOT MORE THAN 60 DAYS AFTER

24 THE PROPOSED REVISED CONTRACT OR RATE IS FILED, SHALL NOTIFY THE

25 ORGANIZATION IN WRITING, SPECIFYING THE REASONS FOR DISAPPROVAL

26 OR FOR APPROVAL WITH MODIFICATIONS. FOR AN APPROVAL WITH

27 MODIFICATIONS, THE NOTICE SHALL SPECIFY WHAT MODIFICATIONS IN THE

05036'99

1 FILING ARE REQUIRED FOR APPROVAL, THE REASONS FOR THE

2 MODIFICATIONS, AND THAT THE FILING BECOMES EFFECTIVE AFTER THE

3 MODIFICATIONS ARE MADE AND APPROVED BY THE COMMISSIONER. THE

4 COMMISSIONER SHALL SCHEDULE A HEARING NOT MORE THAN 30 DAYS AFTER

5 RECEIPT OF A WRITTEN REQUEST FROM THE HEALTH MAINTENANCE ORGANI-

6 ZATION, AND THE REVISED CONTRACT OR RATE SHALL NOT TAKE EFFECT

7 UNTIL APPROVED BY THE COMMISSIONER AFTER THE HEARING. WITHIN 30

8 DAYS AFTER THE HEARING, THE COMMISSIONER SHALL NOTIFY THE ORGANI-

9 ZATION IN WRITING OF THE DISPOSITION OF THE PROPOSED REVISED CON-

10 TRACT OR RATE, TOGETHER WITH THE COMMISSIONER'S FINDINGS OF FACT

11 AND CONCLUSIONS.

12 (2) IF THE REVISED CONTRACT OR RATE IS THE RESULT OF COLLEC-

13 TIVE BARGAINING AND AFFECTS ONLY THE MEMBERS OF THE GROUPS

14 ENGAGED IN THE COLLECTIVE BARGAINING, SUBSECTION (1) DOES NOT

15 APPLY BUT THE REVISED CONTRACT OR RATE SHALL BE IMMEDIATELY FILED

16 WITH THE COMMISSIONER.

17 (3) NOT LESS THAN 30 DAYS BEFORE THE EFFECTIVE DATE OF A

18 PROPOSED CHANGE IN A HEALTH MAINTENANCE CONTRACT OR THE RATE

19 CHARGED, THE HEALTH MAINTENANCE ORGANIZATION SHALL ISSUE TO EACH

20 SUBSCRIBER OR GROUP OF SUBSCRIBERS WHO WILL BE AFFECTED BY THE

21 PROPOSED CHANGE A CLEAR WRITTEN STATEMENT STATING THE EXTENT AND

22 NATURE OF THE PROPOSED CHANGE. IF THE COMMISSIONER HAS APPROVED

23 A PROPOSED CHANGE IN A CONTRACT OR RATE IN WRITING BEFORE THE

24 EXPIRATION OF 60 DAYS AFTER THE DATE OF FILING, THE ORGANIZATION

25 IMMEDIATELY SHALL NOTIFY EACH SUBSCRIBER OR GROUP OF SUBSCRIBERS

26 WHO WILL BE AFFECTED BY THE PROPOSED CHANGE.

05036'99

1 SEC. 3527. (1) UPON OBTAINING A CERTIFICATE OF AUTHORITY, A

2 HEALTH MAINTENANCE ORGANIZATION MAY ENTER INTO HEALTH MAINTENANCE

3 CONTRACTS AND ENGAGE IN OTHER ACTIVITIES CONSISTENT WITH THIS

4 PART AND OTHER APPLICABLE LAWS OF THIS STATE THAT ARE NECESSARY

5 TO PERFORM ITS OBLIGATIONS UNDER ITS CONTRACTS.

6 (2) A HEALTH MAINTENANCE ORGANIZATION SHALL NOT TERMINATE A

7 HEALTH MAINTENANCE CONTRACT OR DENY A RENEWAL OF A CONTRACT

8 BECAUSE OF AGE, SEX, HEALTH STATUS, NATIONAL ORIGIN, OR FREQUENCY

9 OF UTILIZATION OF MEDICALLY INDICATED SERVICES OF AN ENROLLEE OR

10 GROUP OF ENROLLEES.

11 (3) A HEALTH MAINTENANCE CONTRACT MAY BE TERMINATED FOR VIO-

12 LATION OF THE TERMS OF THE CONTRACT OR FOR NONPAYMENT OF THE

13 FIXED PREPAID SUM OR PER CAPITA PREPAYMENT SET FORTH IN THE CON-

14 TRACT IF THE FIXED PREPAID SUM OR PER CAPITA PREPAYMENT IS NOT

15 PAID WITHIN 30 DAYS AFTER THE DUE DATE.

16 SEC. 3528. (1) A HEALTH MAINTENANCE ORGANIZATION SHALL DO

17 ALL OF THE FOLLOWING:

18 (A) ESTABLISH WRITTEN POLICIES AND PROCEDURES FOR CREDEN-

19 TIALING VERIFICATION OF ALL HEALTH CARE PROFESSIONALS WITH WHOM

20 THE HEALTH MAINTENANCE ORGANIZATION CONTRACTS AND SHALL APPLY

21 THESE STANDARDS CONSISTENTLY.

22 (B) VERIFY THE CREDENTIALS OF A HEALTH CARE PROFESSIONAL

23 BEFORE ENTERING INTO A CONTRACT WITH THAT HEALTH CARE

24 PROFESSIONAL. THE HEALTH MAINTENANCE ORGANIZATION'S MEDICAL

25 DIRECTOR OR OTHER DESIGNATED HEALTH CARE PROFESSIONAL SHALL HAVE

26 RESPONSIBILITY FOR, AND SHALL PARTICIPATE IN, HEALTH CARE

27 PROFESSIONAL CREDENTIALING VERIFICATION.

05036'99

1 (C) ESTABLISH A CREDENTIALING VERIFICATION COMMITTEE

2 CONSISTING OF LICENSED PHYSICIANS AND OTHER HEALTH CARE PROFES-

3 SIONALS TO REVIEW CREDENTIALING VERIFICATION INFORMATION AND SUP-

4 PORTING DOCUMENTS AND MAKE DECISIONS REGARDING CREDENTIALING

5 VERIFICATION.

6 (D) MAKE AVAILABLE FOR REVIEW BY THE APPLYING HEALTH CARE

7 PROFESSIONAL UPON WRITTEN REQUEST ALL APPLICATION AND CREDENTIAL-

8 ING VERIFICATION POLICIES AND PROCEDURES.

9 (E) RETAIN ALL RECORDS AND DOCUMENTS RELATING TO A HEALTH

10 CARE PROFESSIONAL'S CREDENTIALING VERIFICATION PROCESS FOR AT

11 LEAST 2 YEARS.

12 (F) KEEP CONFIDENTIAL ALL INFORMATION OBTAINED IN THE CRE-

13 DENTIALING VERIFICATION PROCESS, EXCEPT AS OTHERWISE PROVIDED BY

14 LAW.

15 (2) A HEALTH MAINTENANCE ORGANIZATION SHALL OBTAIN PRIMARY

16 VERIFICATION OF AT LEAST ALL OF THE FOLLOWING INFORMATION ABOUT

17 AN APPLICANT TO BECOME AN AFFILIATED PROVIDER WITH THE HEALTH

18 MAINTENANCE ORGANIZATION:

19 (A) CURRENT LICENSE TO PRACTICE MEDICINE IN THIS STATE AND

20 HISTORY OF LICENSURE.

21 (B) CURRENT LEVEL OF PROFESSIONAL LIABILITY COVERAGE, IF

22 APPLICABLE.

23 (C) STATUS OF HOSPITAL PRIVILEGES, IF APPLICABLE.

24 (D) SPECIALTY BOARD CERTIFICATION STATUS, IF APPLICABLE.

25 (E) CURRENT DRUG ENFORCEMENT AGENCY (DEA) REGISTRATION CER-

26 TIFICATE, IF APPLICABLE.

05036'99

1 (F) GRADUATION FROM MEDICAL SCHOOL.

2 (G) COMPLETION OF POSTGRADUATE TRAINING, IF APPLICABLE.

3 (3) A HEALTH MAINTENANCE ORGANIZATION SHALL OBTAIN, SUBJECT

4 TO EITHER PRIMARY OR SECONDARY VERIFICATION AT THE HEALTH MAINTE-

5 NANCE ORGANIZATION'S DISCRETION, ALL OF THE FOLLOWING INFORMATION

6 ABOUT AN APPLICANT TO BECOME AN AFFILIATED PROVIDER WITH THE

7 HEALTH MAINTENANCE ORGANIZATION:

8 (A) THE HEALTH CARE PROFESSIONAL'S LICENSE HISTORY IN THIS

9 AND ALL OTHER STATES.

10 (B) THE HEALTH CARE PROFESSIONAL'S MALPRACTICE HISTORY.

11 (C) THE HEALTH CARE PROFESSIONAL'S PRACTICE HISTORY.

12 (4) A HEALTH MAINTENANCE ORGANIZATION SHALL OBTAIN AT LEAST

13 EVERY 3 YEARS PRIMARY VERIFICATION OF ALL OF THE FOLLOWING FOR A

14 PARTICIPATING HEALTH CARE PROFESSIONAL:

15 (A) CURRENT LICENSE TO PRACTICE MEDICINE IN THIS STATE.

16 (B) CURRENT LEVEL OF PROFESSIONAL LIABILITY COVERAGE, IF

17 APPLICABLE.

18 (C) STATUS OF HOSPITAL PRIVILEGES, IF APPLICABLE.

19 (D) CURRENT DEA REGISTRATION CERTIFICATE, IF APPLICABLE.

20 (E) SPECIALTY BOARD CERTIFICATION STATUS, IF APPLICABLE.

21 (5) A HEALTH MAINTENANCE ORGANIZATION SHALL REQUIRE ALL PAR-

22 TICIPATING PROVIDERS TO NOTIFY THE HEALTH MAINTENANCE ORGANIZA-

23 TION OF CHANGES IN THE STATUS OF ANY OF THE ITEMS LISTED IN THIS

24 SECTION AT ANY TIME AND IDENTIFY FOR AFFILIATED PROVIDERS THE

25 INDIVIDUAL TO WHOM THEY SHOULD REPORT CHANGES IN THE STATUS OF AN

26 ITEM LISTED IN THIS SECTION.

05036'99

1 (6) A HEALTH MAINTENANCE ORGANIZATION SHALL PROVIDE A HEALTH

2 CARE PROFESSIONAL WITH THE OPPORTUNITY TO REVIEW AND CORRECT

3 INFORMATION SUBMITTED IN SUPPORT OF THAT HEALTH CARE

4 PROFESSIONAL'S CREDENTIALING VERIFICATION APPLICATION AS

5 FOLLOWS:

6 (A) EACH HEALTH CARE PROFESSIONAL WHO IS SUBJECT TO THE CRE-

7 DENTIALING VERIFICATION PROCESS HAS THE RIGHT TO REVIEW ALL

8 INFORMATION, INCLUDING THE SOURCE OF THAT INFORMATION, OBTAINED

9 BY THE HEALTH MAINTENANCE ORGANIZATION TO SATISFY THE REQUIRE-

10 MENTS OF THIS SECTION DURING THE HEALTH MAINTENANCE

11 ORGANIZATION'S CREDENTIALING PROCESS.

12 (B) A HEALTH MAINTENANCE ORGANIZATION SHALL NOTIFY A HEALTH

13 CARE PROFESSIONAL OF ANY INFORMATION OBTAINED DURING THE HEALTH

14 MAINTENANCE ORGANIZATION'S CREDENTIALING VERIFICATION PROCESS

15 THAT DOES NOT MEET THE HEALTH MAINTENANCE ORGANIZATION'S CREDEN-

16 TIALING VERIFICATION STANDARDS OR THAT VARIES SUBSTANTIALLY FROM

17 THE INFORMATION PROVIDED TO THE HEALTH MAINTENANCE ORGANIZATION

18 BY THE HEALTH CARE PROFESSIONAL, EXCEPT THAT THE HEALTH MAINTE-

19 NANCE ORGANIZATION IS NOT REQUIRED TO REVEAL THE SOURCE OF INFOR-

20 MATION IF THE INFORMATION IS NOT OBTAINED TO MEET THE REQUIRE-

21 MENTS OF THIS SECTION OR IF DISCLOSURE IS PROHIBITED BY LAW.

22 (C) A HEALTH CARE PROFESSIONAL HAS THE RIGHT TO CORRECT ANY

23 ERRONEOUS INFORMATION. A HEALTH MAINTENANCE ORGANIZATION SHALL

24 HAVE A FORMAL PROCESS BY WHICH A HEALTH CARE PROFESSIONAL MAY

25 SUBMIT SUPPLEMENTAL OR CORRECTED INFORMATION TO THE HEALTH MAIN-

26 TENANCE ORGANIZATION'S CREDENTIALING VERIFICATION COMMITTEE AND

27 REQUEST A RECONSIDERATION OF THE HEALTH CARE PROFESSIONAL'S

05036'99

1 CREDENTIALING VERIFICATION APPLICATION IF THE HEALTH CARE

2 PROFESSIONAL FEELS THAT THE HEALTH CARRIER'S CREDENTIALING VERI-

3 FICATION COMMITTEE HAS RECEIVED INFORMATION THAT IS INCORRECT OR

4 MISLEADING. SUPPLEMENTAL INFORMATION IS SUBJECT TO CONFIRMATION

5 BY THE HEALTH MAINTENANCE ORGANIZATION.

6 (7) IF A HEALTH MAINTENANCE ORGANIZATION CONTRACTS TO HAVE

7 ANOTHER ENTITY PERFORM THE CREDENTIALING FUNCTIONS REQUIRED BY

8 THIS SECTION, THE COMMISSIONER SHALL HOLD THE HEALTH MAINTENANCE

9 ORGANIZATION RESPONSIBLE FOR MONITORING THE ACTIVITIES OF THE

10 ENTITY WITH WHICH IT CONTRACTS AND FOR ENSURING THAT THE REQUIRE-

11 MENTS OF THIS SECTION ARE MET.

12 (8) NOTHING IN THIS ACT SHALL BE CONSTRUED TO REQUIRE A

13 HEALTH MAINTENANCE ORGANIZATION TO SELECT A PROVIDER AS AN AFFIL-

14 IATED PROVIDER SOLELY BECAUSE THE PROVIDER MEETS THE HEALTH MAIN-

15 TENANCE ORGANIZATION'S CREDENTIALING VERIFICATION STANDARDS, OR

16 TO PREVENT A HEALTH MAINTENANCE ORGANIZATION FROM UTILIZING SEPA-

17 RATE OR ADDITIONAL CRITERIA IN SELECTING THE HEALTH CARE PROFES-

18 SIONALS WITH WHOM IT CONTRACTS.

19 SEC. 3529. (1) A HEALTH MAINTENANCE ORGANIZATION MAY CON-

20 TRACT WITH OR EMPLOY HEALTH PROFESSIONALS ON THE BASIS OF COST,

21 QUALITY, AVAILABILITY OF SERVICES TO THE MEMBERSHIP, CONFORMITY

22 TO THE ADMINISTRATIVE PROCEDURES OF THE HEALTH MAINTENANCE ORGAN-

23 IZATION, AND OTHER FACTORS RELEVANT TO DELIVERY OF ECONOMICAL,

24 QUALITY CARE, BUT SHALL NOT DISCRIMINATE SOLELY ON THE BASIS OF

25 THE CLASS OF HEALTH PROFESSIONALS TO WHICH THE HEALTH PROFES-

26 SIONAL BELONGS.

05036'99

1 (2) A HEALTH MAINTENANCE ORGANIZATION SHALL ENTER INTO

2 CONTRACTS WITH PROVIDERS THROUGH WHICH HEALTH CARE SERVICES ARE

3 USUALLY PROVIDED TO ENROLLEES UNDER THE HEALTH MAINTENANCE ORGAN-

4 IZATION PLAN.

5 (3) AN AFFILIATED PROVIDER CONTRACT SHALL PROHIBIT THE PRO-

6 VIDER FROM SEEKING PAYMENT FROM THE ENROLLEE FOR SERVICES PRO-

7 VIDED PURSUANT TO THE PROVIDER CONTRACT, EXCEPT THAT THE CONTRACT

8 MAY ALLOW AFFILIATED PROVIDERS TO COLLECT COPAYMENTS DIRECTLY

9 FROM ENROLLEES.

10 (4) AN AFFILIATED PROVIDER CONTRACT SHALL CONTAIN PROVISIONS

11 ASSURING ALL OF THE FOLLOWING:

12 (A) THE PROVIDER MEETS APPLICABLE LICENSURE OR CERTIFICATION

13 REQUIREMENTS.

14 (B) APPROPRIATE ACCESS BY THE HEALTH MAINTENANCE ORGANIZA-

15 TION TO RECORDS OR REPORTS CONCERNING SERVICES TO ITS ENROLLEES.

16 (C) THE PROVIDER COOPERATES WITH THE HEALTH MAINTENANCE

17 ORGANIZATION'S QUALITY ASSURANCE ACTIVITIES.

18 (5) THE COMMISSIONER MAY WAIVE THE CONTRACT REQUIREMENT

19 UNDER SUBSECTION (2) IF A HEALTH MAINTENANCE ORGANIZATION HAS

20 DEMONSTRATED THAT IT IS UNABLE TO OBTAIN A CONTRACT AND ACCESSI-

21 BILITY TO PATIENT CARE WOULD NOT BE COMPROMISED. WHEN 10% OR

22 MORE OF A HEALTH MAINTENANCE ORGANIZATION'S ELECTIVE INPATIENT

23 ADMISSIONS, OR PROJECTED ADMISSIONS FOR A NEW HEALTH MAINTENANCE

24 ORGANIZATION, OCCUR IN HOSPITALS WITH WHICH THE HEALTH MAINTE-

25 NANCE ORGANIZATION DOES NOT HAVE CONTRACTS OR AGREEMENTS THAT

26 PROTECT ENROLLEES FROM LIABILITY FOR AUTHORIZED ADMISSIONS AND

27 SERVICES, THE HEALTH MAINTENANCE ORGANIZATION MAY BE REQUIRED TO

05036'99

1 MAINTAIN A HOSPITAL RESERVE FUND EQUAL TO 3 MONTHS' PROJECTED

2 CLAIMS FROM SUCH HOSPITALS.

3 (6) A HEALTH MAINTENANCE ORGANIZATION SHALL SUBMIT TO THE

4 COMMISSIONER FOR APPROVAL STANDARD CONTRACT FORMATS PROPOSED FOR

5 USE WITH ITS AFFILIATED PROVIDERS AND ANY SUBSTANTIVE CHANGES TO

6 THOSE CONTRACTS. THE CONTRACT FORMAT OR CHANGE IS CONSIDERED

7 APPROVED 30 DAYS AFTER FILING UNLESS APPROVED OR DISAPPROVED

8 WITHIN THE 30 DAYS. AS USED IN THIS SUBSECTION, "SUBSTANTIVE

9 CHANGES TO CONTRACT FORMATS" MEANS A CHANGE TO A PROVIDER CON-

10 TRACT THAT ALTERS THE METHOD OF PAYMENT TO A PROVIDER, ALTERS THE

11 RISK ASSUMED BY EACH PARTY TO THE CONTRACT, OR AFFECTS A PROVI-

12 SION REQUIRED BY LAW.

13 (7) A HEALTH MAINTENANCE ORGANIZATION OR APPLICANT SHALL

14 PROVIDE EVIDENCE THAT IT HAS EMPLOYED, OR HAS EXECUTED AFFILIA-

15 TION CONTRACTS WITH, A SUFFICIENT NUMBER OF PROVIDERS TO ENABLE

16 IT TO DELIVER THE HEALTH MAINTENANCE SERVICES IT PROPOSES TO

17 OFFER.

18 SEC. 3530. (1) A HEALTH MAINTENANCE ORGANIZATION SHALL

19 MAINTAIN CONTRACTS WITH THOSE NUMBERS AND THOSE TYPES OF AFFILI-

20 ATED PROVIDERS THAT ARE SUFFICIENT TO ASSURE THAT COVERED SERV-

21 ICES ARE AVAILABLE TO ITS ENROLLEES WITHOUT UNREASONABLE DELAY.

22 THE COMMISSIONER SHALL DETERMINE WHAT IS SUFFICIENT AS PROVIDED

23 IN THIS SECTION AND AS MAY BE ESTABLISHED BY REFERENCE TO REASON-

24 ABLE CRITERIA USED BY THE HEALTH MAINTENANCE ORGANIZATION,

25 INCLUDING, BUT NOT LIMITED TO, PROVIDER-COVERED PERSON RATIOS BY

26 SPECIALTY, PRIMARY CARE PROVIDER-COVERED PERSON RATIOS,

27 GEOGRAPHIC ACCESSIBILITY, WAITING TIMES FOR APPOINTMENTS WITH

05036'99

1 PARTICIPATING PROVIDERS, HOURS OF OPERATION, AND THE VOLUME OF

2 TECHNOLOGICAL AND SPECIALTY SERVICES AVAILABLE TO SERVE THE NEEDS

3 OF ENROLLEES REQUIRING TECHNOLOGICALLY ADVANCED OR SPECIALTY

4 CARE.

5 (2) IF A HEALTH MAINTENANCE ORGANIZATION HAS AN INSUFFICIENT

6 NUMBER OR TYPE OF PARTICIPATING PROVIDERS TO PROVIDE A COVERED

7 BENEFIT, THE HEALTH MAINTENANCE ORGANIZATION SHALL ENSURE THAT

8 THE ENROLLEE OBTAINS THE COVERED BENEFIT AT NO GREATER COST TO

9 THE ENROLLEE THAN IF THE BENEFIT WERE OBTAINED FROM PARTICIPATING

10 PROVIDERS, OR SHALL MAKE OTHER ARRANGEMENTS ACCEPTABLE TO THE

11 COMMISSIONER.

12 (3) A HEALTH MAINTENANCE ORGANIZATION SHALL ESTABLISH AND

13 MAINTAIN ADEQUATE ARRANGEMENTS TO ENSURE REASONABLE PROXIMITY OF

14 PARTICIPATING PROVIDERS TO THE BUSINESS OR PERSONAL RESIDENCE OF

15 ENROLLEES. IN DETERMINING WHETHER A HEALTH MAINTENANCE ORGANIZA-

16 TION HAS COMPLIED WITH THIS PROVISION, THE COMMISSIONER SHALL

17 GIVE DUE CONSIDERATION TO THE RELATIVE AVAILABILITY OF HEALTH

18 CARE PROVIDERS IN THE SERVICE AREA.

19 SEC. 3531. (1) THIS SECTION APPLIES IF A HEALTH MAINTENANCE

20 ORGANIZATION CONTRACTS WITH HEALTH CARE PROVIDERS TO BECOME

21 AFFILIATED PROVIDERS OR OFFERS A PRUDENT PURCHASER CONTRACT.

22 (2) A HEALTH MAINTENANCE ORGANIZATION MAY ENTER INTO A CON-

23 TRACT WITH 1 OR MORE HEALTH CARE PROVIDERS TO CONTROL HEALTH CARE

24 COSTS, ASSURE APPROPRIATE UTILIZATION OF HEALTH MAINTENANCE SERV-

25 ICES, AND MAINTAIN QUALITY OF HEALTH CARE. THE HEALTH MAINTE-

26 NANCE ORGANIZATION MAY LIMIT THE NUMBER OF CONTRACTS ENTERED INTO

27 UNDER THIS SECTION IF THE NUMBER OF CONTRACTS IS SUFFICIENT TO

05036'99

1 ASSURE REASONABLE LEVELS OF ACCESS TO HEALTH MAINTENANCE SERVICES

2 FOR RECIPIENTS OF THOSE SERVICES. THE NUMBER OF CONTRACTS AUTHO-

3 RIZED BY THIS SECTION THAT ARE NECESSARY TO ASSURE REASONABLE

4 LEVELS OF ACCESS TO HEALTH MAINTENANCE SERVICES FOR RECIPIENTS

5 SHALL BE DETERMINED BY THE HEALTH MAINTENANCE ORGANIZATION AS

6 APPROVED BY THE COMMISSIONER UNDER THIS CHAPTER. HOWEVER, THE

7 HEALTH MAINTENANCE ORGANIZATION SHALL OFFER A CONTRACT, COM-

8 PARABLE TO THOSE CONTRACTS ENTERED INTO WITH OTHER AFFILIATED

9 PROVIDERS, TO AT LEAST 1 HEALTH CARE PROVIDER THAT PROVIDES THE

10 APPLICABLE HEALTH MAINTENANCE SERVICES AND IS LOCATED WITHIN A

11 REASONABLE DISTANCE FROM THE RECIPIENTS OF THOSE HEALTH MAINTE-

12 NANCE SERVICES, IF A HEALTH CARE PROVIDER THAT PROVIDES THE

13 APPLICABLE HEALTH MAINTENANCE SERVICES IS LOCATED WITHIN THAT

14 REASONABLE DISTANCE.

15 (3) A HEALTH MAINTENANCE ORGANIZATION SHALL GIVE ALL HEALTH

16 CARE PROVIDERS THAT PROVIDE THE APPLICABLE HEALTH MAINTENANCE

17 SERVICES AND ARE LOCATED IN THE GEOGRAPHIC AREA SERVED BY THE

18 HEALTH MAINTENANCE ORGANIZATION AN OPPORTUNITY TO APPLY TO THE

19 HEALTH MAINTENANCE ORGANIZATION TO BECOME AN AFFILIATED

20 PROVIDER.

21 (4) A CONTRACT SHALL BE BASED UPON THE FOLLOWING WRITTEN

22 STANDARDS WHICH SHALL BE FILED BY THE HEALTH MAINTENANCE ORGANI-

23 ZATION WITH THE COMMISSIONER ON A FORM AND IN A MANNER THAT IS

24 UNIFORMLY DEVELOPED AND APPLIED BY THE COMMISSIONER:

25 (A) STANDARDS FOR MAINTAINING QUALITY HEALTH CARE.

26 (B) STANDARDS FOR CONTROLLING HEALTH CARE COSTS.

05036'99

1 (C) STANDARDS FOR ASSURING APPROPRIATE UTILIZATION OF HEALTH

2 CARE SERVICES.

3 (D) STANDARDS FOR ASSURING REASONABLE LEVELS OF ACCESS TO

4 HEALTH CARE SERVICES.

5 (E) OTHER STANDARDS CONSIDERED APPROPRIATE BY THE HEALTH

6 MAINTENANCE ORGANIZATION.

7 (5) IF THE COMMISSIONER DETERMINES THAT STANDARDS UNDER

8 SUBSECTION (4) ARE DUPLICATIVE OF STANDARDS ALREADY FILED BY THE

9 HEALTH MAINTENANCE ORGANIZATION, THOSE DUPLICATIVE STANDARDS NEED

10 NOT BE FILED UNDER SUBSECTION (4).

11 (6) A HEALTH MAINTENANCE ORGANIZATION SHALL DEVELOP AND

12 INSTITUTE PROCEDURES THAT ARE DESIGNED TO NOTIFY HEALTH CARE PRO-

13 VIDERS THAT PROVIDE THE APPLICABLE HEALTH MAINTENANCE SERVICES

14 AND ARE LOCATED IN THE GEOGRAPHIC AREA SERVED BY THE ORGANIZATION

15 OF THE ACCEPTANCE OF APPLICATIONS FOR A PROVIDER PANEL. THE PRO-

16 CEDURES SHALL INCLUDE THE GIVING OF NOTICE TO THOSE PROVIDERS

17 UPON REQUEST AND SHALL INCLUDE PUBLICATION IN A NEWSPAPER WITH

18 GENERAL CIRCULATION IN THE GEOGRAPHIC AREA SERVED BY THE ORGANI-

19 ZATION AT LEAST 30 DAYS BEFORE THE INITIAL PROVIDER APPLICATION

20 PERIOD.

21 (7) A HEALTH MAINTENANCE ORGANIZATION SHALL PROVIDE FOR AN

22 INITIAL 60-DAY PROVIDER APPLICATION PERIOD DURING WHICH PROVIDERS

23 MAY APPLY TO THE HEALTH MAINTENANCE ORGANIZATION TO BECOME AFFIL-

24 IATED PROVIDERS. A HEALTH MAINTENANCE ORGANIZATION THAT HAS

25 ENTERED INTO A CONTRACT WITH AN AFFILIATED PROVIDER SHALL PRO-

26 VIDE, AT LEAST ONCE EVERY 4 YEARS, FOR A 60-DAY PROVIDER

27 APPLICATION PERIOD DURING WHICH A PROVIDER MAY APPLY TO THE

05036'99

1 ORGANIZATION TO BECOME AN AFFILIATED PROVIDER. NOTICE OF THIS

2 PROVIDER APPLICATION PERIOD SHALL BE GIVEN TO PROVIDERS UPON

3 REQUEST AND SHALL BE PUBLISHED IN A NEWSPAPER WITH GENERAL CIRCU-

4 LATION IN THE GEOGRAPHIC AREA SERVED BY THE ORGANIZATION AT LEAST

5 30 DAYS BEFORE THE COMMENCEMENT OF THE PROVIDER APPLICATION

6 PERIOD. UPON RECEIPT OF A REQUEST BY A HEALTH CARE PROVIDER, THE

7 ORGANIZATION SHALL PROVIDE THE WRITTEN STANDARDS REQUIRED UNDER

8 THIS CHAPTER TO THE HEALTH CARE PROVIDER. WITHIN 90 DAYS AFTER

9 THE CLOSE OF A PROVIDER APPLICATION PERIOD, OR WITHIN 30 DAYS

10 FOLLOWING THE COMPLETION OF THE APPLICABLE PHYSICIAN CREDENTIAL-

11 ING PROCESS, WHICHEVER IS LATER, A HEALTH MAINTENANCE ORGANIZA-

12 TION SHALL NOTIFY AN APPLICANT IN WRITING AS TO WHETHER THE

13 APPLICATION TO BECOME AN AFFILIATED PROVIDER HAS BEEN ACCEPTED OR

14 REJECTED. IF AN APPLICANT HAS BEEN REJECTED, THE HEALTH MAINTE-

15 NANCE ORGANIZATION SHALL STATE IN WRITING THE REASONS FOR REJEC-

16 TION, CITING 1 OR MORE OF THE STANDARDS.

17 (8) A HEALTH CARE PROVIDER WHOSE CONTRACT AS AN AFFILIATED

18 PROVIDER IS TERMINATED SHALL BE PROVIDED UPON REQUEST WITH A

19 WRITTEN EXPLANATION BY THE ORGANIZATION OF THE REASONS FOR THE

20 TERMINATION.

21 (9) A HEALTH MAINTENANCE ORGANIZATION THAT IS PROVIDING PRU-

22 DENT PURCHASER AGREEMENT SERVICES TO AN INSURER SHALL PROVIDE THE

23 INSURER ON A TIMELY BASIS WITH INFORMATION REQUESTED BY THE

24 INSURER THAT THE ORGANIZATION HAS AND THAT THE INSURER NEEDS TO

25 COMPLY WITH SECTION 2212.

26 SEC. 3533. (1) A HEALTH MAINTENANCE ORGANIZATION MAY OFFER

27 PRUDENT PURCHASER CONTRACTS TO GROUPS OR INDIVIDUALS AND IN

05036'99

1 CONJUNCTION WITH THOSE CONTRACTS A HEALTH MAINTENANCE

2 ORGANIZATION MAY PAY OR MAY REIMBURSE ENROLLEES, OR MAY CONTRACT

3 WITH ANOTHER ENTITY TO PAY OR REIMBURSE ENROLLEES, FOR UNAUTHO-

4 RIZED SERVICES OR FOR SERVICES BY NONAFFILIATED PROVIDERS IN

5 ACCORDANCE WITH THE TERMS OF THE CONTRACT AND SUBJECT TO COPAY-

6 MENTS, DEDUCTIBLES, OR OTHER FINANCIAL PENALTIES DESIGNED TO

7 ENCOURAGE ENROLLEES TO OBTAIN SERVICES FROM THE ORGANIZATION'S

8 PROVIDERS.

9 (2) PRUDENT PURCHASER CONTRACTS AND THE RATES CHARGED FOR

10 THEM ARE SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS HEALTH

11 MAINTENANCE CONTRACTS. THE RATES CHARGED BY AN ORGANIZATION FOR

12 COVERAGE UNDER CONTRACTS ISSUED UNDER THIS SECTION SHALL NOT BE

13 UNREASONABLY LOWER THAN WHAT IS NECESSARY TO MEET THE EXPENSES OF

14 THE ORGANIZATION FOR PROVIDING THIS COVERAGE AND SHALL NOT HAVE

15 AN ANTICOMPETITIVE EFFECT OR RESULT IN PREDATORY PRICING IN RELA-

16 TION TO PRUDENT PURCHASER AGREEMENT COVERAGES OFFERED BY OTHER

17 ORGANIZATIONS.

18 (3) A HEALTH MAINTENANCE ORGANIZATION SHALL NOT ISSUE PRU-

19 DENT PURCHASER CONTRACTS UNLESS IT IS IN FULL COMPLIANCE WITH THE

20 REQUIREMENTS FOR ADEQUATE WORKING CAPITAL, STATUTORY DEPOSITS,

21 AND RESERVES AS PROVIDED IN THIS CHAPTER AND IT IS NOT OPERATING

22 UNDER ANY LIMITATION TO ITS AUTHORIZATION TO DO BUSINESS IN THIS

23 STATE.

24 (4) A HEALTH MAINTENANCE ORGANIZATION SHALL MAINTAIN FINAN-

25 CIAL RECORDS FOR ITS PRUDENT PURCHASER CONTRACTS AND ACTIVITIES

26 IN A FORM SEPARATE OR SEPARABLE FROM THE FINANCIAL RECORDS OF

27 OTHER OPERATIONS AND ACTIVITIES CARRIED ON BY THE ORGANIZATION.

05036'99

1 SEC. 3535. SOLICITATION OF ENROLLEES OR ADVERTISING OF THE

2 SERVICES, CHARGES, OR OTHER NONPROFESSIONAL ASPECTS OF THE HEALTH

3 MAINTENANCE ORGANIZATION'S OPERATION UNDER THIS SECTION SHALL NOT

4 BE CONSTRUED TO BE IN VIOLATION OF LAWS RELATING TO SOLICITATION

5 OR ADVERTISING BY HEALTH PROFESSIONALS, BUT SHALL NOT INCLUDE

6 ADVERTISING THAT MAKES ANY QUALITATIVE JUDGMENT AS TO A HEALTH

7 PROFESSIONAL WHO PROVIDES SERVICES FOR A HEALTH MAINTENANCE

8 ORGANIZATION. A SOLICITATION OR ADVERTISING SHALL NOT OFFER A

9 MATERIAL BENEFIT OR OTHER THING OF VALUE AS AN INDUCEMENT TO PRO-

10 SPECTIVE SUBSCRIBERS OTHER THAN THE SERVICES OF THE

11 ORGANIZATION.

12 SEC. 3537. (1) AFTER THE INITIAL 24 MONTHS OF OPERATION, A

13 HEALTH MAINTENANCE ORGANIZATION SHALL HAVE AN OPEN ENROLLMENT

14 PERIOD OF NOT LESS THAN 30 DAYS AT LEAST ONCE DURING EACH CONSEC-

15 UTIVE 12-MONTH PERIOD. DURING EACH ENROLLMENT PERIOD, THE HEALTH

16 MAINTENANCE ORGANIZATION SHALL ACCEPT UP TO ITS CAPACITY AS

17 DETERMINED BY THE ORGANIZATION AND SUBMITTED TO THE COMMISSIONER

18 NOT LESS THAN 60 DAYS BEFORE THE COMMENCEMENT OF THE ENROLLMENT

19 PERIOD, INDIVIDUALS IN THE ORDER IN WHICH THEY APPLY FOR ENROLL-

20 MENT IN A MANNER THAT DOES NOT UNFAIRLY DISCRIMINATE ON THE BASIS

21 OF AGE, SEX, RACE, HEALTH, OR ECONOMIC STATUS. THE COMMISSIONER

22 MAY WAIVE COMPLIANCE BY THE ORGANIZATION WITH THIS OPEN ENROLL-

23 MENT REQUIREMENT FOR ANY 12-MONTH PERIOD FOR WHICH THE ORGANIZA-

24 TION DEMONSTRATES TO THE COMMISSIONER'S SATISFACTION THAT EITHER

25 OF THE FOLLOWING WILL OCCUR:

26 (A) IT HAS ENROLLED, OR WILL BE COMPELLED TO ENROLL, A

27 DISPROPORTIONATE NUMBER OF INDIVIDUALS WHO ARE LIKELY TO UTILIZE

05036'99

1 ITS SERVICES MORE OFTEN THAN AN ACTUARIALLY DETERMINED AVERAGE AS

2 DETERMINED UNDER RULES PROMULGATED BY THE COMMISSIONER, AND

3 ENROLLMENT DURING AN OPEN ENROLLMENT PERIOD OF AN ADDITIONAL

4 NUMBER OF THOSE INDIVIDUALS WILL JEOPARDIZE ITS ECONOMIC

5 VIABILITY.

6 (B) IF IT MAINTAINED AN OPEN ENROLLMENT PERIOD, IT WOULD NOT

7 BE ABLE TO COMPLY WITH THE RULES PROMULGATED UNDER THIS CHAPTER.

8 (2) A HEALTH MAINTENANCE ORGANIZATION PROVIDING HEALTH MAIN-

9 TENANCE SERVICES TO SPECIFIED GROUPS OF INDIVIDUALS MAY ACCEPT

10 MEMBERS OF THE GROUPS BEFORE ACCEPTING OTHER INDIVIDUALS IN THE

11 ORDER IN WHICH THEY APPLY.

12 (3) A HEALTH MAINTENANCE ORGANIZATION WHICH, UNDER THIS SEC-

13 TION, ENROLLS INDIVIDUALS WHO ARE NOT MEMBERS OF A GROUP MAY RATE

14 THIS NONGROUP MEMBERSHIP ON THE BASIS OF ACTUAL AND CREDIBLE LOSS

15 EXPERIENCE.

16 SEC. 3539. (1) FOR AN INDIVIDUAL COVERED UNDER A NONGROUP

17 CONTRACT OR UNDER A CONTRACT NOT COVERED UNDER SUBSECTION (2), A

18 HEALTH MAINTENANCE ORGANIZATION MAY EXCLUDE OR LIMIT COVERAGE FOR

19 A CONDITION ONLY IF THE EXCLUSION OR LIMITATION RELATES TO A CON-

20 DITION FOR WHICH MEDICAL ADVICE, DIAGNOSIS, CARE, OR TREATMENT

21 WAS RECOMMENDED OR RECEIVED WITHIN 6 MONTHS BEFORE ENROLLMENT AND

22 THE EXCLUSION OR LIMITATION DOES NOT EXTEND FOR MORE THAN 6

23 MONTHS AFTER THE EFFECTIVE DATE OF THE HEALTH MAINTENANCE

24 CONTRACT.

25 (2) A HEALTH MAINTENANCE ORGANIZATION SHALL NOT EXCLUDE OR

26 LIMIT COVERAGE FOR A PREEXISTING CONDITION FOR AN INDIVIDUAL

27 COVERED UNDER A GROUP CONTRACT.

05036'99

1 (3) EXCEPT AS PROVIDED IN SUBSECTION (5), A HEALTH

2 MAINTENANCE ORGANIZATION THAT HAS ISSUED A NONGROUP CONTRACT

3 SHALL RENEW OR CONTINUE IN FORCE THE CONTRACT AT THE OPTION OF

4 THE INDIVIDUAL.

5 (4) EXCEPT AS PROVIDED IN SUBSECTION (5), A HEALTH MAINTE-

6 NANCE ORGANIZATION THAT HAS ISSUED A GROUP CONTRACT SHALL RENEW

7 OR CONTINUE IN FORCE THE CONTRACT AT THE OPTION OF THE SPONSOR OF

8 THE PLAN.

9 (5) GUARANTEED RENEWAL IS NOT REQUIRED IN CASES OF FRAUD,

10 INTENTIONAL MISREPRESENTATION OF MATERIAL FACT, LACK OF PAYMENT,

11 IF THE HEALTH MAINTENANCE ORGANIZATION NO LONGER OFFERS THAT PAR-

12 TICULAR TYPE OF COVERAGE IN THE MARKET, OR IF THE INDIVIDUAL OR

13 GROUP MOVES OUTSIDE THE SERVICE AREA.

14 (6) AS USED IN THIS SECTION, "GROUP" MEANS A GROUP OF 2 OR

15 MORE SUBSCRIBERS.

16 SEC. 3541. A HEALTH MAINTENANCE ORGANIZATION SHALL NOT PRO-

17 HIBIT OR DISCOURAGE A HEALTH PROFESSIONAL FROM ADVOCATING ON

18 BEHALF OF AN ENROLLEE FOR APPROPRIATE MEDICAL TREATMENT OPTIONS

19 PURSUANT TO THE GRIEVANCE PROCEDURE IN SECTION 2213 OR THE HEALTH

20 CARRIER EXTERNAL REVIEW ACT OR FROM DISCUSSING WITH AN ENROLLEE

21 OR PROVIDER ANY OF THE FOLLOWING:

22 (A) HEALTH CARE TREATMENTS AND SERVICES.

23 (B) QUALITY ASSURANCE PLANS REQUIRED BY LAW, IF APPLICABLE.

24 (C) THE FINANCIAL RELATIONSHIPS BETWEEN THE HEALTH MAINTE-

25 NANCE ORGANIZATION AND THE HEALTH PROFESSIONAL INCLUDING ALL OF

26 THE FOLLOWING AS APPLICABLE:

05036'99

1 (i) WHETHER A FEE-FOR-SERVICE ARRANGEMENT EXISTS, UNDER

2 WHICH THE PROVIDER IS PAID A SPECIFIED AMOUNT FOR EACH COVERED

3 SERVICE RENDERED TO THE PARTICIPANT.

4 (ii) WHETHER A CAPITATION ARRANGEMENT EXISTS, UNDER WHICH A

5 FIXED AMOUNT IS PAID TO THE PROVIDER FOR ALL COVERED SERVICES

6 THAT ARE OR MAY BE RENDERED TO EACH COVERED INDIVIDUAL OR

7 FAMILY.

8 (iii) WHETHER PAYMENTS TO PROVIDERS ARE MADE BASED ON STAN-

9 DARDS RELATING TO COST, QUALITY, OR PATIENT SATISFACTION.

10 SEC. 3543. (1) WITH THE COMMISSIONER'S APPROVAL, A HEALTH

11 MAINTENANCE ORGANIZATION MAY OWN OR INVEST IN A THIRD PARTY

12 ADMINISTRATOR. THE COMMISSIONER SHALL GRANT APPROVAL UPON BEING

13 SATISFIED THAT ALL OF THE FOLLOWING CONDITIONS ARE MET:

14 (A) THE THIRD PARTY ADMINISTRATOR IS INCORPORATED AS A DIS-

15 TINCT LEGAL ENTITY UNDER THE BUSINESS CORPORATION ACT, 1972 PA

16 284, MCL 450.1101 TO 450.2098, THE NONPROFIT CORPORATION ACT,

17 1982 PA 162, MCL 450.2101 TO 450.3192, OR THE MICHIGAN LIMITED

18 LIABILITY COMPANY ACT, 1993 PA 23, MCL 450.4101 TO 450.5200.

19 (B) THE THIRD PARTY ADMINISTRATOR HAS A CERTIFICATE OF

20 AUTHORITY ISSUED PURSUANT TO THE THIRD PARTY ADMINISTRATOR ACT,

21 1984 PA 218, MCL 550.901 TO 550.962.

22 (C) BASED ON GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, THE

23 PROPOSED OR OPERATING THIRD PARTY ADMINISTRATOR IS FINANCIALLY

24 SOUND AND MAINTAINS ADEQUATE WORKING CAPITAL.

25 (D) THE INVESTMENT IN THE THIRD PARTY ADMINISTRATOR BY THE

26 HEALTH MAINTENANCE ORGANIZATION DOES NOT ENDANGER THE CONTINUED

27 OPERATION OF THE HEALTH MAINTENANCE ORGANIZATION.

05036'99

1 (E) THE THIRD PARTY ADMINISTRATOR MAINTAINS FINANCIAL

2 RECORDS FOR ITS ACTIVITIES SEPARATE OR SEPARABLE FROM THE FINAN-

3 CIAL RECORDS OF THE HEALTH MAINTENANCE ORGANIZATION.

4 (2) EXCEPT AS OTHERWISE PROVIDED IN THIS CHAPTER, A THIRD

5 PARTY ADMINISTRATOR OPERATING UNDER THIS SECTION IS FULLY SUBJECT

6 TO THE THIRD PARTY ADMINISTRATOR ACT, 1984 PA 218, MCL 550.901 TO

7 550.962. NEITHER THIS SECTION NOR THE OPERATION OF THE THIRD

8 PARTY ADMINISTRATOR AS A SEPARATE LEGAL ENTITY DIMINISHES THE

9 COMMISSIONER'S AUTHORITY UNDER THIS ACT OR OTHER LAWS REGULATING

10 THE HEALTH MAINTENANCE ORGANIZATION OR THEIR PARENT COMPANIES.

11 (3) AN INDIVIDUAL COVERED UNDER A PLAN ADMINISTERED BY A

12 THIRD PARTY ADMINISTRATOR OPERATING UNDER THIS SECTION IS NOT

13 LIABLE FOR INCURRED MEDICAL EXPENSES FOR COVERED SERVICES IF THE

14 PLAN SPONSOR CONTINUES TO PAY THE MEDICAL EXPENSES THAT ARE ELI-

15 GIBLE FOR PAYMENT.

16 SEC. 3545. WITH THE COMMISSIONER'S PRIOR APPROVAL, A HEALTH

17 MAINTENANCE ORGANIZATION MAY ACQUIRE OBLIGATIONS FROM ANOTHER

18 MANAGED CARE ENTITY. THE COMMISSIONER SHALL NOT GRANT PRIOR

19 APPROVAL UNLESS THE COMMISSIONER DETERMINES THAT THE TRANSACTION

20 WILL NOT JEOPARDIZE THE HEALTH MAINTENANCE ORGANIZATION'S FINAN-

21 CIAL SECURITY.

22 SEC. 3547. (1) THE COMMISSIONER AT ANY TIME MAY VISIT OR

23 EXAMINE THE HEALTH CARE SERVICE OPERATIONS OF A HEALTH MAINTE-

24 NANCE ORGANIZATION AND CONSULT WITH ENROLLEES TO THE EXTENT NEC-

25 ESSARY TO CARRY OUT THE INTENT OF THIS CHAPTER.

26 (2) IN ADDITION TO THE AUTHORITY GRANTED UNDER CHAPTER 2,

27 THE COMMISSIONER:

05036'99

1 (A) SHALL HAVE ACCESS TO ALL INFORMATION OF THE HEALTH

2 MAINTENANCE ORGANIZATION RELATING TO THE DELIVERY OF HEALTH SERV-

3 ICES, INCLUDING, BUT NOT LIMITED TO BOOKS, PAPERS, COMPUTER DATA-

4 BASES, AND DOCUMENTS, IN A MANNER THAT PRESERVES THE CONFIDEN-

5 TIALITY OF THE HEALTH RECORDS OF INDIVIDUAL ENROLLEES.

6 (B) MAY REQUIRE THE SUBMISSION OF INFORMATION REGARDING A

7 PROPOSED CONTRACT BETWEEN A HEALTH MAINTENANCE ORGANIZATION AND

8 AN AFFILIATED PROVIDER AS THE COMMISSIONER CONSIDERS NECESSARY TO

9 ASSURE THAT THE CONTRACT IS IN COMPLIANCE WITH THIS CHAPTER.

10 SEC. 3548. (1) A HEALTH MAINTENANCE ORGANIZATION SHALL KEEP

11 ALL OF ITS BOOKS, RECORDS, AND FILES AT OR UNDER THE CONTROL OF

12 ITS PRINCIPAL PLACE OF DOING BUSINESS IN THIS STATE, AND SHALL

13 KEEP A RECORD OF ALL OF ITS SECURITIES, NOTES, MORTGAGES, OR

14 OTHER EVIDENCES OF INDEBTEDNESS, REPRESENTING INVESTMENT OF FUNDS

15 AT ITS PRINCIPAL PLACE OF DOING BUSINESS IN THIS STATE IN THE

16 SAME MANNER AS PROVIDED FOR IN SECTION 5256.

17 (2) A HEALTH MAINTENANCE ORGANIZATION SHALL MAINTAIN FINAN-

18 CIAL RECORDS FOR ITS HEALTH MAINTENANCE ACTIVITIES SEPARATE FROM

19 THE FINANCIAL RECORDS OF ANY OTHER OPERATION OR ACTIVITY CARRIED

20 ON BY THE PERSON LICENSED UNDER THIS CHAPTER TO OPERATE THE

21 HEALTH MAINTENANCE ORGANIZATION.

22 (3) A HEALTH MAINTENANCE ORGANIZATION SHALL HOLD AND MAIN-

23 TAIN LEGAL TITLE TO ALL ASSETS, INCLUDING CASH AND INVESTMENTS.

24 HEALTH MAINTENANCE ORGANIZATION FUNDS AND ASSETS SHALL NOT BE

25 COMMINGLED WITH AFFILIATES OR OTHER ENTITIES IN POOLING OR CASH

26 MANAGEMENT TYPE ARRANGEMENTS. ALL HEALTH MAINTENANCE

05036'99

1 ORGANIZATION ASSETS SHALL BE HELD SEPARATE FROM ALL OTHER

2 ACTIVITIES OF OTHER MEMBERS IN A HOLDING COMPANY SYSTEM.

3 SEC. 3549. A HEALTH MAINTENANCE ORGANIZATION SHALL NOTIFY

4 THE APPROPRIATE BOARD AS TO ANY DISCIPLINARY ACTION TAKEN BY THE

5 HEALTH MAINTENANCE ORGANIZATION FOR ANY OF THE GROUNDS UNDER

6 SECTION 16221 OF THE PUBLIC HEALTH CODE, 1978 PA 368, MCL

7 333.16221, THAT RESULTS IN A CHANGE OF EMPLOYMENT STATUS OR LIMI-

8 TATIONS ON SCOPE OF PARTICIPATION OF A PHYSICIAN OR DENTIST UNDER

9 CONTRACT TO OR DIRECTLY EMPLOYED BY THE HEALTH MAINTENANCE ORGAN-

10 IZATION, INCLUDING AN OFFER BY THE HEALTH MAINTENANCE ORGANIZA-

11 TION TO PERMIT THE PHYSICIAN OR DENTIST TO RESIGN INSTEAD OF THE

12 HEALTH MAINTENANCE ORGANIZATION TAKING DISCIPLINARY ACTION

13 AGAINST THE PHYSICIAN OR DENTIST. THE NOTICE SHALL CONTAIN A

14 SUMMARY OF THE INFORMATION PERTINENT TO THE CHANGE AND SHALL BE

15 TRANSMITTED IN WRITING TO THE APPROPRIATE BOARD WITHIN 30 DAYS

16 AFTER THE CHANGE OCCURS. AS USED IN THIS SECTION, "BOARD" MEANS

17 A LICENSING BOARD CREATED UNDER ARTICLE 15 OF THE PUBLIC HEALTH

18 CODE, 1978 PA 368, MCL 333.16101 TO 333.18838.

19 SEC. 3551. (1) A HEALTH MAINTENANCE ORGANIZATION'S MINIMUM

20 NET WORTH SHALL BE DETERMINED USING ACCOUNTING PROCEDURES

21 APPROVED BY THE COMMISSIONER THAT ENSURE THAT A HEALTH MAINTE-

22 NANCE ORGANIZATION IS FINANCIALLY AND ACTUARIALLY SOUND.

23 (2) A HEALTH MAINTENANCE ORGANIZATION LICENSED UNDER FORMER

24 PART 210 OF THE PUBLIC HEALTH CODE, 1978 PA 368, ON THE EFFECTIVE

25 DATE OF THIS CHAPTER THAT AUTOMATICALLY RECEIVED A CERTIFICATE OF

26 AUTHORITY UNDER SECTION 3505(1) SHALL POSSESS AND MAINTAIN

27 UNIMPAIRED NET WORTH AS REQUIRED UNDER FORMER SECTION 21034 OF

05036'99

1 THE PUBLIC HEALTH CODE, 1978 PA 368, UNTIL THE EARLIER OF THE

2 FOLLOWING:

3 (A) THE HEALTH MAINTENANCE ORGANIZATION ATTAINS A LEVEL OF

4 NET WORTH AS PROVIDED IN SUBSECTION (3) AT WHICH TIME THE HEALTH

5 MAINTENANCE ORGANIZATION SHALL CONTINUE TO MAINTAIN THAT LEVEL OF

6 NET WORTH.

7 (B) DECEMBER 31, 2003.

8 (3) A HEALTH MAINTENANCE ORGANIZATION APPLYING FOR A CERTIF-

9 ICATE OF AUTHORITY ON OR AFTER THE EFFECTIVE DATE OF THIS CHAPTER

10 AND A HEALTH MAINTENANCE ORGANIZATION WISHING TO MAINTAIN A CER-

11 TIFICATE OF AUTHORITY IN THIS STATE AFTER DECEMBER 31, 2003 SHALL

12 POSSESS AND MAINTAIN UNIMPAIRED NET WORTH IN AN AMOUNT DETERMINED

13 ADEQUATE BY THE COMMISSIONER TO CONTINUE TO COMPLY WITH

14 SECTION 403 BUT NOT LESS THAN THE FOLLOWING:

15 (A) FOR A HEALTH MAINTENANCE ORGANIZATION THAT CONTRACTS OR

16 EMPLOYS PROVIDERS IN NUMBERS SUFFICIENT TO PROVIDE 90% OF THE

17 HEALTH MAINTENANCE ORGANIZATION'S BENEFIT PAYOUT, MINIMUM NET

18 WORTH IS THE GREATEST OF THE FOLLOWING:

19 (i) $1,500,000.00.

20 (ii) FIVE PERCENT OF THE HEALTH MAINTENANCE ORGANIZATION'S

21 SUBSCRIPTION REVENUE.

22 (iii) THREE MONTHS' UNCOVERED EXPENDITURES.

23 (B) FOR A HEALTH MAINTENANCE ORGANIZATION THAT DOES NOT CON-

24 TRACT OR EMPLOY PROVIDERS IN NUMBERS SUFFICIENT TO PROVIDE 90% OF

25 THE HEALTH MAINTENANCE ORGANIZATION'S BENEFIT PAYOUT, MINIMUM NET

26 WORTH IS THE GREATEST OF THE FOLLOWING:

05036'99

1 (i) $3,000,000.00.

2 (ii) TEN PERCENT OF THE HEALTH MAINTENANCE ORGANIZATION'S

3 SUBSCRIPTION REVENUE.

4 (iii) THREE MONTHS' UNCOVERED EXPENDITURES.

5 (4) THE COMMISSIONER SHALL TAKE INTO ACCOUNT THE RISK-BASED

6 CAPITAL REQUIREMENTS AS DEVELOPED BY THE NATIONAL ASSOCIATION OF

7 INSURANCE COMMISSIONERS IN ORDER TO DETERMINE ADEQUATE COMPLIANCE

8 WITH SECTION 403 UNDER THIS SECTION.

9 SEC. 3553. (1) MINIMUM DEPOSIT REQUIREMENTS FOR A HEALTH

10 MAINTENANCE ORGANIZATION SHALL BE DETERMINED AS PROVIDED UNDER

11 THIS SECTION AND USING ACCOUNTING PROCEDURES APPROVED BY THE COM-

12 MISSIONER THAT ENSURE THAT A HEALTH MAINTENANCE ORGANIZATION IS

13 FINANCIALLY AND ACTUARIALLY SOUND.

14 (2) A HEALTH MAINTENANCE ORGANIZATION LICENSED UNDER FORMER

15 PART 210 OF THE PUBLIC HEALTH CODE, 1978 PA 368, ON THE EFFECTIVE

16 DATE OF THIS CHAPTER THAT AUTOMATICALLY RECEIVED A CERTIFICATE OF

17 AUTHORITY UNDER SECTION 3505(1) SHALL POSSESS AND MAINTAIN A

18 DEPOSIT AS REQUIRED UNDER FORMER SECTION 21034 OF THE PUBLIC

19 HEALTH CODE, 1978 PA 368, UNTIL THE EARLIER OF THE FOLLOWING:

20 (A) THE HEALTH MAINTENANCE ORGANIZATION ATTAINS THE LEVEL OF

21 DEPOSIT AS PROVIDED IN SUBSECTION (3) AT WHICH TIME THE HEALTH

22 MAINTENANCE ORGANIZATION SHALL CONTINUE TO MAINTAIN THAT LEVEL OF

23 DEPOSIT.

24 (B) DECEMBER 31, 2001.

25 (3) A HEALTH MAINTENANCE ORGANIZATION APPLYING FOR A CERTIF-

26 ICATE OF AUTHORITY ON OR AFTER THE EFFECTIVE DATE OF THIS CHAPTER

27 AND A HEALTH MAINTENANCE ORGANIZATION WISHING TO MAINTAIN A

05036'99

1 CERTIFICATE OF AUTHORITY IN THIS STATE AFTER DECEMBER 31, 2001

2 SHALL POSSESS AND MAINTAIN A DEPOSIT IN AN AMOUNT DETERMINED ADE-

3 QUATE BY THE COMMISSIONER TO CONTINUE TO COMPLY WITH SECTION 403

4 BUT NOT LESS THAN $100,000.00 PLUS 5% OF ANNUAL SUBSCRIPTION REV-

5 ENUE UP TO A $1,000,000.00 MAXIMUM DEPOSIT.

6 (4) THE DEPOSIT REQUIRED UNDER THIS SECTION SHALL BE MADE

7 WITH THE STATE TREASURER OR WITH A FEDERAL OR STATE CHARTERED

8 FINANCIAL INSTITUTION UNDER A TRUST INDENTURE ACCEPTABLE TO THE

9 COMMISSIONER FOR THE SOLE BENEFIT OF THE SUBSCRIBERS AND ENROLL-

10 EES IN CASE OF INSOLVENCY.

11 SEC. 3555. A HEALTH MAINTENANCE ORGANIZATION SHALL MAINTAIN

12 A FINANCIAL PLAN EVALUATING, AT A MINIMUM, CASH FLOW NEEDS AND

13 ADEQUACY OF WORKING CAPITAL. THE PLAN SHALL DO ALL OF THE

14 FOLLOWING:

15 (A) DEMONSTRATE COMPLIANCE WITH ALL HEALTH MAINTENANCE

16 ORGANIZATION FINANCIAL REQUIREMENTS PROVIDED FOR IN THIS

17 CHAPTER.

18 (B) PROVIDE FOR ADEQUATE WORKING CAPITAL, WHICH SHALL NOT BE

19 NEGATIVE AT ANY TIME. THE COMMISSIONER MAY ESTABLISH A MINIMUM

20 WORKING CAPITAL REQUIREMENT FOR A HEALTH MAINTENANCE ORGANIZATION

21 TO ENSURE THE PROMPT PAYMENT OF LIABILITIES.

22 (C) IDENTIFY THE MEANS OF ACHIEVING AND MAINTAINING A POSI-

23 TIVE CASH FLOW, INCLUDING PROVISIONS FOR RETIREMENT OF EXISTING

24 OR PROPOSED INDEBTEDNESS.

25 SEC. 3557. A HEALTH MAINTENANCE ORGANIZATION SHALL FILE

26 NOTICE WITH THE COMMISSIONER OF ANY SUBSTANTIVE CHANGES IN

27 OPERATIONS NO LATER THAN 30 DAYS AFTER THE SUBSTANTIVE CHANGE IN

05036'99

1 OPERATIONS. A SUBSTANTIVE CHANGE IN OPERATIONS INCLUDES, BUT IS

2 NOT LIMITED TO, ANY OF THE FOLLOWING:

3 (A) A CHANGE IN THE HEALTH MAINTENANCE ORGANIZATION'S OFFI-

4 CERS OR DIRECTORS. IN ADDITION TO THE NOTIFICATION, THE HEALTH

5 MAINTENANCE ORGANIZATION SHALL FILE A DISCLOSURE STATEMENT ON A

6 FORM PRESCRIBED BY THE COMMISSIONER FOR EACH NEWLY APPOINTED OR

7 ELECTED OFFICER OR DIRECTOR.

8 (B) A CHANGE IN THE LOCATION OF CORPORATE OFFICES.

9 (C) A CHANGE IN THE ORGANIZATION'S ARTICLES OF INCORPORATION

10 OR BYLAWS. A COPY OF THE REVISED ARTICLES OF INCORPORATION OR

11 BYLAWS SHALL BE INCLUDED WITH THE NOTICE.

12 (D) A CHANGE IN CONTRACTUAL ARRANGEMENTS UNDER WHICH THE

13 HEALTH MAINTENANCE ORGANIZATION IS MANAGED.

14 (E) ANY OTHER SIGNIFICANT CHANGE IN OPERATIONS.

15 SEC. 3559. (1) SUBJECT TO SUBSECTION (2), A HEALTH MAINTE-

16 NANCE ORGANIZATION SHALL OBTAIN A REINSURANCE CONTRACT OR ESTAB-

17 LISH A PLAN OF SELF-INSURANCE AS MAY BE NECESSARY TO ENSURE SOL-

18 VENCY OR TO PROTECT SUBSCRIBERS IN THE EVENT OF INSOLVENCY. A

19 REINSURANCE CONTRACT SHALL BE WITH AN INSURER THAT IS AUTHORIZED

20 OR ELIGIBLE TO TRANSACT INSURANCE IN MICHIGAN.

21 (2) A REINSURANCE CONTRACT OR PLAN UNDER SUBSECTION (1)

22 SHALL BE FILED FOR APPROVAL WITH THE COMMISSIONER NOT LATER THAN

23 30 DAYS AFTER THE FINALIZATION OF THE CONTRACT OR PLAN. A REIN-

24 SURANCE CONTRACT OR PLAN SHALL CLEARLY STATE ALL SERVICES TO BE

25 RECEIVED BY THE HEALTH MAINTENANCE ORGANIZATION. A REINSURANCE

26 CONTRACT OR PLAN SHALL BE CONSIDERED APPROVED 30 DAYS AFTER IT IS

05036'99

1 FILED WITH THE COMMISSIONER UNLESS DISAPPROVED IN WRITING BY THE

2 COMMISSIONER BEFORE THE EXPIRATION OF THOSE 30 DAYS.

3 (3) A HEALTH MAINTENANCE ORGANIZATION SHALL MAINTAIN INSUR-

4 ANCE COVERAGE TO PROTECT THE HEALTH MAINTENANCE ORGANIZATION THAT

5 INCLUDES, AT A MINIMUM, FIRE, THEFT, FIDELITY, GENERAL LIABILITY,

6 ERRORS AND OMISSIONS, DIRECTOR'S AND OFFICER'S LIABILITY COVER-

7 AGE, AND MALPRACTICE INSURANCE. A HEALTH MAINTENANCE ORGANIZA-

8 TION SHALL OBTAIN THE COMMISSIONER'S PRIOR APPROVAL BEFORE

9 SELF-INSURING FOR THESE COVERAGES.

10 SEC. 3561. A HEALTH MAINTENANCE ORGANIZATION SHALL HAVE A

11 PLAN FOR HANDLING INSOLVENCY THAT ALLOWS FOR CONTINUATION OF BEN-

12 EFITS FOR THE DURATION OF THE CONTRACT PERIOD FOR WHICH PREMIUMS

13 HAVE BEEN PAID AND CONTINUATION OF BENEFITS TO ANY MEMBER WHO IS

14 CONFINED ON THE DATE OF INSOLVENCY IN AN INPATIENT FACILITY UNTIL

15 HIS OR HER DISCHARGE FROM THAT FACILITY. CONTINUATION OF BENE-

16 FITS IN THE EVENT OF INSOLVENCY IS SATISFIED IF THE HEALTH MAIN-

17 TENANCE ORGANIZATION HAS AT LEAST 1 OF THE FOLLOWING, AS APPROVED

18 BY THE COMMISSIONER:

19 (A) A FINANCIAL GUARANTEE CONTRACT INSURED BY A SURETY BOND

20 ISSUED BY AN INDEPENDENT INSURER WITH A SECURE RATING FROM A

21 RATING AGENCY THAT MEETS THE REQUIREMENTS OF SECTION 436A(1)(P).

22 (B) A REINSURANCE CONTRACT ISSUED BY AN AUTHORIZED OR ELIGI-

23 BLE INSURER TO COVER THE EXPENSES TO BE PAID FOR CONTINUED BENE-

24 FITS AFTER AN INSOLVENCY.

25 (C) A CONTRACT BETWEEN THE HEALTH MAINTENANCE ORGANIZATION

26 AND ITS AFFILIATED PROVIDERS THAT PROVIDES FOR THE CONTINUATION

05036'99

1 OF PROVIDER SERVICES IN THE EVENT OF THE HEALTH MAINTENANCE

2 ORGANIZATION'S INSOLVENCY.

3 (D) AN IRREVOCABLE LETTER OF CREDIT.

4 (E) AN INSOLVENCY RESERVE ACCOUNT ESTABLISHED WITH A FEDERAL

5 OR STATE CHARTERED FINANCIAL INSTITUTION UNDER A TRUST INDENTURE

6 ACCEPTABLE TO THE COMMISSIONER FOR THE SOLE BENEFIT OF SUBSCRIB-

7 ERS AND ENROLLEES, EQUAL TO 3 MONTHS' PREMIUM INCOME.

8 SEC. 3563. (1) IF A HEALTH MAINTENANCE ORGANIZATION BECOMES

9 INSOLVENT, UPON THE COMMISSIONER'S ORDER ALL OTHER HEALTH MAINTE-

10 NANCE ORGANIZATIONS AND HEALTH INSURERS THAT PARTICIPATED IN THE

11 ENROLLMENT PROCESS WITH THE INSOLVENT HEALTH MAINTENANCE ORGANI-

12 ZATION AT A GROUP'S LAST REGULAR ENROLLMENT PERIOD SHALL OFFER

13 THE INSOLVENT HEALTH MAINTENANCE ORGANIZATION'S AND HEALTH

14 INSURER'S GROUP ENROLLEES A 30-DAY ENROLLMENT PERIOD BEGINNING ON

15 THE DATE OF THE COMMISSIONER'S ORDER. EACH HEALTH MAINTENANCE

16 ORGANIZATION AND HEALTH INSURER SHALL OFFER THE INSOLVENT HEALTH

17 MAINTENANCE ORGANIZATION'S ENROLLEES THE SAME COVERAGES AND RATES

18 THAT IT HAD OFFERED TO THE ENROLLEES OF THE GROUP AT ITS LAST

19 REGULAR ENROLLMENT PERIOD.

20 (2) IF NO OTHER HEALTH MAINTENANCE ORGANIZATION OR HEALTH

21 INSURER HAD BEEN OFFERED TO SOME GROUPS ENROLLED IN THE INSOLVENT

22 HEALTH MAINTENANCE ORGANIZATION, OR IF THE COMMISSIONER DETER-

23 MINES THAT THE OTHER HEALTH MAINTENANCE ORGANIZATIONS OR HEALTH

24 INSURERS LACK SUFFICIENT HEALTH CARE DELIVERY RESOURCES TO ASSURE

25 THAT HEALTH CARE SERVICES WILL BE AVAILABLE AND ACCESSIBLE TO ALL

26 OF THE GROUP ENROLLEES OF THE INSOLVENT HEALTH MAINTENANCE

27 ORGANIZATION, THEN THE COMMISSIONER SHALL ALLOCATE EQUITABLY THE

05036'99

1 INSOLVENT HEALTH MAINTENANCE ORGANIZATION'S GROUP CONTRACTS FOR

2 THESE GROUPS AMONG ALL HEALTH MAINTENANCE ORGANIZATIONS THAT

3 OPERATE WITHIN A PORTION OF THE INSOLVENT HEALTH MAINTENANCE

4 ORGANIZATION'S SERVICE AREA, TAKING INTO CONSIDERATION THE HEALTH

5 CARE DELIVERY RESOURCES OF EACH HEALTH MAINTENANCE ORGANIZATION.

6 EACH HEALTH MAINTENANCE ORGANIZATION TO WHICH A GROUP OR GROUPS

7 ARE SO ALLOCATED SHALL OFFER THE GROUP OR GROUPS THE HEALTH MAIN-

8 TENANCE ORGANIZATION'S EXISTING COVERAGE THAT IS MOST SIMILAR TO

9 EACH GROUP'S COVERAGE WITH THE INSOLVENT HEALTH MAINTENANCE

10 ORGANIZATION AT RATES DETERMINED IN ACCORDANCE WITH THE SUCCESSOR

11 HEALTH MAINTENANCE ORGANIZATION'S EXISTING RATING METHODOLOGY.

12 (3) THE COMMISSIONER SHALL ALLOCATE EQUITABLY THE INSOLVENT

13 HEALTH MAINTENANCE ORGANIZATION'S NONGROUP ENROLLEES WHO ARE

14 UNABLE TO OBTAIN OTHER COVERAGE AMONG ALL HEALTH MAINTENANCE

15 ORGANIZATIONS THAT OPERATE WITHIN A PORTION OF THE INSOLVENT

16 HEALTH MAINTENANCE ORGANIZATION'S SERVICE AREA, TAKING INTO CON-

17 SIDERATION THE HEALTH CARE DELIVERY RESOURCES OF EACH HEALTH

18 MAINTENANCE ORGANIZATION. EACH HEALTH MAINTENANCE ORGANIZATION

19 TO WHICH NONGROUP ENROLLEES ARE ALLOCATED SHALL OFFER THE NON-

20 GROUP ENROLLEES THE HEALTH MAINTENANCE ORGANIZATION'S EXISTING

21 COVERAGE WITHOUT A PREEXISTING CONDITION LIMITATION FOR INDIVID-

22 UAL OR CONVERSION COVERAGE AS DETERMINED BY THE ENROLLEE'S TYPE

23 OF COVERAGE IN THE INSOLVENT HEALTH MAINTENANCE ORGANIZATION AT

24 RATES DETERMINED IN ACCORDANCE WITH THE SUCCESSOR HEALTH MAINTE-

25 NANCE ORGANIZATION'S EXISTING RATING METHODOLOGY. SUCCESSOR

26 HEALTH MAINTENANCE ORGANIZATIONS THAT DO NOT OFFER DIRECT

05036'99

1 NONGROUP ENROLLMENT MAY AGGREGATE ALL OF THE ALLOCATED NONGROUP

2 ENROLLEES INTO 1 GROUP FOR RATING AND COVERAGE PURPOSES.

3 SEC. 3565. (1) A NONGROUP SUBSCRIBER, IN ADDITION TO OTHER

4 RIGHTS AVAILABLE TO REVOKE AN OFFER, MAY CANCEL A HEALTH MAINTE-

5 NANCE CONTRACT WITHIN 72 HOURS AFTER SIGNING. ANY DEPOSIT OR

6 PREPAYMENT MADE SHALL BE REFUNDED WITHIN 30 DAYS OF RECEIPT OF

7 THE NOTICE OF CANCELLATION. A NONGROUP SUBSCRIBER SHALL BE

8 RESPONSIBLE FOR PAYMENT OF REASONABLE FEES FOR ANY SERVICES

9 RECEIVED DURING THE 72 HOURS. FEES MAY BE DEDUCTED FROM THE

10 DEPOSIT OR PREPAYMENT BEFORE THE REFUND IS MADE.

11 (2) CANCELLATION SHALL OCCUR WHEN WRITTEN NOTICE OF CANCEL-

12 LATION IS MAILED OR HAND-DELIVERED TO THE ORGANIZATION OR ITS

13 AGENT OR REPRESENTATIVE.

14 (3) NOTICE OF CANCELLATION SHALL BE SUFFICIENT IF IT INDI-

15 CATES THE INTENTION OF THE PERSON NOT TO BE BOUND BY THE CONTRACT

16 OR APPLICATION.

17 (4) THE RIGHT OF CANCELLATION SHALL APPEAR IN BOLDFACED TYPE

18 ON THE SAME PAGE THE INDIVIDUAL SUBSCRIBER SIGNS TO BIND THE

19 CONTRACT.

20 SEC. 3567. (1) A HEALTH MAINTENANCE CONTRACT SHALL CLEARLY

21 DELINEATE ALL CONDITIONS UNDER WHICH THE HEALTH MAINTENANCE

22 ORGANIZATION MAY CANCEL COVERAGE FOR AN ENROLLEE.

23 (2) A HEALTH MAINTENANCE CONTRACT FOR NONGROUP SUBSCRIBERS

24 SHALL SPECIFY AN ENROLLEE'S RIGHTS AND OPTIONS IN THE CASE OF A

25 PROPOSED AMENDMENT OR CHANGE IN THE CONTRACT OR THE RATE

26 CHARGED.

05036'99

1 (3) CONTINUED PREPAYMENT BY THE SUBSCRIBER DURING THE PERIOD

2 OF APPEAL, AND WHILE AN APPEAL IS IN PROGRESS, DOES NOT

3 CONSTITUTE ACCEPTANCE OF THE PROPOSED AMENDMENT OR RATE CHANGE.

4 SEC. 3569. (1) EXCEPT AS PROVIDED IN SECTION 3515(2), A

5 HEALTH MAINTENANCE ORGANIZATION SHALL ASSUME FULL FINANCIAL RISK

6 ON A PROSPECTIVE BASIS FOR THE PROVISION OF HEALTH MAINTENANCE

7 SERVICES. HOWEVER, THE ORGANIZATION MAY DO ANY OF THE

8 FOLLOWING:

9 (A) REQUIRE AN AFFILIATED PROVIDER TO ASSUME FINANCIAL RISK

10 UNDER THE TERMS OF ITS CONTRACT.

11 (B) OBTAIN INSURANCE.

12 (C) MAKE OTHER ARRANGEMENTS FOR THE COST OF PROVIDING TO AN

13 ENROLLEE HEALTH MAINTENANCE SERVICES THE AGGREGATE VALUE OF WHICH

14 IS MORE THAN $5,000.00 IN A YEAR FOR THAT ENROLLEE.

15 (2) IF THE HEALTH MAINTENANCE ORGANIZATION REQUIRES AN

16 AFFILIATED PROVIDER TO ASSUME FINANCIAL RISK UNDER THE TERMS OF

17 ITS CONTRACT, THE CONTRACT SHALL REQUIRE BOTH OF THE FOLLOWING:

18 (A) THE HEALTH MAINTENANCE ORGANIZATION TO PAY THE AFFILI-

19 ATED PROVIDER, INCLUDING A SUBCONTRACTED PROVIDER, DIRECTLY OR

20 THROUGH A LICENSED THIRD PARTY ADMINISTRATOR FOR HEALTH MAINTE-

21 NANCE SERVICES PROVIDED TO ITS ENROLLEES.

22 (B) THE HEALTH MAINTENANCE ORGANIZATION TO KEEP ALL POOLED

23 FUNDS AND WITHHOLD AMOUNTS AND ACCOUNT FOR THEM ON ITS FINANCIAL

24 BOOKS AND RECORDS AND RECONCILE THEM AT YEAR END IN ACCORDANCE

25 WITH THE WRITTEN AGREEMENT BETWEEN THE AFFILIATED PROVIDER AND

26 THE HEALTH MAINTENANCE ORGANIZATION.

05036'99

1 (3) AS USED IN THIS SECTION, "REQUIRING AN AFFILIATED

2 PROVIDER TO ASSUME FINANCIAL RISK" MEANS A TRANSACTION WHEREBY A

3 PORTION OF THE CHANCE OF LOSS, INCLUDING EXPENSES INCURRED,

4 RELATED TO THE DELIVERY OF HEALTH MAINTENANCE SERVICES IS SHARED

5 WITH AN AFFILIATED PROVIDER IN RETURN FOR A CONSIDERATION. THESE

6 TRANSACTIONS INCLUDE, BUT ARE NOT LIMITED TO, FULL OR PARTIAL

7 CAPITATION AGREEMENTS, WITHHOLDS, RISK CORRIDORS, AND INDEMNITY

8 AGREEMENTS.

9 SEC. 3571. A HEALTH MAINTENANCE ORGANIZATION IS NOT PRE-

10 CLUDED FROM MEETING THE REQUIREMENTS OF, RECEIVING MONEYS FROM,

11 AND ENROLLING BENEFICIARIES OR RECIPIENTS OF, STATE AND FEDERAL

12 HEALTH PROGRAMS.

13 SEC. 3573. A PERSON PROPOSING TO OPERATE A SYSTEM OF HEALTH

14 CARE DELIVERY AND FINANCING THAT IS TO BE OFFERED TO INDIVIDUALS,

15 WHETHER OR NOT AS MEMBERS OF GROUPS, IN EXCHANGE FOR A FIXED PAY-

16 MENT AND ORGANIZED SO THAT PROVIDERS AND THE ORGANIZATION ARE IN

17 SOME PART AT RISK FOR THE COST OF SERVICES IN A MANNER SIMILAR TO

18 A HEALTH MAINTENANCE ORGANIZATION, BUT FAILS TO MEET THE REQUIRE-

19 MENTS SET FORTH IN THIS CHAPTER, MAY OPERATE SUCH A SYSTEM IF THE

20 COMMISSIONER FINDS THAT THE PROPOSED OPERATION WILL BENEFIT PER-

21 SONS WHO WILL BE SERVED BY IT. THE OPERATION SHALL BE AUTHORIZED

22 AND REGULATED IN THE SAME MANNER AS A HEALTH MAINTENANCE ORGANI-

23 ZATION UNDER THIS CHAPTER INCLUDING THE FILING OF PERIODIC

24 REPORTS, EXCEPT TO THE EXTENT THAT THE COMMISSIONER FINDS THAT

25 THE REGULATION IS INAPPROPRIATE TO THE SYSTEM OF HEALTH CARE

26 DELIVERY AND FINANCING. A PERSON OPERATING A SYSTEM OF HEALTH

27 CARE DELIVERY AND FINANCING UNDER THIS SECTION SHALL NOT

05036'99

1 ADVERTISE OR SOLICIT OR IN ANY WAY IDENTIFY ITSELF IN A MANNER

2 IMPLYING TO THE PUBLIC THAT IT IS A HEALTH MAINTENANCE ORGANIZA-

3 TION AUTHORIZED UNDER THIS CHAPTER.

4 Enacting section 1. Part 210 of the public health code,

5 1978 PA 368, MCL 333.21001 to 333.21098, is repealed.

05036'99 Final page. DKH