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SB-0088, As Passed Senate, November 3, 2005

SUBSTITUTE FOR

SENATE BILL NO. 88

A bill to amend 1956 PA 218, entitled

"The insurance code of 1956,"

by amending sections 3515, 3517, 3519, 3523, 3529, 3533, 3539, and

3571 (MCL 500.3515, 500.3517, 500.3519, 500.3523, 500.3529,

500.3533, 500.3539, and 500.3571), sections 3515 and 3519 as

amended by 2002 PA 621, sections 3517, 3533, 3539, and 3571 as

added by 2000 PA 252, and sections 3523 and 3529 as amended by 2002

PA 304.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 3515. (1) A health maintenance organization may provide

additional health maintenance services or any other related health

care service or treatment not required under this chapter.

(2) A health maintenance organization may have health

maintenance contracts with deductibles. A health maintenance

organization may have health maintenance contracts ~~with~~ that

include copayments, ~~that are required for specific health~~

~~maintenance services. Copayments for services required under~~

~~section 3501(b)~~ stated as dollar amounts for the cost of covered

services, and coinsurance, stated as percentages for the cost of

covered services. Coinsurance for basic health services, excluding

deductibles, ~~shall be nominal,~~ shall not exceed 50% of a health

maintenance organization's reimbursement to an affiliated provider

for providing the service to an enrollee , and shall not be based

on the provider's standard charge for the service. This subsection

does not limit the commissioner's authority to regulate and

establish fair, sound, and reasonable copayment and coinsurance

limits including out of pocket maximums.

(3) By May 15, 2008, and by each May 15 after 2008, the

commissioner shall make a determination as to whether the greater

copayment and coinsurance levels allowed by the amendatory act that

added this subsection have increased the number of employers who

have contracted for health maintenance organization services and

whether these levels have increased the number of enrollees

receiving health maintenance organization services. In making this

determination, the commissioner shall hold a public hearing by

February 1, 2008, and may hold a public hearing thereafter, shall

seek the advice and input from appropriate independent sources,

including, but not limited to, all health maintenance organizations

operating in this state and with enrollees in this state, and shall

issue a report delineating specific examples of copayment and

coinsurance levels in force and suggestions to increase the number

of persons enrolled in health maintenance organizations.

(4) If the results of the report issued under subsection (3)

are disputed or if the commissioner determines that the

circumstances that the report was based on have changed, the

commissioner shall issue a supplemental report to the report under

subsection (3) that includes copies of the written objections

disputing the commissioner's report determinations or that

specifies the change of circumstances. The supplemental report

shall be issued not later than December 15 immediately following

the release of the report under subsection (3) that this report

supplements and shall be supported by substantial evidence.

(5) All of the following shall be considered by the

commissioner for purposes of subsections (3) and (4):

(a) Information and data gathered from health maintenance

organizations regarding the effects of greater copayment and

coinsurance levels allowed by the amendatory act that added this

subsection.

(b) Information and data provided by employers who employ

residents of this state.

relevant.

(6) The reports and certifications required under subsections

(3) and (4) shall be forwarded to the governor, the clerk of the

house of representatives, the secretary of the senate, and all

members of the senate and house of representatives standing

committees on insurance and health issues.

(7) A health maintenance organization shall not require

contributions be made to a deductible for ~~preventative~~ preventive

health care services. As used in this subsection, ~~"preventative~~

"preventive health care services" means services designated to

maintain an individual in optimum health and to prevent unnecessary

injury, illness, or disability.

(8) ~~(3)~~ A health maintenance organization may accept from

governmental agencies and from private persons payments covering

any part of the cost of health maintenance contracts.

Sec. 3517. (1) A health maintenance contract shall not provide

for payment of cash or other material benefit to an enrollee,

except as stated in this chapter.

(2) Subsection (1) does not prohibit a health maintenance

organization from promoting optimum health by offering to all

currently enrolled subscribers or to all currently covered

enrollees 1 or more healthy lifestyle programs. A "healthy

lifestyle program" means a program recognized by a health

maintenance organization that enhances health or reduces risk of

disease, including, but not limited to, promoting nutrition and

physical exercise and compliance with disease management programs

and preventive service guidelines that are supported by evidence-

based medical practice. Subsection (1) does not prohibit a health

maintenance organization from offering a currently enrolled

subscriber or currently covered enrollee goods, vouchers, or

equipment that supports achieving optimal health goals. An offering

of goods, vouchers, or equipment under this subsection is not a

violation of subsection (1) and shall not be considered valuable

consideration, a material benefit, a gift, a rebate, or an

inducement under this act.

(3) ~~(2)~~ For an emergency episode of illness or injury that

requires immediate treatment before it can be secured through the

health maintenance organization, or for an out-of-area service

specifically authorized by the health maintenance organization, an

enrollee may utilize a provider within or without this state not

normally engaged by the health maintenance organization to render

service to its enrollees. The organization shall pay reasonable

expenses or fees to the provider or enrollee as appropriate in an

individual case. These transactions are not considered acts of

insurance and, except as provided in this chapter and section

3406k, are not otherwise subject to this act.

Sec. 3519. (1) A health maintenance organization contract and

the contract's rates, including any deductibles, ~~and~~ copayments,

and coinsurances, between the organization and its subscribers

shall be fair, sound, and reasonable in relation to the services

provided, and the procedures for offering and terminating contracts

shall not be unfairly discriminatory.

(2) A health maintenance organization contract and the

contract's rates shall not discriminate on the basis of race,

color, creed, national origin, residence within the approved

service area of the health maintenance organization, lawful

occupation, sex, handicap, or marital status, except that marital

status may be used to classify individuals or risks for the purpose

of insuring family units. The commissioner may approve a rate

differential based on sex, age, residence, disability, marital

status, or lawful occupation, if the differential is supported by

sound actuarial principles, a reasonable classification system, and

is related to the actual and credible loss statistics or reasonably

anticipated experience for new coverages. A healthy lifestyle

program as defined in section 3517(2) is not subject to the

commissioner's approval under this subsection and is not required

to be supported by sound actuarial principles, a reasonable

classification system, or be related to actual and credible loss

statistics or reasonably anticipated experience for new coverages.

(3) All health maintenance organization contracts shall

include, at a minimum, basic health services.

Sec. 3523. (1) A health maintenance contract shall be filed

with and approved by the commissioner.

(2) A health maintenance contract shall include any approved

riders, amendments, and the enrollment application.

(3) In addition to the provisions of this act that apply to an

expense-incurred hospital, medical, or surgical policy or

certificate, a health maintenance contract shall include all of the

following:

(a) Name and address of the organization.

(b) Definitions of terms subject to interpretation.

(d) The conditions of eligibility.

(e) A statement of responsibility for payments.

(f) A description of specific benefits and services available

under the contract within the service area, with respective

copayments, coinsurances, and deductibles.

(g) A description of emergency and out-of-area services.

(h) A specific description of any limitation, exclusion, and

exception, including any preexisting condition limitation, grouped

together with captions in boldfaced type.

(i) Covenants that address confidentiality, an enrollee's

right to choose or change the primary care physician or other

providers, availability and accessibility of services, and any

rights of the enrollee to inspect and review his or her medical

records.

(j) Covenants of the subscriber shall address all of the

following subjects:

(i) Timely payment.

(ii) Nonassignment of benefits.

(iii) Truth in application and statements.

(iv) Notification of change in address.

(v) Theft of membership identification.

(k) A statement of responsibilities and rights regarding the

grievance procedure.

(l) A statement regarding subrogation and coordination of

benefits provisions, including any responsibility of the enrollee

to cooperate.

(m) A statement regarding conversion rights.

(n) Provisions for adding new family members or other acquired

dependents, including conversion of individual contracts to family

contracts and family contracts to individual contracts, and the

time constraints imposed.

(o) Provisions for grace periods for late payment.

(p) A description of any specific terms under which the health

maintenance organization or the subscriber can terminate the

contract.

(q) A statement of the nonassignability of the contract.

Sec. 3529. (1) A health maintenance organization may contract

with or employ health professionals on the basis of cost, quality,

availability of services to the membership, conformity to the

administrative procedures of the health maintenance organization,

and other factors relevant to delivery of economical, quality care,

but shall not discriminate solely on the basis of the class of

health professionals to which the health professional belongs.

(2) A health maintenance organization shall enter into

contracts with providers through which health care services are

usually provided to enrollees under the health maintenance

organization plan.

(3) An affiliated provider contract shall prohibit the

provider from seeking payment from the enrollee for services

provided pursuant to the provider contract, except that the

contract may allow affiliated providers to collect copayments,

coinsurances, and deductibles directly from enrollees.

(4) An affiliated provider contract shall contain provisions

assuring all of the following:

(a) The provider meets applicable licensure or certification

requirements.

(b) Appropriate access by the health maintenance organization

to records or reports concerning services to its enrollees.

organization's quality assurance activities.

(5) The commissioner may waive the contract requirement under

subsection (2) if a health maintenance organization has

demonstrated that it is unable to obtain a contract and

accessibility to patient care would not be compromised. When 10% or

more of a health maintenance organization's elective inpatient

admissions, or projected admissions for a new health maintenance

organization, occur in hospitals with which the health maintenance

organization does not have contracts or agreements that protect

enrollees from liability for authorized admissions and services,

the health maintenance organization may be required to maintain a

hospital reserve fund equal to 3 months' projected claims from such

hospitals.

(6) A health maintenance organization shall submit to the

commissioner for approval standard contract formats proposed for

use with its affiliated providers and any substantive changes to

those contracts. The contract format or change is considered

approved 30 days after filing unless approved or disapproved within

the 30 days. As used in this subsection, "substantive changes to

contract formats" means a change to a provider contract that alters

the method of payment to a provider, alters the risk assumed by

each party to the contract, or affects a provision required by law.

(7) A health maintenance organization or applicant shall

provide evidence that it has employed, or has executed affiliation

contracts with, a sufficient number of providers to enable it to

deliver the health maintenance services it proposes to offer.

Sec. 3533. (1) A health maintenance organization may offer

prudent purchaser contracts to groups or individuals and in

conjunction with those contracts a health maintenance organization

may pay or may reimburse enrollees, or may contract with another

entity to pay or reimburse enrollees, for unauthorized services or

for services by nonaffiliated providers in accordance with the

terms of the contract and subject to copayments, coinsurances,

deductibles, or other financial penalties designed to encourage

enrollees to obtain services from the organization's providers.

(2) Prudent purchaser contracts and the rates charged for them

are subject to the same regulatory requirements as health

maintenance contracts. The rates charged by an organization for

coverage under contracts issued under this section shall not be

unreasonably lower than what is necessary to meet the expenses of

the organization for providing this coverage and shall not have an

anticompetitive effect or result in predatory pricing in relation

to prudent purchaser agreement coverages offered by other

organizations.

(3) A health maintenance organization shall not issue prudent

purchaser contracts unless it is in full compliance with the

requirements for adequate working capital, statutory deposits, and

reserves as provided in this chapter and it is not operating under

any limitation to its authorization to do business in this state.

(4) A health maintenance organization shall maintain financial

records for its prudent purchaser contracts and activities in a

form separate or separable from the financial records of other

operations and activities carried on by the organization.

Sec. 3539. (1) For an individual covered under a nongroup

contract or under a contract not covered under subsection (2), a

health maintenance organization may exclude or limit coverage for a

condition only if the exclusion or limitation relates to a

condition for which medical advice, diagnosis, care, or treatment

was recommended or received within 6 months before enrollment and

the exclusion or limitation does not extend for more than 6 months

after the effective date of the health maintenance contract.

(2) A health maintenance organization shall not exclude or

limit coverage for a preexisting condition for an individual

covered under a group contract.

(3) Except as provided in subsection (5), a health maintenance

organization that has issued a nongroup contract shall renew or

continue in force the contract at the option of the individual.

(4) Except as provided in subsection (5), a health maintenance

organization that has issued a group contract shall renew or

continue in force the contract at the option of the sponsor of the

plan.

(5) Guaranteed renewal is not required in cases of fraud,

intentional misrepresentation of material fact, lack of payment, if

the health maintenance organization no longer offers that

particular type of coverage in the market, or if the individual or

group moves outside the service area.

(6) A health maintenance organization is not required to

continue a healthy lifestyle program or to continue any incentive

associated with a healthy lifestyle program, including, but not

limited to, goods, vouchers, or equipment.

(7) ~~(6)~~ As used in this section, "group" means a group of 2

or more subscribers.

Sec. 3571. A health maintenance organization is not precluded

from meeting the requirements of, receiving ~~moneys~~ money from,

and enrolling beneficiaries or recipients of , state and federal

health programs. A health maintenance organization that

participates in a state or federal health program shall meet the

solvency and financial requirements of this act, unless the health

maintenance organization is in receivership or under supervision,

but is not required to offer benefits or services that exceed the

requirements of the state or federal health program. This section

does not apply to state employee or federal employee health

programs.