1998 Regular Session
To: Public Health and Welfare
By: Senator(s) Bean
Senate Bill 2435
AN ACT TO AMEND SECTIONS 83-41-303 AND 83-41-325, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT A PROVIDER-SPONSORED ORGANIZATION ELIGIBLE TO OFFER A MEDICARE CHOICE PRODUCT SHALL NOT BE REQUIRED TO MEET HMO SOLVENCY REQUIREMENTS BUT MAY BE LICENSED WHEN IT HAS MET FEDERAL SOLVENCY STANDARDS; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. Section 83-41-303, Mississippi Code of 1972, is amended as follows:
83-41-303. (a) "Affiliated Health Care Provider" means a provider who is affiliated with another provider through contract, ownership or other means if (i) the provider, directly or indirectly, controls, is controlled by or is under common control with another provider, (ii) both providers are part of a controlled group of corporations under Internal Revenue Service guidelines, (iii) the providers are part of an affiliated service group under the Internal Revenue Code, or (iv) each provider participates in a lawful combination under which the provider shares substantial financial risk in connection with a provider-sponsored organization's operations.
(b) "Basic health care services" means the following medically necessary services: preventive care, emergency care, inpatient and outpatient hospital and physician care, diagnostic laboratory and diagnostic and therapeutic radiological services and includes, but is not limited to, mental health services or services for alcohol or drug abuse, dental or vision services or long-term rehabilitation treatment for the purpose of preventing, alleviating, curing or healing human illness or physical disability.
(c) "Capitated basis" means fixed per member per month payment or percentage of premium payment wherein the provider assumes the full risk for the cost of contracted services without regard to the type, value or frequency of services provided. Capitated basis includes the cost associated with operating staff model facilities.
(d) "Carrier" means a health maintenance organization, an insurer, a nonprofit hospital and medical service corporation, fraternal societies, preferred provider organizations or any other entity responsible for the payment of benefits or provision for services under a group contract or individual contract on a prepayment basis.
(e) "Commissioner" means the Commissioner of Insurance.
(f) "Copayment" means an amount an enrollee must pay in order to receive a specific service which is not fully prepaid.
(g) "Deductible" means the amount an enrollee is responsible to pay out-of-pocket before the carrier begins to be responsible for the costs associated with treatment.
(h) "Enrollee" means an individual who is covered for the benefits offered by the carrier.
(i) "Evidence of coverage" means a statement of the essential features and services of the health care provider which is given to the subscriber by the carrier or by the group contract holder.
(j) "Extension of benefits" means the continuation of coverage under a particular benefit provided under a contract following termination with respect to an enrollee or subscriber who is totally disabled on the date of termination.
(k) "Financing" means the prepayment of premium or premium equivalences for services to be received by the enrollee in the future together with acceptance and assumption of the risk, including capitation fee.
(l) "Grievance" means a written complaint submitted in accordance with the provider's formal grievance procedure by or on behalf of the enrollee regarding any aspect of the carrier or provider to the enrolled.
(m) "Group contract" means a contract for health care services which by its terms limits eligibility to members of a specified group and may include coverage for dependents.
(n) "Group contract holder" means a person having a group contract.
(o) "Health maintenance organization" means any person that undertakes to provide or arrange for the delivery of basic health care services through an organized system which combines the delivery and financing of health care to enrollees on a prepaid or other financial basis (except for enrolled responsibility for copayment or deductibles) through an organized system which combines the delivery and financing of health care. When an organization accepts and assumes risks and accepts payments, fees, premiums or premium equivalences or that risk it is deemed to be a health maintenance organization.
(p) "Health maintenance organization producer" means a person who holds a life, health and accident insurance license and a certificate of authority to represent the health maintenance organization who solicits, negotiates, effects, procures, delivers, renews or continues a policy or contract for health maintenance organization membership, or who takes or transmits a membership fee or premium for such a policy or contract, other than for himself, or a person who advertises or otherwise holds himself out to the public as such.
(q) "Individual contract" means a contract for health care services issued to and covering an individual may include dependents of the subscriber.
(r) "Insolvent" or "insolvency" means that the organization has been declared insolvent and placed under an order of rehabilitation or liquidation by a court of competent jurisdiction.
(s) "Managed hospital payment basis" means agreements wherein the financial risk is primarily related to the degree of utilization rather than to the cost of services.
(t) "Net worth" means the excess of total admitted assets over total liabilities, but the liabilities shall not include fully subordinated debt.
(u) "Participating provider" means a provider as defined in paragraph (w) who, under an express or implied contract with the health maintenance organization or with its contractor or subcontractor, has agreed to provide health care services to enrollees with an expectation of receiving payment, other than copayment or deductible, directly or indirectly from the health maintenance organization.
(v) "Person" means any natural or artificial person including, but not limited to, individuals, partnerships, associations, trusts, fraternal societies, or corporations.
(w) "Provider" means any physician, hospital or other person licensed or otherwise authorized to furnish health care services.
(x) Provider-sponsored organization" means a public or private entity established or organized, and operated, by a provider or a group of affiliated health care providers that (i) provides a substantial portion of covered benefits directly through the provider or Affiliated Health Care Providers and (ii) with respect to which the Affiliated Health Care Providers (A) share, directly or indirectly, a substantial financial risk with respect to the provision of covered benefits and (B) have at least a majority financial interest in the entity.
(y) "Replacement coverage" means the benefits provided by a succeeding carrier.
(z) "Subscriber" means an individual whose employment or other status, except family dependency, is the basis for eligibility for enrollment in the health maintenance organization, or in the case of an individual contract, the person in whose name the contract is issued.
(aa) "Uncovered expenditures" means the costs to the health maintenance organization for health care services that are the obligation of the health maintenance organization, for which an enrollee may also be liable if the health maintenance organization is insolvent and for which no alternative arrangements have been made that are acceptable to the commissioner.
SECTION 2. Section 83-41-325, Mississippi Code of 1972, is amended as follows:
83-41-325. (1) Except as provided in subsection (18), before issuing any certificate of authority, the commissioner shall require that the health maintenance organization have an initial net worth of One Million Five Hundred Thousand Dollars ($1,500,000.00) and shall thereafter maintain the minimum net worth required under subsection (2).
(2) Except as provided in subsections (3) and (4) of this section, every health maintenance organization must maintain a minimum net worth equal to the greater of:
(a) One Million Dollars ($1,000,000.00); or
(b) Two percent (2%) of annual premium revenues as reported on the most recent annual financial statement filed with the commissioner on the first One Hundred Fifty Million Dollars ($150,000,000.00) of premium and one percent (1%) of annual premium on the premium in excess of One Hundred Fifty Million Dollars ($150,000,000.00); or
(c) An amount equal to the sum of three (3) months uncovered health care expenditures as reported on the most recent financial statement filed with the commissioner; or
(d) For a health maintenance organization in which seventy-five percent (75%) or more of the providers are paid on a capitated basis, an amount equal to the sum of:
(i) Eight percent (8%) of annual health care expenditures except those paid on a capitated basis or managed hospital payment basis as reported on the most recent financial statement filed with the commissioner; and
(ii) Four percent (4%) of annual hospital expenditures paid on a managed hospital payment basis as reported on the most recent financial statement filed with the commissioner.
(3) A health maintenance organization licensed before July 1, 1995, must maintain a minimum net worth of:
(a) Twenty-five percent (25%) of the amount required by subsection (2) by December 31, 1995;
(b) Fifty percent (50%) of the amount required by subsection (2) by December 31, 1996;
(c) Seventy-five percent (75%) of the amount required by subsection (2) by December 31, 1997;
(d) One hundred percent (100%) of the amount required by subsection (2) by December 31, 1998.
(4) (a) In determining net worth, no debt shall be considered fully subordinated unless the subordination clause is in a form acceptable to the commissioner. Any interest obligation relating to the repayment of any subordinated debt must be similarly subordinated.
(b) The interest expenses relating to the repayment of any fully subordinated debt shall be considered covered expenses.
(c) Any debt incurred by a note meeting the requirements of this section, and otherwise acceptable to the commissioner, shall not be considered a liability and shall be recorded as equity.
(5) Unless otherwise provided below, each health maintenance organization shall deposit with the commissioner or, at the discretion of the commissioner, with any organization or trustee acceptable to him through which a custodial or controlled account is utilized, cash, securities, or any combination of these or other measures that are acceptable to him which at all times shall have a value of not less than Five Hundred Thousand Dollars ($500,000.00).
(6) A health maintenance organization that is in operation on July 1, 1995, shall make a deposit equal to Two Hundred Fifty Thousand Dollars ($250,000.00).
In the second year, the amount of the additional deposit for a health maintenance organization that is in operation on July 1, 1995, shall be equal to Two Hundred Fifty Thousand Dollars ($250,000.00), for a total of Five Hundred Thousand Dollars ($500,000.00).
(7) The deposit shall be an admitted asset of the health maintenance organization in the determination of net worth.
(8) All income from deposits shall be an asset of the organization. A health maintenance organization that has made a securities deposit may withdraw that deposit or any part thereof after making a substitute deposit of cash, securities, or any combination of these or other measures of equal amount and value. Any securities shall be approved by the commissioner before being deposited or substituted.
(9) The deposit shall be used to protect the interests of the health maintenance organization's enrollees and to assure continuation of health care services to enrollees of a health maintenance organization which is in rehabilitation or conservation. The commissioner may use the deposit for administrative costs directly attributable to a receivership or liquidation. If the health maintenance organization is placed in receivership or liquidation, the deposit shall be an asset subject to the provisions of the liquidation act.
(10) The commissioner may reduce or eliminate the deposit requirement if the health maintenance organization deposits with the State Treasurer, commissioner, or other official body of the state or jurisdiction of domicile for the protection of all subscribers and enrollees, wherever located, of such health maintenance organization, cash, acceptable securities or surety, and delivers to the commissioner a certificate to such effect, duly authenticated by the appropriate state official holding the deposit.
(11) If the commissioner becomes aware of a need for additional deposits he may order a health maintenance organization to place with the State Treasurer additional deposits to meet the need to protect the securities.
(12) Every health maintenance organization shall, when determining liabilities, include an amount estimated in the aggregate to provide for any unearned premium and for the payment of all claims for health care expenditures which have been incurred, whether reported or unreported, which are unpaid and for which such organization is or may be liable, and to provide for the expense of adjustment or settlement of such claims, and guaranteed renewal reserves if applicable.
The liabilities shall be computed in accordance with regulations promulgated by the commissioner upon reasonable consideration of the ascertained experience and character of the health maintenance organization.
(13) Every contract between a health maintenance organization and a participating provider of health care services shall be in writing and shall set forth that if the health maintenance organization fails to pay for health care services as set forth in the contract, the subscriber or enrollee shall not be liable to the provider for any sums owed by the health maintenance organization.
(14) If the participating provider contract has not been reduced to writing as required or that the contract fails to contain the required prohibition, the participating provider shall not collect or attempt to collect from the subscriber or enrollee sums owed by the health maintenance organization.
(15) No participating provider, or agent, trustee or assignee thereof, may maintain any action at law against a subscriber or enrollee to collect sums owed by the health maintenance organization.
(16) The commissioner shall require that each health maintenance organization have a plan for handling insolvency which allows for continuation of benefits for the duration of the contract period for which premiums have been paid and continuation of benefits to members who are confined on the date of insolvency in an inpatient facility until their discharge or expiration of benefits. The commissioner in his discretion may require:
(a) Insurance to cover the expenses to be paid for continued benefits after an insolvency;
(b) Provisions in provider contracts that obligate the provider to provide services for the duration of the period after the health maintenance organization's insolvency for which premium payment has been made and until the enrollees' discharge from inpatient facilities;
(c) Insolvency reserves;
(d) Acceptable letters of credit;
(e) Any other arrangements to assure that benefits are continued as specified above.
(17) An agreement to provide health care services between a provider and a health maintenance organization must require that if the provider terminates the agreement, the provider shall give the health maintenance organization at least sixty (60) days' advance notice of termination.
(18) Notwithstanding anything herein to the contrary, a provider-sponsored organization shall not be required to meet the solvency requirements provided for herein but instead shall be eligible to be licensed under state law in accordance with this article when it has met federal solvency standards required of a provider-sponsored organization eligible to offer a Medicare choice plan in Mississippi, in accordance with Section 4001 of the Balanced Budget Act of 1997, Public Law 105-33.
SECTION 3. This act shall take effect and be in force from and after July 1, 1998.