S 1244 Session 110 (1993-1994)
S 1244 General Bill, By J.V. Smith and Giese
A Bill to amend Title 44, Chapter 7, Code of Laws of South Carolina, 1976,
relating to hospitals, tuberculosis camps, and health services districts by
adding Article 20 so as to enact the "Health Purchasing Cooperatives and
Community Care Networks Act" and to provide the requirements for and
regulation of these cooperatives and networks.
03/09/94 Senate Introduced and read first time SJ-2
03/09/94 Senate Referred to Committee on Medical Affairs SJ-2
A BILL
TO AMEND TITLE 44, CHAPTER 7, CODE OF LAWS OF SOUTH
CAROLINA, 1976, RELATING TO HOSPITALS, TUBERCULOSIS
CAMPS, AND HEALTH SERVICES DISTRICTS BY ADDING
ARTICLE 20 SO AS TO ENACT THE "HEALTH
PURCHASING COOPERATIVES AND COMMUNITY CARE
NETWORKS ACT" AND TO PROVIDE THE
REQUIREMENTS FOR AND REGULATION OF THESE
COOPERATIVES AND NETWORKS.
Whereas, the General Assembly finds that:
(1) health care costs to small businesses and individuals are
increasing at an alarming rate;
(2) access to care and controlling health care costs can be
improved by giving consumers more and better choices in the health
plans they purchase;
(3) small groups and individuals should have a broad range of
health care options when they purchase health care;
(4) small groups and individuals can improve their purchasing
power by pooling themselves into larger groups;
(5) the health care marketplace should provide cost-effective,
affordable health care through greater use of managed care options;
(6) health care providers should better coordinate the delivery of
their services to improve access and cost for consumers;
(7) health care reimbursement should place greater financial risks
on health insurers and providers of health care to create incentives for
efficient delivery of health care; and
(8) consumers and payers of health care should be more informed
about the cost and quality of the health care products they purchase,
and providers should make more information available to the public.
Now, therefore,
Be it enacted by the General Assembly of the State of South
Carolina:
SECTION 1. Chapter 7, Title 44 of the 1976 Code is amended by
adding:
"Article 20
Health Purchasing Cooperatives and
Community Care Networks
Section 44-7-2400. This article may be cited as the `Health
Purchasing Cooperatives and Community Care Networks Act'.
Section 44-7-2405. As used in this article:
(1) `Board' means the State Budget and Control Board.
(2) `Capitated rates' means a payment for health services that
is a set fee for each individual enrollee, regardless of the number and
type of services provided.
(3) `Community Care Network' means a form of risk-assuming
business organization which provides health benefits for residents of
this State and which is in compliance with all rating, underwriting,
financial responsibility, taxation, claims handling, sales, solicitation,
licensing, trade practices, and all other applicable provisions of the
South Carolina Insurance Code. A community care network may be
created by health providers, health maintenance organizations, or
health insurers.
(4) `Department' means the Department of Health and
Environmental Control.
(5) `Director' means the Director of the Department of
Insurance.
(6) `Health care provider' means a health care professional
licensed, certified, or registered under the laws of this State or an
organization licensed pursuant to Section 44-69-30 or 44-71-30 or a
facility licensed pursuant to Section 44-7-260 or 44-89-40 to provide
health care services.
(7) `Health plan' means a hospital or medical policy or contract
or hospital or medical service plan contract or major medical expense
insurance or health maintenance organization contract. `Health plan'
does not include accident only, specific disease, credit, dental, vision,
Medicare or Champus supplement, long-term care, or disability income
insurance or coverage issued as a supplement to workers'
compensation or similar insurance or automobile medical-payment
insurance.
(8) `Health Purchasing Cooperatives' or `Co-ops' means a
nonprofit membership corporation that acts as a purchasing agent for
health coverage on behalf of all individuals and small employers who
seek to obtain coverage through the co-op.
(9) `Modified community rating' means a rating methodology
used to develop health premiums which spreads financial risk across
a large population and allows adjustments for age, gender, geographic
area, family status, and benefit plan design.
(10) `Pre-existing condition' means a health plan provision that
excludes coverage for charges or expenses incurred during a specific
period following the insured's effective date of coverage as to:
(a) a condition that, during a specified period immediately
preceding the effective date of coverage, had manifested itself in such
a manner as would cause an ordinarily prudent person to seek medical
advice, diagnosis, care, or treatment or for which medical advice,
diagnosis, care, or treatment was recommended or received as to that
condition; or
(b) pregnancy existing on the effective date of coverage.
(11) `Purchaser' means a person or organization that purchases
health care services regardless of whether the cost of coverage or
services is paid for by the business or by the person receiving
coverage or services.
(12) `Small employer' means a person, firm, corporation,
partnership, or association actively engaged in business that on at least
fifty percent of its working days during the preceding calendar year
employed no more than fifty eligible employees. In determining the
number of eligible employees, companies that are affiliated companies
or that are eligible to file a combined tax return for purposes of state
taxation, are considered one employer.
(13) `Specialized benefit package' means accident only, specific
disease, individual hospital indemnity, dental only, vision only,
Medicare supplement, long-term care, or disability insurance or
workers' compensation or similar insurance or automobile medical-payment insurance.
(14) `Standard health care services' means a health insurance plan
developed by the director pursuant to the requirements of the Small
Employers Health Insurance Availability Act of 1994. The director
shall set forth his recommendations no later than June 30, 1995.
Section 44-7-2410. (A) The creation of Health Purchasing
Cooperatives is authorized in this State for the purposes of pooling
small businesses, self-employed individuals, and state employees and
retirees and the dependents of these employees and retirees. A co-op
must be operated as a state-chartered, nonprofit private organization
pursuant to Chapter 33 of Title 31.
(B) A co-op shall operate only for the benefit of its members. A
co-op must be the exclusive entity for the coordination and oversight
of health coverage purchases by its members; however, no co-op may
discriminate in its activities based on the health status or historical or
projected experience of small employers or their employees,
individuals, or any other group eligible for membership in the co-op.
Nothing in this article or any other provision of law, may limit the
formation of business health coalitions organized solely to offer health
coverage to members of its organization or trade association. However,
a business coalition must comply with the standards set forth for co-ops in Section 44-7-2415(5), (6), (7), (9), (10), and (12).
(C) A health plan offered through a co-op must be provided by a
certified community care network. A co-op may not directly provide
insurance or bear any risk or form of self-insurance plans among its
members. A co-op may not engage in any activities for which an
insurance agent's license is required. A co-op may cooperate with
other co-ops in order to improve services provided to co-op members.
(D) Membership in a co-op must be voluntary. However, a small
employer electing to purchase health coverage through a co-op or have
its employees purchase health coverage through a co-op must provide
that all employees of that small employer purchase health coverage
through the co-op.
(E) A co-op must be certified by the director. All applications and
filings and reports by co-ops to the director must be treated as public
documents. However, nothing in this section may be construed to
require disclosure of trade secrets, privileged or confidential
commercial information, or replies to a specific request for
information made by the director. This information must be
considered proprietary information and not subject to disclosure to
outside persons.
(F) A co-op must be governed by a board of directors chosen by
the membership of the co-op. No member of the board of directors
of a co-op may be employed by, affiliated with, an agent of, or a
representative of a health care provider or insurance carrier. Each co-op shall appoint an advisory board made up of health care providers
and community care networks participating in the co-op.
(G) A co-op shall offer its members at least the following:
(1) two health plans that integrate financing and delivery of
health care and assume financial risk, such as health maintenance
organizations or community care networks; and
(2) one health plan that is an indemnity, fee for service plan.
Section 44-7-2415. A co-op has the following duties and
responsibilities to:
(1) adopt rules regarding criteria for selection of community care
networks;
(2) if applicable, adopt rules regarding the collection of premiums,
including risk assessment and risk adjustment that might impact
premium distribution;
(3) approve an annual co-op budget and levy assessments to cover
operating expenses of the co-op;
(4) establish the conditions of co-op membership in accordance
with requirements outlined by the director;
(5) provide to co-op members clear, standardized information on
each health plan offered by a community care network including price,
enrollee costs, quality, patient satisfaction, enrollment, and enrollee
responsibilities and obligations and comparison sheets to be used in
providing co-op members information regarding the coverage that may
be obtained through a community care network;
(6) annually offer all co-op members a health plan offered by a
certified community care network which meets the requirements of the
co-op;
(7) request proposals from community care networks for
specialized health benefit plans, offering them as options to co-op
members;
(8) establish administrative and accounting procedures for the
operation of the co-op; a co-op may contract with a qualified third
party for services necessary to carry out its powers and duties;
(9) develop a plan to market and publicize its services to its
members and potential members; no community care network may
market its services or health plans directly or indirectly to members of
a co-op;
(10) ensure that a health plan offered by a community care network
which provides the standard health services through a preferred
provider network, a health maintenance organization, or a pure
indemnity product is offered to members of the co-op;
(11) establish an ombudsman function to handle enrollee complaints
and problems and establish a grievance procedure to handle complaints
against the co-op or a community care network serving members of
the co-op;
(12) assess the relative risk and adjust for variations in relative risks
among health plans offered by community care networks. To assist
the co-op in this function, each community care network shall report
information necessary to assess relative risk among the plans
including, at a minimum, basic demographic information on the
enrollment in a specific health plan and an analysis from the claims
history of the diagnoses for the individuals enrolled in each health
plan. The co-op also shall devise a methodology to provide for
appropriate risk adjustments to compensate for medical education and
for disproportionate amounts of uncompensated care; and
(13) develop a lifestyle incentive program for all community care
networks. A community care network may adjust its rates to offer
credit or incentives for the development of lifestyle incentive
programs.
Section 44-7-2420. A co-op may receive and accept grants, loans,
funds from public or private agencies, and contributions of money,
property, labor, or any other thing of value.
Section 44-7-2425. (A) A co-op may establish procedures for
collecting premiums from members and distributing them to
participating community care networks. If a co-op chooses to collect
and distribute premiums, payment must be made by individuals or
employers directly to the co-op for the benefit of the health plans.
(B) The following must be conditions of participation in a co-op:
(1) assurance that the group is a valid small employer and is not
formed for the purpose of securing health benefit coverage and that
individuals in the small employer group are employees. Assurances
also must be provided by sole proprietors and self-employed
individuals;
(2) no co-op may require a small employer to pay any portion
of a premium as a condition of participation in the co-op; and
(3) if an employer offers more than one health plan and the
employer contributes to coverage of employees or dependents, the co-op shall require that the employer contribute the same dollar amount
for each employee, regardless of the health plan chosen by the
employee. An eligible individual who enrolls with a health plan
through a co-op is liable to the health plan for premiums. A co-op
member who loses his or her job may remain in the co-op and pay
premiums directly to the co-op.
(C) The purchase of health care for state employees, state retirees,
and their dependents through a co-op must be determined by the
board. When purchasing health care through a co-op, the board
annually shall offer to all employees and retirees the opportunity to
select from health plans offered by all community care networks in the
area where the employee lives. The board shall seek to make available
to state employees community care networks that offer health plans
through health maintenance organizations, exclusive provider
organizations, preferred provider organizations, and pure indemnity
plans if the board elects to purchase health care for state employees
and retirees through a co-op.
Section 44-7-2430. A community care network may be created by
health care providers, health maintenance organizations, and health
insurers for the purpose of providing health care to members of health
purchasing cooperatives or any other health purchaser or self-insured.
Section 44-7-2435. (A) A community care network must be
certified by the director. An applicant for certification shall submit
information in a manner prescribed by the director. The information
submitted must demonstrate:
(1) that each facility, institution, and participating provider is
licensed or certified and in good standing with the department or other
appropriate licensing agency;
(2) the capacity to administer the health plans it is offering;
(3) the structure to deliver the level and type of health care
services outlined in the health plans it is offering;
(4) established policies and procedures to conduct utilization
review and management;
(5) established procedures to achieve, monitor, and evaluate the
quality and cost-effectiveness of care provided by its provider
network;
(6) the ability to provide enrollees adequate access to health care
providers including geographic availability and adequate numbers and
types of providers;
(7) the ability to monitor access to its provider network;
(8) established procedures to handle enrollee inquiries and
complaints and a satisfactory grievance procedure;
(9) the ability to utilize medical outcome data to educate
network providers, update utilization review procedures, and
recommend changes to benefit design;
(10) the ability to recruit and retain health professionals at all
levels including a plan to increase the number of minority health care
providers;
(11) the ability to provide patient care in the most appropriate,
least restrictive clinical setting; and
(12) financial solvency including the ability to assume the risk of
providing and paying for covered services, utilizing reinsurance,
provider risk-sharing, and other appropriate mechanisms to share
financial risk.
(B) A community care network accredited by a nationally
recognized accrediting body or federal agency with standards
acceptable to the director or a community care network that is a
qualified or accredited health maintenance organization may be
considered to have met the requirements of subsection (A)(1-8) and
(12).
Section 44-7-2440. The director may suspend or revoke certification
of a community care network that fails to continue to meet the
requirements of Sections 44-7-2430 through 44-7-2460. The director
may require reports and information necessary to carry out the
responsibilities of this article.
Section 44-7-2445. (A) A community care network shall comply
with all rating, underwriting, claims-handling, sales, solicitation,
licensing, unfair trade practices, and other provisions of the South
Carolina Insurance Code.
(B) A health plan offered by a community care network shall:
(1) offer standard health care services;
(2) provide fair compensation to rural health providers;
(3) offer an initial enrollment period of at least thirty days and
an annual thirty-day open enrollment period to members of a health
co-op and their dependents for each health plan offered by a
community care network and develop procedures for enrollment of
new members and members with changes in employment or family
composition. The provisions of Section 44-7-2460(C) do not apply to
an eligible enrollee who does not enroll in a community care network
during open enrollment periods offered by the plans;
(4) accept all members of a co-op who are eligible and who
choose a particular health plan.
(C) A community care network shall provide clear, standardized
information on each health plan offered by a community care network
as required by Section 44-7-2415(5).
Section 44-7-2450. A community care network may:
(1) purchase, lease, construct, renovate, operate, or maintain
hospitals or medical facilities, or both, and their ancillary equipment
and property as may reasonably be required for its principal office or
for purposes as may be necessary in the transaction of the business of
the organization;
(2) furnish health care services through providers which are under
contract with or employed by the community care network; (3) contract with a person for the performance on its behalf of certain
functions such as marketing, enrollment, and administration;
(4) provide or contract with an insurance company or health
maintenance organization licensed in this State for the provision of
insurance, indemnity, or reimbursement against the cost of health care
services provided by the network or for reinsurance coverage;
(5) offer other health care plans, in addition to the standard health
care services.
Section 44-7-2455. (A) A community care network may provide
services to more than one co-op. A network may terminate its
contract with a co-op upon providing one hundred twenty days' notice
before nonrenewal by the network. A health care provider who is
made an offer may participate in a community care network as long
as the provider abides by the terms and conditions of the provider
network contract, provides services at a rate or price equal to the rate
or price negotiated by the network, and meets all of the network's
qualifications for participation.
(B) A community care network shall establish a panel of providers
from its provider network to review and make recommendations to the
network on the health plans and issues related to the plans offered by
the network through a health co-op. Referral activities by providers
participating in a certified community care network are exempt from
the requirements of Chapter 113 of Title 44.
Section 44-7-2460. (A) As a condition of doing business in this
State, beginning July 1, 1995, or upon certification by the director, a
community care network shall offer and issue all health benefit plans
to members of a certified health co-op who agree to make required
premium payments and satisfy the other provisions of the plan.
(B) Pre-existing conditions may not exclude coverage for a period
beyond six months following the individual's or small employer's
effective date of coverage. Pre-existing conditions may relate only to: (1) conditions that during July 1, 1994, through December 31,
1994, had manifested themselves in such a manner as would cause an
ordinarily prudent person to seek medical advice, diagnosis, care, or
treatment or for which medical advice, diagnosis, care, or treatment
was recommended or received; or
(2) a pregnancy existing on January 1, 1995.
However, in determining whether a pre-existing condition provision
applies to an eligible employee or dependent, credit must be given for
the time a member of a health co-op was covered under previous
coverage if the previous coverage was continuous to a date not more
than thirty days before the effective date of the coverage under a
health plan offered by a community care network.
(C) A community care network shall use a modified community
rating methodology in determining the premiums for health plans
offered to members of a health co-op.
(D) A community care network may not modify the rate for twelve
months from the initial issue date or renewal date, unless the
composition of the group changes or benefits are changed. Renewal
rates must be based on the same modified community rating
methodology applied to new business."
SECTION 2. This act takes effect January 1, 1995.
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