South Carolina General Assembly
110th Session, 1993-1994

Bill 1244

Indicates Matter Stricken
Indicates New Matter

                    Current Status

Introducing Body:               Senate
Bill Number:                    1244
Primary Sponsor:                J. Verne Smith
Committee Number:               13
Type of Legislation:            GB
Subject:                        Health Purchasing
                                Cooperatives and Community
                                Care Networks
Residing Body:                  Senate
Current Committee:              Medical Affairs
Computer Document Number:       CYY/15743AC.94
Introduced Date:                19940309    
Last History Body:              Senate
Last History Date:              19940309    
Last History Type:              Introduced, read first time,
                                referred to Committee
Scope of Legislation:           Statewide
All Sponsors:                   J. Verne Smith
Type of Legislation:            General Bill


Bill  Body    Date          Action Description              CMN  Leg Involved
____  ______  ____________  ______________________________  ___  ____________

1244  Senate  19940309      Introduced, read first time,    13
                            referred to Committee

View additional legislative information at the LPITS web site.

(Text matches printed bills. Document has been reformatted to meet World Wide Web specifications.)



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.