PRINTER'S NO. 1828
No. 1505 Session of 1997
INTRODUCED BY VEON, SURRA, THOMAS, GEORGE, BELARDI, SATHER,
MUNDY, ROONEY, MANDERINO, WALKO, HALUSKA, McCALL,
CAPPABIANCA, YOUNGBLOOD, CASORIO, BLAUM, CURRY, ITKIN, BEBKO-
JONES, SHANER, MELIO, OLASZ, LAUGHLIN, DeLUCA, SCRIMENTI,
PRESTON, JOSEPHS, MIHALICH, PETRARCA, BOSCOLA, WASHINGTON,
GIGLIOTTI, STEELMAN, TRICH, A. H. WILLIAMS AND M. COHEN,
MAY 14, 1997
REFERRED TO COMMITTEE ON INSURANCE, MAY 14, 1997
AN ACT
1 Amending the act of December 29, 1972 (P.L.1701, No.364),
2 entitled "An act providing for the establishment of nonprofit
3 corporations having the purpose of establishing, maintaining
4 and operating a health service plan; providing for
5 supervision and certain regulations by the Insurance
6 Department and the Department of Health; giving the Insurance
7 Commissioner and the Secretary of Health certain powers and
8 duties; exempting the nonprofit corporations from certain
9 taxes and providing penalties," further providing for
10 definitions, for services to be provided and for certificates
11 of authority; providing for managed care comparison reports;
12 further providing for contracts with providers and insurers;
13 providing for clinical quality assurance, for consumer and
14 provider information, for a managed care consumer advocate
15 program, for grievance procedures, for utilization review and
16 for managed care organization standards for an availability
17 and accessibility bill of rights; and making editorial
18 changes.
19 The General Assembly of the Commonwealth of Pennsylvania
20 hereby enacts as follows:
21 Section 1. Sections 1 and 2 of the act of December 29, 1972
22 (P.L.1701, No.364), known as the Health Maintenance Organization
23 Act, amended December 19, 1980 (P.L.1300, No.234), are amended
1 to read:
2 Section 1. Short Title.--This act shall be known and may be
3 cited as the ["Health Maintenance Organization] "Managed Care
4 Plan Act."
5 Section 2. Purpose.--The purpose of this act is to permit
6 and encourage the formation and regulation of [health
7 maintenance organizations] managed care plans and to authorize
8 the Secretary of Health to provide technical advice and
9 assistance to corporations desiring to establish, operate and
10 maintain [a health maintenance organization] managed care plans
11 to the end that increased competition and consumer choice
12 offered by diverse [health maintenance organizations] managed
13 care plans can constructively serve to advance the purposes of
14 quality assurance, cost-effectiveness and access.
15 Section 2. The definition of "direct provider" in section 3
16 of the act, amended December 19, 1980 (P.L.1300, No.234), is
17 amended and the section is amended by adding definitions to
18 read:
19 Section 3. Definitions.--As used in this act:
20 * * *
21 "Clinical peer" or "peer" means a physician or other health
22 care professional who holds a nonrestricted license in this
23 Commonwealth or another state and in the same or similar
24 specialty as typically manages the medical condition, procedure
25 or treatment under review.
26 * * *
27 "Department" means the Department of Health of the
28 Commonwealth.
29 "Direct provider" means an individual who is a direct
30 provider of health care services under a benefit plan of a
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1 [health maintenance organization] managed care plan or an
2 individual whose primary current activity is the administration
3 of health facilities in which such care is provided. An
4 individual shall not be considered a direct provider of health
5 care solely because the individual is a member of the governing
6 body of a health-related organization.
7 "Direct services ratio" means the ratio between an
8 organization's medical revenues and medical expenses.
9 "Emergency" means a medical emergency.
10 "Enrollee" or "subscriber" means a person covered by a health
11 insurance policy or managed care plan including a person who is
12 covered as an eligible dependent of another person.
13 "Grievance" means a complaint made by or on behalf of a
14 subscriber. The term includes:
15 (1) a determination by a managed care plan or its designated
16 utilization review organization or by any health care
17 professional or health care facility affiliated with or acting
18 under arrangement with the plan, that an admission, availability
19 of care, continued stay or other health care service reviewed
20 does not meet the plan's requirements for medical necessity,
21 appropriateness, health care setting, level of care or
22 effectiveness and that, the requested service is therefore
23 denied, reduced or terminated;
24 (2) the availability, delivery or quality of health care
25 services, including delay, timing or location of services,
26 appropriate skill level of health care professional, denial of
27 coverage for emergency and related services or any other managed
28 care plan action or policy which hinders the receipt of covered
29 health care services;
30 (3) claims payment, handling or reimbursement for health
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1 care services; or
2 (4) matters pertaining to the contractual relationship
3 between a covered person and a managed care plan.
4 * * *
5 "Health outcomes" means:
6 (1) the results of treatment adjusted for severity for
7 patients seeking treatment;
8 (2) the recurrence of treatment; and
9 (3) the treatment received which is indicative of the
10 possible lack of treatment of a less severe but related health
11 problem.
12 "Managed care plan" or "plan" means a system pursuant to
13 which health care, related equipment or services are provided
14 for members or subscribers whose access to other health care
15 must be approved by a primary care practitioner selected by or
16 for such member or subscriber from a panel of participating
17 practitioners. The term includes, but is not limited to, health
18 maintenance organizations and preferred provider organizations.
19 "Medical audit" means an onsite review of the quality of care
20 being provided and the effectiveness of the quality assurance of
21 the managed care plan.
22 "Medical emergency" means the initial treatment of a sudden,
23 unexpected onset of a medical condition or traumatic injury, but
24 does not include treatment for an occupational injury for which
25 benefits are provided under any workers' compensation law or
26 occupational disease law. The symptoms or injury must be of
27 sufficient severity that a prudent layperson would seek
28 immediate attention.
29 "Medical expenses" means the cost of providing health care
30 services.
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1 "Medical revenues" means the income generated from providing
2 health care services.
3 "Medically necessary" means treatment which is reasonable and
4 necessary for the diagnosis or treatment of illness or injury or
5 to improve the functioning of a malformed body member. Treatment
6 is considered reasonable and necessary if it is safe, effective
7 and appropriate. The term does not include experimental or
8 investigational treatment.
9 "Preferred provider organization" means a health care benefit
10 arrangement designed to supply services at a reasonable cost
11 through incentives for enrollees to use designated health care
12 providers and in which:
13 (1) patients pay more to use services rendered by health
14 care providers who are not part of the organization's network;
15 and
16 (2) health care providers expect to benefit through
17 increased patient volume and prompt payment, in return for the
18 health care providers' agreement to abide by a fee schedule and
19 follow utilization management procedures.
20 "Primary care provider" means a health care professional who
21 is designated by a managed care plan to supervise, coordinate,
22 or provide initial care or continuing care to a subscriber, and
23 who may be required by the plan to initiate a referral for
24 specialty care and to maintain supervision of the health care
25 services rendered to the subscriber. The term includes a
26 physician, a gynecologist, a pediatrician, an obstetrician or
27 other licensed health care specialist.
28 "Risk-assuming preferred provider organization" means a
29 preferred provider organization which has one or more of the
30 following characteristics:
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1 (1) Assumption by the preferred provider organization of
2 financial risk arising out of contractual liability to pay for
3 or reimburse enrollees for covered health care services.
4 (2) Participation in financial gains or losses of a health
5 benefits plan based on aggregate measures of expenditures or
6 utilization.
7 (3) Participation in the overall financial risk of a health
8 benefits plan by placing upper limits on future premium
9 increases.
10 (4) Other characteristics which create a financial risk to
11 the preferred provider organization and arise out of the
12 preferred provider arrangement.
13 The term does not include a third-party administrator, or a
14 licensed insurer, when functioning solely as a third-party
15 administrator.
16 * * *
17 Urgent care services" means those health care services that
18 are appropriately provided for an unforeseen condition of a kind
19 that usually requires medical attention without delay but that
20 does not pose a threat to the life, limb or permanent health of
21 the injured or ill person, without regard to where these
22 services are provided, and that may include services provided
23 out of a managed care plan's approved service area pursuant to
24 indemnity payments or plan contracts.
25 Section 3. Sections 4 and 5.1 of the act, amended or added
26 December 19, 1980 (P.L.1300, No.234), are amended to read:
27 Section 4. Services Which Shall be Provided.--(a) Any law
28 to the contrary notwithstanding, any corporation may establish,
29 maintain and operate a [health maintenance organization] managed
30 care plan upon receipt of a certificate of authority to do so in
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1 accordance with this act.
2 (b) Such [health maintenance organizations] managed care
3 plans shall:
4 (1) Provide either directly or through arrangements with
5 others, basic health services to individuals enrolled;
6 (2) Provide either directly or through arrangements with
7 other persons, corporations, institutions, associations or
8 entities, basic health services; [and]
9 (3) Provide physicians' services (i) directly through
10 physicians who are employes of such organization, (ii) under
11 arrangements with one or more groups of physicians (organized on
12 a group practice or individual practice basis) under which each
13 such group is reimbursed for its services primarily on the basis
14 of an aggregate fixed sum or on a per capita basis, regardless
15 of whether the individual physician members of any such group
16 are paid on a fee-for-service or other basis or (iii) under
17 similar arrangements which are found by the secretary to provide
18 adequate financial incentives for the provision of quality and
19 cost-effective care.
20 Section 5.1. Certificate of Authority.--(a) Every
21 application for a certificate of authority under this act shall
22 be made to the commissioner and secretary in writing and shall
23 be in such form and contain such information as the regulations
24 of the Departments of Insurance and Health may require.
25 (b) A certificate of authority shall be jointly issued by
26 order of the commissioner and secretary when:
27 (1) The secretary has found and determined that the
28 applicant:
29 (i) has demonstrated the potential ability to assure both
30 availability and accessibility of adequate personnel and
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1 facilities in a manner [enhancing] assuring availability,
2 accessibility, quality of care and continuity of services in
3 accordance with section 10.1 of this act;
4 (ii) has [arrangements for an ongoing quality of health care
5 assurance program; and] demonstrated, to the satisfaction of the
6 secretary, that its internal quality assurance system can
7 identify, evaluate and remedy problems relating to access,
8 continuity, underutilization and quality of care in accordance
9 with section 9.1 of this act;
10 (iii) has appropriate mechanisms whereby the [health
11 maintenance organization] managed care plan will effectively
12 provide or arrange for the provision of basic health care
13 services on a prepaid basis; [and]
14 (iv) has demonstrated that one-sixth of the board membership
15 represents front line employes of the plan or their union
16 representatives and that one-third of the board membership
17 represents enrollees who were elected by the enrollees of the
18 plan; and
19 (v) has demonstrated compliance with the provisions of this
20 act.
21 (2) The commissioner has found and determined that the
22 applicant has a reasonable plan to operate the [health
23 maintenance organization] managed care plan in a financially
24 sound manner and is reasonably expected to meet its obligations
25 to enrollees and prospective enrollees. In making this
26 determination, the commissioner [may] shall consider:
27 (i) The adequacy of working capital and funding sources.
28 (ii) Arrangements for insuring the payment of the cost of
29 health care services or the provision for automatic
30 applicability of an alternative coverage in the event of
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1 discontinuance of the [health maintenance organization] managed
2 care plan.
3 (iii) Any agreement with providers of health care services
4 whereby they assume financial risk for the provision of services
5 to subscribers.
6 (iv) Any deposit of cash, or guaranty or maintenance or
7 minimum restricted reserves which the commissioner, by
8 regulation, may adopt to assure that the obligations to
9 subscribers will be performed.
10 (v) That no managed care plan shall possess a direct
11 services ratio less than ninety per cent during the prior three-
12 year licensing period.
13 (c) Within ninety days of receipt of a completed application
14 for a certificate of authority, the commissioner and secretary
15 shall jointly either:
16 (1) approve the application and issue a certificate of
17 authority; or
18 (2) disapprove the application [specifying] and specify in
19 writing the reasons for such disapproval. Any disapproval of an
20 application may be appealed in accordance with Title 2 of the
21 Pennsylvania Consolidated Statutes (relating to administrative
22 law and procedure).
23 (d) A certificate of authority shall expire three years from
24 the date of issuance.
25 Section 4. The act is amended by adding a section to read:
26 Section 5.2. Managed Care Comparison Reports.--(a) Pursuant
27 to the act of July 8, 1986 (P.L.408, No.89), known as the
28 "Health Care Cost Containment Act," the council shall, on an
29 annual basis, publish managed care comparison reports. The
30 reports shall measure and compare the cost effectiveness and
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1 quality of service of each managed care plan operating in this
2 Commonwealth.
3 (b) Each managed care plan shall report to the council the
4 following:
5 (1) Outcomes for conditions identified by the council.
6 (2) The direct services ratio.
7 (3) The number of members per 1,000 seeking and receiving
8 treatment for conditions identified by the council.
9 (4) Other information requested by the council consistent
10 with subsection (a) of this section.
11 (c) The council shall develop standardized reporting
12 requirements and procedures to implement this section.
13 (d) The council shall develop subscriber and provider
14 satisfaction surveys in accordance with written survey protocols
15 developed by the council to survey at least annually a broad
16 range of current subscribers, former subscribers, direct
17 providers and primary care providers of each certified managed
18 care plan. Surveys shall be returned to the council by
19 subscribers, direct providers and primary care providers in
20 postage-paid envelopes for processing. The council shall report
21 the results to the department and to the plan. The results shall
22 be included in the comparison reports.
23 (e) Each managed care plan shall provide its subscribers
24 with a current copy of its annual comparison report.
25 Section 5. Sections 6.1, 7, 8 and 9 of the act, amended or
26 added December 19, 1980 (P.L.1300, No.234), are amended to read:
27 Section 6.1. Foreign [Health Maintenance Organizations]
28 Managed Care Plans.--(a) A [health maintenance organization]
29 managed care plan approved and regulated under the laws of
30 another state may be authorized by issuance of a certificate of
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1 authority to operate or do business in this Commonwealth by
2 satisfying the commissioner and the secretary that it is fully
3 and legally organized under the laws of [its] the other state,
4 and that it complies with all requirements for [health
5 maintenance organizations] managed care plans organized within
6 the Commonwealth.
7 (b) The commissioner and the secretary may waive or modify
8 the provisions of this act under which they have the authority
9 to act if they determine that the same are not appropriate to a
10 particular [health maintenance organization] managed care plan
11 of another state, that such waiver or modification will be
12 consistent with the purposes and provisions of this act, and
13 that it will not result in unfair discrimination in favor of the
14 [health maintenance organization] managed care plan of another
15 state.
16 (c) The commissioner and the secretary are hereby authorized
17 and directed to develop with other states reciprocal licensing
18 agreements concerning the licensure of [health maintenance
19 organizations] managed care plans which permit the commissioner
20 and the secretary to accept audits, inspections and reviews of
21 agencies from other states to determine whether [health
22 maintenance organizations] managed care plans licensed in other
23 states meet Commonwealth requirements.
24 Section 7. Board of Directors.--A corporation receiving a
25 certificate of authority to operate a [health maintenance
26 organization] managed care plan under the provisions of this act
27 shall be organized in such a manner that assures that at least
28 one-third of the membership of the board of directors of the
29 [health maintenance organization] managed care plan will be
30 subscribers of the [organization] plan. The board of directors
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1 shall be elected in the manner stated in the corporation's
2 charter or bylaws.
3 Section 8. Contracts with Practitioners, Hospitals,
4 Insurance Companies, Enrollees, Etc.--(a) Contracts enabling
5 [the] a corporation to provide the services authorized under
6 section 4 of this act made with hospitals and practitioners of
7 medical, dental and related services shall be filed with the
8 secretary. The secretary shall have power to require immediate
9 renegotiation of such contracts whenever he determines that they
10 provide for excessive payments, or that they fail to include
11 reasonable incentives for cost control, or that they otherwise
12 substantially and unreasonably contribute to escalation of the
13 costs of providing health care services to subscribers, or that
14 they are otherwise inconsistent with the purposes of this act.
15 (b) A [health maintenance organization] managed care plan
16 may reasonably contract with any individual, partnership,
17 association, corporation or organization for the performance on
18 its behalf of other necessary functions including, but not
19 limited to, marketing, enrollment, and administration, and may
20 contract with an insurance company authorized to do an accident
21 and health business in this State or a hospital plan corporation
22 or a professional health service corporation for the provision
23 of insurance or indemnity or reimbursement against the cost of
24 health care services provided by the [health maintenance
25 organization] managed care plan as it deems to be necessary.
26 Such contracts shall be filed with the commissioner.
27 (c) A managed care plan may not discourage or prevent a
28 primary care provider, through a contractual arrangement or
29 otherwise, from discussing any diagnostic or treatment option.
30 (d) (1) Notwithstanding the provisions of any law to the
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1 contrary, if a managed care plan terminates its contract with a
2 participating provider at the plan's initiative, an enrollee who
3 has selected that provider to receive covered services may
4 continue to receive covered services from that provider, at the
5 enrollee's option, until the end of the enrollee's period of
6 enrollment or for up to one year of treatment, whichever date is
7 later. During that period, those health care services shall be
8 covered by the plan under the same terms and conditions as they
9 were covered while the provider was participating in the plan.
10 (2) A managed care plan shall require all providers upon
11 entering into or renewing contracts with the plan to agree to
12 continue to provide health care services to an enrollee of the
13 plan under the same terms and conditions as stipulated in the
14 contract for a period of up to one year following termination of
15 the contract. Exceptions to this subsection shall be made if the
16 provider relocates outside the service area.
17 (e) No managed care plan may provide any financial incentive
18 in an effort to influence treatment decisions.
19 Section 9. Right to Serve or Benefits When Outside the
20 State.--If a subscriber entitled to services provided by the
21 corporation necessarily incurs expenses for such services while
22 outside the service area, the [health maintenance organization]
23 managed care plan to which the person is a subscriber may, in
24 its discretion and if satisfied both as to the necessity for
25 such services and that it was such as the subscriber would have
26 been entitled to under similar circumstances in the service
27 area, reimburse the subscriber or pay on his behalf all or part
28 of the reasonable expenses incurred for such services. Such
29 decision for reimbursement shall be subject to review by the
30 commissioner at the request of a subscriber.
19970H1505B1828 - 13 -
1 Section 6. The act is amended by adding sections to read:
2 Section 9.1. Clinical Quality Assurance.--(a) Each managed
3 care plan shall develop a clinical quality assurance plan for
4 the monitoring and evaluation of health care provided by all
5 participating providers of the managed care plan.
6 (b) The quality assurance plan shall be submitted to and
7 approved by the department prior to the managed care plan's
8 enrolling subscribers. Certified plans shall submit a quality
9 assurance plan within six months of the effective date of this
10 section, and annually thereafter, for review and approval by the
11 department.
12 (c) The quality assurance plan shall be available at no cost
13 to the general public.
14 (d) The quality assurance plan shall include:
15 (1) An identifiable structure for performing quality
16 assurance functions within the managed care plan, including
17 regular meetings and records of meetings.
18 (2) Quality assurance objectives which include specific
19 goals for implementation.
20 (3) A system for physician and other health professional
21 performance review.
22 (4) A method for assuring a comprehensive review.
23 (5) A system for evaluating health outcomes, including, but
24 not limited to, outcomes for persons with disabilities, chronic
25 illnesses, rare diseases, mental illnesses and substance abuse
26 problems.
27 (6) Written guidelines for quality of care studies and
28 related monitoring activities.
29 (7) Quality indicators relating to specific clinical or
30 health service delivery areas which are objective, measurable
19970H1505B1828 - 14 -
1 and based on current knowledge and clinical experience.
2 (8) Health services delivery standards or practice
3 guidelines consistent with standards and guidelines developed by
4 commonly accepted sources and approved by the department.
5 (9) A method for evaluating and monitoring individual cases.
6 (10) A provision for periodic medical audits at least every
7 two years by the department.
8 (11) An internal grievance system.
9 (12) Procedures for suspending or terminating participating
10 providers for providing substandard care under the benefit plan
11 of the managed care plan.
12 (13) A provision requiring the submission of annual reports
13 to the department.
14 (14) A system for protecting and promoting subscriber
15 rights.
16 (15) A system for assuring compliance with medical records
17 standards and continuous confidentiality of medical records.
18 (16) A system for credentialing and recredentialing
19 participating providers every three years.
20 (17) A provision authorizing the release of all standards
21 used for coverage decisions with participating providers to the
22 department and the subscribers.
23 (18) A system to insure that any denial of coverage is
24 approved by a provider specializing in the condition for which
25 treatment is sought.
26 (19) The managed care plan's direct services ratio for the
27 most recent quarter.
28 (20) A system to establish discharge planning standards for
29 subscribers about to be released from State mental hospitals or
30 correctional facilities.
19970H1505B1828 - 15 -
1 Section 9.2. Release of Information.--(a) Each managed care
2 plan shall develop common language informational materials for
3 subscribers and prospective subscribers to include:
4 (1) Benefits provided under the contract and any benefit
5 limitations, exclusions, prior authorization requirements,
6 standing referral procedures and procedures or services the
7 managed care plan has designated experimental or
8 investigational.
9 (2) An explanation of the procedure for selecting, changing
10 and accessing participating providers, including:
11 (i) the subscriber's financial responsibility for services
12 provided under the benefit plan; and
13 (ii) a description of how to obtain all necessary
14 authorizations and price authorization requirements.
15 (3) A summary of minimum standards for continuity, access
16 and availability of health care services, time between making an
17 appointment and being seen in accordance with section 16.1 and
18 how the managed care plan complies with those requirements.
19 (4) An explanation of policies, procedures and other
20 criteria that form the basis for a denial or limitation of
21 coverage or reimbursement.
22 (5) A current list of all providers, primary care providers
23 and specialists available to subscribers, including, but not
24 limited to, any limitation on their availability, address,
25 specialty and hospital affiliation.
26 (6) A description of the managed care plan's method of
27 resolving subscriber complaints, including claim or treatment
28 denials, dissatisfaction with care and access to care and a
29 description of any other complaint and appeal rights in
30 accordance with section 9.4 of this act.
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1 (7) How to contact the department's consumer advocate and a
2 description of services provided by the consumer advocate.
3 (8) A card stating the toll-free telephone number for a
4 subscriber or a health care provider to contact the plan to
5 receive authorizations.
6 (9) A description of the mechanisms in which subscribers may
7 participate in the development of policies of the plan.
8 (10) A description of practice standards or parameters which
9 deviate from the practice standards or parameters established or
10 recognized by a professional provider association.
11 (b) The managed care plan shall advise participating
12 providers of:
13 (1) Practice standards and parameters used by the plan in
14 approving and paying for services.
15 (2) Practice standards and parameters which deviate from the
16 practice standards and parameters established or recognized by a
17 professional provider association.
18 The information required by this subsection shall be updated at
19 least annually and any time that the information is altered.
20 Section 9.3. Managed Care Consumer Advocate Program.--(a) A
21 managed care consumer advocate program shall be established
22 within the department to perform the following functions on
23 behalf of enrollees of managed care plans:
24 (1) Assist consumers in receiving a timely response from
25 managed care plan representatives.
26 (2) Assist consumers by providing information, referral and
27 assistance to individuals about means of obtaining health
28 coverage and services appropriate to the consumers' needs.
29 (3) Educate and train consumers in the use of available
30 resources concerning managed care plans.
19970H1505B1828 - 17 -
1 (4) Assist enrollees to understand their rights and
2 responsibilities under their managed care plan. This clause
3 includes accessing appropriate levels of care and specialty
4 providers.
5 (5) Identify, investigate and resolve enrollee complaints
6 about health care services and assist enrollees with filing
7 complaints and appeals.
8 (6) Advocate policies and programs that protect consumer
9 interests and rights under managed care plans.
10 (7) Prepare an annual consumer satisfaction survey for
11 distribution to the public.
12 (b) The consumer advocate shall be accessible through a
13 toll-free telephone number and shall ensure that individuals
14 receive timely responses to their inquiries.
15 (c) The consumer advocate shall be immune from civil
16 liability for good faith performance of official duties.
17 (d) Each managed care plan shall advise enrollees of the
18 role of the consumer advocate and how to contact the consumer
19 advocate.
20 (e) The consumer advocate shall report to the General
21 Assembly on the types of assistance, provided by category and
22 frequency of assistance provided by each managed care plan.
23 Section 9.4. Grievance Procedure.--(a) A managed care plan
24 shall possess a written grievance procedure for prompt and
25 effective resolution of enrollee grievances approved by the
26 secretary. Any modifications to the grievance procedure shall be
27 approved by the secretary. The grievance procedure shall include
28 the following elements:
29 (1) There shall be a uniform standard for initiating
30 complaints.
19970H1505B1828 - 18 -
1 (2) There shall be two levels of review with the second-
2 level review being conducted by clinical peers assigned by the
3 secretary.
4 (3) There shall be expedited reviews in cases of denials
5 which may jeopardize the life or health of an enrollee with a
6 maximum time period of five days or as rapidly as the situation
7 requires, whichever is shorter, from the expedited review
8 request.
9 (4) The enrollee shall be notified of the enrollee's rights
10 at each step in the grievance process, which rights shall
11 include:
12 (i) The right to appeal and the procedure to appeal.
13 (ii) The right to present pertinent data including testimony
14 of expert witnesses.
15 (iii) The right to receive a written decision containing a
16 summary of the grievance, the decision, the contract basis or
17 medical rationale for the decision and the names and titles of
18 the persons participating in the decision.
19 (iv) The continuation of health care services without being
20 financially liable beyond the level required prior to the
21 grievance for services received pending resolution of the
22 second-level review.
23 (v) The right to contact and the toll-free telephone number
24 of the consumer advocate.
25 (5) First-level review shall be completed within five
26 working days from the date of the request, for expedited
27 reviews.
28 (6) The parties involved in the grievance process shall
29 cooperate in providing materials relevant to the grievance in a
30 manner to permit a decision in accordance with the time periods
19970H1505B1828 - 19 -
1 established in this act. Any delay in a decision that occurs as
2 a result of the plan's actions or inactions shall result in a
3 favorable decision for the enrollee.
4 (7) If the enrollee prevails at the second-level review or
5 upon appeal to the department, the plan shall pay the enrollee's
6 reasonable attorney fees, expert witness fees and other
7 reasonable costs.
8 (8) The plan shall prepare and submit an annual report to
9 the department regarding the volume of grievances for
10 classifications of grievances designated by the advocate, the
11 resulting decisions and the level at which the grievance was
12 finally resolved.
13 (b) The secretary shall establish a managed care grievance
14 procedure which shall include the following elements:
15 (1) There shall be review and approval of plan grievance
16 procedures based on compliance with the requirements of this
17 act, as well as other statutory or regulatory requirements.
18 (2) Clinical peers shall be randomly assigned, independent
19 from the plan and shall have no financial interest in the
20 grievance being processed at the second-level review.
21 (3) Second-level reviews shall be completed within thirty
22 days of the request.
23 (4) An enrollee may request an appeal following a second-
24 level review. The appeal shall be in the form of an
25 administrative hearing pursuant to 2 Pa.C.S. Ch. 7 Subch. A
26 (relating to judicial review of Commonwealth agency action).
27 (c) Nothing in this act shall be construed to preempt other
28 consumer rights or remedies available under law.
29 Section 9.5. Oversight of Utilization Review Program.--A
30 managed care plan shall monitor all utilization review
19970H1505B1828 - 20 -
1 activities carried out by, or on behalf of, the plan and for
2 ensuring that all requirements of this act and applicable
3 regulations are satisfied. The plan shall also ensure that
4 appropriate personnel have operational responsibility for the
5 conduct of the plan's utilization review program.
6 Section 9.6. Contracting.--If a managed care plan contracts
7 for a utilization review organization or other entity to perform
8 the utilization review functions required under this act or
9 applicable regulations, the secretary shall hold the plan
10 responsible for monitoring the activities of the utilization
11 review organization or entity with which the plan contracts and
12 for ensuring that the requirements of this act and applicable
13 regulations are satisfied.
14 Section 9.7. Utilization Review.--(a) A managed care plan
15 that conducts utilization review shall implement a written
16 utilization review program that describes all review activities,
17 both delegated and nondelegated, for covered services provided.
18 The program document shall describe the following:
19 (1) Procedures to evaluate the clinical necessity,
20 appropriateness, efficacy or efficiency of health services.
21 (2) Data sources and clinical review criteria used in
22 decision making.
23 (3) The process for conducting appeals of adverse
24 determinations.
25 (4) Mechanisms to ensure consistent application of review
26 criteria and compatible decisions.
27 (5) Data collection processes and analytical methods used in
28 assessing utilization of health care services.
29 (6) Provisions for assuring confidentiality of clinical and
30 proprietary information.
19970H1505B1828 - 21 -
1 (7) The organizational structure, such as utilization review
2 committee, quality assurance or other committee, that
3 periodically assesses utilization review activities and reports
4 to the plan's governing body.
5 (8) The staff position functionally responsible for day-to-
6 day program management.
7 (b) A managed care plan shall file an annual summary report
8 of its utilization review program activities with the
9 department.
10 Section 9.8. Operational Requirements.--(a) A utilization
11 review program shall use documented clinical review criteria
12 that are based on sound clinical evidence and are evaluated
13 periodically to assure ongoing efficacy. A managed care plan may
14 develop its own clinical review criteria or it may purchase or
15 license clinical review criteria from qualified vendors. A
16 managed care plan shall make available its clinical review
17 criteria to the department.
18 (b) Qualified health care professionals shall administer the
19 utilization review program and oversee review decisions. A
20 clinical peer shall evaluate the clinical appropriateness of
21 adverse determinations.
22 (c) A managed care plan shall issue utilization review
23 decisions in a timely manner and as follows:
24 (1) The plan shall obtain all information required to make a
25 utilization review decision, including pertinent clinical
26 information.
27 (2) The plan shall develop and implement a process to ensure
28 that utilization reviewers apply clinical review criteria
29 consistently.
30 (d) A managed care plan shall routinely assess the
19970H1505B1828 - 22 -
1 effectiveness and efficiency of its utilization review program.
2 (e) A managed care plan's data systems shall be sufficient
3 to support utilization review program activities and to generate
4 management reports to enable the plan to monitor and manage
5 health care services effectively.
6 (f) If a managed care plan delegates any utilization review
7 activities to a utilization review organization, the plan shall
8 maintain adequate oversight, which shall include:
9 (1) A written description of the utilization review
10 organization's activities and responsibilities, including
11 reporting requirements.
12 (2) Evidence of formal approval of the utilization review
13 organization program by the plan.
14 (3) A process by which the plan evaluates the performance of
15 the utilization review organization.
16 (g) A managed care plan shall coordinate the utilization
17 review program with other medical management activity conducted
18 by the plan, such as quality assurance, credentialing, provider
19 contracting, data reporting, grievance procedures, processes for
20 assessing member satisfaction and risk management.
21 (h) A managed care plan shall provide covered persons and
22 participating providers with access to its review staff by a
23 toll-free telephone number.
24 (i) When conducting utilization review, a managed care plan
25 shall collect only information necessary to certify the
26 admission, procedure or treatment, length of stay, frequency and
27 duration of services.
28 (j) No compensation to persons providing utilization review
29 services for a managed care plan shall contain incentives,
30 direct or indirect, for those persons to make inappropriate
19970H1505B1828 - 23 -
1 review decisions. No compensation to those persons may be based,
2 directly or indirectly, on the quantity or type of adverse
3 determinations rendered.
4 Section 9.9. Procedures for Review Decisions.--(a) A
5 managed care plan shall maintain written procedures for making
6 utilization review decisions and for notifying subscribers and
7 providers acting on behalf of subscribers of its decisions.
8 (b) (1) For initial determinations, a managed care plan
9 shall issue the determination within two working days of
10 obtaining all necessary information regarding a proposed
11 admission, procedure or service requiring a review
12 determination. For purposes of this section, the term "necessary
13 information" includes the results of any face-to-face clinical
14 evaluation or second opinion that may be required.
15 (2) In the case of a determination to certify an admission,
16 procedure or service, the plan shall notify the provider
17 rendering the service by telephone within twenty-four hours of
18 making the initial certification and shall provide written or
19 electronic confirmation of the telephone notification to the
20 subscriber and the provider within two working days of the
21 initial certification.
22 (3) In the case of an adverse determination, the plan shall
23 notify the provider rendering the service by telephone within
24 twenty-four hours of the adverse determination and shall provide
25 written or electronic confirmation of the telephone notification
26 to the subscriber and the provider within one working day of the
27 adverse determination.
28 (c) (1) For concurrent review determination, a managed care
29 plan shall issue the determination within one working day of
30 obtaining all necessary information.
19970H1505B1828 - 24 -
1 (2) In the case of a determination to certify an extended
2 stay or additional services, the plan shall notify by telephone
3 the provider rendering the service within one working day of the
4 certification and shall provide written or electronic
5 confirmation to the subscriber and the provider within one
6 working day after the telephone notification. Written
7 notification shall include the number of extended days or next
8 review date, the new total number of days or services approved,
9 and the date of admission or initiation of services.
10 (3) In the case of an adverse determination, the plan shall
11 notify by telephone the provider rendering the service within
12 twenty-four hours of making the adverse determination and shall
13 provide written or electronic notification to the subscriber and
14 the provider within one working day of the telephone
15 notification. The service shall be continued without liability
16 to the covered person until the covered person has been notified
17 of the determination.
18 (d) (1) For retrospective review determinations, a managed
19 care plan shall make the determination within thirty working
20 days of receiving all necessary information.
21 (2) In the case of a certification, the plan shall notify in
22 writing the subscriber and the provider rendering the service.
23 (3) In the case of an adverse determination, the plan shall
24 notify in writing the provider rendering the service and the
25 subscriber within five working days of the adverse
26 determination.
27 (e) A written notification of an adverse determination shall
28 include the principal reason or reasons for the determination,
29 the instructions for initiating a grievance and the instructions
30 for requesting a written statement of the clinical rationale,
19970H1505B1828 - 25 -
1 including the clinical review criteria used to make the
2 determination. A managed care plan shall provide the clinical
3 rationale in writing for an adverse determination, including the
4 clinical review criteria used to make that determination, to any
5 party who received notice of the adverse determination and who
6 follows the procedures for a request.
7 (f) A managed care plan shall develop and implement written
8 procedures to address the failure or inability of a provider or
9 a subscriber to provide all necessary information for review. In
10 cases where the provider or a subscriber will not release
11 necessary information, the plan may deny certification.
12 Section 7. Section 10 of the act, amended December 19, 1980
13 (P.L.1300, No.234), is amended to read:
14 Section 10. Supervision.--(a) Except as otherwise provided
15 in this act, a [health maintenance organization] managed care
16 plan operating under the provisions of this act shall not be
17 subject to the laws of this State now in force relating to
18 insurance corporations engaged in the business of insurance nor
19 to any law hereafter enacted relating to the business of
20 insurance unless such law specifically and in exact terms
21 applies to such [health maintenance organization] plan. For a
22 [health maintenance organization] managed care plan established,
23 operated and maintained by a corporation, this exemption shall
24 apply only to the operations and subscribers of the [health
25 maintenance organization] plan.
26 (b) All [health maintenance organizations] managed care
27 plans shall be subject to the following insurance laws:
28 (1) The act of July 22, 1974 (P.L.589, No.205), known as the
29 "Unfair Insurance Practices Act."
30 (2) Any rehabilitation, liquidation or conservation of a
19970H1505B1828 - 26 -
1 [health maintenance organization] managed care plan shall be
2 deemed to be the rehabilitation, liquidation or conservation of
3 an insurance company and shall be conducted under the
4 supervision of the commissioner pursuant to the law governing
5 the rehabilitation, liquidation, or conservation of insurance
6 companies.
7 (c) (1) All rates charged subscribers or groups of
8 subscribers by a [health maintenance organization] managed care
9 plan and the form and content of all contracts between a [health
10 maintenance organization] plan and its subscribers or groups of
11 subscribers, all rates of payment to hospitals made by a [health
12 maintenance organization] plan pursuant to contracts provided
13 for in this act, budgeted acquisition costs in connection with
14 the solicitation of subscribers, and the certificates issued by
15 a [health maintenance organization] plan representing its
16 agreements with subscribers shall, at all times, be on file with
17 the commissioner and be deemed approved unless explicitly
18 rejected within sixty days of filing.
19 (2) Filings under this subsection shall be [made] submitted
20 to the commissioner in such form, and shall set forth such
21 information as the commissioner may require to carry out the
22 provisions of this act. Any disapproval of a filing by the
23 commissioner may be appealed in accordance with Title 2 of the
24 Pennsylvania Consolidated Statutes (relating to administrative
25 law and procedure).
26 (d) Solicitors or agents compensated directly or indirectly
27 by any corporation subject to the provisions of this act shall
28 meet such prerequisites as the commissioner by regulation shall
29 require.
30 (e) A [health maintenance organization] managed care plan
19970H1505B1828 - 27 -
1 shall establish and maintain a grievance resolution system
2 satisfactory to the secretary, whereby the complaints of its
3 subscribers may be acted upon promptly and satisfactorily.
4 (f) If a [health maintenance organization] managed care plan
5 offers eye care which is within the scope of the practice of
6 optometry, it shall make optometric care available to its
7 subscribers, and shall make the same reimbursement whether the
8 service is provided by an optometrist or a physician.
9 Section 8. The act is amended by adding sections to read:
10 Section 10.1. Availability and Accessibility Bill of
11 Rights.--(a) A managed care plan shall cover health emergency
12 services and urgent care services without authorization,
13 regardless of provider or facility.
14 (b) A managed care plan shall include a sufficient number
15 and type of primary care practioners, specialists and hospitals
16 throughout the services area to meet the needs of enrollees and
17 to ensure reasonable choice. The mix of providers shall meet the
18 needs of enrollee population adjusted for characteristics
19 including, but not limited to, age, gender and health status. At
20 a minimum, the plan shall have one full-time primary care
21 physician per 1,200 enrollees.
22 (c) A managed care plan shall permit subscribers to change
23 primary care providers at any time upon notice to the plan. The
24 plan may not require more than fifteen days' prior notice.
25 (d) A managed care plan shall develop and implement a
26 procedure for subscribers with specific conditions to receive a
27 standing referral from their primary care provider to a
28 specialist with expertise in treating the condition. A standing
29 referral may be authorized by the primary care provider if the
30 subscriber requires continuing care from a specialist or if the
19970H1505B1828 - 28 -
1 subscriber is suffering from a prolonged, life-threatening,
2 degenerative or disabling condition. Authorization of the
3 specialist to provide health care services to the subscriber
4 shall be made in the same manner as the authorization of
5 subscribers' primary care provider.
6 (e) No managed care plan may:
7 (1) Deny enrollment to a subscriber who is a member of a
8 group for which the plan is providing or has proposed to provide
9 basic health services.
10 (2) Offer to provide basic health services contingent upon
11 the exclusion of individuals who would otherwise be included in
12 the defined group.
13 (f) A managed care plan may not impose a penalty on
14 enrollees who seek direct access to an obstetrician or
15 gynecologist.
16 (g) In applying practice standards or parameters, a managed
17 care plan shall make appropriate adjustments based on the
18 severity of the subscriber's condition consistent with generally
19 recognized standards or parameters established or recognized by
20 a professional provider association.
21 (h) A managed care plan shall cover medically necessary
22 services provided by any provider if a participating provider
23 cannot attend to the enrollee within a time period appropriate
24 to the enrollee's medical condition. In no case shall the
25 waiting period for an appointment exceed thirty days from the
26 date of initial contact to schedule an appointment.
27 (i) A managed care plan shall provide coverage for all FDA-
28 approved drugs and devices, whether or not the drug or device
29 has been approved for the specific treatment or condition, and
30 provided that the treating physician determines that the drug or
19970H1505B1828 - 29 -
1 device is medically necessary or appropriate for the enrollee's
2 condition.
3 (j) Enrollees shall have thirty days from the commencement
4 of the contract to cancel for any reason. Cancellation shall be
5 provided to the managed care plan in writing, and a United
6 States postmark shall be conclusive evidence of the date
7 received.
8 (k) A managed care plan shall cover medically necessary
9 services furnished as a result of a medical emergency by a
10 nonparticipating provider.
11 (l) Enrollees shall be covered for any condition which is
12 normally covered under the plan. This shall include secondary
13 conditions resulting from a noncovered primary condition.
14 Section 10.2 Disenrollment Parameters.---(a) A managed care
15 plan may disenroll an enrollee only in accordance with the
16 following:
17 (1) A subscriber shall be provided a notice thirty days
18 prior to disenrollment. The notice shall state the reason for
19 the disenrollment, the effective date of disenrollment and the
20 subscriber's right to appeal the disenrollment to the
21 department.
22 (2) A disenrollment shall only be provided for nonpayment of
23 charges or premiums, termination of conditions under which
24 enrollment occurred, violation of policies published by the
25 secretary, policies of the managed care organization as approved
26 by the secretary, change of residence or fraudulent use of
27 managed care services.
28 (3) The plan shall offer to each subscriber who is eligible
29 for disenrollment, as a result of discontinuation of membership
30 in a group enrolled with the managed care organization, a
19970H1505B1828 - 30 -
1 subscription agreement with the same level of benefits as
2 provided under the group contract. The plan may charge a
3 different reasonable premium to any subscriber who is not a
4 member of a group.
5 Section 9. Sections 11, 12, 13, 15, 16 and 17 of the act,
6 amended December 19, 1980 (P.L.1300, No.234), are amended to
7 read:
8 Section 11. Reports and Examinations.--(a) (1) [The] A
9 corporation that has a certificate of authority under section 4
10 of this act shall, on or before the first of March of every
11 year, file with the commissioner a statement verified by at
12 least two of the principal officers of the corporation
13 summarizing its financial activities during the calendar or
14 fiscal year immediately preceding, and showing its financial
15 condition at the close of business on December 31 of that year,
16 or the corporation's fiscal year. [Such] The statement shall be
17 in such form and shall contain such matter as the commissioner
18 prescribes.
19 (2) The financial affairs and status of [every such
20 corporation] each corporation that has a certificate of
21 authority under section 4 of this act shall be examined by the
22 commissioner or [his] the commissioner's agents not less
23 frequently than once in every three years [and for]. For this
24 purpose, the commissioner and [his] the commissioner's agents
25 shall be entitled to:
26 (i) the aid and cooperation of the officers and employes of
27 the corporation [and shall have convenient];
28 (ii) access to all books, records, papers, and documents that
29 relate to the financial affairs of the corporation[. They shall
30 have authority to]; and
19970H1505B1828 - 31 -
1 (iii) examine under oath or affirmation the officers, agents,
2 employes and subscribers for the health services of the
3 corporation, and all other persons having or having had
4 substantial part in the work of the corporation in relation to
5 its affairs, transactions and financial condition.
6 (3) The [Insurance Commissioner] commissioner may at any
7 time, without making such examination, call on any such
8 corporation for a written report authenticated by at least two
9 of its principal officers concerning the financial affairs and
10 status of the corporation.
11 (b) A corporation that has a certificate of authority under
12 section 4 of this act shall maintain its financial records in
13 such manner that the revenues and expenses associated with the
14 establishment, maintenance and operation of its prepaid health
15 care delivery system under this act are identifiable and
16 distinct from other activities it may engage in which are not
17 directly related to the establishment, maintenance and operation
18 of its prepaid health care delivery system under this act.
19 (c) The secretary or [his] the secretary's agents shall have
20 free access to all the books, records, papers and documents that
21 relate to the business of the corporation, other than financial.
22 Section 12. Contracts to Provide Medical Care.--A [health
23 maintenance organization] managed care plan established pursuant
24 to this act may receive and accept from governmental or private
25 agencies payments covering all or part of the cost of
26 subscriptions to provide its services, facilities, appliances,
27 medicines or supplies.
28 Section 13. Exemption from Taxation.--Every [health
29 maintenance organization] managed care plan established,
30 maintained and operated by a corporation not-for-profit is
19970H1505B1828 - 32 -
1 hereby declared to be a charitable and benevolent institution
2 and all its income, funds, investments and property shall be
3 exempt from all taxation of the State or its political
4 subdivisions.
5 Section 15. Penalty.--(a) The commissioner and secretary
6 may suspend or revoke any certificate of authority issued to a
7 [health maintenance organization] managed care plan under this
8 act, or, in their discretion, impose a penalty of not more than
9 one thousand dollars ($1,000) for each and every unlawful act
10 committed, if they find that any of the following conditions
11 exist:
12 (1) that the [health maintenance organization] managed care
13 plan is providing inadequate or poor quality care, thereby
14 creating a threat to the health and safety of its subscribers;
15 (2) that the [health maintenance organization] managed care
16 plan is unable to fulfill its contractual obligations to its
17 subscribers;
18 (3) that the [health maintenance organization] managed care
19 plan or any person on its behalf has advertised its services in
20 an untrue, misrepresentative, misleading, deceptive or unfair
21 manner; or
22 (4) that the [health maintenance organization] managed care
23 plan has otherwise failed to substantially comply with this act.
24 (b) Before the commissioner or secretary, whichever is
25 appropriate, shall take any action as above set forth, [he] the
26 commissioner or secretary shall give written notice to the
27 [health maintenance organization,] managed care plan accused of
28 violating the law, stating specifically the nature of [such] the
29 alleged violation and fixing a time and place, at least ten days
30 thereafter, when a hearing of the matter shall be held. Hearing
19970H1505B1828 - 33 -
1 procedure and appeals from decisions of the commissioner or
2 secretary shall be as provided in Title 2 of the Pennsylvania
3 Consolidated Statutes (relating to administrative law and
4 procedure).
5 Section 16. Exclusions.--[Certificates] No certificates of
6 authority shall [not] be required of:
7 (1) [Health maintenance organizations] Managed care plans
8 offered by employers for the exclusive enrollment of their own
9 employes, or by unions for the sole use of their members.
10 (2) Any plan, program or service offered by an employer for
11 the prevention of disease among his employes.
12 Section 17. Effect of Act on Other Plans.--(a) Any
13 requirements or privileges granted under this act shall apply
14 exclusively to that portion of business or activities which
15 reasonably relates to the establishment, maintenance and
16 operation of a [health maintenance organization] managed care
17 plan pursuant to the provisions of this act.
18 (b) [Any health maintenance organization program] A managed
19 care plan approved by the commissioner or secretary and
20 operating under the provisions of 40 Pa.C.S. Ch.61 (relating to
21 hospital plan corporations) or 40 Pa.C.S. Ch.63 (relating to
22 professional health services plan corporations) or under any
23 statute superseded by either of such statutes, prior to the
24 effective date of this act, may continue to operate under the
25 provisions of such authority or successor provisions, if any.
26 Section 10. This act shall take effect in 60 days.
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