PRINTER'S NO. 4132
No. 2699 Session of 2006
INTRODUCED BY KENNEY, OLIVER, WATSON, ROSS, BEBKO-JONES, BISHOP,
JAMES, KIRKLAND, MYERS, WATERS, ADOLPH, BARRAR, BLACKWELL,
BOYD, BUXTON, CALTAGIRONE, CIVERA, COHEN, COSTA, CRAHALLA,
CRUZ, DALLY, DERMODY, FABRIZIO, GANNON, GEORGE, GILLESPIE,
GODSHALL, GOODMAN, HARHART, HENNESSEY, HESS, W. KELLER,
KILLION, LEACH, LEDERER, LEVDANSKY, MACKERETH, MAHER,
MAITLAND, MANN, McGEEHAN, MICOZZIE, O'BRIEN, PARKER, PETRONE,
PHILLIPS, QUIGLEY, RAYMOND, ROEBUCK, RUBLEY, SABATINA,
SHAPIRO, SIPTROTH, T. STEVENSON, E. Z. TAYLOR, J. TAYLOR,
THOMAS, TIGUE, TRUE, WILLIAMS AND YUDICHAK, JUNE 6, 2006
REFERRED TO COMMITTEE ON HEALTH AND HUMAN SERVICES, JUNE 6, 2006
AN ACT
1 Authorizing and directing the Department of Public Welfare to
2 establish and maintain a managed health care program for
3 medical assistance recipients; requiring actuarially sound
4 rates for certain managed care organizations; providing for
5 the right of appeal and approval by the General Assembly of
6 changes to the Commonwealth medical assistance plan and
7 associated waivers; and repealing inconsistent portions of
8 other acts.
9 The General Assembly of the Commonwealth of Pennsylvania
10 hereby enacts as follows:
11 Section 1. Short title.
12 This act shall be known and may be cited as the Health
13 Choices Act.
14 Section 2. Legislative intent.
15 It is the intent of the General Assembly to:
16 (1) Improve the accessibility, continuity and quality of
1 health care services for participants in the Commonwealth's
2 medical assistance program, while responsibly controlling
3 program costs.
4 (2) Establish a process for the establishment and
5 maintenance of a program to manage the care of participants
6 in the medical assistance program.
7 (3) Ensure that managed care organizations serving
8 medical assistance recipients receive compensation that is
9 actuarially sound and otherwise compliant with Federal and
10 Commonwealth statutes and regulations and that is determined
11 through a transparent process.
12 (4) Provide for legislative approval of certain
13 amendments to the Commonwealth State plan for the medical
14 assistance program.
15 (5) Establish procedures by which managed care
16 organizations may appeal decisions made by the Department of
17 Public Welfare with respect to the calculation of capitation
18 rates and payments and other contractual provisions.
19 Section 3. Definitions.
20 The following words and phrases when used in this act shall
21 have the meanings given to them in this section unless the
22 context clearly indicates otherwise:
23 "Actuarial standards board." The body established by the
24 American Academy of Actuaries to promulgate actuarial standards
25 of practice.
26 "Actuarially sound rates." With respect to the health
27 choices program, capitation rates which:
28 (1) Are adequate to cover the reasonably expected
29 medical, administrative and assessment expenses, and a
30 reasonable level of profit or contingency, associated with
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1 the fulfillment of a contractor's obligations in the
2 applicable contract year.
3 (2) Make provision for assumed expense levels, for all
4 expenses, that are reasonably attainable by all contractors
5 in each geographic zone in the contract year, based primarily
6 on the actual expense experience of such contractor during
7 prior years and expenses actually expected to be incurred in
8 the applicable contract year.
9 (3) Are based on assumptions that represent the most
10 likely outcomes for costs and utilization expected within the
11 range of assumptions developed for the populations and
12 benefits covered in each geographic zone.
13 (4) Are compliant with all applicable standards,
14 statutes, rules and regulations governing the development of
15 such rates.
16 (5) Are based on methods, considerations and analyses
17 that conform to applicable guidelines promulgated by the
18 actuarial standards board.
19 "Capitation." A fee the Department of Public Welfare
20 periodically pays to a contractor for each recipient enrolled
21 under a contract for the provision of medical services, whether
22 or not the recipient receives the services during the period
23 covered by the fee.
24 "CMS." The Centers for Medicare and Medicaid Services of the
25 United States Department of Health and Human Services and such
26 successor entities which may from time to time discharge the
27 duties of CMS with respect to the medical assistance program.
28 "Contractor." A managed care organization providing managed
29 care services relating to medical care provided to recipients
30 under one or more contracts with the Department of Public
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1 Welfare pursuant to the health choices program. This term shall
2 also refer to a managed care organization seeking to enter into
3 a contract with the Department of Public Welfare to provide
4 services under health choices program.
5 "Department." The Department of Public Welfare of the
6 Commonwealth.
7 "HIPAA." The Health Insurance Portability and Accountability
8 Act of 1996 (Public Law 104-191, 110 Stat. 1936) and regulations
9 promulgated thereunder.
10 "In-plan services." Services included in the medical
11 assistance program pursuant to the State plan.
12 "Managed care organization." A public or private
13 organization that is a federally qualified health maintenance
14 organization or meets the State plan's definition of a health
15 maintenance organization or otherwise qualifies as a managed
16 care plan as defined in Article XXI of the act of May 17, 1921
17 (P.L.682, No.284), known as The Insurance Company Law of 1921.
18 "Medical assistance." The Commonwealth program authorized by
19 Subchapter XIX of the Social Security Act (49 Stat. 620, 42
20 U.S.C. 1396 et seq.), known as Medicaid and authorized in this
21 Commonwealth under the act of June 13, 1967 (P.L.31, No.21),
22 known as the Public Welfare Code, and subject to regulations
23 promulgated under such statutes. The term shall also refer to
24 any successor program implemented by either the Federal
25 Government or the Commonwealth, to the extent a contractor is
26 providing services contemplated in this act with respect to such
27 program.
28 "Program." The Commonwealth's health choices program, as
29 provided for in this act, which provides mandatory managed
30 health care to recipients in specified areas of this
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1 Commonwealth through contracts with managed care organizations.
2 "Program change." Amendments, revisions or additions to the
3 Department of Public Welfare's medical assistance fee schedule,
4 State plan or to Federal or Commonwealth regulations, laws,
5 guidelines, waivers or policies, insofar as they affect the
6 scope or nature of benefits available to eligible persons.
7 "Recipient." An individual eligible to receive health care
8 or health-related services under the medical assistance program.
9 "State plan." The document prepared by the Commonwealth in
10 the manner required by section 1396a(a) of the Social Security
11 Act (49 Stat. 620, 42 U.S.C. § 1396a(a)), as approved by the
12 Centers for Medicare and Medicaid Services, that describes the
13 nature, scope and operation of the medical assistance program
14 and gives assurances that the Commonwealth will administer the
15 program in compliance with Federal requirements. The term shall
16 also include waivers granted by the Centers for Medicare and
17 Medicaid Services not otherwise included in the plan submitted
18 by the Commonwealth for Centers for Medicare and Medicaid
19 Services approval.
20 "Waiver." A determination made by the Centers for Medicare
21 and Medicaid Services under Subchapter XIX of the Social
22 Security Act (49 Stat. 620, 42 U.S.C. 1396 et seq.), known as
23 Medicaid, and regulations promulgated thereunder, which allows
24 the Commonwealth to make modifications in its operation of the
25 medical assistance program.
26 "Zone." A geographic area, designated as provided in this
27 act, within which contractors provide services to recipients.
28 Section 4. General provisions regarding program.
29 (a) Administration.--The Commonwealth, acting by and through
30 the department, shall implement and administer the program in
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1 all areas of this Commonwealth as provided in this act.
2 (b) Replacing other law as the means for providing
3 assistance.--The program shall require the provision of all
4 medical assistance-covered medical benefits in the amount,
5 duration and scope set forth in the act of June 13, 1967
6 (P.L.31, No.21), known as the Public Welfare Code, for
7 recipients in the following categories:
8 (1) Supplemental Security Income.
9 (2) Temporary assistance for needy families.
10 (3) Healthy beginnings.
11 (4) General assistance.
12 (5) Successors to the categories listed in paragraphs
13 (1), (2), (3) and (4).
14 (c) Exclusion.--Recipients residing in long-term care
15 facilities, residential facilities and Commonwealth facilities,
16 other than State-operated intermediate care facilities for the
17 mentally retarded, shall be excluded from participation in the
18 program.
19 (d) Adding or removing optional benefits.--The department
20 may amend the State plan to add or remove optional medical
21 assistance benefits which are not required by this act, the
22 Public Welfare Code, other acts of the General Assembly or by
23 Subchapter XIX of the Social Security Act (49 Stat. 620, 42
24 U.S.C. 1396 et seq.), known as Medicaid, and regulations
25 promulgated thereunder to be provided by the Commonwealth to
26 recipients, with the exception of pharmaceutical services, which
27 shall remain a covered benefit under the program and provided by
28 contracts with managed care contractors.
29 (e) Mandatory participation exclusion.--Notwithstanding the
30 provisions of subsection (b), the department may exclude
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1 recipients from mandatory participation in the program as a
2 result of:
3 (1) Determination by the department that the recipient
4 is eligible for the Commonwealth's health insurance premium
5 payment program.
6 (2) The recipient becoming ventilator-dependent in an
7 acute or rehabilitation hospital for more than 30 consecutive
8 days.
9 (3) The recipient's enrollment in the Department of
10 Aging waiver.
11 (4) The recipient's enrollment in the Michael Dallas
12 Model waiver.
13 (f) Alternative services.--Contracts executed by and between
14 the department and contractors shall allow contractors to
15 provide supplemental and cost-effective alternative services to
16 recipients in lieu of or in addition to in-plan services and to
17 take other measures which in the contractor's judgment promote
18 quality of care or efficiency, and the process established in
19 this act for determination of actuarially sound capitation rates
20 shall take the effect of such supplemental and cost-effective
21 alternative services and other measures into account.
22 (g) Allocation of responsibility.--Contracts executed by and
23 between the department and contractors may provide for the
24 allocation of responsibility to provide health care services
25 between physical and behavioral health care among contractors.
26 Section 5. Program administration.
27 (a) Zones.--The department shall administer the program for
28 both physical health care and behavorial health care in the
29 following areas of this Commonwealth, incorporating the
30 provisions of this act:
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1 (1) Southeast zone: Bucks, Chester, Delaware, Montgomery
2 and Philadelphia Counties.
3 (2) Southwest zone: Allegheny, Armstrong, Beaver,
4 Butler, Fayette, Greene, Indiana, Lawrence, Washington and
5 Westmoreland Counties.
6 (3) Lehigh and Capital zone: Adams, Berks, Cumberland,
7 Dauphin, Lancaster, Lebanon, Lehigh, Northampton, Perry and
8 York Counties.
9 (4) Other zones: Other counties, or groupings of
10 counties, which are covered by program contracts in effect as
11 of the effective date of this act by and between the
12 department and contractors which provide for the provision of
13 behavioral health care services to recipients residing in
14 such counties.
15 (b) Designation.--Within 120 days of the effective date of
16 this act, the department shall designate groupings of counties
17 not included in the groupings described in subsection (a) as
18 zones for expansion of the program to counties of this
19 Commonwealth not covered by the program. Such determination
20 shall be based upon factors, including, but not limited to:
21 (1) Population, in terms both of the total number of
22 people who live in an area, and population density, as well
23 as the number of current and anticipated recipients.
24 (2) Multicounty arrangements created under the act of
25 October 20, 1966 (3rd Sp.Sess., P.L.96, No.6), known as the
26 Mental Health and Mental Retardation Act of 1966, operating
27 under other statutes relating to the provision of human
28 services or cooperating in contracting with the Commonwealth
29 or in the operation of human services programs.
30 (3) The department's regions.
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1 (4) Constraints imposed by geography, transportation and
2 health care provider systems.
3 (5) Relationships among consumers and providers.
4 (6) Managed care organization service areas.
5 (c) Residents of seventh or eighth class counties.--The
6 department may exclude recipients residing in a county of the
7 seventh or eighth class, as such classifications are established
8 under the act of August 9, 1955 (P.L.323, No.130), known as The
9 County Code, from participation in the program upon making a
10 finding that population density, availability of providers or
11 other factors make inclusion of such recipients in the program
12 impracticable.
13 Section 6. Program expansion.
14 (a) Responsibilities of department.--Within 270 days of the
15 effective date of this act, the department shall:
16 (1) Issue one or more requests for proposals for the
17 expansion of the program to all counties of this Commonwealth
18 not covered by one or more program contracts for physical
19 health care at that time, based upon the zones created
20 pursuant to section 5.
21 (2) Review and evaluate responses from managed care
22 organizations to the requests for proposals issued pursuant
23 to paragraph (1), in accordance with applicable Federal and
24 Commonwealth laws and regulations.
25 (3) Select contractors for each zone into which the
26 program is to be expanded in accordance with the provisions
27 of section 7 and this section. The contractors having the
28 responsibility to provide services for the benefit of all
29 program recipients residing in these zones are subject only
30 to the limitations imposed in section 4.
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1 (4) Negotiate and execute contracts with selected
2 contractors for each zone into which the program is to be
3 expanded, incorporating terms and conditions in conformance
4 with the provisions of this act, including, without
5 limitation, actuarially sound capitation rates determined in
6 accordance with section 7.
7 (5) Seek and make all efforts to obtain any necessary or
8 desirable amendments to or approvals of waivers from CMS or
9 any other agencies of the Federal Government to allow timely
10 implementation of the expansion provided for in this section.
11 (b) Selection of contractors.--The department shall select
12 no fewer than two contractors to provide managed care services
13 for each zone into which the program is to be expanded, such
14 contractors having the responsibility to provide services for
15 the benefit of all program recipients residing in such zone,
16 subject only to the limitations provided in section 4. If the
17 department selects one or more counties to act as contractors to
18 provide managed behavioral health care services to recipients
19 residing in designated counties, the requirement to select more
20 than one contractor shall not apply as to the provision of
21 behavioral health care services in such counties only.
22 (c) Implementation of expansion.--The department may
23 implement the expansion required by this section in phases, but
24 program shall become operational in all zones to the full extent
25 required under this act no later than 24 months after the
26 effective date of this act.
27 Section 7. Capitation rates.
28 (a) Development and determination of rates.--The department
29 shall adopt by regulation a methodology for development and
30 determination of actuarially sound capitation rates to be paid
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1 to contractors which is in all respects compliant with this act.
2 The methodology shall include a list of all relevant factors
3 which the department shall take into account in the development
4 of such rates.
5 (b) Annual capitation rates.--
6 (1) Capitation rates paid by the department to
7 contractors shall be actuarially sound.
8 (2) Capitation rates shall be determined by the
9 department in accordance with the methodology in the
10 regulations adopted pursuant to subsection (a).
11 (3) The department shall use its best efforts to publish
12 final capitation rates for each contractor for the next
13 contract year not less than 120 days prior to the beginning
14 of such contract year and shall advise contractors of any
15 delays in the publication of such rates.
16 (4) The department shall disclose to contractors its
17 application of all factors used in the development of the
18 capitation rates for such contractor and all information
19 submitted to CMS relating to such capitation rates, no later
20 than the date the department discloses the rates it intends
21 to offer with respect to a contract period. The department
22 shall also provide the contractor with any other such
23 information which it submits to CMS after the initial
24 disclosure contemplated in this subsection within ten days of
25 its submission to CMS.
26 (c) Intrayear adjustments to capitation rates.--
27 (1) The department shall adjust capitation rates within
28 a contract year to achieve or maintain actuarially sound
29 capitation rates for contractors to reflect program changes,
30 such adjustments shall cover all applicable portions of the
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1 contract year to which such program changes apply and be
2 developed pursuant to the methodology required be established
3 under subsection (a).
4 (2) In considering the need for intrayear capitation
5 rate adjustments, the department shall evaluate the impact of
6 program changes which have been imposed during the course of
7 the contract year in combination with prospective program
8 changes.
9 (3) Other than program changes designated by the
10 department as being emergency program changes or program
11 changes required by changes in Federal law or regulation with
12 an earlier effective date, no program change shall become
13 effective with less than 60 days' notice to the contractor.
14 (4) The department shall disclose to contractors its
15 application of all factors used in the development of the
16 capitation rates with respect to an intrayear adjustment in
17 capitation rates for such contractors and all information
18 submitted to CMS relating to such capitation rates, no later
19 than the date when the department disclosed the rates it
20 intends to offer with respect to such intrayear adjustment.
21 The department shall also provide the contractor with any
22 other such information which it submits to CMS after the
23 initial disclosure contemplated in this subsection within ten
24 days of its submission to CMS.
25 Section 8. Appeals.
26 (a) Claims by contractor.--All claims against the department
27 relating to any matter regarding any contract relating to the
28 program may be filed by the contractor in the Board of Claims
29 under 62 Pa.C.S. Ch. 17 Subch. C (relating to Board of Claims),
30 including, without limitation, claims relating to the actuarial
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1 soundness of capitation rates.
2 (b) Effect of agreements between contractor and
3 department.--No provision of any agreement by and between a
4 contractor and the department, any request for proposal,
5 regulation, bulletin or other statement issued by any agency or
6 department of the commonwealth shall foreclose:
7 (1) The right of a contractor to file a claim before the
8 Board of Claims, including its right to appeal any
9 determination by the department as to the actuarial soundness
10 of any capitation rate or to appeal a finding by the Board of
11 Claims with respect to such claim.
12 (2) The right of a contractor to file any other claim or
13 appeal in any forum having jurisdiction to consider such
14 claim or appeal.
15 (3) The right of the contractor to perform at the
16 capitation rate accepted by the department during the
17 pendency of such claim or appeal. Any such provision shall be
18 void and unenforceable against a contractor.
19 (c) Notification by contractor.--A contractor which desires
20 to perform at the capitation rate accepted by the department
21 during the pendency of proceedings in the Board of Claims or any
22 appeal of a finding by the Board of Claims shall notify the
23 department of its intention to file a claim in the Board of
24 Claims no later than the date the contractor executes the
25 contract incorporating such rate.
26 Section 9. Replacement of contractors.
27 (a) Requests for proposals.--The department may, from time
28 to time, determine to issue requests for proposals:
29 (1) to expand the number of contractors serving one or
30 more zones;
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1 (2) to replace contractors;
2 (3) to assess the qualification or performance of
3 current contractors; or
4 (4) at the discretion of the department.
5 (b) Compliance by department.--In the event the department
6 exercises its right under this section, it shall comply with the
7 provisions of section 7 with respect to the determination of
8 capitation rates.
9 Section 10. Amendments to the State plan.
10 (a) Waiver or amendment submissions.--Prior to the
11 department submitting a waiver, an amendment to the State plan
12 or an amendment to a waiver to CMS for its approval where such
13 waiver, State plan amendment or amended waiver would cause a
14 change in expenditure of Commonwealth funds of more than $20
15 million during any fiscal year, the department shall submit such
16 proposed waiver, State plan amendment or waiver amendment for
17 review under the provisions of the act of June 25, 1982
18 (P.L.633, No.181), known as the Regulatory Review Act.
19 (b) Determination of expenditures.--In making the
20 determination of Commonwealth expenditures required by
21 subsection (a), the department shall take into account all
22 waivers, State plan amendments and amended waivers then proposed
23 or in effect, in combination with all waivers, State plan
24 amendments and waiver amendments expected to be requested for
25 the remainder of the then current fiscal year.
26 Section 11. General provisions.
27 In discharging its responsibilities under this act, the
28 department shall be subject to the provisions of the act of June
29 21, 1957 (P.L.390, No.212), referred to as the Right-to-Know
30 Law. The department shall not make available any information:
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1 (1) in violation of the provisions of HIPAA; or
2 (2) disclosing capitation rates for individual managed
3 care organizations, including, without limitation, financial
4 and actuarial information provided by a managed care
5 organization or a managed care orginization contractor to the
6 department for the purpose of negotiating or determining
7 capitation rates to be paid for health care services on
8 behalf of recipients.
9 Section 12. Report to General Assembly.
10 Within 12 months following the effective date of this act,
11 and annually thereafter, the department shall deliver a report
12 on the implementation and operation of the program to:
13 (1) The Speaker of the House of Representatives.
14 (2) The minority leader of the House of Representatives.
15 (3) The chairman of the Appropriations Committee of the
16 House of Representatives.
17 (4) The minority chairman of the Appropriations
18 Committee of the House of Representatives.
19 (5) The chairman of the Health and Human Services
20 Committee of the House of Representatives.
21 (6) The minority chairman of the Health and Human
22 Services Committee of the House of Representatives.
23 (7) The President pro tempore of the Senate.
24 (8) The minority leader of the Senate.
25 (9) The chairman of the Appropriations Committee of
26 Senate.
27 (10) The minority chairman of the Appropriations
28 Committee of the Senate.
29 (11) The chairman of the Public Health and Welfare
30 Committee of the Senate.
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1 (12) The minority chairman of the Public Health and
2 Welfare Committee of the Senate.
3 Section 13. Repeals.
4 All acts, including without limitation, the act of December
5 3, 2002 (P.L.1147, No.142), are repealed to the extent they are
6 inconsistent with this act.
7 Section 14. Effective date.
8 This act shall take effect as follows:
9 (1) Section 7 shall take effect immediately.
10 (2) The remainder of this act shall take effect in 60
11 days.
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