H 4635 General Bill, By Edge, Bailey, Barfield, Battle, Bowers, H. Brown, 
J. Brown, A.W. Byrd, Cato, Cave, Clyburn, Cobb-Hunter, Dantzler, Easterday, 
Gamble, Gourdine, Hamilton, Harrison, Haskins, Hawkins, J. Hines, Hinson, 
Inabinett, B.L. Jordan, Keegan, Kelley, Kennedy, Limehouse, Lloyd, Mason, 
McCraw, McGee, McKay, Meacham, Moody-Lawrence, Neilson, Rhoad, Rice, Robinson, 
Rodgers, Seithel, Simrill, Whatley, Whipper, Wilkes, Witherspoon, Woodrum and 
Young-Brickell
 A BILL TO AMEND TITLE 38, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO
 INSURANCE, BY ADDING CHAPTER 93 SO AS TO AUTHORIZE THE ISSUANCE OF
 CERTIFICATES OF AUTHORITY TO NONPROFIT CORPORATIONS TO OPERATE AS HEALTH PLAN
 PURCHASING COOPERATIVES IN THE STATE AND TO PROVIDE FOR RELATED MATTERS.

   02/17/98  House  Introduced and read first time HJ-6
   02/17/98  House  Referred to Committee on Labor, Commerce and
                     Industry HJ-6

A BILL

TO AMEND TITLE 38, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO INSURANCE, BY ADDING CHAPTER 93 SO AS TO AUTHORIZE THE ISSUANCE OF CERTIFICATES OF AUTHORITY TO NONPROFIT CORPORATIONS TO OPERATE AS HEALTH PLAN PURCHASING COOPERATIVES IN THE STATE AND TO PROVIDE FOR RELATED MATTERS.

Be it enacted by the General Assembly of the State of South Carolina:

SECTION 1. Title 38 of the 1976 Code is amended by adding:

Section 38-93-10. As used in this chapter, the term:

(1) 'Agent' means 'agent' as that term is used and defined in Section 38-1-20(20).

(2) 'Carrier' means an entity that provides health insurance to employers in this State. For the purposes of this chapter, carrier includes an insurance company, hospital or medical service corporation, health care plan, fraternal benefit society, health maintenance organization, or any other licensed entity providing a plan of health insurance or health benefits subject to state insurance regulation.

(3) 'Health benefit plan' means a hospital or medical insurance policy or certificate, health care plan contract or certificate, qualified higher deductible health plan, or health maintenance organization subscriber contract. Health benefit plan does not include limited accident and sickness insurance policies such as credit, dental, vision, Medicare supplement, long-term care, hospital indemnity, or specified disease insurance; coverage issued as a supplement to liability insurance; workers' compensation or similar insurance; or automobile medical payment insurance.

(4) 'Health plan purchasing cooperative', 'purchasing cooperative', or 'cooperative' means a nonprofit corporation authorized by the Director of the Department of Insurance pursuant to this chapter and operated for the benefit of members located within a particular geographic area of the State by providing members with purchasing services and detailed information on comparative prices, usage, medical outcomes, quality, and enrollee satisfaction through selected health benefit plans. A health plan purchasing cooperative is considered as a true group and not as an association.

(5) 'Medical outcome' means a change in an individual's health status after the provision of health services.

(6) 'Premium' means all monies paid by an employer and eligible employees as a condition of receiving coverage from a carrier, including any fees or other contributions associated with the health benefit plan. Premiums do not include fees for membership in the cooperative.

(7) 'Small employer' means a person, firm, corporation, partnership, association, political subdivision, or sole proprietor that is actively engaged in a business that, at the time of application, on at least fifty percent of its working days during the preceding calendar quarter, employed no fewer than two and no more than fifty eligible employees, in which a bona fide employer-employee relationship exists. In determining the number of eligible employees,

companies that are affiliated companies or companies that are eligible to file a combined tax return for purposes of state taxation are considered one employer. Subsequent to the issuance of a health benefit plan to a small employer and for the purpose of determining eligibility, the size of a small employer shall be determined annually. Except as otherwise provided, provisions of this chapter that apply to a small employer shall continue to apply at least until the plan anniversary following the date the small employer no longer meets the requirements of this paragraph. Nothing in this chapter shall be construed to prohibit a carrier from including self-employed individuals in its definition of small employer.

Section 38-93-20. (A) On and after July 1, 1999, the Director of the Department of Insurance is authorized to issue certificates of authority to nonprofit corporations to operate as health plan purchasing cooperatives to provide services to members located within particular geographic area of the State in accordance with the provisions of this chapter.

(B) A health plan purchasing cooperative authorized by the director pursuant to subsection (A) may also offer other related employee benefits and services to its members, including continuation coverage administration and purchasing services for limited accident and sickness insurance coverages such as dental, vision, and long-term care; however, a purchasing cooperative offering such related benefits or services must provide separate and explicitly identified rate or fee schedules for such benefits and services to distinguish them from health benefit plan premiums and membership fees.

(C)(1) A health benefit plan, limited accident and sickness policy, or other insurance offered through a cooperative must be provided by a carrier.

(2) A cooperative may not directly provide insurance or bear any risk associated with a health benefit plan or other insurance offered through the cooperative.

(D) No entity shall hold itself out as a health plan purchasing cooperative without a certificate of authority granted by the Director of the Department of Insurance. An entity not authorized as a health plan purchasing cooperative by the director shall not use as part of its advertising or marketing any self-descriptive term which is confusingly similar to a health plan purchasing cooperative. An entity not authorized as a health plan purchasing cooperative by the director and providing services substantially similar to those of a purchasing cooperative shall clearly indicate in its advertising and marketing materials that such entity is not a health plan purchasing cooperative. Failure to comply with this subsection is an unfair and deceptive act or practice in the business of insurance within the meaning of Chapter 57 of this title.

(E) Nothing in this chapter shall be deemed to permit a health plan purchasing cooperative to act as an insurer as defined in Section 38-1-20(25) or as an agent as defined in Section 38-1-20(20).

Section 38-93-30. (A) Each health plan purchasing cooperative shall serve a particular geographic area of the State that consist of either one entire county or more than one contiguous entire county. The Director of the Department of Insurance shall not authorize a purchasing cooperative to serve a geographic area which divides a county or contains noncontiguous counties.

(B) A purchasing cooperative which serves a portion of a metropolitan statistical area shall not serve less than all of that metropolitan statistical area. The director shall not authorize a purchasing cooperative to serve a geographic area which divides a metropolitan statistical area.

(C) The authority granted by the director to a purchasing cooperative to serve a particular geographic area is nonexclusive, and there is no limit upon the number of purchasing cooperatives which may be authorized to serve a particular geographic area.

(D) The director shall authorize service for a geographic service area as proposed by the applicant nonprofit corporation if such proposed service area meets the requirements of this section.

(E) Except as provided elsewhere in this section, nothing in this chapter shall restrict the geographic area served by a purchasing cooperative having less than one hundred thousand enrolled member subscribers. For purposes of this subsection, the purchasing cooperative shall report to the director, in a manner prescribed by the director, the number of member subscribers enrolled in the purchasing cooperative on an annual basis. For purchasing cooperatives having greater than one hundred thousand enrolled member subscribers, the purchasing cooperative shall demonstrate annually, to the satisfaction of the director, that permission to continue to enroll additional member subscribers will not have an adverse effect on the availability of private health benefit plan coverage offered outside the purchasing cooperative's geographic service area. Failure to provide satisfactory evidence shall result in the suspension of the purchasing cooperative's authority to enroll additional member subscribers in all or part of the purchasing cooperative's geographic service area, until such time as the director shall conclude that the requirements of this subsection have been satisfied.

(F) Officers, directors, or employees of a health plan purchasing cooperative shall not serve as officers, directors, or employees of another health plan purchasing cooperative.

(G) A geographic area may include one or more contiguous counties in an adjoining State.

Section 38-93-40. (A)(1) Membership in a health plan purchasing cooperative shall be voluntary.

(2) A purchasing cooperative shall accept for membership in the cooperative an eligible small employer which agrees to pay the membership fee and a premium for coverage through the purchasing cooperative and which abides by the bylaws and rules of the purchasing cooperative.

(3) A purchasing cooperative may, at its option, accept for membership in the cooperative any otherwise eligible employer which does not qualify as a small employer because it employed more than fifty eligible employees during fifty percent or more of its working days during the previous calendar quarter.

(4) A purchasing cooperative may, at it option, accept for membership in the cooperative any otherwise eligible employer which does not qualify as a small employer because it is an individual or sole proprietor. If a purchasing cooperative chooses to accept such employers, the purchasing cooperative may not discriminate in the acceptance process based upon health status.

(B) Each purchasing cooperative shall have the following powers, duties, and responsibilities:

(1) establishing and clearly defining the conditions of membership and participation in the purchasing cooperative. Each cooperative shall establish conditions for small employers which must include, but need not be limited to, assurance that the group is a valid small employer and is not formed for the purpose of securing health benefit coverage and assurance that the individuals in the small employer group are employees and have not been added for the purpose of securing health benefit coverage. A purchasing cooperative shall not establish or enforce membership conditions or participation requirements, bylaws, rules, or policies, financial or otherwise, which have the effect of excluding or including membership on the basis of health status of otherwise eligible individuals or other risk characteristics including, but not limited to, industry type, occupation, experience, age, gender, family composition, education, avocation, or income; nor shall a purchasing cooperative require any small employer, employee, self-employed individual, or dependent to subscribe to limited accident and sickness insurance policies, products, or services not related to health care;

(2) providing to cooperative members clear, standardized information on each health benefit plan or other coverage offered by carriers through the cooperative to cooperative members, including information on price, enrollee costs, quality, patient satisfaction, enrollment, and enrollee responsibilities and obligations and providing health benefit plan and other insurance comparison sheets in accordance with Department of Insurance regulations;

(3) annually offering to all members of the cooperative all health benefit plans and other insurance offered by carriers which meet the requirements of this chapter and which submit a responsive proposal as to information necessary for health benefit plans and other insurance comparison sheets and providing assistance to cooperative members in selecting and obtaining coverage with carriers that meet those requirements. A purchasing cooperative, whenever feasible, shall contract with multiple, unaffiliated carriers to offer health benefit plans and other insurance to its members. A purchasing cooperative may selectively contract with carriers based on the quality and cost effectiveness of services and other factors deemed to be relevant by the purchasing cooperative;

(4) requesting proposals for health benefit plans and other insurance from carriers;

(5) establishing administrative procedures and accounting procedures consistent with generally accepted accounting principles for the operation of the cooperative and members' services, preparing an annual cooperative budget, and preparing annual program and fiscal reports on cooperative operations as required by this chapter;

(6) developing and implementing a marketing plan to publicize the cooperative to potential members;

(7) developing grievance procedures to be used in resolving disputes between members and the cooperative and disputes between carriers and the cooperative. A member of, or carrier that serves, a cooperative shall not be prohibited from filing grievances directly with the Department of Insurance;

(8) ensuring that carriers have grievance procedures to be used in resolving disputes with members of the cooperative. A member may appeal to the cooperative any grievance that is not resolved by the carrier;

(9) maintaining all records, reports, and other information required by this chapter or by department regulation or other applicable laws;

(10) contracting with qualified, independent third parties for any services necessary to carry out the powers and duties required by this chapter;

(11) assisting agents or employees in enrolling eligible members, employees, and dependents in selected health benefit plans and other insurance and services, establishing procedures for collecting premiums, collecting premiums, appropriately distributing collected premiums to participating carriers, and paying third-party contractors. The cooperative shall pay participating carriers their contracting premium amounts on a prepaid monthly basis or as otherwise mutually agreed upon; and

(12) working with participating carriers to establish standard criteria for selecting participating licensed agents.

(C) Each cooperative may set and collect reasonable fees for membership in the cooperative which may finance reasonable and necessary costs incurred in administering the cooperative. Any such fee must be clearly identified and not inconsistent with the provisions of subsection (B)(1) of this section.

(D)(1) Each cooperative shall provide semiannual financial statements and annual reports regarding cooperative programs and operations to the Director of the Department of Insurance.

(2) Each cooperative shall provide for annual independent audits by a certified public accountant and make reports of such audits available to the director and the public.

(3) Each purchasing cooperative shall file annually with the director, at such time and in such form and manner as specified by the director, evidence of adequate security and prudence in account, premium collection, and the handling and transfer of monies and evidence of compliance with the provisions of this chapter, including a description of the specific services provided by the purchasing cooperative.

(E) Each purchasing cooperative shall maintain a trust account of accounts for the deposit of any premium monies collected.

(F) Each purchasing cooperative shall disclose to the director any oral or written agreements made prior to its authorization as a purchasing cooperative.

(G) Any act of selling health benefit plans or other insurance shall be in accordance with the provisions of this title.

Section 38-93-50. The Department of Insurance shall assist health plan purchasing cooperatives. To this end, the department is responsible for:

(1) initially and thereafter annually certifying that each cooperative complies with the provisions of this chapter and regulations promulgated pursuant to Section 38-93-90. The department may decertify any cooperative if the cooperative fails to comply with the provisions of this chapter and the regulations promulgated by the Director of the Department of Insurance;

(2) conducting an annual review of the performance of each cooperative to ensure that the cooperative is in compliance with the provisions of this chapter and applicable regulations;

(3) establishing criteria for plans to be offered through cooperatives to cooperative members. Such plans may include without limitation fee-for-service plans, preferred provider organizations, health maintenance organizations, provider sponsored health care corporation plans, and medical savings accounts;

(4) receiving and reviewing appeals by members of a cooperative and carriers whose grievances were not resolved by the cooperative.

Section 38-93-60. (A) Each cooperative shall use appropriate, efficient, and standardized means to notify members of the availability of health benefit plan coverage offered through the cooperative.

(B)(1) Each cooperative shall make available to its members marketing materials prepared by or for the cooperative that accurately summarize the health benefit plans and other insurance and services that are offered through it to members, including descriptions and standardized comparisons of each plan or service and information on price, benefits, and measures of performance such as medical outcomes and consumer satisfaction. A purchasing cooperative shall disseminate such descriptive and comparative information to all members of the cooperative.

(2) Such marketing materials and measures of performance shall be filed with and approved by the Director of the Department of Insurance prior to the use or dissemination of such materials or measures of performance.

(C)(1) Each cooperative shall offer annually to each member all health benefit plans and other insurance and services available through the cooperative and provide each member with the appropriate materials relating thereto.

(2) Each purchasing cooperative shall adopt its own policy regarding whether member employers shall be permitted to limit the selection of carriers, health benefit plans, or other insurance for their employees from among those health benefit plans and other insurance policies offered through the purchasing cooperative. Any limitation imposed by an employer must be made without discrimination as to the health status of an individual or class.

Section 38-93-70. (A) Each purchasing cooperative shall be a nonprofit corporation.

(B) A purchasing cooperative may not amend its articles of incorporation to operate as a for profit corporation.

(C) Nothing in this section shall limit a cooperative from contracting with a for profit corporation to provide services specified in Section 38-93-40(B)(10).

(D)(1) No person having had a financial interest in a purchasing cooperative's financing, marketing, or delivery of services, other than as a representative of a member employer or a consumer of services, during the immediately preceding twelve-month period shall serve as a member of the board of directors of the purchasing cooperative.

(2) No person serving as a member of the board of directors of a purchasing cooperative shall have a financial interest in the purchasing cooperative's financing, marketing, or delivery of services, other than as a representative of a member employer or as a consumer of services, during his or her term as a board member.

(E) A purchasing cooperative may establish, as it deems necessary and appropriate, an advisory group to assist its board of directors in deliberations. Such advisory group may include health care providers, carriers, insurance agents, consumers, or other persons.

Section 38-93-80. (A) Before authorization by the Director of the Department of Insurance to operate as a health plan purchasing cooperative, a nonprofit corporation shall, directly or through a contractor which provides administrative services to the corporation, file with the director a corporate surety bond in an amount deemed adequate by the director to provide for administration of the proposed purchasing cooperative for a six-month period, in favor of the State and for the use and benefit of the State and of members and creditors of the cooperative. Such bond shall be for protection against insolvency or against malfeasance, including fraud or theft of funds. The bond shall be conditioned as follows:

(1) for prompt payment of premiums due;

(2) for payment of all indebtedness of the corporation; and

(3) for payment of costs incurred by the State in the administration of the corporation.

(B) Any such bond filed or deposit made or remaining portion thereof held under this section shall be released and discharged upon settlement and termination of all liabilities against it.

(C) Any health benefit plan offered through a purchasing cooperative must guarantee uninterrupted coverage for a six-month period in the event of the purchasing cooperative's insolvency, subject to timely payment of premiums due.

(D) Examinations, rehabilitation, receivership, orders, and administrative supervision of health plan purchasing cooperatives shall be in accordance with this title.

Section 38-93-90. The Director of the Department of Insurance shall promulgate regulations for the administration of this chapter."

SECTION 2. This act takes effect July 1, 1999.