H 4635 Session 112 (1997-1998)
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:
"CHAPTER 93
Health Plan Purchasing Cooperatives
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.
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