ENROLLED
COMMITTEE SUBSTITUTE
FOR
H. B. 4404
(By Delegates
Kominar, Webster, Mahan, Klempa,
Cann, White, Long, Crosier, Williams and Ashley)
[Passed March 8, 2008; in effect ninety days from passage.]
AN ACT to amend the Code of West Virginia, 1931, as amended, by
adding thereto a new article, designated §33-15E-1, §33-15E-2,
§33-15E-3, §33-15E-4, §33-15E-5, §33-15E-6, §33-15E-7,
§33-15E-8, §33-15E-9, §33-15E-10, §33-15E-11, §33-15E-12,
§33-15E-13, §33-15E-14, §33-15E-15, §33-15E-16 and §33-15E-17,
all relating to licensing and regulating discount medical plan
organizations and discount prescription drug plan
organizations; requiring payment of fees; authorizing proposal
of and promulgation of rules, including emergency rules; and
providing civil and criminal penalties for violations.
Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended
by adding thereto a new article, designated §33-15E-1, §33-15E-2,
§33-15E-3, §33-15E-4, §33-15E-5, §33-15E-6, §33-15E-7, §33-15E-8, §33-15E-9, §33-15E-10, §33-15E-11, §33-15E-12, §33-15E-13,
§33-15E-14, §33-15E-15, §33-15E-16 and §33-15E-17, all to read as
follows:
ARTICLE 15E. DISCOUNT MEDICAL PLAN ORGANIZATIONS AND DISCOUNT
PRESCRIPTION DRUG PLAN ORGANIZATIONS ACT.
§33-15E-1. Short title.
This article shall be cited as the "Discount Medical Plan
Organizations and Discount Prescription Drug Plan Organizations
Act."
§33-15E-2. Purpose.
The purpose of this article is to establish standards for
discount medical plan organizations and discount prescription drug
plan organizations in order to better protect consumers from unfair
or deceptive marketing, sales and enrollment practices and to
facilitate consumer understanding of the role and function of the
organizations in providing access to medical or ancillary services.
§33-15E-3. Definitions.
For purposes of this article:
(1) "Affiliate" means a person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or
is under common control with, the specified person.
(2) "Ancillary services" includes audiology, dental, vision,
mental health, substance abuse, chiropractic and podiatry services.
(3) "Control" or "controlled by" or "under common control with" has the same meaning ascribed to them in subsection (d),
section two, article forty-six of this chapter.
(4) "Discount medical plan" means a business arrangement or
contract in which a person, in exchange for fees, dues, charges or
other consideration, offers access for its plan members to
providers of medical or ancillary services and the right to receive
discounts on medical or ancillary services provided under the
discount medical plan from those providers. "Discount medical
plan" does not include any plan that does not charge a membership
or other fee to use the plan's discount medical card.
(5) "Discount prescription drug plan" means a business
arrangement or contract in which a person, in exchange for fees,
dues, charges or other consideration, provides access for its plan
members to providers of pharmacy services and the right to receive
discounts on pharmacy services provided under the discount
prescription drug plan from those providers. "Discount prescription
drug plan" does not include:
(A) Any plan that does not charge a membership or other fee to
use the plan's discount prescription drug card;
(B) A patient access program; or
(C) A Medicare prescription drug plan.
(6) "Discount medical plan organization" means an entity that
contracts with providers, provider networks or other discount
medical plan organizations to offer access to medical or ancillary services at a discount to plan members, provides access for
discount medical plan members to the services in exchange for fees,
dues, charges or other consideration, and determines the charges to
plan members.
(7) "Discount prescription drug plan organization" means an
entity that contracts with providers, pharmacy networks or other
discount prescription drug plan organizations to offer access to
pharmacy services to plan members at a discount, provides access
for discount prescription drug plan members to the services in
exchange for fees, dues, charges or other consideration, and
determines the charges to plan members.
(8) "Facility" means an institution providing medical or
ancillary services or a health care setting, including, hospitals
or other licensed inpatient centers, ambulatory surgical or
treatment centers, skilled nursing centers, residential treatment
centers, rehabilitation centers or diagnostic laboratories or
imaging centers.
(9) "Health care professional" means a physician, pharmacist
or other health care practitioner who is licensed to perform
specified medical or ancillary services within the scope of his or
her license.
(10) "Marketer" means a person that markets, promotes, sells
or distributes a discount medical plan, including any entity that
places its name on and markets or distributes a discount medical plan pursuant to a marketing agreement with a discount medical plan
organization.
(11) "Medical services" means any maintenance, care of or
preventive care for the human body or care, service or treatment of
an illness or dysfunction of or injury to the human body, and
includes, physician care, inpatient care, hospital surgical
services, emergency services, ambulance services, laboratory
services and medical equipment and supplies. "Medical services"
does not include pharmacy or ancillary services.
(12) "Medicare prescription drug plan" means a plan that
provides a Medicare Part D prescription drug benefit in accordance
with the requirements of the federal Medicare Prescription Drug,
Improvement and Modernization Act of 2003, Pub. L. 108-173 § 101 et
seq.
(13) "Member" means any person who pays fees, dues, charges or
other consideration for the right to receive the benefits of a
discount medical plan or discount prescription drug plan.
(14) "Patient access program" means a voluntary program
sponsored by one or more pharmaceutical manufacturers that provides
free or discounted health care products directly to low income or
uninsured individuals either through a discount card or direct
shipment.
(15) "Person" means an individual, a corporation, a
partnership, a joint venture, a joint stock company, a trust, an unincorporated organization, any similar entity or any combination
of the foregoing.
(16) "Pharmacy services" includes pharmaceutical supplies and
prescription drugs.
(17) "Provider" means any health care professional or facility
that has contracted, directly or indirectly, with a discount
medical plan organization to provide medical or ancillary services
to members.
(18) "Provider network" means an entity that negotiates
directly or indirectly with a discount medical plan organization on
behalf of more than one provider to provide medical or ancillary
services to members.
§33-15E-4. Licensing requirements.
(a) A person is required to obtain a license prior to doing
business in this state as a discount medical plan organization.
(b) The Commissioner shall propose rules for legislative
approval in accordance with the provisions of article three,
chapter twenty-nine-a of this code, as well as emergency rules in
accordance with section fifteen of said article, setting forth the
licensing requirements. These rules shall include, at a minimum:
(1) All necessary forms and other information considered
necessary and required by the Commissioner for processing the
license application;
(2) Applicable fees;
(3) Reciprocity requirements;
(4) Time frames for the application and approval process;
(5) Conditions of approval of the license application or
denial of the license;
(6) Renewal process;
(7) Notice requirements; and
(8) Any other provisions considered necessary by the
Commissioner to effectuate the provisions of this article.
§33-15E-5. Minimum capital requirements.
(a) Before the commissioner issues a license to any person
required to obtain a license under section four of this article,
the person seeking to operate a discount medical plan organization
shall demonstrate that it has a positive net worth of at least one
hundred fifty thousand dollars.
(b) Each discount medical plan organization shall at all times
maintain a positive net worth of at least one hundred fifty
thousand dollars.
§33-15E-6. Surety bond requirements.
Each licensed discount medical plan organization shall
maintain in force a surety bond in its own name, in an amount not
less than thirty-five thousand dollars, in favor of the
Commissioner for the benefit of any person who is damaged by any
violation of this article. The bond shall cover any violation
occurring during the time period during which the bond is in effect and shall be issued by an insurance company licensed to do business
in this state. A copy of the bond or a statement identifying the
depository, trustee, and account number of the surety account, and
thereafter proof of annual renewal of the bond or maintenance of
the surety account, shall be filed with the Commissioner.
§33-15E-7. Examinations.
The Commissioner may examine the business and affairs of any
discount medical plan organization to protect the interests of the
residents of this state based on the following reasons, including
complaint indices, recent complaints or information from other
states, or as he or she deems necessary. An examination shall be
performed in accordance with the provisions of section nine,
article two of this chapter, except that a discount medical plan
organization that is the subject of the examination shall pay the
expenses incurred in conducting the examination. Failure by the
discount medical plan organization to pay the expenses is grounds
for the refusal to renew, revoke or suspend a license to operate as
a discount medical plan organization.
§33-15E-8. Charges and fees; refund requirements; bundling of
services.
(a) A discount medical plan organization may charge a periodic
charge as well as a reasonable one-time processing fee for a
discount medical plan.
(b)(1) All discount medical plan certificates or other document demonstrating membership in the plan issued to persons in
this state shall have a notice, prominently printed on the first
page of the document or in a similarly conspicuous manner, stating
that the member has the right to cancel his or her membership for
any reason within thirty days of its receipt. If a member cancels
his or her membership in the discount medical plan organization
within the first thirty days after the date of receipt of the
written document demonstrating membership, the member shall, upon
return of the discount medical plan card to the discount medical
plan organization, receive a reimbursement of all periodic charges
and the amount of any one-time processing fee that exceeds thirty
dollars. Notice of cancellation is deemed given when delivered by
hand or deposited in a mailbox, properly addressed and postage
prepaid to the mailing address of the discount medical plan
organization or e-mailed to the e-mail address of the discount
medical plan organization.
(2) If the discount medical plan organization cancels a
membership for any reason other than nonpayment of charges by the
member, the discount medical plan organization shall make a pro
rata reimbursement of all periodic charges to the member.
(c) When a marketer or discount medical plan organization
sells a discount medical plan in conjunction with any other
products, the marketer or discount medical plan organization shall:
(1) Provide the charges for each discount medical plan in writing to the member; or
(2) Reimburse the member for all periodic charges for the
discount medical plan and all periodic charges for any other
product if the member cancels his or her membership in accordance
with subdivision (1), subsection (b) of this section.
(d) A health carrier that provides a discount medical plan
product that is incidental to the insured product is not subject to
this section.
§33-15E-9. Record filing and retention requirements.
(a)(1) Upon demand by the Commissioner, a discount medical
plan organization shall file with the commissioner a list of
prospective member fees and charges associated with the discount
medical plan.
(b) A copy of every form to be used by a discount medical plan
organization, including the form for the written document
demonstrating membership in the plan and all advertising, marketing
materials and brochures, shall be retained by such organization and
available for inspection by the Commissioner for at least two years
from the date on which such form was last used.
§33-15E-10. Provider agreements; provider listing requirements.
(a)(1) A discount medical plan organization shall have a
written provider agreement with all providers offering medical or
ancillary services to its members. The written provider agreement
may be entered into directly with the provider or indirectly with a provider network to which the provider belongs.
(2) A provider agreement between a discount medical plan
organization and a provider shall provide the following:
(A) A list of the medical or ancillary services and products
to be provided at a discount;
(B) The amount or amounts of the discounts or, alternatively,
a fee schedule that reflects the provider's discounted rates; and
(C) A written document demonstrating that the provider has
agreed that it will not charge members more than the discounted
rates.
(3) A provider agreement between a discount medical plan
organization and a provider network shall require that the provider
network have written agreements with its providers that:
(A) Contain the provisions described in subdivision (2) of
this subsection;
(B) Authorize the provider network to contract with the
discount medical plan organization on behalf of the provider; and
(C) Require the provider network to maintain an up-to-date
list of its contracted providers and to provide the list on a
monthly basis to the discount medical plan organization.
(4) A provider agreement between a discount medical plan
organization and an entity that contracts with a provider network
shall require that the entity, in its contract with the provider
network, require the provider network to have written agreements with its providers that comply with subdivision (3) of this
subsection.
(5) The discount medical plan organization shall maintain a
copy of each of its active provider agreements; each such
organization shall also retain a copy of every inactive provider
agreement for at least two years after the expiration date of each
such agreement.
(b) Each discount medical plan organization shall maintain on
its Internet website page a current list of the names and addresses
of the providers with which it has contracted directly or through
a provider network; the address of the website shall be prominently
displayed on all of the discount medical plan organization's
advertisements, marketing materials, brochures and discount medical
plan cards.
§33-15E-11. Marketing requirements.
(a) A discount medical plan organization may market directly
or contract with other marketers for the distribution of its
product.
(b)(1) A discount medical plan organization shall have a
written agreement with a marketer prior to the marketer's
marketing, promoting, selling or distributing the discount medical
plan.
(2) The agreement between the discount medical plan
organization and the marketer shall prohibit the marketer from using advertising, marketing materials, brochures and discount
medical plan cards without the discount medical plan organization's
approval in writing.
(3) The discount medical plan organization shall be bound by
and responsible for the activities of a marketer that are within
the scope of the marketer's agency relationship with the
organization.
(c) A discount medical plan organization shall approve in
writing all advertisements, marketing materials, brochures and
discount cards used by marketers to market, promote, sell or
distribute the discount medical plan prior to their use.
§33-15E-12. Annual reports.
(a) If the information required in subsection (b) of this
section is not provided at the time of renewal of a license under
section four of this article, a discount medical plan organization
shall file an annual report with the commissioner in the form
prescribed by the commissioner, within three months after the end
of each fiscal year.
(b) The report shall include:
(1) Audited financial statements prepared in accordance with
generally accepted accounting principals certified by an
independent certified public accountant, including the
organization's balance sheet, income statement and statement of
changes in cash flow for the preceding year, except that, subject to the approval of the commissioner, an organization that is an
affiliate of a parent entity that is publicly traded and that
prepares audited financial statements reflecting the consolidated
operations of the parent entity may instead submit the audited
financial statements of the parent entity and a written guaranty
that the minimum capital requirements required under section five
of this article will be met by the parent entity;
(2) Any changes in the list of names and residence addresses
of all persons responsible for the conduct of the organization's
affairs, together with a disclosure of the extent and nature of any
contracts or arrangements with these persons and the discount
medical plan organization, including any possible conflicts of
interest;
(3) The number of discount medical plan members in the state;
and
(4) Any other information relating to the performance of the
discount medical plan organization that may be required by the
commissioner.
(c) Any discount medical plan organization that fails to file
an annual report in the form and within the time required by this
section may be fined up to five hundred dollars per day for the
first ten days during which the violation continues and up to one
thousand dollars per day after the first ten days during which the
violation continues. The commissioner may also suspend the organization's authority to enroll new members or to do business in
this state while the violation continues.
§33-15E-13. Discount prescription drug plan organizations.
(a) A discount prescription drug plan organization shall
comply with sections eight, nine, ten and eleven of this article
and shall report any of the information described in section twelve
of this article in the form and manner as the commissioner may
require. A discount prescription drug plan organization is also
subject to sections fourteen, fifteen and sixteen of this article.
(b) Each discount prescription drug plan organization shall
designate and provide the commissioner with the name, address and
telephone number of a discount prescription drug plan compliance
officer responsible for ensuring compliance with the provisions of
this article that are applicable to discount prescription drug
plans and discount prescription drug plan organizations.
§33-15E-14. Administrative enforcement actions; injunctions.
(a) The commissioner may investigate the business affairs and
conduct of every person applying for or holding a discount medical
plan organization license and the operational affairs of a discount
prescription drug plan organization to determine whether a
violation of this article or any rule promulgated hereunder has
occurred or is occurring.
(b) If the commissioner has cause to believe that a violation
of this article or any rule promulgated hereunder has occurred or is occurring and that an enforcement action may be warranted, he or
she shall notify the discount medical plan organization or discount
prescription drug plan organization in writing, specifically
stating the grounds for enforcement action and informing the
organization that it may pursue a hearing on the matter in
accordance with the provisions of section thirteen, article two of
this chapter.
(c) If, after notice and hearing, a violation of this article
or any legislative rule promulgated under this article is found,
the Insurance Commissioner may take one or more of the following
enforcement actions:
(1) Place a discount medical plan organization on probation or
suspend, revoke or refuse to issue or renew the organization's
license;
(2) Levy a civil penalty on the organization in an amount not
exceeding ten thousand dollars for each violation;
(3) Issue an administrative order requiring the discount
medical plan organization or discount prescription drug plan
organization to cease and desist from engaging in the act or
practice that constitutes the violation; or
(4) Suspend the authority of the discount medical plan
organization or discount prescription drug plan organization to
enroll new members.
(d) In addition to the penalties and other provisions of this article, the Commissioner may seek both temporary and permanent
injunctive relief in the circuit court of Kanawha County when a
discount medical plan is being operated by a person or entity that
is not licensed pursuant to this article or any person has engaged
or is engaging in any activity prohibited by this article or any
rule adopted pursuant to this article.
§33-15E-15. Criminal penalties.
(a) Any person that willfully operates as or aids and abets
another operating as a discount medical plan organization in
violation of subsection (a), section four of this article, is
guilty of a felony and, upon conviction thereof, shall be fined not
more than twenty thousand dollars for each unauthorized act or
imprisoned in the state correctional facility not less than one nor
more than five years, or both fined and imprisoned.
(b)(1) A person that collects fees for purported membership in
a discount medical plan or discount prescription drug plan and
knowingly and willfully fails to provide benefits with a value of
one thousand dollars or more, is guilty of a felony and, upon
conviction thereof, shall be fined not more than two thousand five
hundred dollars or imprisoned in a state correctional facility not
less than one nor more than ten years, or both fined and
imprisoned.
(2) A person that collects fees for purported membership in a
discount medical plan or discount prescription drug plan and knowingly and willfully fails to provide benefits with a value of
less than one thousand dollars, is guilty of a misdemeanor and,
upon conviction thereof, shall be fined an amount not to exceed two
thousand five hundred dollars or confined in jail for a term not to
exceed one year, or both fined and confined.
§33-15E-16. Insurance fraud unit.
The insurance fraud unit created pursuant to the provisions of
section eight, article forty-one of this chapter may investigate
suspected violations of this article.
§33-15E-17. Rules.
The Commissioner may propose rules for legislative approval in
accordance with the provisions of article three, chapter twenty-
nine-a of this code to carry out the provisions of this article.
The Commissioner may also promulgate emergency legislative rules to
carry out the provisions of this article, including rules setting
forth the requirements and prohibited practices with regard to the
marketing of discount medical plans and discount prescription drug
plans and for disclosures to members and prospective members of the
plans.
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