Senate Bill No. 575
(By Senators Stollings, Foster, Plymale, Love, Jenkins and
Hunter)
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[Introduced February 5, 2008; referred to the Committee on Health
and Human Resources; and then to the Committee on Banking and
Insurance.]
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A BILL 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 may 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, or is controlled by,
or is under common control with, the person specified.
(2) "Ancillary services" includes, but is not limited to,
audiology, dental, vision, mental health, substance abuse, chiropractic and podiatry services.
(3) "Commissioner" means the West Virginia Insurance
Commissioner.
(4) "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.
(5) "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.
(6) "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.
(7) "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 and, in exchange for fees,
dues, charges or other consideration, provides access for discount
medical plan members to the services.
(8) "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 and, in exchange
for fees, dues, charges or other consideration, provides access for
discount prescription drug plan members to the services.
(9) "Facility" means an institution providing medical or
ancillary services or a health care setting, including, but not
limited to, 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.
(10) "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.
(11) "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.
(12) "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, but is not limited to, 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.
(13) "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.
(14) "Member" means any individual 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.
(15) "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.
(16) "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.
(17) "Pharmacy services" includes pharmaceutical supplies and
prescription drugs.
(18) "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.
(19) "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 pursuant to this
article before doing business in this state as a discount medical
plan organization.
(b) Except as provided in subsection (c) of this section, each
application for a license to operate as a discount medical plan
organization shall be in a form prescribed by the commissioner,
shall be verified by an officer or authorized representative of the
applicant and shall include the following:
(1) A copy of the organizational documents of the applicant,
such as the articles of incorporation and all amendments;
(2) A copy of the applicant's bylaws or other enabling
documents that establish organizational structure;
(3) The applicant's federal identification number, business
address and mailing address;
(4) A list of names, addresses, official positions and
biographical information of the individuals who are responsible for
conducting the applicant's affairs, including all members of the
board of directors, board of trustees, executive committee or other
governing board or committee, the officers, contracted management
company personnel and any person or entity owning or having the
right to acquire ten percent or more of the voting securities of
the applicant, and a disclosure of the extent and nature of any
contracts or arrangements between any individual who is responsible
for conducting the applicant's affairs and the discount medical
plan organization, including any possible conflicts of interest;
(5) A complete biographical statement, on forms prescribed by
the commissioner, with respect to each individual identified in the
documents provided pursuant to subdivision (4) of this subsection;
(6) A statement generally describing the applicant, its
facilities and personnel, and the medical or ancillary services for
which a discount will be made available under the discount medical
plan;
(7) A copy of the form of all contracts made or to be made
between the applicant and any providers or provider networks
regarding the provision of medical or ancillary services to
members;
(8) A copy of the form of any contract made or arrangement to
be made between the applicant and any individual listed in
subdivision (4) of this subsection;
(9) A copy of the form of any contract made or to be made
between the applicant and any person, corporation, partnership, or
other entity for the performance on the applicant's behalf of any
function, including marketing, administration, enrollment and
subcontracting for the provision of medical or ancillary services
to members;
(10) A copy of the applicant's most recent financial
statements audited by an independent certified public accountant,
except that, subject to the approval of the commissioner, an
applicant 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 submit the
audited financial statement of the parent entity and a written
guaranty that the minimum capital requirements required under
section five of this article will instead be met by the parent
entity;
(11) A description of the proposed methods of marketing, including, but not limited to, describing the use of marketers, use
of the Internet, sales by telephone and use of salespersons to
market the discount medical plan benefits;
(12) A description of the member complaint procedures to be
established and maintained by the applicant; and
(13) Any other information the commissioner requires.
(c) Upon application to and approval by the commissioner and
payment of the applicable fees, a discount medical plan
organization that holds a current license or other form of
authority from another state to operate as a discount medical plan
organization is not required to submit the information required
under subsection (b) of this section if the commissioner is
satisfied that the other state's requirements are substantially
equivalent to those required under subsection (b).
(d) Within ninety days after the date of receipt of a
completed application, the commissioner shall:
(1) Issue a license if the commissioner is satisfied that:
(A) The applicant has met the requirements of subsection (b)
or (c) of this section and has the required minimum capital in
accordance with section five of this article; and
(B) The ownership, control and management of the applicant are
competent and trustworthy and possess managerial experience that
would make the proposed operation of the discount medical plan
organization beneficial to plan members; or
(2) Disapprove the application and state the grounds for
disapproval.
(e) Prior to licensure by the commissioner, each discount
medical plan organization shall establish an Internet website
conforming to the requirements of subsection (b), section ten of
this article.
(f)(1) A license is effective for one year, unless prior to
its expiration the license is suspended or revoked in accordance
with subsection (h) of this section.
(2) The commissioner shall renew the license of each holder
that files a renewal application form and demonstrates that it
continues to meet the requirements of this article.
(g) Except where it is otherwise specially provided, the
commissioner shall assess discount medical plan organizations the
following fees: For filing an application pursuant to subsection
(b) or (c) of this section and an application to renew a license
pursuant to subsection (f) of this section, two hundred dollars;
for receiving and filing annual reports, one hundred dollars; for
filing a certified copy of articles of incorporation, fifty
dollars; for filing a copy of its charter, fifty dollars; for
filing statements preliminary to licensure, one hundred dollars;
for filing of a rate, seventy-five dollars; for filing of a form,
fifty dollars; for filing any additional paper required by law or
furnishing copies of the additional paper, five dollars; and for every copy of a report or certificate of condition of administrator
to be filed in any other state, twenty-five dollars. All fees and
moneys collected shall be used for the purposes set forth in
section thirteen, article three of this chapter.
(h) Each licensed discount medical plan organization shall
immediately notify the commissioner whenever the organization's
license or other form of authority to operate as a discount medical
plan organization in another state is suspended, revoked,
nonrenewed or is the subject of any disciplinary administrative
proceeding related to the organization's operation as a discount
medical plan organization.
(I) A provider who provides discounts to his or her own
patients without a cost or fee of any kind to the patient is not
required to obtain and maintain a license under 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, to be used in the
discretion of the commissioner to protect the financial interest of
members. The bond shall be issued by an insurance company licensed
to do business in this state.
§33-15E-7. Examinations and investigations.
The commissioner may examine or investigate the business and
affairs of any discount medical plan organization or discount
prescription drug plan he or she considers necessary. The
examination or investigation is subject to and shall be performed
in accordance with the provisions of article two of this chapter.
§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, stating in substance 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 charges for each discount medical plan shall be
provided in writing to the member.
(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. Charge and form filing requirements.
(a)(1) A discount medical plan organization shall file with
the commissioner a list of all prospective member fees and charges
associated with the discount medical plan.
(2) Any fee or charge to members that is greater than thirty
dollars per month shall be submitted to the commissioner for
approval prior to its use.
(3) The discount medical plan organization has the burden of
proof that a fee or charge bears a reasonable relationship to the
benefits to be received by the member.
(b) All forms 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 first be filed with and approved by
the commissioner.
(c)(1) A charge or form shall be considered approved on the
sixtieth day after its date of filing unless it has been previously
disapproved by the commissioner.
(2) The commissioner shall disapprove any charge or form that
does not meet the requirements of this section or that is
unreasonable, discriminatory, misleading or unfair.
(3) If a charge or form is disapproved, the commissioner shall
notify the discount medical plan organization, specify in the
notice the reasons for disapproval, and advise the discount medical
plan organization that it may demand a hearing in accordance with
the provisions of section thirteen, article two of this chapter to
contest the commissioner's decision.
§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.
(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.
(a) The commissioner may examine and 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 the persons have been or are engaged in any
violation of this article or rules of this state or have engaged in
unfair or deceptive acts or practices in any state.
(b) If the commissioner has cause to believe that a violation
of this article or any rule promulgated under this article has
occurred 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 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 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.
§33-15E-15. Criminal penalties; insurance fraud unit.
(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
confined 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.
(c) Any conduct regarding the operation of a discount medical
plan or discount prescription drug plan is the "business of
insurance" for purposes of article forty-one of this chapter, and
suspected violations of this article may be investigated by the
insurance fraud unit.
§33-15E-16. Injunctions.
(a) In addition to the penalties and other provisions of this
article, the commissioner may seek both temporary and permanent
injunctive relief when:
(1) A discount medical plan is being operated by a person or
entity that is not licensed pursuant to this article; or
(2) Any person, entity or discount medical plan organization
has engaged in any activity prohibited by this article or any rule
adopted pursuant to this article.
(b) The venue for any proceeding brought pursuant to this
section is in the circuit court of Kanawha County.
§33-15E-17. Rules.
The commissioner may 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.
NOTE: The purpose of this bill is to provide a mechanism for
the regulation and licensing by the Insurance Commissioner of
discount medical plan organizations and discount prescription drug
plan organizations.
This article is new; therefore, strike-throughs and
underscoring have been omitted.