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Introduced Version Senate Bill 575 History

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Key: Green = existing Code. Red = new code to be enacted
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.
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