SENATE, No. 638

SECTION 1. The Massachusetts General Laws are hereby further amended by adding, after Section 176N, the following new Section: -

SECTION 176O

Section 1.  Definitions.

 “Board,” shall mean the Board of Directors of the Small Group Purchasing Program established by Section 4.

 “Carrier,” an insured, licensed or otherwise authorized to transact accident and health insurance under Chapter 175; non-profit hospital service corporation organized under Chapter 176A; a non-profit medical service corporation organized under Chapter 176B; a health maintenance organization organized under Chapter 176G; and an insured group health benefit plan that includes a preferred provider arrangement organized under Chapter 176I; which issues a health benefit plan to one or more eligible insured on or after March 1, 1992.

 “Commissioner,” The Commissioner of the Division of Insurance.

“Eligible Employee,” An employee who works on a full-time basis and has a normal work week of thirty or more hours.  The term includes a sole proprietor, a partner of a partnership, and an independent contractor, if the sole proprietor, partner or independent contractor is included as an employee under a health benefit plan of a small employer, but does not include and employee who works on a part-time, temporary or substitute basis.

 “Health Benefit Plan,” any individual, general, blanket, or group policy of health, accident and sickness insurance issued by an insurer licensed under Chapter 175; a group hospital service plan issued by a non-profit hospital service corporation under Chapter 176A; a group medical service plan issued by a non-profit hospital service corporation under Chapter 176B; a group health maintenance contract issued by a health maintenance organization under Chapter 176B; an insured group health benefit plan that includes a preferred provider arrangement under Chapter 176I; and any multiple employer welfare arrangement (MEWA) required to be licensed under Chapter 175’ offered to an eligible business.  The term “health benefit plan” shall not include accident only, credit, dental or disability income insurance, coverage issued as a supplement to liability insurance, insurance arising out of a workers’ compensation or similar law, automobile medical payment insurance, insurance under which beneficiaries are payable with or without regard to fault and which is statutorily required to be contained in a liability insurance policy or equivalent self-insurance, long-term care only insurance, or any group blanket or general policy which provide supplemental coverage to Medicare or other governmental programs.

“Health Insurance Purchasing Co-operatives,” (HIPC) A private, non-profit entity established pursuant to Section 5 of this Act through which small employers may voluntarily obtain health care coverage.

“HIPC Area,” the geographic region within which an HIPC operates under this Act, as determined by the Board.

“Member Small Employer,” a small employer who enrolls with an HIPC.

 “Participating Health Partnership,” a carrier offering coverage under this Act through a contract with an HIPC, as established in Section 7 of this act.

 “Plan of Operation,” the articles, bylaws and operating rules adopted by the Board in accordance with Section 3(F) of this act

 “Service Area,” a geographic region in which a carrier is authorized or licensed to operate.

 “Small Employer,” (Insert the definition of small employer contained in the Commonwealth’s small employer market reform statue.  If the Commonwealth has not enacted such a statue, use the following definition):  A person, firm, corporation, partnership, or association who is actively engaged in business who, on at least 50 percent of its working days during the preceding calendar quarter, employed at least three but no more than fifty full-time employees, the majority of whom were employed within this state.  In determining the number of full-time employees, companies which are affiliated companies, or which are eligible to file a combined tax return for purposed of state taxation, shall be considered one employer.

 “Standard health benefit plan,” a health benefit plan developed by the Board of Reinsurance Program pursuant to Section 8 of Chapter 176J.  If the Board of Reinsurance Program has not developed a standard health benefit plan then a standard health benefit plan shall be developed by the Board of the Small Group Purchasing Program.

Section 2.  Creation of the Program.

There is created a non-profit legal entity to be known as the Massachusetts Small Group Purchasing Program.  The program shall perform its functions under the plan of oepration established and approved under Section 3(F) and shall exercise its powers through a Board of Directors established under Section 4.

Said program shall come under the immediate supervision of the Commissioner.  As needed, the Commissioner will provide technical assistance to the Program and to the Program’s Board of Directors.

Section 3.  Powers and Duties of the Programs.

The Program, acting through the Board, shall have the following powers and duties to:

(a)  Define, within 120 days of the appointment of the initial Board, a standard health benefit plan has not been developed by the Board of Reinsurance Program.

(b) Establish, within 120 days of the appointment of the Board, HIPC areas which shall be contiguous and which in total shall encompass the entire Commonwealth.  To the largest extent possible HIPC shall reflect metropolitan standard areas and other existing markets.

(c)Develop a carrier comparison form to be used in providing member small employers and their eligible employees with information regarding participating health partnerships.

(d) Develop a dispute resolution procedure to be used in resolving disputes between a HIPC and a member small employers and enrollees.  The dispute resolution procedure shall include the right to appeal to the Commissioner the Program’s resolution of the dispute.

(e)Report annually to the Governor and the General Assembly on the operation of the Program, the HIPCs, and the participating health partnerships.  Such report shall also be made available to the public.

(f) (1)  Submit to the Commissioner, within 120 days of the appointment of the initial Board, a plan of operation necessary or suitable to assure the fair, reasonable, and equitable administration of the Program, and submit to the Commissioner any subsequent amendments to such plan of operation.  The plan of operation and any amendments thereto shall become effective, after appropriate notice and hearing, upon the Commissioner’s written approval or unless the Commissioner has failed to approve it within 120 days.

(2)    If the Program fails to submit a suitable plan of operation within 120 days following the appointment of the initial Board, or if at any time thereafter the Program fails to submit suitable amendments to the plan of operation, the Commissioner shall, after notice and hearings, adopt and promulgate such reasonable rules as are necessary or advisable to effectuate the provisions of this Act.  Such rules shall continue in force until superseded by a plan of operation submitted by the Program and approved by the Commissioner.

(3)    All participating health partnerships, member small employers and HIPCs shall comply with the plan of operation.

(g) Develop standard enrollment procedures to be used in enrolling small employers and their eligible employees and dependents.

(h) Establish participation requirements to be used by member small employers.  The participation requirements must be applied consistently by the HIPCs and the participating health partnerships which contract with the HIPCs.

(i) Develop uniform standards for use by HIPCs and participating health partnerships in reporting medical outcomes data and other data from participating health partnerships.  In formulating such standards, the Program shall be consistent with health care data collection activities in effect in this and/or nationally.  Any data collection requirements promulgated by the Program shall be based on a study of the feasibility and cost-effectiveness of the requirements and on the credibility of the data collected, including the constituency with national standards for electronic data interchange and their necessity for supporting evaluation of participating health partnerships with respect to cost containment, quality, control of technology expense, and customer satisfaction.

(j) Enter into such contracts as are necessary or proper to carry out the provisions and purposes of this Act.

(k) Sue or be sued.

(l) Determine an annual budget which shall be submitted to and approved by the Commissioner.  The Program shall raise the monies necessary to fund its budget by assessing all HIPCs on a prorated basis based on the number of individuals participating in the HIPC.  The Program’s assessment shall be funded by each HIPC through the surcharge permitted under Section 6(B).

(m) Establish operating procedures and reporting requirements for HIPCs to assure that they are operating in accordance with the provisions of this Act and to conduct audits of HIPCs as appropriate.

(n) Establish operating procedures for the electronic transfer of information between participating health partnerships and the HIPC following the ANSI 12 standards and the guidelines developed by the Workgroup on Electronic Data Interchange.

(o) Conduct a study to determine whether a risk adjustment mechanism should be developed for use by HIPCs.

Section 4.  Board of Directors.

(a)  A Board of Directors for the Massachusetts Small Group Purchasing Program is hereby created.  The Board shall consist of nine members, composed and appointed in accordance with the following: -

(1)    The Commission, who shall also serve as the Board’s chair;

(2)    One representative of consumers employed by small employers;

(3)    The representatives of health benefit plans, one of whom shall be a representative of an insurance company with experience in the small employer market, one of whom shall be a representative of a health maintenance organization, and one of whom shall be a representative of either a hospital or health services plan corporation;

(4)    Two representatives of small employers; and

(5)    Two representatives of the medical community, one of whom shall be a representative of hospitals and one of whom shall be a representative of other medical providers.

(b)  With the exception of the Commissioner, each Board member shall be appointed by the Governor within 60 days of the effective date of this Act.

(c)  With the exception of the Commissioner, four members of the initially appointed Board shall be appointed to serve two-year terms and the remaining four members shall be appointed to serve four-year terms.  Thereafter, with the exception of the Commissioner, the terms of all Board members shall be four years.

(d)  There shall be no liability on the part of, and no cause of action of any nature shall arise against, any member of the Board, or its employees or agents, for any action taken in good faith by them in the performance of their powers and duties as set forth under this Act.

Section 5.  The Establishment of Health Insurance Purchasing Cooperatives.

(a)  The Board shall establish geographic HIPC areas each of which shall be contiguous.  To the largest extent possible HIPC areas shall reflect metropolitan standard areas and other existing markets.

(b) The Board shall create a single HIPC within each designated geographic HIPC area for the benefit of its member small employers.  Each HIPC shall be operated as a state chartered, non-profit private organization.

(c)  Each HIPC shall be operated by a Board of Directors which shall consist of seven members each of whom shall be representatives of small employers.  The Program’s Board of Directors shall appoint each HIPCs initial Board of Directors.  Four members of the initial Board shall be appointed to one-year terms and the remaining three members shall be appointed to two-year terms.  Subsequent members of the HIPC Board of Directors shall be elected according to the by-laws of the HIPC.

(d)  Each HIPC Board shall adopt by-laws that include a procedure for the election of HIPC Board members by the HIPCs member small employers.

(e)  HIPCs may not purchase both health care services, assume risk for the cost or provision of health care services, or otherwise contract with health care providers for the provision of health care services to member small employers.

(f)  HIPCs may not deny membership to any small employer.

(g)   No state funds shall be used to fund the operation of a HIPC nor to subsidize the coverage provided by participating health partnerships through HIPC.

(h) In order to participate in the HIPC, a member small employer must provide a reasonable contribution toward the cost of coverage of its eligible employees.

Section 6.  Powers and Duties of Health Insurance Purchasing Cooperatives.

            HIPCs shall have the following powers and duties exercisable in accordance with any guidelines established by the Program:

(a) Enter into contracts with participating health partnerships to provide standard health benefit plans to member small employers, eligible employees and their dependents.  Each HIPC shall contract with participating health partnerships separately for its HIPC area.  Each HIPC shall contract with each carrier in its area that is designated by the Commissioner, under Section 7, participating health partnership and shall offer to member small employers every standard health benefit plan of each participating health plan.

(b) Surcharge member small employers a reasonable fee in connection with their premium payments for necessary costs incurred in connection with the operation of the HIPC and the Program.  Such surcharge shall be based on a small employer’s number of enrollees in a participating health plan.

(c) Establish procedures for the collection of premiums and surcharges from member small employers, including remittance of the share of premium paid by enrollees.

(d)   Pay participating health partnerships their contracted rated on a monthly basis or as otherwise specified under by the contract.

(e) Determine how to enroll small employers and their employers and how to make participating health partnerships available to member small employees and their eligible employees and dependents.

(f)  Publicize the existence of the HIPC.

(g) Collect and make available to member small employers and their employees marketing materials that participating health partnerships have voluntarily provided by the HIPC.

(h) Prepare and make available to member small employers and their employees comparison sheets which fairly and accurately summarize the health care plans, rates, cost, and other relevant information of each participating health partnership.

(i) Establish administrative and accounting procedures for the operation of the HIPC.

(j) Contract with, if deemed necessary by the HIPC, a small employer carrier or other administrator to provide administrative services to the HIPC.

(k) Appoint committees, hire personnel, and enter into contracts with third parties for any service necessary to carry out the powers, duties, and responsibilities of the HIPC.

(l) Report annually to the Program on the operations of the HIPC and its contracts with participating health partnerships and on such other information as may be requested by the Board.

(m) Notify the Commissioner of any potential violations of the Act by a participating health partnership.

(n) Hire and executive director.

Section 7.  Designation of Participating Health Partnership.

(a) Within 90 days of the formation of the HIPC, the Commissioner shall establish a process whereby a carrier that fulfills the qualifications of Subsection (B) of this section shall be designated by the Commissioner as a participating health partnership.

(b) Upon application, a carrier shall be designated as a participating health partnership if it meets the following operating characteristics:

(1)    Licensed with the Division of Insurance;

(2)    The capacity to administer the approved health care plans;

(3)    The ability to provide for utilization management;

(4)    The ability to monitor and evaluate the quality and cost-effectiveness of care;

(5)    The ability to demonstrate, consistent with plan requirements, that enrollees have adequate access to providers of health care including geographic availability and adequate numbers and types of providers;

(6)    A satisfactory grievance procedure, including the ability to respond to an enrollee’s calls, questions and complaints;

(7)    Financial solvency, including the ability to assume the risk of providing and paying for covered services, as applicable.  A participating health partnership may utilize reinsurance, provider risk sharing, and other appropriate mechanisms to share a portion of the risk;

(8)    Ability to provide to the Program information on medical outcome data and other data as required by the Program under Section 3(I).

(c)  In order to be designated a participating health partnership, a carrier must be willing to contract with the HIPC to provide a standard health benefit plan to any of the HIPC’s member small employers and their eligible employees and dependents; provided, however, a participating health partnership’s area.

(d)  Participating health partnerships must submit to the HIPC, on a quarterly basis, the premium rates for the standard health benefit plans that the participating health partnership’s service area.

Section 8.  Conditions Applicable to Participating Health Partnerships.

(a) Participating health partnerships shall be subject to the following provisions of Chapter 176J Sections 2 through 8 of the Insurance Code.

(b) A carrier may participate as a participating health partnership in more than one HIPC and within any one HIPC a participating health partnership may offer more than one variation of a standard health benefit plan through either an indemnity plan or managed care network or both.

(c)A participating health partnership may elect to terminate its contract with the HIPC.  A participating health partnership that elects to terminate its contract with the HIPC shall provide at least 120 days notice of its decision to the HIPC prior to the non-renewal of any coverage provided by the participating health partnership to a member small employer.

(d) A participating health partnership that elects to terminate its contract with the HIPC shall be prohibited from contracting with the HIPC for three years following the effective date of the termination of its contract with the HIPC.

(e) After notice and hearing, the Commissioner may suspend or revoke the designation as a participating health partnership within an HIPC of any carrier that fails to maintain compliance with the requirements of this Act.

(f) A participating health partnership shall offer coverage to enrollees throughout its entire service area within an HIPC geographic region, it shall offer that coverage in that entire county.

(g) A participating health partnership may not be required to offer coverage or accept enrollments if:

(1)    The eligible employee or dependent does not reside within the participating health partnership’s service area; or

(2)    A participating health partnership provides ninety days prior notice to the Commissioner and the HIPC that it will not have the capacity to deliver services adequately in its approved service area to additional enrollees; or

(3)    The Commissioner determines that acceptance of an application or applications would place a participating health partnership in a financially impaired condition.

(h) A participating health partnership that cannot offer coverage pursuant to paragraph 8(G)(2) may not offer coverage to any new employer group or individual within the service area until the later of ninety days following such refusal or the date on which the participating health partnership notifies the Commissioner and the HIPC that it has regained the capacity to deliver services in the service area.  A participating health partnership that cannot offer coverage pursuant to paragraph 8(G)(3) may not offer coverage or accept applications for any individual or employer group until a determination by the Commissioner that acceptance of an application will not put the participating health partnership in a financially impaired condition.

(i) Nothing in this Act shall prohibit a participating health partnership from providing coverage in the HIPC through a managed care system, and from contracting either directly or indirectly through a third party, with particular health care providers or types, classes or categories of health care providers.  Further, nothing in this Act shall prohibit an accountable health partnership from contracting with third parties to perform certain functions.

(j)  Nothing in this Act shall prohibit a participating health partnership from establishing its own level of payment for reimbursement health care providers providing health care services to enrollees.

(k)  A participating health partnership shall comply with all claims handling, sales solicitation, unfair trade practices, licensing, capitalization, reserve, investment standards, and other financial solvency provisions of the Insurance Cod.

Section 9.  Marketing Requirements.

(a)  Each HIPC shall use appropriate and efficient means to notify small employers of the availability of coverage through HIPC.

(b)  Each HIPC shall make available to all member small employers the cost comparison from which fairly and accurately summarizes the benefit plans, rates, cost, and other relevant information on participating health partnerships available through the HIPC.

(c)Nothing in this Act shall be construed to prohibit a participating health partnership from using the services of a licensed agent or broker in order to assist in marketing.

(d)  HIPCs shall comply with all sales, solicitation, and unfair trade practices provisions of the Insurance Code.

(e)  The member small employer shall make available to its eligible employees cost comparison sheets which fairly and accurately summarize the benefit plans, rates, costs, and other relevant information on any plans offered by the member small employer.

(f)  Member small employers shall select a participating health partnership form the HIPC.  Member small employers may select as many shared standard health benefit plans from the participating health partnership as the small employer deems appropriate.

(g)  An HIPC must provide member small employers an opportunity to change participating health partnerships during a period.