CHAPTER 382

FORMERLY

SENATE BILL NO. 308

AS AMENDED BY HOUSE AMENDMENT NO. 1

AN ACT TO AMEND PART VIII, TITLE 16 OF THE DELAWARE CODE RELATING TO HOSPITALS AND OTHER HEALTH FACILITIES: AND PROVIDING FOR THE ESTABLISHMENT OF HEALTH MAINTENANCE ORGANIZATIONS.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:

Section 1. Amend Part VIII, Title 16 of the Delaware Code by adding thereto a new chapter, designated as Chapter 91, which new Chapter shall read as follows:

"CHAPTER 91. HEALTH MAINTENANCE ORGANIZATIONS

§9101. Purpose

It is the purpose of the General Assembly in enacting this Chapter to provide for the establishment of health maintenance organizations, which are an alternate form of delivering health care services. It is the intent of the General Assembly that such organizations be subject only to the restrictions and regulations provided for in this Chapter.

§9102. Definitions

As used in this Chapter, unless the context clearly indicates a different meaning, the following words and phrases shall have the meaning ascribed to them in this section:

(1) "Basic health services" means a range of services including at least the followings usual physician services, hospitalization, laboratory, x-ray, emergency and preventive services, and out-of-area coverage.

(2) 'Certified health maintenance organization' means a health maintenance organization which has been issued a certificate of authority under §9104, or which is operating pending action on an application as provided in §9103(b).

(3) 'Department' means the Delaware Department of Health and Social Services.

(4) 'Health Maintenance Organization' means a public or private organization, organized under the laws of any state, which:

(i) Provides or otherwise makes available to enrolled participants health care services, including at least the basic health services defined in (1) above;

(ii) Is compensated (except for copayment) for the provision of basic health care services to enrolled participants on a predetermined periodic rate basis; and

(iii) Provides physicians' services primarily directly through physicians who are either employees or partners of such organization, or through arrangements with Individual physicians or one or more groups of physicians (organized on a group practice or individual practice basis).

(5) Insurance Department' means the Delaware Insurance Department.

§9103. Certificate of Authority Required

(a) No person shall establish or operate a health maintenance organization in this State or enter this State for the purpose of enrolling persons in a health maintenance organization without obtaining a certificate of authority under this Chapter. A foreign corporation shall not be eligible to apply for such certificate unless it has first qualified to do business in this State as a foreign corporation pursuant to 8 Del. C. 9371.

(b) Every health maintenance organization which is established or operating in this State on the effective date of this Chapter must apply for and obtain a certificate of authority under this

Chapter in order to continue such operation. If such application is filed within thirty (30) days of the effective date of this Chapter, such operation may continue until the aplication is acted upon. If the application Is deified, the applicant shall then be treated as a health maintenance organization which has had its certificate of authority revoked under §9112.

(c) If a health maintenance organization operates in this State or enters this State for the purpose of enrolling perons in a health maintenance organization, after the effective date of this Chapter, then the health maintenance organization shall be deemed to have consented that service of process in any action, suit or proceeding based upon any cause of action arising in this State, may thereafter be made by service upon the Secretary of State.

§9104. Procedure for Issuance of Certificate of Authority

(a) Each application for a certificate of authority shall be made in writing to the Department, shall be verified by an officer or authorized representative of the applicant, shall be in a form prescribed by the Department, and shall set forth or be accompanied by the following,

(1) A copy of the basic organizational document of the applicant such as the certificate of incorporation, articles of association, partnership agreement, trust agreement or other applicable documents and all amendments thereto;

(2) A list of the names, addresses, and official positions of the persons who are to be responsible for the conduct of the affairs of the applicant, including all members of the Board of Direztors, Board of Trustees, or other governing board, the principal officers in the case of a corporation, and the partners or members in the case of a partnership or association;

(3) A statement describing how the health maintenance organization shall operate, including Its anticipated enrollment, its basic health services, facilities and personnel;

(4) Financial statements showing the applicant's assets, liabilities and sources of financial support; provided that if the applicant's financial affairs are audited by an independent certified public accountant, a copy of the applicant's most recent certified financial statement shall be deemed to satisfy this requirement; and

(5) All Information needed for the Department to make the determinations in (b) of this section.

(b) Within sixty (60) days of receipt of an application for issuance of a certificate of authority, the Department shall determine whether the applicant, with respect to health care services to be furnished:

(1) Has demonstrated the ability to provide such health care services in a manner assuring availability, accessibility and continuity of services;

(2) Has arrangements for an ongoing health care quality assurance program concerning health care processes;

(3) Has the capability to comply with all applicable rules and regulations promulgated by the Department.

(4) Has the capability to provide or arrange for the provision to its enrollees of basic health care services on a prepaid basis through insurance or otherwise, except to the extent of reasonable requirements of copayments; and

(5) Has the staff and facilities to directly provide at least half of the outpatient medical care costs of its anticipated enrollees on a prepaid basis.

(c) The Department shall issue a certificate of authority to any person filing an application under this section within sixty (60) days of receipt of such application if:

(1) The application contains all of the information required in (a) of this section;

(2) The Department has not made a negative determination pursuant to (b) of this section; and

(3) Payment of the application fees prescribed in §9114 has been made.

(d) If within sixty (60) days after an application for a certificate of authority has been tiled, the Department has not issued such certificate, the Department shall immediately notify the applicant In writing of the reasons why such certificate has not been issued and the applicant shall be entitled to request a hearing on the application. The hearing shall be held within sixty (60) days of receipt of written request therefor. Proceedings In regard to such hearing shall be conducted in accordance with provisions for case decisions as set forth in the Administrative Procedures Act, 29 Del. C. Chapter 101, and in accordance with applicable rules and regulations of the Department.

§9105. Deposit Requirement

(a) No certificate of authority shall be Issued pursuant to §9105 unless there Is first filed with the Department a certification by the Insurance Commissioner of Delaware that a deposit has been made, and is being maintained, in accordance with the terms and conditions of 18 Del. C. §513(f).

(b) The required deposit shall be continuously maintained, and held by the Commissioner in trust, subject to the provisions of 18 Del. C. Chapter 15, as the same may be amended from time to time.

(c) In case of a deficiency of deposit as provided for in 18 Del. C. §1511, the Commissoner shall transmit notice thereof both to the health maintenance organlzaton and to the Department. In case the deficiency Is not cured within the time allowed, the Commissioner shall give notice thereof to the Department and the Department shall forthwith revoke its certificate of authority to the health maintenance organization.

§9106. Filing of Rates

Every health maintenance organization operating in this State shall file with the Department every manual, minimum, class rate, rating schedule or rating plan and every other rating rule, and every modification of any of the foregoing which it proposes to use. Every such filing shall state the proposed effective date thereof.

§9107 Annual Report

(a) Every health maintenance organization shall annually, on or before June 1, file with the Department a report covering the preceding fiscal year.

(b) Such report shall include:

(1) A financial statement of the organization, including its balance sheet and receipts and disbursements for the preceding fiscal year; and,

(2) A statement explaining any material change in the Information orginally submitted pursuant to §9104.

§9108. Prohibited Practices

(a) No health maintenance organization or representative thereof may cause or knowingly permit the use of advertising or solicitation which is untrue or misleading.

(b) No health maintenance organization may cancel or refuse to renew the enrollment of an enrollee solely on the basis fo his or her health. This paragrah shall not prevent a health maintenance organization from cancelling the enrollment of an enrollee if the enrollee misrepresented the state of his or her health at the time of enrollment. This paragraph shall not prevent a health maintenance organization from cancelling or refusing to renew an enrollment for reasons other than an enrollee's health, including without limitation non-payment of premiums or fraud by the enrollee.

(c) The Department shall have exclusive authority to investigate violations of the provisions of this section.

§9109. Sale and Solicitation

A certified health maintenance organization may, at Its sole option, solicit enrollees and sell its services through:

(1) its own employees;

(2) persons licensed or otherwise permitted to sell health Insurance; or

(3) persons licensed or otherwise permitted to sell the benefit program of a health service corporation.

§9110. Relationships with Insurance Companies and Health Service Corporations

Any person or corporation authorized to transact insurance or to engage in the business of a

health service corporation in this State, may either directly or through a subsidiary or affiliate,

operate a health maintenance organization subject to the provisions of this Chapter. In addition, no provision of the insurance Code shall bar such person or corporation from contracting with a health maintenance organization to provide insurance, reinsurance or similar protection for such health maintenance organization against the cost of care provided through the health maintenance organization and to provide coverage in the event of the failure of the health maintenance organization to meet its obligations.

§9111. Examinations

(a) The Department may make examinations concerning the quality of health care services of any health maintenance organization. The Department may make such examination as it deems necessary for the protection of the interests of the enrollees of the health maintenance organization, but not less frequently than very three years.

(b) Every health maintenance organization shall submit its books and records relating to health care services to such examinations. In the course of such examinations, the Department may administer oaths to and examine the officers and agents of the health maintenance organization and of any health care providers with which it has contracts, agreements or other arrangements.

(c) The reasonable expenses of examinations under this section shall be assessed against the organization being examined and remitted to the Department.

(d) In lieu of such examination of an out-of-state health maintenance organization; the Department may accept the report of a similar examination made by the appropriate agency of another state; provided that if the health maintenance organization delivers health care services in this State, such report from another state shall not relieve the Department of its responsibility to make its own examination.

§9112. Suspension or Revocation of Certificate of Authority

(a) The Department may revoke or suspend a certificate of authority issued to a health maintenance organization pursuant to this Chapter, or may place a health maintenance organization on probation for such period as it determines, or may publicly censure a health maintenance organization, if it determines, after a hearing, that:

(1) The health maintenance organization is operating in a manner which deviates substantially, in a manner detrimental to its enrollees, from the plan of operation described by it in securing its certificate of authority;

(2) The health maintenance organization does not have in effect arrangements to provide the quantity and quality of health care services required by its enrollees;

(3) The health maintenance organization is no longer in compliance with all of the requirements of S9104(b); or

(1) The continued operation of the health maintenance organization would be detrimental to the health or well-being of its enrollees needing services.

(b) Proceedings in regard to any hearing held pursuant to this section shall be conducted in accordance with provisions for case decisions as set forth in the Administrative Procedures Act, 29 Del. C. Chapter 101, and any applicable rules and regulations of the Department. Any decision rendered following a hearing shall set forth the findings of fact and conclusions of the Department as to any violations of this Chapter, and shall also set forth the reasons for the Department's choice of any sanction to be imposed. The Department's choice of sanction shall not be disturbed upon appeal, except for abuse of discretion.

(c) Suspension of a certificate of authority pursuant to this section shall not prevent a health maintenance organization from continuing to serve all its enrollees as of the date the Department issues a decision imposing suspension, nor shall it preclude thereafter adding as enrollees newborn children or other newly acquired dependents of existing enrollees. Unless otherwise determined by the Department and set forth in its decision, a suspension shall, during the period when it is in effect, preclude all other new enrollments and also all advertising or solicitation on behalf of the health maintenance organization other than communication, approved by the Department, which are intended to give information as to the effect of the suspension.

(d) In the event that the Department decides to revoke the certificate of authority of a health maintenance organization, the decision so providing shall specify the time and manner in which its business shall be concluded. If the Department determines it is appropriate, it may refer the matter of conservation or liquidation to the Insurance Commissioner, and he shell then proceed in accordance with 18 Del. C. Chapter 59. In any case, after the Department has issued a decision revoking a certificate of authority, unless stayed in connection with an appeal, the health maintenance organization shall not conduct any further business except as expressly permitted in the Department's decision and it shall engage only in such activities as are directed by the Department or are required to assist its enrollees in securing continued health care coverage.

§9113. Regulation and Administrative Procedures

The Department shall have authority to promulgate such reasonable rules and regulations as are necessary to carry out the provisions of this Chapter. Such rules or regulations shall conform to and be promulgated pursuant to the Administrative Procedures Act, 29 Del. C. Chapter 101.

§9119. Fees

Every health maintenance organization subject to this Chapter shall pay the following fees:

(1) For filing an application for a certificate of authority - one hundred dollars.

(2) For filing an annual report - fifty dollars.

§9115. Relationship to Other Laws

(a) Except as provided in (e) below, a certified health maintenance organizaton shall not be deemed to be practicing medicine and the health maintenance organization shall be exempt from the provisions of statutes, rules and regulations relating to the practice of medicine

(b) No health maintenance organization delivering health care services in this State shall engage in a contract with or employ, for the delivery of such services, any person who does not hold a Delaware license to practice the profession for which such person is engaged or employed, if such practice requires a license.

(c) Except as provided in §9108 or §9109, solicitation of enrollees by a certified health maintenance organization or its employees shall not be construed as a violation of any statute, rule or regulation relating to solicitation or advertising by health professionals.

(d) The provisions of Title 18 and other laws of this State relating to insurance, insurance contracts, insurance policies, insurers or health service corporations shall not be applicable to any certified health maintenance organization. If an insurer or health service corporation operates a certified health maintenance organization, only the activities related to the operation of the certified health maintenance organization shall be exempt from the provisions of such laws relating to insurers or health service corporations.

(e) Notwithstanding (a) and (d) of this section, every health maintenance organization shall be a health care provider within the meaning of the Health Care Malpractice Insurance and Litigation Act, 18 Del. C. Chapter 68.

(f) Issuance of a certificate of authority pursuant to §9104 shall be deemed licensure by the State Board of Health for purposes of the Delaware Health Facilities Act, 16 Del. C. §9703(5).

§9116. Confidentiality of Health Information

Any data or informaton pertaining to the diagnosis, treatment or health of any enrollee or applicant obtained from such person or from any health care provider by any health maintenance organization shall be held in confidence and shall not be disclosed to any person except upon the express consent of the enrollee or applicant, or his physician, or pursuant to statute or court order for the production of evidence or the discovery thereof, or in the event of claim or litigation between such person and the health maintenance organization wherein such data or information is pertinent. The communication of such data or information from a health care provider to a health maintenance organization shall not prevent such data or information from being deemed confidential for purposes of the Delaware Uniform Rules of Evidence.

§9117. Freedom of Choice

In order to promote freedom of choice by employers and others in Delaware who purchase group health care coverage, it shall be unlawful, from and after 30 days following the effective date of this enactment, for any insurer, health service corporation, or other person in the business of providing or insuring health care services or coverage, to offer any insurance or health care coverage to any person in this State on a basis which would preclude such person from allowing some members of a group to elect to enroll in a certified health maintenance organization, either by means of an express prohibition or by requiring the same payment regardless of such election; provided, however, that it shall not be unlawful for such persons to offer insurance or coverage on a basis where the rates or cost thereof are calculated according to the number of persons in the group for which such coverage is provided. The Insurance Department shall have authority to enforce the provisions of this section.

§9118. Short Title

This Chapter shall be known and may be cited as the Delaware Health Maintenance Organization Act or the Delaware HMO Act."

Section 2. Severability of Sections if Held Invalid

If any section, term or provision of this Act shall be adjudged invalid for any reason, such judgment shall not effect, impair or invalidate any other section, term or provision of this Act, and the remaining sections, terms and provisions shall be and remain in full force and effect.

Section 3. Effective Date. This Act shall take effect 90 days after the date of enactment.

Approved July 9, 1982.