A bill to limit the administrative expenses and profits of managed care entities to not more than 15 percent of premium revenues.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Managed Care Integrity Act of 
2001''.

SEC. 2. LIMITATION OF ADMINISTRATIVE EXPENSES AND PROFITS OF MANAGED 
              CARE ENTITIES.

    (a) Application to Managed Care Entities.--
            (1) In general.--Notwithstanding any other provision of 
        law, each health benefits plan offered by a managed care entity 
        shall ensure that, with respect to a contract year, the 
        actuarial value of the aggregate benefits provided under the 
        plan during such year to enrollees is not less than 85 percent 
        of the aggregate amount of payments received from, or on behalf 
        of, such enrollees for such year.
            (2) Waiver of requirements.--
                    (A) In general.--The Secretary of Health and Human 
                Services may waive the requirement of paragraph (1) for 
                a 12-month period with respect to a managed care entity 
                if the Secretary determines, based on the 
                recommendations of the agency responsible for licensing 
                such entity (or the health care plans of such entity) 
                in a State, that--
                            (i) the solvency of the entity is in 
                        jeopardy; or
                            (ii) compliance with the requirement would 
                        cause the entity to fail to meet the solvency 
                        requirements required for licensure in the 
                        State.
                    (B) Renewals.--The Secretary of Health and Human 
                Services may renew a waiver under subparagraph (A), 
                except that the no waiver may be granted for a period 
                in excess of 24 months in any 36-month period.
            (3) Administrative costs.--
                    (A) Limitation.--For purposes of this subsection, 
                the costs associated with the management and operation 
                of a managed care plan (including the costs of 
                compensation and personnel fringe benefits, interest 
                expenses, costs of occupancy of a facility, and 
                marketing costs) shall not be included in determining 
                the actuarial value of the aggregate benefits provided 
                under the plan.
                    (B) Regulations.--The Secretary of Health and Human 
                Services shall promulgate regulations to define ``costs 
                associated with the management and operation of a 
                manages care plan'' for purposes of subparagraph (A).
            (4) Definition.--For purposes of this subsection, the term 
        ``managed care entity'' shall include--
                    (A) managed care entities providing health care 
                coverage for individuals under a group health plan or 
                individual health insurance coverage;
                    (B) medicaid managed care organizations as defined 
                in section 1903(m)(1)(A) of the Social Security Act (42 
                U.S.C. 1396b(m)(1)(A));
                    (C) managed care entities that provide health care 
                coverage for individuals under the Federal Employees 
                Health Benefits Program under chapter 89 of title 5, 
                United States Code; and
                    (D) managed care entities that provide health care 
                coverage for members of the armed forces and their 
                families under chapter 55 of title 10, United States 
                Code.
            (5) Effective date.--Paragraph (1) shall apply to contract 
        years beginning on or after January 1, 2002.
            (6) Enforcement.--The Secretary of Health and Human 
        Services shall develop formal investigation and compliance 
        procedures with respect to complaints received by the Secretary 
        concerning the failure of a health benefits plan to comply with 
        the provisions of this subsection. Under such procedures--
                    (A) the Secretary shall provide the plan with the 
                reasonable opportunity to develop and implement a 
                corrective action plan to correct the deficiencies that 
                were the basis of the complaint received by the 
                Secretary; and
                    (B) the Secretary shall provide the plan with 
                reasonable notice and opportunity for a hearing 
                (including the right to appeal an initial decision) 
                prior to applying the sanctions described in subsection 
                (c).
    (b) Medicare+Choice Organizations.--
            (1) In general.--Section 1852 of the Social Security Act 
        (42 U.S.C. 1395w-22) is amended by adding at the end the 
        following new subsection:
    ``(l) Requirement Relating to the Provision of Benefits.--
            ``(1) In general.--Each Medicare+Choice plan offered by a 
        Medicare+Choice organization shall ensure that, with respect to 
        a contract year, the actuarial value of the aggregate benefits 
        provided under the plan during such year to Medicare+Choice 
        eligible individuals enrolled in the plan is not less than 85 
        percent of the aggregate amount of payments received from, or 
        on behalf of, such individuals for such year.
            ``(2) Waiver of requirement.--
                    ``(A) In general.--The Secretary may waive the 
                requirement under paragraph (1) for a 12-month period 
with respect to a Medicare+Choice plan offered by a Medicare+Choice 
organization, if the Secretary determines, based, except for an 
organization with a waiver under section 1855(a)(2), on the 
recommendations of the agency responsible for licensing such plan in a 
State, that--
                            ``(i) the solvency of the Medicare+Choice 
                        organization is in jeopardy; or
                            ``(ii) compliance with the requirement 
                        would cause the Medicare+Choice organization to 
                        fail to meet the solvency requirements required 
                        for licensure in the State or under this part.
                    ``(B) Renewals.--The Secretary may renew a waiver 
                under subparagraph (A), except that no waiver may be 
                granted for a period in excess of 24 months in any 36-
                month period.
            ``(3) Administrative costs.--
                    ``(A) Limitation.--For purposes of this subsection, 
                the costs associated with the management and operation 
                of a Medicare+Choice plan (including the costs of 
                compensation and personnel fringe benefits, interest 
                expenses, costs of occupancy of a facility, and 
                marketing costs) shall not be included in determining 
                the actuarial value of the aggregate benefits provided 
                under the plan.
                    ``(B) Regulations.--The Secretary shall promulgate 
                regulations to define `costs associated with the 
                management and operation of a manages care plan' for 
                purposes of subparagraph (A).
            ``(4) Enforcement.--The Secretary may terminate a contract 
        with a Medicare+Choice organization under section 1857 in 
        accordance with formal investigation and compliance procedures 
        established by the Secretary under which--
                    ``(A) the Secretary provides the organization with 
                the reasonable opportunity to develop and implement a 
                corrective action plan to correct the deficiencies that 
                were the basis of the Secretary's determination under 
                this paragraph; and
                    ``(B) the Secretary provides the organization with 
                reasonable notice and opportunity for hearing 
                (including the right to appeal an initial decision) 
                before terminating the contract.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to contract years beginning on or after January 1, 
        2002.
    (c) Sanctions.--
            (1) In general.--If the Secretary of Health and Human 
        Services determines that a health benefits plan or a 
        Medicare+Choice organization fails substantially to comply with 
        the provision of this Act or section 1852(l) of the Social 
        Security Act the Secretary may provide, in addition to any 
        other remedies authorized by law, for any of the remedies 
        described in paragraph (2).
            (2) Remedies.--The remedies described in this paragraph 
        are--
                    (A) civil money penalties of not more than $25,000 
                for each determination under paragraph (1) or, with 
                respect to such a determination involving 
                misrepresentation or falsifying information, of not 
                more than $100,000 for each such determination; and
                    (B) with respect to Medicare+Choice organizations--
                            (i) suspension of enrollment of individuals 
                        under part C of title XVIII of the Social 
                        Security Act after the date the Secretary 
                        notifies the organization of a determination 
                        under paragraph (1) and until the Secretary is 
                        satisfied that the basis for such determination 
                        has been corrected and is not likely to recur; 
                        or
                            (ii) suspension of payment to the 
                        organization under such part for individuals 
                        enrolled after the date the Secretary notifies 
                        the organization of a determination under 
                        paragraph (1) and until the Secretary is 
                        satisfied that the basis for such determination 
                        has been corrected and is not likely to recur.

Summary: Managed Care Integrity Act of 2001 - Requires health benefits plans offered by managed care entities to ensure that the actuarial value of the aggregate plan benefits is at least 85 percent of the aggregate amount of payments received from, or on behalf of, plan enrollees. Waives such requirement for a limited period if an entity's solvency is in jeopardy or compliance would cause the entity's failure to meet State solvency requirements. Includes Medicaid managed care organizations and managed care entities providing health care coverage for Federal employees and members of the armed forces within the definition of managed care entity. Requires the Secretary of Health and Human Services to develop related investigation and compliance procedures. Amends title XVIII (Medicare) of the Social Security Act to apply the requirements of this Act to MedicareChoice organizations. Sets forth noncompliance remedies.