I

103D CONGRESS

2D SESSION H. R. 4527

To assure fairness and choice to patients and providers under managed

care health benefit plans.

IN THE HOUSE OF REPRESENTATIVES

MAY 26, 1994

Mr. PETERSON of Minnesota (for himself, Mr. LAUGHLIN, Mr. HALL of

Texas, Mr. ROWLAND, Mr. BARCIA of Michigan, and Mr. ALLARD) introduced the following bill; which was referred jointly to the Committees on

Energy and Commerce and Education and Labor

A BILL

To assure fairness and choice to patients and providers under

managed care health benefit plans.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Patient Protection Act

5 of 1994’’.

6 TITLE I—PROTECTION OF CONSUMER CHOICE

7 (a) Nothing in this Act shall be construed as prohibit8 ing the following:
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1 (1) An individual from purchasing any health

2 care services with that individual’s own funds,

3 whether such services are covered within the individ4 ual’s standard benefit package or from another

5 health care provider or plan.

6 (2) Employers from providing coverage for ben7 efits in addition to the comprehensive benefit pack8 age.

9 TITLE II—CERTIFICATION OF MANAGED CARE

10 PLANS AND UTILIZATION REVIEW PROGRAMS

11 (a) CERTIFICATION PROCESS.—

12 (1) CERTIFICATION.—The Secretary shall es13 tablish a process for certification of managed care

14 plans meeting the requirements of subsection (b)(1)

15 and of utilization review programs meeting the re16 quirements of subsection (b)(2).

17 (2) QUALIFIED MANAGED CARE PLAN.—For

18 purposes of this title, the term ‘‘qualified managed

19 care plan’’ means a managed care plan that the Sec20 retary certifies, upon application by the program, as

21 meeting the requirements of this section.

22 (3) QUALIFIED UTILIZATION REVIEW PRO23 GRAM.—For purposes of this title, the term ‘‘quali24 fied utilization review program’’ means a utilization

25 review program that the Secretary certifies, upon
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1 application by the program, as meeting the require2 ments of this section.

3 (4) UTILIZATION REVIEW PROGRAM.—For pur4 poses of this title the term ‘‘utilization review pro5 gram’’ means a system of reviewing the medical ne6 cessity, appropriateness, or quality of health care

7 services and supplies provided under a health insur8 ance plan or a managed care plan using specified

9 guidelines. Such a system may include preadmission

10 certification, the application of practice guidelines,

11 continued stay review, discharge planning,

12 preauthorization of ambulatory procedures, and ret13 rospective review.

14 (5) MANAGED CARE PLAN.—

15 (A) IN GENERAL.—For purposes of this

16 title the term ‘‘managed care plan’’ means a

17 plan operated by a managed care entity as de18 scribed in subparagraph (B), that provides for

19 the financing and delivery of health care serv20 ices to persons enrolled in such plan through—

21 (i) arrangements with selected provid22 ers to furnish health care services;

23 (ii) explicit standards for the selection

24 of participating providers;
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1 (iii) organizational arrangements for

2 ongoing quality assurance, utilization re3 view programs, and dispute resolution; and

4 (iv) financial incentives for persons

5 enrolled in the plan to use the participat6 ing providers and procedures provided for

7 by the plan.

8 (B) MANAGED CARE ENTITY DEFINED.—

9 For purposes of this title, a managed care en10 tity includes a licensed insurance company, hos11 pital or medical service plan, health mainte12 nance organization, an employer or employee

13 organization, or a managed care contractor as

14 described in subparagraph (C), that operates a

15 managed care plan.

16 (C) MANAGED CARE CONTRACTOR DE17 FINED.—For purposes of this title, a managed

18 care contractor means a person that—

19 (i) establishes, operates or maintains

20 a network of participating providers;

21 (ii) conducts or arranges for utiliza22 tion review activities; and

23 (iii) contracts with an insurance com24 pany, a hospital or medical service plan, an

25 employer, an employee organization, or any
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1 other entity providing coverage for health

2 care services to operate a managed care

3 plan.

4 (6) PARTICIPATING PROVIDER.—The term

5 ‘‘participating provider’’ means a physician, hospital,

6 pharmacy, laboratory, or other appropriately state li7 censed provider of health care services or supplies,

8 that has entered into an agreement with a managed

9 care entity to provide such services or supplies to a

10 patient enrolled in a managed care plan.

11 (7) REVIEW AND RECERTIFICATION.—The Sec12 retary shall establish procedures for the periodic re13 view and recertification of qualified managed care

14 plans and qualified utilization review programs.

15 (8) TERMINATION OF CERTIFICATION.—The

16 Secretary shall terminate the certification of a pre17 viously qualified managed care plan or a qualified

18 utilization review program if the Secretary deter19 mines that such plan or program no longer meets

20 the applicable requirements for certification. Before

21 effecting a termination, the Secretary shall provide

22 the plan notice and opportunity for a hearing on the

23 proposed termination.

24 (9) CERTIFICATION THROUGH ALTERNATIVE

25 REQUIREMENTS.—
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1 (A) CERTAIN ORGANIZATIONS RECOG2 NIZED.—An eligible organization as defined in

3 section 1876(b), shall be deemed to meet the

4 requirements of subsection (b) for certification

5 as a qualified managed care plan.

6 (B) RECOGNITION OF ACCREDITATION.—If

7 the Secretary finds that a State licensure pro8 gram or a national accreditation body estab9 lishes a requirement or requirements for accred10 itation of a managed care plan or utilization re11 view program that are at least equivalent to a

12 requirement(s) established under subsection (b),

13 the Secretary may, to the extent appropriate,

14 treat a managed care plan or a utilization re15 view program thus accredited as meeting the

16 requirement(s) of subsection (b).

17 (b) REQUIREMENTS FOR CERTIFICATION.—

18 (1) MANAGED CARE PLANS.—The Secretary

19 shall establish Federal standards for the certification

20 of qualified managed care plans, including standards

21 whereby:

22 (A) Prospective enrollees in health insur23 ance plans must be provided information as to

24 the terms and conditions of the plan so that

25 they can make informed decisions about accept-
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1 ing a certain system of health care delivery.

2 Where the plan is described orally to enrollees,

3 easily understood, truthful, and objective terms

4 must be used. All written plan descriptions

5 must be in a readable and understandable for6 mat, consistent with standards developed for

7 supplemental insurance coverage under Title

8 XVIII of the Social Security Act. This format

9 must be standardized so that customers can

10 compare the attributes of the plans. Specific

11 items that must be included are—

12 (i) coverage provisions, benefits, and

13 any exclusions by category of service, pro14 vider or physician, and if applicable, by

15 specific service;

16 (ii) any and all prior authorization or

17 other review requirements including

18 preauthorization review, concurrent review,

19 post-service review, post payment review

20 and any procedures that may lead the pa21 tient to be denied coverage for or not be

22 provided a particular service;

23 (iii) financial arrangements or con24 tractual provisions with hospitals, review

25 companies, physicians or any other pro-
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1 vider of health care services that would

2 limit the services offered, restrict referral

3 or treatment options, or negatively affect

4 the physician’s fiduciary responsibility to

5 his or her patients, including but not lim6 ited to financial incentives not to provide

7 medical or other services;

8 (iv) explanation of how plan limita9 tions impact enrollees, including informa10 tion on enrollee financial responsibility for

11 payment for coinsurance or other non-cov12 ered or out-of-plan services;

13 (v) loss ratios; and

14 (vi) enrollee satisfaction statistics (in15 cluding percent reenrollment, reasons for

16 leaving plan, etc.).

17 (B) Plans must demonstrate that they

18 have adequate access to physicians and other

19 providers, so that all covered health care serv20 ices will be provided in a timely fashion. This

21 requirement can not be waived and must be met

22 in all areas where the plan has enrollees, includ23 ing rural areas.

24 (C) Plans must meet financial reserve re25 quirements that are established to assure prop-
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1 er payment for covered services provided. An in2 demnity fund should be established to provide

3 for plan failures even when a plan has met the

4 reserve requirements.

5 (D) All plans shall be required to establish

6 a mechanism, with defined rights, under which

7 physicians participating in the plan provide

8 input into the plan’s medical policy (including

9 coverage of new technology and procedures),

10 utilization review criteria and procedures, qual11 ity and credentialing criteria, and medical man12 agement procedures.

13 (E) All plans shall be required to creden14 tial physicians within the plan, and will allow

15 all physicians within the plan’s geographic serv16 ice area to apply for such credentials. At least

17 once per year, plans shall notify physicians of

18 the opportunity to apply for credentials.

19 (i) Such a credentialing process shall

20 begin upon application of a physician to

21 the plan for inclusion.

22 (ii) Each application shall be reviewed

23 by a credentialing committee with appro24 priate representation of the applicant’s

25 medical specialty.
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1 (iii) Credentialing shall be based on

2 objective standards of quality with input

3 from physicians credentialed in the plan

4 and such standards shall be available to

5 applicants and enrollees. When economic

6 considerations are part of the decision, ob7 jective criteria must be used and must be

8 available to applicants, participating physi9 cians and enrollees. Any economic profiling

10 of physicians must be adjusted to recognize

11 case mix, severity of illness, age of patients

12 and other features of a physician’s practice

13 that may account for higher than or lower

14 than expected costs. Profiles must be made

15 available to those so profiled. When grad16 uate medical education is a consideration

17 in credentialing, equal recognition will be

18 given to training programs accredited by

19 the Accrediting Council on Graduate Medi20 cal Education and by the American Osteo21 pathic Association.

22 (iv) Plans shall be prohibited from

23 discriminating against enrollees with ex24 pensive medical conditions by excluding
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1 practitioners with practices containing a

2 substantial number of such patients.

3 (v) All decisions shall be made on the

4 record and the applicant shall be provided

5 with all reasons used if the application is

6 denied or the contract not renewed.

7 (vi) Plans shall not be allowed to in8 clude clauses in physician or other provider

9 contracts that allow for the plan to termi10 nate the contract ‘‘without cause’’.

11 (vii) There shall be a due process ap12 peal from all adverse decisions. The due

13 process appeal mechanisms shall be as set

14 forth in the Health Care Quality Improve15 ment Act of 1986, 42 U.S.C. § 11101–

16 11152.

17 (viii) The same standards and proce18 dures used for an application for creden19 tials shall also be used in those cases

20 where the plan seeks to reduce or withdraw

21 such credentials. Prior to initiation of a

22 proceeding leading to termination of a con23 tract ‘‘for cause’’, the physician shall be

24 provided notice, an opportunity for discus25 sion, and an opportunity to enter into and
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1 complete a corrective action plan, except in

2 cases where there is imminent harm to pa3 tient health or an action by a state medical

4 board or other government agency that ef5 fectively impairs the physician’s ability to

6 practice medicine within the jurisdiction.

7 (F) Procedures shall be established to en8 sure that all applicable Federal and State laws

9 designed to protect the confidentiality of pro10 vider and individual medical records are fol11 lowed.

12 (2) QUALIFIED UTILIZATION REVIEW PRO13 GRAMS.—The Secretary, shall establish Federal

14 standards for the certification of qualified utilization

15 review programs, including:

16 (A) Plans must have a medical director re17 sponsible for all clinical decisions by the plan

18 and provide assurances that the medical review

19 or utilization practices they use, and the medi20 cal review or utilization practices of payers or

21 reviewers with whom they contract, comply with

22 the following requirements.

23 (B) Screening criteria, weighting elements,

24 and computer algorithms utilized in the review
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1 process and their method of development, must

2 be released to physicians and the public.

3 (C) Such criteria must be based on sound

4 scientific principles and developed in coopera5 tion with practicing physicians and other af6 fected health care providers.

7 (D) Any person who recommends denial of

8 coverage or payment, or determines that a serv9 ice should not be provided, based on medical ne10 cessity standards, must be of the same medical

11 branch (allopathic or osteopathic medicine) and

12 specialty (specialties as recognized by the Amer13 ican Board of Medical Specialties or the Amer14 ican Osteopathic Association) as the practi15 tioner who provided the service.

16 (E) Each claimant or provider (upon as17 signment of a claimant) who has had a claim

18 denied as not medically necessary must be pro19 vided an opportunity for a due process appeal

20 to a medical consultant or peer review group

21 not involved in the organization that performed

22 the initial review.

23 (F) Any individual making a negative

24 judgment or recommendation about the neces25 sity or appropriateness of services or the site of
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1 service must be a physician licensed to practice

2 medicine in the jurisdiction from which the

3 claim arose.

4 (G) Upon request, physicians will be pro5 vided the names and credentials of all individ6 uals conducting medical necessity or appro7 priateness review, subject to reasonable safe8 guards and standards.

9 (H) Patient or physician requests for prior

10 authorization of a non-emergency service must

11 be answered within two business days, and

12 qualified personnel must be available for same13 day telephone responses to inquiries about med14 ical necessity, including certification of contin15 ued length of stay.

16 (I) Plans must ensure that enrollees, in

17 plans where prior authorization is a condition

18 to coverage of a service, are required to sign

19 medical information release consent forms upon

20 enrollment for use where services requiring

21 prior authorization are recommended or pro22 posed by their physician.

23 (J) When prior approval for a service or

24 other covered item is obtained, it shall be con25 sidered approval for all purposes and the service
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1 shall be considered to be covered unless there

2 was fraud or incorrect information provided at

3 the time such prior approval was obtained.

4 (K) Procedures for ensuring that all appli5 cable Federal and State laws designed to pro6 tect the confidentiality of provider and individ7 ual medical records are followed.

8 (3) APPLICATION OF STANDARDS.—

9 (A) IN GENERAL.—Standards shall first be

10 established under this subsection by not later

11 than 12 months after the date of the enactment

12 of this section. In developing standards under

13 this subsection, the Secretary shall—

14 (i) review standards in use by national

15 private accreditation organizations and

16 State licensure programs;

17 (ii) recognize, to the extent appro18 priate, differences in the organizational

19 structure and operation of managed care

20 plans; and

21 (iii) establish procedures for the time22 ly consideration of applications for certifi23 cation by managed care plans and utiliza24 tion review programs.
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1 (B) REVISION OF STANDARDS.—The Sec2 retary shall periodically review the standards

3 established under this subsection, and may re4 vise the standards from time to time to assure

5 that such standards continue to reflect appro6 priate policies and practices for the cost-effec7 tive and medically appropriate use of services

8 within managed care plans and utilization re9 view programs.

10 TITLE III—CHOICE REQUIREMENTS FOR POINT

11 OF SERVICE PLANS

12 SEC. 3. (a) CHOICE REQUIREMENTS FOR POINT OF

13 SERVICE PLANS.—

14 (1) Each sponsor of a health benefit plan that

15 restricts access to providers (including such plans

16 provided, offered, or made available by voluntary

17 health purchasing co-operatives, employers, and self18 insurers), shall offer to all eligible enrollees the op19 portunity to obtain coverage for out-of-network serv20 ices through a ‘‘point of service’’ plan, as defined by

21 subparagraph (2), at the time of enrollment and at

22 least for a continuous one-month period annually

23 thereafter.

24 (2) For purposes of this Act, an ‘‘out-of-net25 work’’ or ‘‘point of service’’ plan provides additional
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1 coverage and/or access to care to nonnetwork provid2 ers to an eligible enrollee of a health plan that re3 stricts access to items and services provided by a

4 health care provider who is not a member of the

5 plan’s provider network (as defined in subparagraph

6 (2)), or, that may cover any other services the en7 rollee seeks, whether such services are provided in or

8 outside of the enrollee’s plan.

9 (3) A ‘‘provider network’’ means, with respect

10 to a health plan that restricts access, those providers

11 who have entered into a contract of agreement with

12 the plan under which such providers are obligated to

13 provide items and services in the standard benefits

14 package to eligible individuals enrolled in the plan,

15 or have an agreement to provide services on a fee16 for-service basis.

17 (4) PREMIUMS.—A plan may charge an enrollee

18 who opts to obtain point of service coverage an alter19 native premium that takes into account the actuarial

20 value of such coverage.

21 (5) COPAYMENTS.—A point of service plan shall

22 require payment of coinsurance for an out-of-net23 work item or service, as follows:
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1 (A) The applicable coinsurance percentage

2 shall not be greater than 20 percent of payment

3 for items and services.

4 (B) The applicable coinsurance percentage

5 may be applied differentially with respect to

6 out-of-network items and services, subject to

7 the requirements of subparagraph (i).

8 (6) PAYMENT DISCLOSURE REQUIREMENT.—All

9 sponsors of point of service plans and physicians

10 participating in such plans shall be required to dis11 close their fees, applicable payment schedules, coin12 surance requirements or any other financial require13 ments that affect patient payment levels.

14 (7) POVERTY EXCLUSION.—Any enrollee, in15 cluding enrolled dependents, whose income does not

16 exceed 200 percent of the established federal poverty

17 guideline for the applicable year, shall be charged no

18 more than amount allowed under applicable plan

19 limits. Such amount, except for reasonable coinsur20 ance, shall be considered payment in full.

21 TITLE IV—CHOICE OF HEALTH PLANS FOR

22 ENROLLMENT

23 SEC. 4. (a) IN GENERAL.—Each sponsor of a health

24 benefit plan, who offers, provides or makes available such

25 benefit plan (including voluntary health insurance pur-
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1 chasing co-operatives, employers, and selfinsurers), must

2 provide to each eligible enrollee a choice of health plans

3 among available plans.

4 (b) OFFERING OF PLANS BY VOLUNTARY HEALTH

5 INSURANCE PURCHASING COOPERATIVES, EMPLOYERS,

6 AND OTHER SPONSORS.—

7 (1) IN GENERAL.—Each voluntary health insur8 ance purchasing cooperative, employer, or other

9 sponsor shall include among its health plan offerings

10 at least one of each of the following types of health

11 benefit plans:

12 (A) A health maintenance organization or

13 preferred provider organization, where available.

14 (B) A traditional insurance plan (as de15 fined in paragraph (2)).

16 (C) A benefit payment schedule plan (as

17 defined in paragraph (3)).

18 (2) TRADITIONAL INSURANCE PLAN DE19 FINED.—For purposes of this act, the term ‘‘tradi20 tional insurance plan’’ is defined to include those

21 plans that offer the standard benefits package that

22 pay for medical services on a fee-for-service basis

23 using a usual, customary or reasonable payment

24 methodology or a resource-based relative value
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1 schedule, usually linked to an annual deductible and/

2 or coinsurance payment on each allowed amount.

3 (3) BENEFIT PAYMENT SCHEDULE PLAN DE4 FINED.—For purposes of this Act, the term ‘‘benefit

5 payment schedule plan’’ means a health plan that—

6 (A) provides coverage for all items and

7 services included in the standard benefit pack8 age that are furnished by any lawful health care

9 provider of the enrollee’s choice (within the

10 scope of state licensure);

11 (B) makes payment for the services of a

12 provider on a fee-for-service basis without re13 gard to whether or not there is a contractual

14 arrangement between the plan and the provider;

15 and

16 (C) provides a benefit payment schedule

17 that identifies covered services and the payment

18 for each service covered by the plan. No co-pay19 ments or coinsurance shall be applied.

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