II

106TH CONGRESS

2D SESSION S. 2975

To limit the administrative expenses and profits of managed care entities

to not more than 15 percent of premium revenues.

IN THE SENATE OF THE UNITED STATES

JULY 27, 2000

Mrs. FEINSTEIN introduced the following bill; which was read twice and

referred to the Committee on Finance

A BILL

To limit the administrative expenses and profits of managed

care entities to not more than 15 percent of premium

revenues.

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 ‘‘Managed Care Integ5 rity Act of 2000’’.

6 SEC. 2. LIMITATION OF ADMINISTRATIVE EXPENSES AND

7 PROFITS OF MANAGED CARE ENTITIES.

8 (a) APPLICATION TO MANAGED CARE ENTITIES.—

9 (1) IN GENERAL.—Notwithstanding any other

10 provision of law, each health benefits plan offered by
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1 a managed care entity shall ensure that, with re2 spect to a contract year, the actuarial value of the

3 aggregate benefits provided under the plan during

4 such year to enrollees is not less than 85 percent of

5 the aggregate amount of payments received from, or

6 on behalf of, such enrollees for such year.

7 (2) WAIVER OF REQUIREMENTS.—

8 (A) IN GENERAL.—The Secretary of

9 Health and Human Services may waive the re10 quirement of paragraph (1) for a 12-month pe11 riod with respect to a waive the requirement of

12 paragraph (1) for a 12-month period with re13 spect to a managed care entity if the Secretary

14 determines, based on the recommendations of

15 the agency responsible for licensing such entity

16 (or the health care plans of such entity) in a

17 State, that—

18 (i) the solvency of the entity is in

19 jeopardy; or

20 (ii) compliance with the requirement

21 would cause the entity to fail to meet the

22 solvency requirements required for licen23 sure in the State.

24 (B) RENEWALS.—The Secretary of Health

25 and Human Services may renew a waiver under
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1 subparagraph (A), except that the no waiver

2 may granted for a period in excess of 24

3 months in any 36-month period.

4 (3) ADMINISTRATIVE COSTS.—

5 (A) LIMITATION.—For purposes of this

6 subsection, the costs associated with the man7 agement and operation of a managed care plan

8 (including the costs of compensation and per9 sonnel fringe benefits, interest expenses, costs

10 of occupancy of a facility, and marketing costs)

11 shall not be included in determining the actu12 arial value of the aggregate benefits provided

13 under the plan.

14 (B) REGULATIONS.—The Secretary of

15 Health and Human Services shall promulgate

16 regulations to define ‘‘costs associated with the

17 management and operation of a manages care

18 plan’’ for purposes of subparagraph (A).

19 (4) DEFINITION.—For purposes of this sub20 section, the term ‘‘managed care entity’’ shall

21 include—

22 (A) managed care entities providing health

23 care coverage for individuals under a group

24 health plan or individual health insurance cov25 erage;
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1 (B) medicaid managed care organizations

2 as defined in section 1903(m)(1)(A);

3 (C) managed care entities that provide

4 health care coverage for individuals under the

5 Federal Employees Health Benefits Program

6 under chapter 89 of title 5, United States Code;

7 and

8 (D) managed care entities that provide

9 health care coverage for members of the armed

10 forces and their families under chapter 55 of

11 title 10, United States Code.

12 (5) EFFECTIVE DATE.—Paragraph (1) shall

13 apply to contract years beginning on or after Janu14 ary 1, 2001.

15 (6) ENFORCEMENT.—The Secretary of Health

16 and Human Services shall develop formal investiga17 tion and compliance procedures with respect to com18 plaints received by the Secretary concerning the fail19 ure of a health benefits plan to comply with the pro20 visions of this subsection. Under such procedures—

21 (A) the Secretary shall provide the plan

22 with the reasonable opportunity to develop and

23 implement a corrective action plan to correct

24 the deficiencies that were the basis of the com25 plaint received by the Secretary; and
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1 (B) the Secretary shall provide the plan

2 with reasonable notice and opportunity for

3 hearing (including the right to appeal an initial

4 decision) prior to applying the sanctions de5 scribed in subsection (c).

6 (b) MEDICARE+CHOICE ORGANIZATIONS.—

7 (1) IN GENERAL.—Section 1852 of the Social

8 Security Act (42 U.S.C. 1395w–25) is amended by

9 adding at the end the following new subsection:

10 ‘‘(l) REQUIREMENT RELATING TO THE PROVISION OF

11 BENEFITS.—

12 ‘‘(1) IN GENERAL.—Each Medicare+Choice

13 plan offered by a Medicare+Choice organization

14 shall ensure that, with respect to a contract year,

15 the actuarial value of the aggregate benefits pro16 vided under the plan during such year to

17 Medicare+Choice eligible individuals enrolled in the

18 plan is not less than 85 percent of the aggregate

19 amount of payments received from, or on behalf of,

20 such individuals for such year.

21 ‘‘(2) WAIVER OF REQUIREMENT.—

22 ‘‘(A) IN GENERAL.—The Secretary may

23 waive the requirement under paragraph (1) for

24 a 12-month period with respect to a

25 Medicare+Choice plan offered by a
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1 Medicare+Choice organization, if the Secretary

2 determines, based, except for an organization

3 with a waiver under section 1855(a)(2), on the

4 recommendations of the agency responsible for

5 licensing such plan in a State, that—

6 ‘‘(i) the solvency of the

7 Medicare+Choice organization is in jeop8 ardy; or

9 ‘‘(ii) compliance with the requirement

10 would cause the Medicare+Choice organi11 zation to fail to meet the solvency require12 ments required for licensure in the State

13 or under this part.

14 ‘‘(B) RENEWALS.—The Secretary may

15 renew a waiver under subparagraph (A), except

16 that no waiver may be granted for a period in

17 excess of 24 months in any 36-month period.

18 ‘‘(3) ADMINISTRATIVE COSTS.—

19 ‘‘(A) LIMITATION.—For purposes of this

20 subsection, the costs associated with the man21 agement and operation of a Medicare+Choice

22 plan (including the costs of compensation and

23 personnel fringe benefits, interest expenses,

24 costs of occupancy of a facility, and marketing

25 costs) shall not be included in determining the
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1 actuarial value of the aggregate benefits pro2 vided under the plan.

3 ‘‘(B) REGULATIONS.—The Secretary of

4 Health and Human Services shall promulgate

5 regulations to define ‘costs associated with the

6 management and operation of a manages care

7 plan’ for purposes of subparagraph (A).

8 ‘‘(4) ENFORCEMENT.—The Secretary of Health

9 and Human Services may terminate a contract with

10 a Medicare+Choice organization under section 1857

11 in accordance with formal investigation and compli12 ance procedures established by the Secretary under

13 which—

14 ‘‘(A) the Secretary provides the organiza15 tion with the reasonable opportunity to develop

16 and implement a corrective action plan to cor17 rect the deficiencies that were the basis of the

18 Secretary’s determination under this paragraph;

19 and

20 ‘‘(B) the Secretary provides the organiza21 tion with reasonable notice and opportunity for

22 hearing (including the right to appeal an initial

23 decision) before terminating the contract.’’.
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1 (2) EFFECTIVE DATE.—The amendment made

2 by paragraph (1) shall apply to contract years begin3 ning on or after January 1, 2001.

4 (c) SANCTIONS.—

5 (1) IN GENERAL.—If the Secretary of Health

6 and Human Services determines that a health bene7 fits plan or a Medicare+Choice organization fails

8 substantially to comply with the provision of this Act

9 or section 1852(l) of the Social Security Act the Sec10 retary may provide, in addition to any other rem11 edies authorized by law, for any of the remedies de12 scribed in paragraph (2).

13 (2) REMEDIES.—The remedies described in this

14 paragraph are—

15 (A) civil money penalties of not more than

16 $25,000 for each determination under para17 graph (1) or, with respect to such a determina18 tion involving misrepresentation or falsifying in19 formation, of not more than $100,000 for each

20 such determination; and

21 (B) with respect to Medicare+Choice

22 organizations—

23 (i) suspension of enrollment of indi24 viduals under part C of title XVIII of the

25 Social Security Act after the date the Sec-
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1 retary notifies the organization of a deter2 mination under paragraph (1) and until

3 the Secretary is satisfied that the basis for

4 such determination has been corrected and

5 is not likely to recur; or

6 (ii) suspension of payment to the or7 ganization under such part for individuals

8 enrolled after the date the Secretary noti9 fies the organization of a determination

10 under paragraph (1) and until the Sec11 retary is satisfied that the basis for such

12 determination has been corrected and is

13 not likely to recur.

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