II

103D CONGRESS

2D SESSION S. 2196

To assure fairness and choice to patients and providers under managed

care health benefit plans, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JUNE 15 (legislative day, JUNE 7), 1994

Mr. WELLSTONE (for himself and Mr. BURNS) introduced the following bill;

which was read twice and referred to the Committee on Labor and

Human Resources

A BILL

To assure fairness and choice to patients and providers under

managed care health benefit plans, and for other purposes.

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

7 CONSUMER CHOICE

8 SEC. 2. PROTECTION OF CONSUMER CHOICE.

9 Nothing in this Act shall be construed as prohibit10 ing—
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1 (1) an individual from purchasing any health

2 care services with the individual’s own funds, wheth3 er such services are covered within any benefits

4 package otherwise available to the individual; and

5 (2) employers from providing coverage for bene6 fits in addition to any benefits package otherwise

7 available to an individual.

8 TITLE II—CERTIFICATION OF

9 MANAGED CARE PLANS AND

10 UTILIZATION REVIEW PRO11 GRAMS

12 SEC. 3. DEFINITIONS.

13 For purposes of this title:

14 (1) QUALIFIED MANAGED CARE PLAN.—The

15 term ‘‘qualified managed care plan’’ means a man16 aged care plan that the Secretary certifies, upon ap17 plication by the program, as meeting the require18 ments of section 4(b).

19 (2) QUALIFIED UTILIZATION REVIEW PRO20 GRAM.—The term ‘‘qualified utilization review pro21 gram’’ means a utilization review program that the

22 Secretary certifies, upon application by the program,

23 as meeting the requirements of section 4(c).

24 (3) UTILIZATION REVIEW PROGRAM.—The term

25 ‘‘utilization review program’’ means a system of re-
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1 viewing the medical necessity, appropriateness, or

2 quality of health care services and supplies provided

3 under a health insurance plan or a managed care

4 plan using specified guidelines. Such a system may

5 include preadmission certification, the application of

6 practice guidelines, continued stay review, discharge

7 planning, preauthorization of medical procedures,

8 and retrospective review.

9 (4) MANAGED CARE PLAN.—

10 (A) IN GENERAL.—The term ‘‘managed

11 care plan’’ means a plan operated by a man12 aged care entity (as defined in subparagraph

13 (B)), that provides for the financing and deliv14 ery of health care services to persons enrolled in

15 such plan through—

16 (i) arrangements with selected provid17 ers to furnish health care services;

18 (ii) explicit standards for the selection

19 of participating providers;

20 (iii) organizational arrangements for

21 ongoing quality assurance, utilization re22 view programs, and dispute resolution; and

23 (iv) financial incentives for persons

24 enrolled in the plan to use the participat-
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1 ing providers and procedures provided for

2 by the plan.

3 (B) MANAGED CARE ENTITY.—The term

4 ‘‘managed care entity’’ includes a licensed in5 surance company, hospital or medical service

6 plan, health maintenance organization, an em7 ployer or employee organization, or a managed

8 care contractor (as defined in subparagraph

9 (C)), that operates a managed care plan.

10 (C) MANAGED CARE CONTRACTOR.—The

11 term ‘‘managed care contractor’’ means a per12 son that—

13 (i) establishes, operates, or maintains

14 a network of participating providers;

15 (ii) conducts or arranges for utiliza16 tion review activities; and

17 (iii) contracts with an insurance com18 pany, a hospital or medical service plan, an

19 employer, an employee organization, or any

20 other entity providing coverage for health

21 care services to operate a managed care

22 plan.

23 (5) PARTICIPATING PROVIDER.—The term

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

25 pharmacy, laboratory, or other appropriately author-
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1 ized provider of health care services or supplies, that

2 has entered into an agreement with a managed care

3 entity to provide such services or supplies to a pa4 tient enrolled in a managed care plan.

5 (6) SECRETARY.—The term ‘‘Secretary’’ means

6 the Secretary of Health and Human Services.

7 SEC. 4. CERTIFICATION OF MANAGED CARE PLANS AND

8 UTILIZATION REVIEW PROGRAMS.

9 (a) IN GENERAL.—

10 (1) CERTIFICATION.—The Secretary shall es11 tablish a process for certification of managed care

12 plans meeting the requirements of subsection (b)

13 and utilization review programs meeting the require14 ments of subsection (c).

15 (2) REVIEW AND RECERTIFICATION.—The Sec16 retary shall establish procedures for the periodic re17 view and recertification of qualified managed care

18 plans and qualified utilization review programs.

19 Such procedures shall include steps by which a

20 health plan may remedy any deficiencies cited.

21 (3) TERMINATION OF CERTIFICATION.—If the

22 Secretary determines that a qualified managed care

23 plan or qualified utilization review program no

24 longer substantially meets the applicable require25 ments for certification, the Secretary shall establish
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1 procedures for terminating the certification of the

2 plan or program for reasons including the failure of

3 remedies for deficiencies referred to in paragraph

4 (2). Prior to the date a termination becomes effec5 tive, the Secretary shall provide the plan notice and

6 opportunity for a hearing on the proposed termi7 nation.

8 (4) CERTIFICATION THROUGH ALTERNATIVE

9 REQUIREMENTS.—

10 (A) CERTAIN ORGANIZATIONS RECOG11 NIZED.—An eligible organization (as defined in

12 section 1876(b) of the Social Security Act),

13 shall be deemed to meet the requirements of

14 subsection (b) for certification as a qualified

15 managed care plan.

16 (B) RECOGNITION OF ACCREDITATION.—If

17 the Secretary finds that a State licensure pro18 gram or a national accreditation body estab19 lishes requirements for accreditation of a man20 aged care plan or utilization review program

21 that are at least equivalent to requirements es22 tablished under this section, the Secretary may,

23 to the extent appropriate, treat a managed care

24 plan or a utilization review program accredited
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1 by such program or body as meeting the appli2 cable requirements of this section.

3 (b) REQUIREMENTS FOR CERTIFICATION OF MAN4 AGED CARE PLANS.—

5 (1) IN GENERAL.—The Secretary shall establish

6 Federal standards for the certification of managed

7 care plans, including standards which require man8 aged care plans to meet the requirements described

9 in paragraphs (2) through (6).

10 (2) INFORMATION ON TERMS OF PLAN.—Man11 aged care plans shall provide prospective enrollees

12 information on the terms and conditions of the plan

13 so that the enrollees can make informed decisions

14 about accepting a certain system of health care de15 livery. Easily understood, truthful, linguistically ap16 propriate and objective terms must be used in all

17 oral and written descriptions of a plan. Such de18 scriptions shall be consistent with standards devel19 oped for supplemental insurance coverage under title

20 XVIII of the Social Security Act. Descriptions of

21 plans under this paragraph must be standardized so

22 that customers can compare the attributes of the

23 plans. Specific items that must be included in a de24 scription of a plan are—
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1 (A) coverage provisions, benefits, and any

2 exclusions by category of service, provider, or

3 physician, and if applicable, any exclusions by

4 specific service;

5 (B) any and all prior authorization or

6 other review requirements including

7 preauthorization review, concurrent review,

8 post-service review, post-payment review and

9 any procedures that may lead the patient to be

10 denied coverage for, or not be provided, a par11 ticular service;

12 (C) financial arrangements or contractual

13 provisions with hospitals, utilization review or14 ganizations, physicians, or any other provider of

15 health care services that would limit the serv16 ices offered, restrict referral or treatment op17 tions, or negatively affect a physician’s fidu18 ciary responsibility to patients, including finan19 cial incentives not to provide medical or other

20 services;

21 (D) an explanation of how plan limitations

22 impact enrollees, including information on en23 rollee financial responsibility for payment for

24 coinsurance or other noncovered or out-of-plan

25 services; 
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1 (E) the plan’s loss ratios and an expla2 nation that they reflect the percentage of pre3 miums expended for health services; and

4 (F) enrollee satisfaction statistics, includ5 ing reenrollment statistics and a description of

6 enrollees’ reasons for leaving the plan.

7 (3) ADEQUATE ACCESS TO PHYSICIANS.—Man8 aged care plans shall be required to demonstrate

9 that they have adequate access to physicians and

10 other providers so that all covered health care serv11 ices will be provided in a timely manner. This re12 quirement may not be waived and must be met in

13 all areas where the plan has enrollees, including

14 rural areas.

15 (4) FINANCIAL RESERVES.—Managed care

16 plans shall be required to meet financial reserve re17 quirements that are established to assure proper

18 payment for health care services provided under the

19 plan. The Secretary shall establish a mechanism to

20 provide adequately for indemnification of plan fail21 ures even when a plan has met the reserve require22 ments.

23 (5) PROVIDER INPUT.—Managed care plans

24 shall be required to establish a mechanism under

25 which physicians and other providers participating in
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1 a plan have defined rights to provide input into the

2 plan’s medical policy (including coverage of new

3 technology and procedures), utilization review cri4 teria and procedures, quality and credentialing cri5 teria, and medical management procedures.

6 (6) CREDENTIALS FOR PHYSICIANS.—

7 (A) IN GENERAL.—Managed care plans

8 shall be required to credential physicians fur9 nishing health care services under the plan. Any

10 physicians within a plan’s geographic service

11 area may apply for credentials under the plan

12 and at least once each year, the plan shall no13 tify such physicians of the opportunity to apply

14 for credentials.

15 (B) CREDENTIALING PROCESS.—

16 (i) IN GENERAL.—Each managed care

17 plan shall establish a credentialing process.

18 Such process shall begin upon application

19 by a physician to be included under the

20 plan. Each application by a physician shall

21 be reviewed by a credentialing committee

22 with appropriate representation of the ap23 plicant’s medical specialty.

24 (ii) STANDARDS.—Credentialing

25 under a plan shall be based on objective
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1 standards of quality with input from physi2 cians credentialed by the plan.

3 Credentialing standards shall be available

4 to applicants and enrollees.

5 (iii) ECONOMIC CONSIDERATIONS.—If

6 economic considerations, including practi7 tioners’ patterns of expenditure per pa8 tient, are part of a credentialing decision,

9 objective criteria must used in examining

10 such considerations and such criteria must

11 be available to applicants, participating

12 physicians, and enrollees. Any economic

13 profiling of physicians must be adjusted to

14 recognize case mix, severity of illness, age

15 of patients and other features of a physi16 cian’s practice that may account for higher

17 or lower than expected costs. Economic

18 profiles must be made available to the phy19 sicians profiled.

20 (iv) GRADUATE MEDICAL EDU21 CATION.—If graduate medical education is

22 a consideration in credentialing, equal rec23 ognition will be given to training programs

24 accredited by the Accrediting Council on
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1 Graduate Medical Education and by the

2 American Osteopathic Association.

3 (v) RECORDING DECISIONS.—A record

4 shall be maintained of all decisions made

5 under the credentialing process and each

6 applicant shall be provided with reasons

7 for an application being denied or a con8 tract not being renewed.

9 (vi) DUE PROCESS.—Prior to initi10 ation of a proceeding leading to termi11 nation of a contract, the physician shall be

12 provided notice, an opportunity for discus13 sion, and an opportunity to enter into and

14 complete a corrective action plan, except in

15 cases where there is imminent harm to pa16 tient health or an action by a State medi17 cal board or other government agency that

18 effectively impairs the physician’s ability to

19 practice medicine.

20 (vii) REDUCING OR WITHDRAWING

21 CREDENTIALS.—The same standards and

22 procedures used for an application for cre23 dentials shall also be used in those cases

24 where the plan seeks to reduce or withdraw

25 such credentials.
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1 (viii) APPEALS.—There shall be al2 lowed a due process appeal from all ad3 verse decisions affecting practitioners with

4 whom a plan has contracted. The due proc5 ess appeal mechanisms shall be as set forth

6 in the Health Care Quality Improvement

7 Act of 1986 (42 U.S.C. 11101–11152).

8 (C) DISCRIMINATION AGAINST ENROLL9 EES.—Managed care plans shall be prohibited

10 from discriminating against enrollees based on

11 health status or anticipated need for medical

12 services likely to lead to high expenses by ex13 cluding practitioners with practices containing a

14 substantial number of such patients.

15 (7) CONFIDENTIALITY OF RECORDS.—Managed

16 care plans shall be required to establish procedures

17 to ensure that all applicable Federal and State laws

18 designed to protect the confidentiality of provider

19 and individual medical records are followed.

20 (c) REQUIREMENTS FOR CERTIFICATION OF UTILI21 ZATION REVIEW PROGRAMS.—

22 (1) IN GENERAL.—The Secretary shall establish

23 Federal standards for the certification of utilization

24 review programs, including standards which require
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1 such programs to meet the requirements described

2 in paragraph (2).

3 (2) REQUIREMENTS.—Plans must have a medi4 cal director responsible for all clinical decisions by

5 the plan and provide assurances that the medical re6 view or utilization practices used by the plans, and

7 the medical review or utilization practices of payers

8 or reviewers with whom the plans contract, comply

9 with the following requirements:

10 (A) Screening criteria used in the review

11 process, the methods by which they are applied,

12 and their method of development, must be re13 leased to physicians and the public upon re14 quest.

15 (B) Such criteria and methods must be

16 based on sound scientific principles and devel17 oped in cooperation with practicing physicians

18 and other affected health care providers.

19 (C) Any person who recommends denial of

20 coverage or payment, or determines that a serv21 ice should not be provided, based on medical ne22 cessity standards, must be of the same medical

23 branch (allopathic or osteopathic medicine) and

24 specialty (specialties as recognized by the Amer25 ican Board of Medical Specialties or the Amer-
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1 ican Osteopathic Association) as the practi2 tioner who provided the service.

3 (D) Each claimant or provider (upon as4 signment of a claim) who has had a claim de5 nied as not medically necessary must be pro6 vided an opportunity for a due process appeal

7 to a medical consultant or peer review group

8 that is independent of the entity that performed

9 the initial review.

10 (E) Any individual making a final, nega11 tive judgment or recommendation about the ne12 cessity or appropriateness of services or the site

13 of service must be a comparably qualified health

14 care professional licensed to practice in the ju15 risdiction from which the claim arose.

16 (F) Upon request, physicians and other

17 professionals will be provided the names and

18 credentials of all individuals conducting medical

19 necessity or appropriateness review, subject to

20 reasonable safeguards and standards.

21 (G) Prior authorization shall not be re22 quired for emergency care, and patient or phy23 sician requests for prior authorization of a non24 emergency service must be answered within 24

25 hours and qualified personnel must be available
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1 for same-day telephone responses to inquiries

2 about medical necessity, including certification

3 of continued length of stay. If review personnel

4 are not available, medical services provided

5 shall be considered approved.

6 (H) Plans must ensure that enrollees, in

7 plans where prior authorization is a condition

8 for coverage of a service, are offered the oppor9 tunity to sign medical information release con10 sent forms upon enrollment for use where serv11 ices requiring prior authorization are rec12 ommended or proposed by their physician.

13 (I) When prior approval for a service or

14 other covered item is obtained, the service shall

15 be considered to be covered unless there was

16 fraud or incorrect information provided at the

17 time such prior approval was obtained.

18 (J) Plans must establish procedures for

19 ensuring that all applicable Federal and State

20 laws designed to protect the confidentiality of

21 provider and individual medical records are fol22 lowed.

23 (d) CONSIDERATIONS IN DEVELOPING STAND24 ARDS.—In developing standards under subsections (b) and

25 (c), the Secretary shall—
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1 (1) review standards in use by national private

2 accreditation organizations and State licensure pro3 grams;

4 (2) recognize, to the extent appropriate, dif5 ferences in the organizational structure and oper6 ation of managed care plans; and

7 (3) establish procedures for the timely consider8 ation of applications for certification by managed

9 care plans and utilization review programs.

10 (e) TIMETABLE FOR ESTABLISHMENT OF STAND11 ARDS.—

12 (1) IN GENERAL.—Not later than 12 months

13 after the date of the enactment of this Act standards

14 shall first be established under this section.

15 (2) REVISION OF STANDARDS.—The Secretary

16 shall periodically review the standards established

17 under this section, and may revise the standards

18 from time to time to assure that such standards con19 tinue to reflect appropriate policies and practices for

20 the cost-effective and medically appropriate use of

21 services within managed care plans and utilization

22 review programs.
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1 TITLE III—CHOICE OF HEALTH

2 PLANS FOR ENROLLMENT

3 SEC. 5. CHOICE OF HEALTH PLANS FOR ENROLLMENT.

4 (a) IN GENERAL.—Each sponsor, including a self-in5 sured sponsor, of a health benefit plan, who offers, pro6 vides, or makes available such plan must provide to each

7 eligible enrollee a choice of health plans among available

8 plans.

9 (b) OFFERING OF PLANS.—Each sponsor referred to

10 in subsection (a) shall include among its health plan offer11 ings at least one of each of the following types of health

12 benefit plans, where available:

13 (1) A managed care plan, including a health

14 maintenance organization or preferred provider or15 ganization.

16 (2) A traditional insurance plan (as defined in

17 subsection (c)(1)).

18 (3) A benefit payment schedule plan (as defined

19 in subsection (c)(2)), pursuant to the following ac20 tivities of the Secretary:

21 (A) Not later than 12 months after the

22 date of the enactment of this Act, the Secretary

23 shall—

24 (i) conduct a study on the projected

25 impact of benefit payment schedule plans
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1 on enrollees and on the Nation’s health

2 care costs; and

3 (ii) submit a report to Congress on

4 the results of such study.

5 (B) The Secretary shall promulgate regula6 tions to—

7 (i) assure that benefit payment sched8 ule plans, if approved, are affordable for

9 all enrollees and contribute to health care

10 cost containment; and

11 (ii) remedy any other significant defi12 ciencies identified by the study described in

13 subparagraph (A).

14 (c) DEFINITIONS.—For purposes of this section:

15 (1) TRADITIONAL INSURANCE PLAN.—The term

16 ‘‘traditional insurance plan’’ includes plans that

17 offer a health benefits package and that pay for

18 medical services on a fee-for-service basis using a

19 usual, customary, or reasonable payment methodol20 ogy or a resource based relative value schedule, usu21 ally linked to an annual deductible and/or coinsur22 ance payment on each allowed amount.

23 (2) BENEFIT PAYMENT SCHEDULE PLAN.—The

24 term ‘‘benefit payment schedule plan’’ means a

25 health plan that—
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1 (A) provides coverage for all items and

2 services included in a health benefits package

3 that are furnished by any health care provider

4 licensed under State law of the enrollee’s

5 choice;

6 (B) makes payment for the services of a

7 provider on a fee-for-service basis without re8 gard to whether or not there is a contractual

9 arrangement between the plan and the provider;

10 (C) provides a benefit payment schedule

11 that identifies covered services and the payment

12 for each service covered by the plan; and

13 (D) applies no copayments or coinsurance.

14 SEC. 6. CHOICE REQUIREMENTS FOR POINT-OF-SERVICE

15 PLANS.

16 (a) IN GENERAL.—Each sponsor, including a self-in17 sured sponsor, of a health benefit plan that restricts access

18 to providers, shall offer to all eligible enrollees the oppor19 tunity to obtain coverage for out-of-network items or serv20 ices through a point-of-service plan (as defined under sub21 section (e)(1)), at the time of enrollment and at least for

22 a continuous one-month period annually thereafter.

23 (b) COINSURANCE.—A point-of-service plan may re24 quire payment of coinsurance for an out-of-network item

25 or service, as follows:
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1 (1) The applicable coinsurance percentage shall

2 not be greater than 20 percent of payment for items

3 and services.

4 (2) The applicable coinsurance percentage may

5 be applied differentially with respect to out-of-net6 work items and services, subject to the requirements

7 of paragraph (1).

8 (c) PAYMENT DISCLOSURE REQUIREMENT.—All

9 sponsors of point-of-service plans and physicians and other

10 professionals participating in such plans shall be required

11 to disclose their fees, applicable payment schedules, coin12 surance requirements, or any other financial requirements

13 that affect patient payment levels.

14 (d) POVERTY EXCLUSION.—Any enrollee, including

15 enrolled dependents, whose income does not exceed 200

16 percent of the established Federal poverty guideline for

17 the applicable year, shall be charged no more than the

18 amount allowed under applicable plan limits. Such amount

19 shall be considered payment in full.

20 (e) DEFINITIONS.—For purposes of this section:

21 (1) POINT-OF-SERVICE PLAN.—The term

22 ‘‘point-of-service plan’’ means a plan that offers

23 services to enrollees through a provider network (as

24 defined in paragraph (2)) and also offers additional
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1 services and/or access to care by network or non-net2 work providers.

3 (2) PROVIDER NETWORK.—The term ‘‘provider

4 network’’ means, with respect to a health plan that

5 restricts access, those providers who have entered

6 into a contract or agreement with the plan under

7 which such providers are obligated to provide items

8 and services under the plan to eligible individuals

9 enrolled in the plan, or have an agreement to pro10 vide services on a fee-for-service basis.

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