< Back to H.R. 3235 (100th Congress, 1987–1988)

Text of Health Maintenance Organization Amendments of 1988

This bill was enacted after being signed by the President on October 24, 1988. The text of the bill below is as of Oct 24, 1988 (Passed Congress/Enrolled Bill).

102 STAT. 2578                     PUBLIC LAW 100-517—OCT. 24, 1988

                     Public Law 100-517
                     100th Congress
                                                        An Act
  Oct. 24,1988         To amend the Public Health Service Act to revise the program of assistance for
                                           health maintenance organizations.
   [H.R. 3235]
                      Be it enacted by the Senate and House of Representatives of the
Health               United States of America in Congress assembled,
Maintenance
Organization         SECTION 1. SHORT TITLE, REFERENCE.
Amendments of
1988                   (a) SHORT TITLE.—This Act may be cited as the "Health Mainte-
42 u s e 201 note.   nance Organization Amendments of 1988".
                       (b) REFERENCE.—Whenever in this Act (other than in section 6(a))
                     an amendment or repeal is expressed in terms of an amendment to,
                     or repeal of, a section or other provision, the reference shall be
                     considered to be made to a section or other provision of the Public
                     Health Service Act.
                     SEC. 2. ORGANIZATIONAL STRUCTURE.
                       Section 1301(a) (42 U.S.C. 300e(a)) is amended by striking out
                     "legal entity" and inserting in lieu thereof "public or private entity
                     which is organized under the laws of any State and".
                     SEC. 3. DEDUCTIBLES.
                       Section 1301(bXl) (42 U.S.C. 300e(bXl)) is amended by adding after
                     the second sentence the following: "If a health maintenance
                     organization offers to its members the opportunity to obtain basic
                     health services through a physician not described in subsection
                     (bX3XA), the organization may require, in addition to payments
                     described in clause (D) of this paragraph, a reasonable deductible to
                     be paid by a member when obtaining a basic health service from
                     such a physician.".
                     SEC. 4. PHYSICIAN SERVICES.
                       (a) GENERAL RULE.—Section 1301(bX3XA) (42 U.S.C. 300e(bX3XA))
                     is amended by striking out "the services of a physician which are
                     provided as basic health services shall be provided" and insert in
                     lieu thereof "at least 90 percent of the services of a physician which
                     are provided as basic health services shall be provided".
                        flb) DUAL-CHOICE.—Section 1310(b) (42 U.S.C. 300e-9(b)) is
                     amended—
                             (1) in paragraph (1), by inserting before the comma at the end
                          the following: "and provides at least 90 percent of such services
                          through physicians described in section 13010t)X3XA)", and
                             (2) in paragraph (2), by inserting before the comma at the end
                          the following: "and provides no more than 10 percent of such
                          services through physicians who are not described in section
                           1301(bX3XA)".
                     SEC. 5. ORGANIZATION.
                       (a) FISCAL OPERATION.—

PUBLIC LAW 100-517—OCT. 24, 1988 102 STAT. 2579 (1) Section 1301(cXlXA) (42 U.S-C. 300e(cXlXA)) is amended ix) read as follows: "(IXA)have— "(i) a fiscally sound operation, and "(ii) adequate provision against the risk of insolvency, which is satisfactory to the Secretary, and". (2) Section 1301(c) (42 U.S.C. 300e(c)) is amended by adding Regulations. after and below paragraph (9) the following: "The Secretary shall issue r^ulations stating the circumstances under which the Secretary, in administering paragraph (IXA), will consider the resources of an organization which owns or controls a health maintenance organization. Such regulations shall re- quire as a condition to consideration of resources that a n organization which owns or controls a health maintenance organization shall provide satisfactory assurances that it will assume t h e financial obligations of the health maintenance oiganization.". (3) During the period prior to the effective date of r^ulations 42 use 300e issued under section 1301(c) of the Public Health Service Act (as ^°^- amended by paragraph (2)), the Secretary of Health and Human Services shall consider the application for qualification under section 1301(cXlXA) of such Act of a health maintenance organization— (A) which is owned or controlled by another organization, and (B) which requests that t h e resources of the other organization be considered in determining its qualification under such section, if the Secretary receives satisfactory assurances from the other oiganization that it will assume the financial obligations of the health maintenance organization and if the Secretary deter- mines that the other organization meets such other require- ments as the Secretary determines are necessary, (b) BOARD OF DIHECTORS.—^Paragraph (5) of section 1301(c) (42 U5.C. 300e(c)) is repealed and paragraphs (6) through (9) are redesig- nated as paragraphs (5) through (8), respectively. SECL & DEFINITIONS. (a) QHGAN TRANSPLANTS.—Subsection (b) of section 812 of the Health Maintenance Organization Amendments of 1986 (42 U.S.C. 300e-l note) is repealed. (b) COMMUNITY RATING.— (1) The third sentence of section 1302(8XC) (42 U.S.C. 300e- 1(8XQ) is amended to read as follows: ''If a health maintenance organization is to fix rates of payment for individuals and families by groups, it shall— "(iXD classify all of the members of the organization into classes based on factors which the health maintenance organization determines predict the differences in the use of health services by the individuals or families in each class and which have not been disapproved by the Sec- retary, "(II) determine its revenue requirements for providing services to the members of each class established under subclause (I), and "(in) fix the rates of payments for the individuals and families of a group on the basis of a composite of the
102 STAT. 2580 PUBLIC LAW 100-517—OCT. 24, 1988 organization's revenue requirements determined under subclause (II) for providing services to them as members of the classes established under subclause (I), or "(ii) fix the rates of pajnnents for the individuals and families of a group on the basis of the organization's reve- nue requirements for providing services to the group, except that the rates of payments for the individuals and families of a group of less than 100 persons may not be fixed at rates greater than 110 percent of the rate that would be fixed for such individuals and families under subparagraph (B) or clause (i) of this subparagraph.". (2) Section 1302(8X0 (42 U.S.C. 300e-l(8XC)) is amended by adding at the end the following: 'If a health maintenance organization is to fix rates of payment for a group under clause (ii), it shall, upon request of the entity with which it contracts to provide services to such group, disclose to that entity the method and data used in calculating the rates of pa3rment.". SEC 7. EMPLOYEES* HEALTH BENEFIT PLANS. (a) REVISIONS.— (1) STATES AND POLITICAL SUBDIVISIONS.— (A) Section 1310(b) (42 U.S.C. 300e-9(b)) is amended (i) by striking out "subject to subsection (a)" and inserting in lieu thereof ''or a State or political subdivision", and (ii) by striking out "employer pursuant" and inserting in lieu thereof "employer or State or political subdivision pursuant". (B) Section 1310(c) (42 U.S.C. 300e-9(c)) is amended by insertiiig "or State or political subdivision" after "em- ployer" each place it occurs. (2) DISCRIMINATION.—Section 1310(c) (42 U.S.C. 300e-9(c)) is amended by adding at the end the following: "If a health benefits plsoi offered by an employer or a State or political subdivision under subsection (a) includes contributions for serv- ices offered under the plan, the employer or State or political subdivision shall make a contribution under the plan for serv- ices offered by a qualified health maintenance organization in an amount which does not financially discriminate against an employee who enrolls in such organization. For purposes of the preceding sentence, an employer's or a State's or political sub- division's contribution does not financially discriminate if the employer's or State's or political subdivision's method of deter- mining the contributions on behalf of all employees is reason- able and is designed to assure employees a fair choi(» among health benefits plans.". (3) AmiCATiON.—^Nothing in section 1310 of the Public Health Service Act (42 UJS.C. 300e-9), as amended by this Act, shall be construed to supersede any provision of a collective baigaining agreement in effect on the date of enactment of this Act Effective date. (b) REPBAL OF DuAL CHOICE.—^Effective 7 years after the date of the enactment of this Act, section 1310 (42 UJS.C. 300e-9) is ameiided to read as follows:
PUBLIC LAW 100-517—OCT. 24, 1988 102 STAT. 2581 EMPLOYEES' HEALTH BENEFITS PLANS "SEC. 1310. (a) In accordance with regulations which the Secretary Regulations. shall prescribe— "(1) each employer— "(A) which is required during any calendar quarter to pay its employees the minimum wage prescribed by section 6 of the Fair Labor Standards Act of 1938 (or would be required to pay its employees such wage but for section 13(a) of such Act), and "(B) which during such calendar quarter employed an average number of employees of not less than 25, and "(2) any State and each political subdivision thereof which during any calendar quarter employed an average number of employees of not less than 25, as a condition of payment to the State of funds under section 317, 318, or 1002, which offers to its employees in the calendar year beginning after such calendar quarter the option of membership in a qualified health maintenance organization which is engaged in the provision of basic health services in a health maintenance organization serv- ice area in which at least 25 of such employees reside shall meet the requirements of subsection (b) with respect to any qualified health maintenance organization offered by the employer or State or politi- cal subdivision. "Ot)Xl) If a health benefits plan offered by an employer or a State or political subdivision includes contributions for services offered under the plan, the employer or State or political subdivision shall make a contribution under the plan for services offered by a quali- fied health maintenance organization in an amount which does not financially discriminate against an employee who enrolls in such organization. For purposes of the preceding sentence, an employer's or a State's or political subdivision's contribution does not finan- ciallv discriminate if the employer's or State's or political subdivi- sion s method of determining the contributions on behalf of all employees is reasonable and is designed to assure employees a fair choice among health benefits plans. "(2) Each employer or State or political subdivision which provides payroll deductions as a means of paying employees' contributions for health benefits or which provides a health benefits plan to which an employee contribution is not required shall, with the consent of an employee who exercises option of membership in a qualified health maintenance organization, arrange for the employee's con- tribution for membership in the organization to be paid through payroll deductions. '(3) No employer or State or political subdivision shall be required to pay more for health benefits as a result of the application of this subsection than would otherwise be required by any prevailing collective bargaining agreement or other legally enforceable con- tract for the provision of health benefits between the employer or State or political subdivision and its employees. "(c) For purposes of this section, the term 'qualified health maintenance organization' means (1) a health maintenance organization which has provided assurances satisfactory to the Sec- retary that it provides basic and supplemental health services to its members in the manner prescribed by section 1301(b) and that it is organized and operated in the manner prescribed by section 1301(c), and (2) an entity which proposes to become a health maintenance
102 STAT. 2582 PUBLIC LAW 100-517—OCT. 24, 1988 organization and which the Secretary determines will when it be- comes operational provide basic and supplemental health services to its members in the manner prescribed by section 1301(b) and will be organized and operated in the manner prescribed by section 1301(c). "(d)(1) Any employer who knowingly does not comply with one or more of the requirements of paragraph (1) or (2) of subsection (b) shall be subject to a civil penalty of not more than $10,000. If such noncompliance continues, a civil penalty may be assessed and col- lected under this subsection for each thirty-day period such non- compliance continues. Such penalty may be assessed by the Sec- retary and collected in a civil action brought by the United States in a United States district court. • "(2) In any proceeding by the Secretary to assess a civil penalty under this subsection, no penalty shall be assessed until the em- ployer charged shall have been given notice and an opportunity to present its views on such charge. In determining the amount of the penalty, or the amount agreed upon in compromise, the Secretary shall consider the gravity of the noncompliance and the dem- onstrated good faith of the employer charged in attempting to achieve rapid compliance after notification by the Secretary of a noncompliance. "(3) In any civil action brought to review the assessment of a civil penalty assessed under this subsection, the court shall, at the re- quest of any party to such action, hold a trial de novo on the assessment of such civil penalty and in any civil action to collect such a civil penalty, the court shall, at the request of any party to such action, hold a trial de novo on the assessment of such civil penalty unless in a prior civil action to review the assessment of such penalty the court held a trial de novo on such assessment. "(e) For purposes of this section, the term "employer" does not include (1) the Government of the United States, the government of the District of Columbia or any territory or possession of the United States, a State or any political subdivision thereof, or any agency or instrumentality (including the United States Postal Service and Postal Rate Commission) of any of the foregoing, except that such term includes nonappropriated fund instrumentalities of the Government of the United States; or (2) a church, convention or association of churches, or any organization operated, supervised or controlled by a church, convention or association of churches which organization (A) is an organization described in section 501(cX3) of the Internal Revenue Code of 1986, and (B) does not discriminate (i) in the employment, compensation, promotion, or termination of employment of any personnel, or (ii) in the extension of staff or other privileges to any physician or other health personnel, because such persons seek to obtain or obtained health care, or participate in providing health care, through a health maintenance organization. "(f) If the Secretary, after reasonable notice and opportunity for a hearing to a State, finds that it or any of its political subdivisions has failed to comply with paragraph (1) or (2) of subsection Ot>), the Secretary shall terminate payments to such State under sections 317, 318, and 1002 and notify the Governor of such State that further payments under such sections will not be made to the State until the Secretary is satisfied that there will no longer be any such failure to comply.".
PUBLIC LAW 100-517—OCT. 24, 1988 102 STAT. 2583 SEC. 8. RESTRICTIVE STATE LAWS. Section 1311(aXl) (42 U.S.C. 300e-10(aXl)) is amended by striking out "or" at the end of subparagraph (C), by striking out ", and" at the end of subparagraph (D) and inserting in lieu thereof ", or", and by adding at the end the following: "(E) imposes requirements which would prohibit the entity from complying with the requirements of this title, and". SEC. 9. PROHIBITION ON CERTAIN POLICY CHANGES. Abortion. 42 u s e 1302 With respect to abortion services, the Secretary of Health and note. Human Services shall not promulgate or issue any regulations, policy statements, or interpretations or develop any practices concerning the performance of medically necessary procedures if such regulations, policy statements, interpretations, or practices would be inconsistent with regulations, policy statements, interpretations, or practices in effect on the date of the enactment of this Act. Approved October 24, 1988. LEGISLATIVE HISTORY—H.R. 3235: HOUSE REPORTS: No. 100-417 (Comm. on Energy and Commerce) and No. 100-1056 (Comm. of Conference). SENATE REPORTS: No. 100-304 (Comm. on Labor and Human Resources). CONGRESSIONAL RECORD: Vol. 133 (1987): Nov. 3, considered and passed House. Vol. 134 (1988): Aug. 11, considered and passed Senate, amended. Oct. 5, House agreed to conference report. Oct. 7, Senate agreed to conference report. o