[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 3261 Introduced in Senate (IS)]







106th CONGRESS
  2d Session
                                S. 3261

  To provide for the establishment of an HMO Guaranty Fund to provide 
 payments to States to pay the outstanding health care provider claims 
             of insolvent health maintenance organizations.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

            October 30 (legislative day, September 22), 2000

   Mr. Reed introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
  To provide for the establishment of an HMO Guaranty Fund to provide 
 payments to States to pay the outstanding health care provider claims 
             of insolvent health maintenance organizations.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``HMO Guaranty Act of 2000''.

SEC. DEFINITIONS.

    In this Act:
            (1) Board.--The term ``Board'' means the Board of Directors 
        appointed under section 3(d).
            (2) Contractual obligation.--The term ``contractual 
        obligation'' means an obligation by a health maintenance 
        organization, under an agreement, policy, certificate, or 
        evidence of coverage involving a covered individual and the 
        organization, to pay or reimburse the covered individual (or a 
        health care provider who provided items or services to the 
        individual) for services provided prior to the declaration of 
        the insolvency of the health maintenance organization, that 
        remains unpaid at the time of such insolvency. Such term does 
        not include claims by former employees, including medical 
        professional employees, for deferred compensation, severance, 
        vacation, or other employment benefits.
            (3) Covered individual.--The term ``covered individual'' 
        means an enrollee or member of a health maintenance 
        organization.
            (4) Guaranty fund.--The term ``Guaranty Fund'' means the 
        Federal HMO Guaranty Fund established under section 3.
            (5) Health care provider.--The term ``health care 
        provider'' means a physician, hospital, or other person that is 
        licensed or otherwise authorized by the State to provide health 
        care services, and that provided health care services to an 
        enrollee of a health maintenance organization.
            (6) Health maintenance organization.--The term ``health 
        maintenance organization'' has the meaning given such term by 
        section 2791(b)(3) of the Public Health Service Act (42 U.S.C. 
        300gg-91(b)(3)).
            (7) Health maintenance organization contract.--The term 
        ``covered health maintenance organization contract'' means a 
        policy, certificate, or other evidence of health care coverage 
        that is issued by a health maintenance organization.
            (8) Insolvent organization.--The term ``insolvent 
        organization'' means a health maintenance organization that is 
        declared insolvent by court of competent jurisdiction and 
        placed under the control of a State Commissioner of Insurance 
        for the purpose of liquidation.
            (9) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services, in consultation with the 
        Secretary of Labor and the Secretary of the Treasury.
            (10) State.--The term ``State'' includes each of the 
        several States, the District of Columbia, the Commonwealth of 
        Puerto Rico, the Northern Mariana Islands, or any agency or 
        instrumentality thereof.
            (11) Uncovered expenditures.--The term ``uncovered 
        expenditures'' means the expenditures for the provision of 
        health care services that are the obligation of a health 
        maintenance organization that have not been paid by such 
        organization and for which no alternative payment arrangements 
        have been made.

SEC. 3. ESTABLISHMENT OF HMO GUARANTY FUND.

    (a) In General.--There is established in the Treasury of the United 
States a fund to be known as the HMO Guaranty Fund to be used as 
provided for in this Act.
    (b) Amounts in Fund.--
            (1) In general.--There shall be deposited into the Guaranty 
        Fund--
                    (A) amounts collected under section 5(a);
                    (B) penalties collected under section 5(b); and
                    (C) earnings on investments of monies in the 
                Guaranty Fund.
            (2) Investments.--
                    (A) In general.--The Secretary of the Treasury 
                shall invest amounts in the Guaranty Fund that are not 
                required to meet current withdrawals. Such investments 
                may be made only in interest-bearing obligations of the 
                United States. For such purpose, such obligations may 
                be acquired on original issue at the issue price, or by 
                purchase of outstanding obligations at the market 
                price.
                    (B) Availability of income.--Any interest derived 
                from obligations held by the Guaranty Fund and the 
                proceeds from any sale or redemption of such 
                obligations, are hereby appropriated to the Fund.
    (c) Use of Guaranty Fund.--Subject to section 4, amounts in the 
Guaranty Fund shall be used to make payments to a State--
            (1) to pay the outstanding health care provider claims for 
        uncovered expenditures, and to fulfill contractual obligations 
        to covered individuals, with respect to an insolvent health 
        maintenance organization; and
            (2) to provide for a temporary continuation of health care 
        coverage for covered individuals.
    (d) Board of Directors.--
            (1) In general.--The Guaranty Fund shall be administered by 
        a Board of Directors to be composed of 9 individuals of which--
                    (A) three directors shall be appointed by the 
                National Association of Insurance Commissioners from 
                among individuals who serve as insurance regulators of 
                a State;
                    (B) three directors shall be appointed by a 
                national association which represents the health 
                maintenance organization industry of all States (as 
                determined by the Secretary) from among representatives 
                of health maintenance organizations; and
                    (C) three directors shall be--
                            (i) the Secretary of the Treasury, or the 
                        designee of the Secretary;
                            (ii) the Secretary of Health and Human 
                        Services, or the designee of the Secretary; and
                            (iii) the Secretary of Labor, or the 
                        designee of the Secretary.
            (2) Terms, vacancies.--The members of the Board shall 
        establish the terms of service of the members of the Board 
        appointed under subparagraphs (A) and (B) of paragraph (1). Any 
        vacancy in the Board shall not affect its powers, and shall be 
        filled in the same manner as the original appointment.
            (3) Compensation of members.--
                    (A) In general.--Except as provided in subparagraph 
                (B), each member of the Board who is not an officer or 
                employee of the Federal Government shall serve without 
                compensation. All members of the Board who are officers 
                or employees of the United States shall serve without 
                compensation in addition to that received for their 
                services as officers or employees of the United States.
                    (B) Travel expenses.--The members of the Board 
                shall be allowed travel expenses, including per diem in 
                lieu of subsistence, at rates authorized for employees 
                of agencies under subchapter I of chapter 57 of title 
                5, United States Code, while away from their homes or 
                regular places of business in the performance of 
                services for the Board. Such expenses shall be paid 
                from the Guaranty Fund.
            (4) Voting.--Each member of the Board shall have 1 vote. 
        The Board shall set policy and decide all matters by a simple 
        majority of the votes cast.
            (5) Chairperson.--The Board shall elect a chairperson from 
        among its members.
            (6) Meetings.--The Board shall first meet not later than 30 
        days after the date on which all members are appointed under 
        paragraph (1). Subsequent meetings shall be at the call of the 
        chairperson. The Board may hold public hearings after giving 
        proper notice.
            (7) Fiduciary duty.--With respect to the members of the 
        Board that are not appointed under paragraph (1)(A), in 
        carrying out the duties of the Board such members shall have a 
        fiduciary duty to the Guaranty Fund that shall supersede any 
        duty to an employer or other special interest that the member 
        may otherwise represent.
            (8) Limitations on liability.--A member of the Board shall 
        not be liable, or in any way responsible, for the obligations 
        of the Guaranty Fund.
    (e) Duties.--The Board shall--
            (1) administer the Guaranty Fund;
            (2) adopt bylaws that permit the Board to enter into 
        contracts to receive contributions and make distributions in 
        accordance with this Act;
            (3) establish the application criteria and materials 
        necessary to enable a State to submit an application to the 
        Guaranty Fund;
            (4) review and make determination on applications received 
        under section 4(b); and
            (5) carry out other activities in accordance with this Act.

SEC. 4. EXPENDITURES FROM THE GUARANTY FUND.

    (a) In General.--The Guaranty Fund shall be used to make payments 
to a State to enable such State to pay the claims of health care 
providers for health care services provided to covered individuals 
prior to the declaration of insolvency of a health maintenance 
organization and to provide for a temporary continuation of health care 
coverage for such individuals.
    (b) Procedure.--
            (1) In general.--Upon the declaration by a court of 
        competent jurisdiction that a health maintenance organization 
        is insolvent, the official responsible for regulating health 
        insurance in the State in which the declaration is made may 
        submit an application to the Guaranty Fund for payment under 
        this Act.
            (2) Contents of application.--An application submitted by a 
        State under paragraph (1) shall include the following:
                    (A) Liquidation of assets and return of unused 
                funds.--The application shall contain an accounting of 
                amounts received (or expected to be received) as a 
                result of the liquidation of the assets of the 
                insolvent organization.
                    (B) Fund amount.--The application shall contain a 
                request for a specific amount of funds that will be 
                used for the uncovered expenditures and contractual 
                obligations of an insolvent organization.
                    (C) Uncovered expenditures.--The application shall 
                contain an estimate of the aggregate number of 
                uncovered individuals and aggregate amount of uncovered 
                expenditures with respect to the insolvent organization 
                involved.
                    (D) Continuation coverage.--The application shall 
                contain an estimate of the aggregate amount of funds 
                needed to provide continuation coverage to uncovered 
                individuals.
    (c) Consideration by Board.--Not later than 30 days after the date 
on which the Guaranty Fund receives a completed application from a 
State under subsection (b), the Board shall make a determination with 
respect to payments to the States.
    (d) Limitation.--The aggregate amount that may be paid to a State 
under this section with respect to a single uncovered individual shall 
not exceed $300,000.
    (e) Use for Continuation Coverage.--
            (1) In general.--A State may use amounts provided under 
        this section to provide for the continuation of health care 
        coverage for an uncovered individual through a health 
        maintenance organization or other health care coverage that has 
        been determined appropriate by the official responsible for 
        regulating health insurance in the State in collaboration with 
        the Board.
            (2) Limitation.--The period of continuation coverage with 
        respect to an uncovered individual under paragraph (1) shall 
        terminate on the earlier of--
                    (A) the date that is 1 year after the date on which 
                the health maintenance organization was declared 
                insolvent; or
                    (B) or the date on which the contractual obligation 
                of the health maintenance organization to the 
                individual was to terminate.
    (f) Repayment of Funds.--The State shall repay to the Guaranty Fund 
an amount equal to--
            (1) any amounts not utilized by the State on the date on 
        which the liquidation of the insolvent organization is 
        completed; and
            (2) any amounts recovered through liquidation that have not 
        been accounted for in the application of the State under 
        subsection (b)(2)(A).

SEC. 5. CONTRIBUTIONS TO THE GUARANTY FUND.

    (a) Assessment on Health Maintenance Organizations.--
            (1) In general.--Not later than January 1, 2001, and every 
        6 months thereafter, each health maintenance organization that 
        is licensed by a State to provide health care coverage shall 
        pay to the Guaranty Fund an amount to be determined in 
        accordance with an assessment schedule to be established by the 
        Secretary not later than 180 days after the date of enactment 
        of this Act.
            (2) Deferment.--The Board, after consultation with the 
        official responsible for regulating health insurance in the 
        State involved may exempt, abate, or defer, in whole or in 
        part, the assessment of a health maintenance organization under 
        paragraph (1) if the organization demonstrates that the payment 
        of the assessment would endanger the ability of the 
        organization to fulfill its contractual obligations or place 
        the organization in an unsound financial condition.
            (3) Prohibition.--A health maintenance organization shall 
        not adjust the amount of premiums paid by enrollees to account 
        for the assessment paid under paragraph (1).
    (b) Failure to Pay.--A health maintenance organization that fails 
to pay an assessment under subsection (a)(1) within 30 days after the 
date on which such assessment was to be paid shall be subject to a 
civil penalty in an amount not to exceed $1,000 per day.

SEC. 6. STATE PREEMPTION.

    (a) In General.--Nothing in this Act shall be construed to preempt 
or supersede any provision of State law that establishes, implements, 
or continues in effect any standard or requirement relating to health 
maintenance organizations.
    (b) Definition.--In this section, the term ``State law'' means all 
laws, decisions, rules, regulations or other State actions that have 
the effect of law.
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