[Congressional Record Volume 143, Number 22 (Wednesday, February 26, 1997)]
[House]
[Pages H636-H639]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
REPEALING FEDERAL CHARTER OF GROUP HOSPITALIZATION AND MEDICAL
SERVICES, INC.
Mr. DAVIS of Virginia. Mr. Speaker, I move to suspend the rules and
pass the bill (H.R. 497) to repeal the Federal charter of Group
Hospitalization and Medical Services, Inc., and for other purposes.
The Clerk read as follows:
H.R. 497
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. REPEAL OF FEDERAL CHARTER OF GROUP HOSPITALIZATION
AND MEDICAL SERVICES, INC.
(a) Repeal of Federal Charter.--
(1) In general.--The Act entitled ``An Act providing for
the incorporation of certain persons as Group
Hospitalization, Inc.'', approved August 11, 1939 (53 Stat.
1412), is repealed.
(2) Authorization to file articles of incorporation.--Group
Hospitalization and Medical Services, Inc. is hereby
authorized to file articles of incorporation under the
District of Columbia Nonprofit Corporation Act.
(3) Effective Date.--The amendment made by paragraph (1)
shall take effect upon the filing and effectiveness of
articles of incorporation of Group Hospitalization and
Medical Services, Inc. under the District of Columbia
Nonprofit Corporation Act.
(b) Effects of Becoming a District of Columbia Nonprofit
Corporation.--Effective
[[Page H637]]
upon the filing and effectiveness of articles of
incorporation of Group Hospitalization and Medical Services,
Inc. as authorized in paragraph (2) of subsection (a), Group
Hospitalization and Medical Services, Inc.--
(1) Shall be District of Columbia nonprofit corporation
subject to he articles of incorporation;
(2) shall be deemed organized and existing under the
District of Columbia Nonprofit Corporation Act,
notwithstanding any of the provisions of section 4 of the
District of Columbia Nonprofit Corporation Act regarding
organizations subject to any of the provisions of the
insurance laws of the District of Columbia;
(3) shall be legally domiciled in the District of Columbia;
(4) shall be regulated by the Superintendent of Insurance
of the District of Columbia in accordance with the laws and
regulations of the District of Columbia;
(5) shall continue to exist; and
(6) shall continue to be authorized to transact business--
(A) under existing certificates of authority and licenses
issued to Group Hospitalization and Medical Services, Inc.
before such filing and effectiveness,
(B) under the name ``Group Hospitalization and Medical
Services, Inc.'', and
(C) under applicable laws and regulations.
SEC. 2. WAIVER OF CONGRESSIONAL REVIEW PERIOD.
Notwithstanding section 602(c)(1) of the District of
Columbia Self-Government and Governmental Reorganization Act
(sec. 1-233(c)(1), D.C. Code), the Hospital and Medical
Services Corporation Regulatory Act of 1996 (D.C. Act 11-505)
shall take effect on the date of the enactment of such Act or
the date of the enactment of this Act, whichever is later.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Virginia [Mr. Davis] and the gentlewoman from the District of Columbia
[Ms. Norton] each will control 20 minutes.
The Chair recognizes the gentleman from Virginia [Mr. Davis].
(Mr. DAVIS of Virginia asked and was given permission to revise and
extend his remarks.)
Mr. DAVIS of Virginia. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, H.R. 497 repeals the Federal charter of the Group
Hospitalization and Medical Services, Inc., the Blue Cross/Blue Shield
Plan of the National Capital Area.
GHMSI, as it is known, is the only insurance company to have a
Federal charter. It was granted in 1939. Under the charter, provision
is made for its repeal by Congress.
The GHMSI Federal charter has become an anachronism and an impediment
to competition. This bill seeks to level the playing field. When
granted in 1939, the District of Columbia Code did not have provisions
to regulate such an entity. It has had such regulatory provisions now
for a number of years. As recently as 1992 and 1993, Congress amended
the charter to specify that GHMSI be domiciled in the District and
governed by local laws and regulations. At the present time, GHMSI is
subject to the District's Nonprofit Corporation Act and is under the
jurisdiction of the Superintendent of Insurance.
By waiving the congressional review period for D.C. Act 11-505, as
provided for in this bill, the new entity, upon acceptance of its
articles of incorporation, will continue to be governed by local laws
without a gap or a delay in enforcement. The bill authorizes GHMSI to
file articles of incorporation under the District's Nonprofit
Corporation Act. The new entity would continue to be governed under its
existing certificate of authority and licenses and will continue to be
bound by applicable laws and regulations. Local regulation would
continue to be the responsibility of the Superintendent of Insurance of
the District of Columbia.
H.R. 497 is necessary because of the significant changes which have
occurred in health care delivery systems nationwide and in the
Washington metropolitan area. These changes are the result of market-
based reforms stimulated by the growth of managed care. Health care
plans must now compete to survive. Successful plans must be keyed to
consumers, markets, and products. All other Blue Cross plans in the
country are State-chartered corporations operated under State
regulatory oversight. GHMSI alone needs congressional approval to
change its corporate structure.
These arguments are not theoretical. On January 14, 1997, Blue Cross/
Blue Shield of the National Capital Area and Blue Cross/Blue Shield of
Maryland signed a letter of intent to combine by forming a nonprofit
holding company, with both plans as subsidiaries. This is subject to
review by the insurance commissioners for Maryland, Virginia, and the
District of Columbia, but without this bill Congress would also have to
vote its approval. To require congressional approval of such an action
puts GHMSI at a competitive disadvantage.
This bill is essential in order for GHMSI to fully compete in the
marketplace and for the ability of subscribers in the region to obtain
and maintain quality and affordable health care benefits.
Mr. Speaker, I want to make very clear that GHMSI will be the very
same corporation after the repeal of the Federal charter as it was
before the repeal of the Federal charter. This is merely a change in
identity, form, or place of organization for the group health of GHMSI
of the type recognized as a reorganization under section 368(a)(1)(F)
of the Internal Revenue Code of 1986.
Mr. Speaker, I urge passage of this bill.
Questions and Answers Regarding H.R. 497, To Repeal the Federal Charter
of Group Hospitalization and Medical Services, Inc.
Q. What does this bill do?
A: It repeals the Federal Charter of Group Hospitalization
and Medical Services, Inc. This is the entity that holds a
license from the Blue Cross and Blue Shield Association to do
business as Blue Cross and Blue Shield of the National
Capital Area.
Q: Why repeal the federal charter?
A: To help regional consumers by giving the District Blues
the same flexibility that all other health insurance
companies in the country have. The charter has become an
anachronism and an impediment to competition. GHMSI is the
only health insurance company to hold a federal charter. This
bill creates a more level playing field.
Q: When was the federal charter granted?
A: It dates back to 1939, when there was no local home rule
in the District of Columbia and no local laws governing
nonprofit health insurance companies. There is now a
Superintendent of Insurance in the District and a local
Nonprofit Corporation Act.
Q: How are other Blue Cross plans in the country treated?
A: All others are state chartered corporations operating
under state regulatory oversight. GHMSI alone needs
congressional approval to change its corporate structure.
Q: Does Blue Cross support this bill?
A: Yes. In fact, they requested it.
Q: Does the bill effect any other health insurance company
in the country?
A: No. The bill, if enacted, would become part of the
District of Columbia Code.
Q: Does the bill have any impact on federal employees?
A: No.
Q: Is the bill supported by District local officials?
A: Yes. It is supported by locally elected officials and by
the control board.
Q: Does the bill change anything for Blue Cross
subscribers?
A: Not at all.
Q: Does the bill have any direct effect on the federal
budget?
A: No. The Congressional Budget Office and the Joint
Committee on Taxation have so stated in writing.
Q: Has this bill been introduced before?
A: No. But it was included in the Omnibus Continuing
Resolution passed by the House last year.
Q: Is there any known opposition to this bill at the
present time?
A: No. Co-sponsors include members of the regional
delegation from both sides of the aisle.
Q: Does the bill have any impact on for-profit health
insurance companies?
A: No.
Q: How does this bill compare to the laws governing
nonprofit health insurance companies in the bordering states
of Maryland and Virginia?
A: It establishes comparability. The bill authorizes GHMSI
to file articles of incorporation under the District's
Nonprofit Corporation Act. The new entity would continue to
be governed under its existing certificates of authority and
licenses. It would continue to be bound by applicable laws
and regulations. Local regulation would continue to be by the
Superintendent of Insurance of the District of Columbia upon
certification of the articles of incorporation.
Q: Is this bill strictly theoretical?
A: No. On January 14, 1997 Blue Cross/Blue Shield of the
National Capital Area and Blue Cross/Blue Shield of Maryland
signed a Letter of Intent to combine by forming a holding
company, with both plans as subsidiaries. This is subject to
review by the insurance commissioners for Maryland, Virginia,
and the District of Columbia. Without this bill Congress
would also have to vote its approval. To require
congressional approval of such an action puts the Blues at a
competitive disadvantage. Successful plans, reflecting
market-based reforms, must compete to survive by being keyed
to consumers.
Q: What about the waiver provision in the bill for D.C. Act
11-505?
A: This is necessary in order to insure that there will be
no delay and no gap in enforcement of local laws to the new
nonprofit Blue
[[Page H638]]
Cross company authorized by this bill. D.C. Act 11-505 is the
new Hospital and Medical Services Corporation Act enacted by
the District government. It passed unanimously and was
approved by the control board.
Q: Is there any known opposition to D.C. Act 11-505?
A: No. It was transmitted to Congress by the District
Government on February 4, 1997.
Q: What happens if the congressional review period for D.C.
Act 11-505 is not waived?
A: Then the enactment could not pass into the District Code
until after H.R. 479 passes, hence creating a likely delay in
enforcement. Thus, this section of the bill was included out
of an abundance of caution.
Q: Why was D.C. Act 11-505 deemed necessary?
A: Because otherwise there would be no local laws governing
GHMSI or its successor corporation in the District of
Columbia. GHMSI is now operating under a consent order with
the District of Columbia Insurance Administration. The
original federal charter expressly exempts GHMSI from
District Government regulation, though this was amended by
Congress in 1992 to permit such regulation.
Mr. Speaker, I reserve the balance of my time.
Ms. NORTON. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I want to begin by thanking the gentleman from Indiana
[Mr. Burton] for allowing us to expedite consideration of this bill,
and I want to express my appreciation to the subcommittee chair, the
gentleman from Virginia [Tom Davis], for his work in making certain
that this bill came to the floor this morning.
Mr. Speaker, in August 1939 Congress granted a Federal charter to
Group Hospitalization, Inc., which authorized it to arrange for the
provision of hospital services on a nonprofit basis to individuals
residing in the District of Columbia. This was necessary because, at
the time, the District had no laws in place to regulate nonprofit
health insurance companies and, of course, there was no self-government
at the time, but this body was the legislating body for the District of
Columbia. The District only had the means to regulate mutual insurance
companies, which group hospitalization did not wish to become. As a
consequence, Group Hospitalization, Inc. began its operations exempt
from local regulation.
In October 1984, the charter was amended to expand Group
Hospitalization's purpose beyond arranging for hospital services to
include arranging for the provision of medical services on a nonprofit
basis. This amendment also provided for a change of the company's name
to Group Hospitalization and Medical Services, Inc., otherwise known as
GHMSI. GHMSI is currently licensed by the Blue Cross and Blue Shield
Association to do business as Blue Cross and Blue Shield of the
National Capital area.
{time} 1145
In the early 1990's, GHMSI's management engaged in a wide range of
questionable business practices which threatened the corporation's
financial stability. The Senate Government Affairs Committee's
Subcommittee on Investigations held hearings on the situation. The
subcommittee determined that the situation might have been avoided had
GHMSI been fully regulated by the District government.
To remedy this situation and protect the interests of the citizens
served by GHMSI, the Congress amended its charter in both 1992 and 1993
to provide that it be licensed and regulated by the District
government.
Last December, the District government enacted the Hospital and
Medical Services Corporation Regulatory Act. This legislation
establishes an improved statutory framework for the District's
insurance administration to regulate GHMSI and any other similar
nonprofit insurance corporations.
Last month GHMSI and Blue Cross and Blue Shield of Maryland announced
that they had signed a letter of intent to combine their business
operations through the formation of a nonprofit holding company. Both
health plans will continue to operate as subsidiaries of the holding
company. This arrangement is expected to enhance their financial
stability and provide their members with access to a wider array of
service providers.
The completion of this transaction would be made possible by the
repeal of GHMSI's Federal charter. However, it would still be subject
to regulatory reviews and approvals by the insurance commissioners of
the District of Columbia, Maryland, and Virginia.
Today, GHMSI is the only federally chartered health insurance
corporation. All other Blue Cross and Blue Shield plans and all other
commercial insurance companies are State chartered and subject to State
regulatory oversight.
In order for GHMSI to make a change in its corporate structure, the
Congress would have to amend its charter. This is a burdensome process
that encumbers GHMSI's efficient operation.
In order to enable GHMSI to compete within the insurance industry on
a level playing field, it is appropriate that Congress grant its
request to repeal the charter and allow the local government to
exclusively regulate GHMSI's affairs.
This bill is fully in keeping with self-government and home rule. We
therefore have before us, Mr. Speaker, a bill that facilitates the
operations of a very important company located in the District of
Columbia at the same time that it removes a remnant from the prehome
rule period of the District of Columbia. So it serves the interests of
all involved. I am pleased that it also serves the interests of the
local governments in the neighboring regions as well.
Mr. CUMMINGS. Mr. Speaker, the proposal that we are considering today
will help bring improved services and benefits to the many Blue Cross/
Blue Shield subscribers in my district in Baltimore and to many of the
constituents of representatives from suburban Maryland, Northern
Virginia, and Washington, DC.
I commend the gentleman from Virginia for introducing this necessary
legislation.
This bill extinguishes the Federal charter of Blue Cross/Blue Shield
of the National Capital Area, which will permit it to organize and come
under the jurisdiction of D.C. insurance laws--as it should have long
ago. A merger between the National Capital area Blue Cross/Blue Shield
and Maryland Blue Cross/Blue Shield will create a $3 billion-dollar-a-
year nonprofit company--providing health care coverage to 25 percent of
the 8 million residents of Maryland, the District, and the Northern
Virginia suburbs.
Just as important, my constituents in Baltimore that are enrolled in
the Blue Cross/Blue Shield plan will receive tangible results from the
merger. It will increase competition, which will result in better
service, more options, and access to a larger number of doctors,
hospitals, and pharmacies at a lower cost for its customers.
The passage of H.R. 497 is essential to giving my constituents in
Baltimore, and the constituents of the members of Maryland, Virginia,
and Washington, DC the type of comprehensive, quality health care they
deserve.
I am glad to know that we in Congress are doing all that we can to
give health care providers greater flexibility to meet our constituents
health care needs.
Again, I congratulate the gentleman from Virginia, Mr. Davis for
introducing this meaningful legislation and for working with the
minority in such a bipartisan fashion.
I urge my colleagues to suspend the rules and pass H.R. 497.
Mr. HOYER. Mr. Speaker, I rise today to express my support for H.R.
497, a bill to repeal the Federal Charter for Group Hospitalization and
Medical Services, Inc., better known as Blue Cross and Blue Shield of
the National Capital Area.
H.R. 497 eliminates an outdated arrangement under which GHMSI, alone
among health insurance providers, has had to operate. H.R. 497
authorizes GHMSI to file articles of incorporation with the District of
Columbia Nonprofit Corporation Act. The bill thus paves the way for
GHMSI to become a District of Columbia nonprofit corporation--legally
domiciled in the District of Columbia and subject to regulation by the
superintendent of insurance for the District of Columbia.
GHMSI will continue to exist under the same name and will be
authorized to transact business as it has--under all existing licenses
and certificates of authority.
With the exception of GHMSI, Blue Cross Blue Shield plans and all
other commercial insurance companies around the country are State
chartered corporations operating under State regulatory oversight.
H.R. 497 will place GHMSI on an equal footing with other plans and
health insurers--enabling it to continue to provide comprehensive and
affordable coverage to residents of the District of Columbia and the
Washington Metropolitan area, while meeting the challenges of a
changing health care marketplace.
Of particular importance to my Maryland constituents, H.R. 497 will
facilitate the proposed merger of GHMSI with Blue Cross and Blue Shield
of Maryland. A recent letter of intent announced the plan to combine
the business operations of the two entities under a single holding
company.
This combination of business operations will provide a larger
provider network--offering
[[Page H639]]
greater portability and choice, broader product options, and improved
customer service to residents of the District of Columbia, northern
Virginia, and Maryland who work in one area and reside in another.
I urge all of my colleagues to support this bill which will enable
GHMSI to face the abundant challenges of the fast-changing health care
marketplace and to compete and serve its customers on a fair and equal
footing.
Ms. NORTON. Mr. Speaker, I yield back the balance of my time.
Mr. DAVIS of Virginia. Mr. Speaker, I urge the passage of the bill,
and I yield back the balance of my time.
The SPEAKER pro tempore [Mr. Shays]. The question is on the motion
offered by the gentleman from Virginia [Mr. Davis] that the House
suspend the rules and pass the bill, H.R. 479.
The question was taken.
Mr. DAVIS of Virginia. Mr. Speaker, on that I demand the yeas and
nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 5 of rule I and the
Chair's prior announcement, further proceedings on this motion will be
postponed.
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