[Federal Register Volume 59, Number 189 (Friday, September 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-23281]


[[Page Unknown]]

[Federal Register: September 30, 1994]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES
42 CFR Part 417

[OMC-009-FC]
RIN: 0938-AG92

 

Medicare Program; Qualified Health Maintenance Organizations: 
Technical Amendments

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Final rule with comment period.

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SUMMARY: This rule clarifies and updates portions of the HCFA 
regulations that pertain to Federal qualification and continued 
regulation of health maintenance organizations (HMOs), inclusion of 
qualified HMOs in employee health benefits plans, and the 
administration of outstanding loans and loan guarantees that were 
awarded before October 1, 1986, under the Public Health Service Act 
(PHS Act). This rule is part of a special project to clarify and update 
all of 42 CFR part 417, which contains the regulations applicable to 
all entities that provide prepaid health care, that is, HMOs, CMPs 
(competitive medical plans) and HCPPs (health care prepayment plans).
    These are technical and editorial changes that do not affect the 
substance of the regulations. They are intended to make it easier to 
find particular provisions, to provide overviews of the different 
program aspects, and to better ensure uniform understanding of the 
rules.

DATES: Effective Date: These regulations are effective on October 31, 
1994.
    Comment Date: We will consider all comments received at the 
appropriate address as provided below no later than 5 p.m. on November 
29, 1994.

ADDRESSES: Mail written comments (1 original and 3 copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: OMC-9-FC, P.O. Box 26676, 
Baltimore, MD 21207.
    If you prefer, you may deliver your written comments (an original 
and 3 copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201, or
Room 132, East High Rise Building, 6325 Security Boulevard, Baltimore, 
MD 21207.

    Due to staff limitations, we cannot accept facsimile (FAX) 
transmission of comments. Comments will be available for public 
inspection as they are received, beginning approximately 3 weeks from 
date of publication in the Federal Register, in Room 309-G of the 
Department's offices at 200 Independence Avenue, SW., Washington, DC, 
on Monday through Friday from 8:30 a.m. to 5 p.m. (phone: (202) 690-
7890).

FOR FURTHER INFORMATION CONTACT: Tracy Jensen, (202) 619-2158.

SUPPLEMENTARY INFORMATION:

A. Background

    This rule revises subparts D, E, F, and V of part 417 of the HCFA 
rules as part of the special project noted in the SUMMARY.
    The first two steps in the project to clarify and update part 417 
were the publication of two final rules identified as OCC-22-F and OCC-
15-FC. The first was published in the Federal Register on October 17, 
1991, at 56 FR 51984; the second, on July 15, 1993, at 58 FR 38062.
    The regulation identified as OCC-22-F--
     Removed most of the outdated content;
     Redesignated certain portions of part 417 to free section 
numbers needed so that new rules can be incorporated in logical order; 
and
     Designated the remaining text under subpart headings that 
identify the different program aspects so that it is easier to refer to 
those aspects and to find particular rules.
    The second regulation, identified as OCC-15-F--
     Through nomenclature and definition changes, established 
certain terms to be used throughout part 417 with the aim of avoiding 
confusion, making clear that responsibility for the prepaid health care 
programs has been delegated to HCFA, and ensuring use of the most 
precise terms available.
     Established a separate subpart C with four sections to set 
forth the many requirements that apply to the organization and 
operation of HMOs, and that were previously compressed into a single 
section (Sec. 417.107).
    As a result of the redesignations made by OCC-22-F and OCC-15-FC, 
Secs. 417.107 through 417.119 are now available for new rules that are 
required because of statutory amendments that affect the furnishing of 
services by qualified HMOs or may be needed because of future changes 
in the statute.

B. Changes in the Regulations

    In order to clarify and update subparts D, E, F, and V, this rule 
makes the following changes:
     Uses terminology established by OCC-15-FC or that reflects 
accepted usage in all HCFA regulations.
     Revises long unbroken columns of text to designate 
separate provisions and to provide headings that help the reader to get 
an overview and to find particular provisions.
     Uses the active voice and the present indicative (rather 
than the future tense) to describe what HCFA or its employees, agents, 
or contractors do, and uses the most precise terms available.
    A specific goal is to complete the separation of the rules that 
pertain to assurances required of entities applying for Federal 
qualification from those that pertain to assurances given in applying 
for financial assistance (grants, loans, and loan guarantees) that was 
available under the PHS Act before October 1986. To achieve this goal, 
we have--
     Removed the portion of Sec. 417.160 applicable to 
financial assistance that is no longer available; and
     Added a new Sec. 417.940 in subpart V to reference 
Sec. 417.163(g) as applicable to entities that have outstanding loans 
or loan guarantees, and that fail to comply with assurances they gave 
in applying for the loan or loan guarantee. (Section 417.163(g) 
provides that HCFA may bring civil action to enforce compliance with 
assurances.)
    In addition, we have--
     Removed the definitions of the three types of 
``qualified'' HMOs (Sec. 417.141) because definitions are not used for 
substantive content, and in this case simply constituted a partial 
duplication of the rules themselves;
     Incorporated paragraph (a) of Sec. 417.143 into 
Sec. 417.140 to set forth the scope of the whole subpart D; and
     Removed Secs. 417.168 and 417.169 from subpart F because 
their content is being transferred to Sec. 417.142(g) and (h).

Waiver of Proposed Rulemaking

    With one exception, the changes made by this rule are technical and 
editorial in nature. Their aim is to simplify, clarify, and update 
subparts D, E, F, and V without substantive change.
    We have removed from Sec. 417.169 (now redesignated as 
Sec. 417.142(h)), the words ``for purposes of receiving assistance 
under this subpart.'' HCFA has consistently interpreted this language 
(which appears in section 1307(d) of the PHS Act) as applying to 
continued qualification of HMOs as well as to initial applications for 
assistance that was available under that Act before October 1986. This 
interpretation avoids what would be an unintended result: Now that the 
assistance is no longer available, HMOs that had qualified in 
connection with their requests for assistance would have to disenroll 
their Federal Employee Health Benefit Program (FEHBP) enrollees in 
order to retain qualification and to be able to take advantage of the 
requirement that employers include qualified HMOs in their employee 
health benefits plans. It was a mistake to include in Sec. 417.169 the 
limiting language, which did not appear in the predecessor rule issued 
in 1974. We have deleted the language to achieve consistency between 
paragraphs (g) and (h) of Sec. 417.142 and with HCFA's long-standing 
interpretation of the statute.
    Given this justification, we find that there is good cause to waive 
proposed rule-making procedures as unnecessary. As previously 
indicated, however, we will consider timely comments from anyone who 
questions the deletion of the reference to ``assistance'' or believes 
that, in making the technical and editorial changes, we have altered 
the substance of the rules. Although we cannot respond to comments 
individually, if we revise these rules as a result of comments, we will 
discuss all timely comments in the preamble to the revised rules.

Paperwork Reduction Act

    These regulations contain no new information collection 
requirements subject to review by the Office of Management and Budget 
under the Paperwork Reduction Act of 1980.

Regulatory Impact Statement

Regulatory Flexibility Analysis
    Consistent with the Regulatory Flexibility Act (RFA) and section 
1102(b) of the Social Security Act, we prepare a regulatory flexibility 
analysis for each rule, unless the Secretary certifies that the 
particular rule will not have a significant economic impact on a 
substantial number of small entities, or a significant impact on the 
operation of a substantial number of small rural hospitals.
    We have not prepared a regulatory flexibility analysis because we 
have determined, and the Secretary certifies, that these rules will not 
have a significant impact on a substantial number of small entities or 
on the operation of a substantial number of small rural hospitals.
    In accordance with the provisions of Executive Order 12866, this 
regulation was not reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 417

    Administrative practice and procedure, Health maintenance 
organizations (HMOs), Medicare.

    42 CFR Part 417 is amended as set forth below.

PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL 
PLANS, AND HEALTH CARE PREPAYMENT PLANS

    A. The authority citation for part 417 is revised to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh), Title XIII of the Public Health Service Act 
(42 U.S.C. 300e through 300e-17), and 31 U.S.C. 9701, unless 
otherwise noted.

    B. Subpart D is amended as set forth below.

Subpart D--Application for Federal Qualification

    1. Section 417.140 is revised to read as follows:


Sec. 417.140  Scope.

    This subpart sets forth--
    (a) The requirements for--
    (1) Entities that seek qualification as HMOs under title XIII of 
the PHS Act; and
    (2) HMOs that seek--
    (i) qualification for their regional components; or
    (ii) Expansion of their service areas;
    (b) The procedures that HCFA follows to make determinations; and
    (c) Other related provisions, including application fees.


Sec. 417.141  [Removed]

    2. Section 417.141 is removed.
    3. Section 417.142 is revised to read as follows:


Sec. 417.142  Requirements for qualification.

    (a) General rules. (1) An entity seeking qualification as an HMO 
must meet the requirements and provide the assurances specified in 
paragraphs (b) through (f) of this section, as appropriate.
    (2) HCFA determines whether the entity is an HMO on the basis of 
the entity's application and any additional information and 
investigation (including site visits) that HCFA may require.
    (3) HCFA may determine that an entity is any of the following:
    (i) An operational qualified HMO.
    (ii) A preoperational qualified HMO.
    (iii) A transitional qualified HMO.
    (b) Operational qualified HMO. HCFA determines that an entity is an 
operational qualified HMO if--
    (1) HCFA finds that the entity meets the requirements of subparts B 
and C of this part.
    (2) The entity, within 30 days of HCFA's determination, provides 
written assurances, satisfactory to HCFA, that it--
    (i) Provides and will provide basic health services (and any 
supplemental health services included in any contract) to its 
enrollees;
    (ii) Provides and will provide these services in the manner 
prescribed in sections 1301(b) and 1301(c) of the PHS Act and subpart B 
of this part;
    (iii) Is organized and operated and will continue to be organized 
and operated in the manner prescribed in section 1301(c) of the PHS Act 
and subpart C of this part;
    (iv) Under arrangements that safeguard the confidentiality of 
patient information and records, will provide access to HCFA and the 
Comptroller General or any of their duly authorized representatives for 
the purpose of audit, examination or evaluation to any books, 
documents, papers, and records of the entity relating to its operation 
as an HMO, and to any facilities that it operates; and
    (v) Will continue to comply with any other assurances that it has 
given to HCFA.
    (c) Preoperational qualified HMO. (1) HCFA may determine that an 
entity is a preoperational qualified HMO if it provides, within 30 days 
of HCFA's determination, satisfactory assurances that it will become 
operational within 60 days following that determination and will, when 
it becomes operational, meet the requirements of subparts B and C of 
this part.
    (2) Within 30 days after receiving notice that the entity has begun 
operation, HCFA determines whether it is an operational qualified HMO. 
In the absence of this determination, the entity is not an operational 
qualified HMO even though it becomes operational.
    (d) Transitional qualified HMO: General rules--(1) Basic 
requirements. HCFA may determine that an entity is a transitional 
qualified HMO if the entity--
    (i) Meets the requirements of paragraph (d)(2) through (d)(4) of 
this section; and
    (ii) Provides the assurances specified in paragraphs (d)(5) through 
(d)(7) of this section within 30 days of HCFA's determination.
    (2) Organization and operation. The entity is organized and 
operated in accordance with subpart C of this part, except that it need 
not--
    (i) Assume full financial risk for the provision of basic health 
services as required by Sec. 417.120(b); or
    (ii) Comply with the limitations that are imposed on insurance by 
Sec. 417.120(b)(1).
    (3) Range of services. The entity is currently providing the 
following services on a prepaid basis:
    (i) Physician services.
    (ii) Outpatient services and inpatient hospital services. (The 
entity need not provide or pay for hospital inpatient or outpatient 
services that it can show are being provided directly, through 
insurance, or under arrangements, by other entities.)
    (iii) Medically necessary emergency services.
    (iv) Diagnostic laboratory services and diagnostic and therapeutic 
radiologic services.

These services must meet the requirement of Sec. 417.101, but may be 
limited in time and cost without regard to the constraints imposed by 
Sec. 417.101(a).
    (4) Payment for services--(i) General rule. The entity pays for 
basic health services in accordance with Sec. 417.104, except that it 
need not comply with the copayments limitations imposed by 
Sec. 417.104(a)(4).
    (ii) Determination of payment rates. In determining payment rates, 
the entity need not comply with the community rating requirements of 
Secs. 417.104(b) and 417.105(b).
    (5) Contracts in effect on the date of HCFA's determination. The 
entity gives assurances that it will meet the following conditions with 
respect to its group and individual contracts that are in effect on the 
date of HCFA's determination, and which are renewed or renegotiated 
during the period approved by HCFA under paragraph (d)(6) of this 
section:
    (i) Continue to provide services in accordance with paragraph 
(d)(3) of this section.
    (ii) Continue to be organized and operated and to pay for basic 
health services in accordance with paragraphs (d)(2) and (d)(4) of this 
section, respectively.
    (6) Time-phased plan. The entity gives assurances as follows:
    (i) It will implement a time-phased plan acceptable to HCFA that--
    (A) May not extend for more than 3 years from the date of HCFA's 
determination; and
    (B) Specifies definite steps for meeting, at the time of renewal of 
each group or individual contract, all the requirements of subparts B 
and C of this part.
    (ii) Upon completion of this time-phased plan, it will--
    (A) Provide basic and supplemental services to all of its 
enrollees; and
    (B) Be organized and operated, and provide services, in accordance 
with subparts B and C of this part.
    (7) Contracts entered into after the date of HCFA's determination. 
The entity gives assurances that, with respect to any group or 
individual contract entered into after the date of HCFA's 
determination, it will--
    (i) Be organized and operated in accordance with subpart C of this 
part; and
    (ii) Provide basic health services and any supplemental health 
services included in the contract, in accordance with subpart B of this 
part.
    (e) Failure to sign assurances timely. If HCFA determines that an 
entity meets the requirements for qualification and the entity fails to 
sign its assurances within 30 days following the date of the 
determination, HCFA gives the entity written notice that its 
application is considered withdrawn and that it is not a qualified HMO.
    (f) Qualification of regional components. An HMO that has more than 
one regional component is considered qualified for those regional 
components for which assurances have been signed in accordance with 
this section.
    (g) Special rules: Enrollees entitled to Medicare or Medicaid. For 
an HMO that accepts enrollees entitled to Medicare or Medicaid, the 
following rules apply:
    (1) The requirements of titles XVIII and XIX of the Act, as 
appropriate, take precedence over conflicting requirements of sections 
1301(b) and 1301(c) of the PHS Act.
    (2) The HMO must, with respect to its enrollees entitled to 
Medicare or Medicaid, comply with the applicable requirement of title 
XVIII or XIX, including those that pertain to--
    (i) Deductibles and coinsurance;
    (ii) Enrollment mix and enrollment practices;
    (iii) State plan rules on copayment options; and
    (iv) Grievance procedures.
    (3) An HMO that complies with paragraph (g)(2) of this section may 
obtain and retain Federal qualification if, for its other enrollees, 
the HMO meets the requirements of sections 1301(b) and 1301(c) of the 
PHS Act and implementing regulations in this subpart D and in subparts 
B and C of this part.
    (h) Special rules: Enrollees under the Federal employee health 
benefits program (FEHBP). An HMO that accepts enrollees under the FEHBP 
(Chapter 89 of title 5 of the U.S.C.) may obtain and retain Federal 
qualification if, for its other enrollees, it complies with the 
requirements of section 1301(b) and 1301(c) of the PHS Act and 
implementing regulations in this subpart D and subparts B and C of this 
part.
    4. Section 417.144 is revised to read as follows:


Sec. 417.144  Evaluation and determination procedures.

    (a) Basis for evaluation and determination. (1) HCFA evaluates an 
application for Federal qualification on the basis of information 
contained in the application itself and any additional information that 
HCFA obtains through on-site visits, public hearings, and any other 
appropriate procedures.
    (2) If the application is incomplete, HCFA notifies the entity and 
allows 60 days from the date of the notice for the entity to furnish 
the missing information.
    (3) After evaluating all relevant information, HCFA determines 
whether the entity meets the applicable requirements of Secs. 417.142 
and 417.143.
    (b) Notice of determination. HCFA notifies each entity that applies 
for qualification under this subpart of its determination and the basis 
for the determination. The determination may be granting of 
qualification, intent to deny, or denial.
    (c) Intent to deny. (1) If HCFA finds that the entity does not 
appear to meet the requirements for qualification and appears to be 
able to meet those requirements within 60 days, HCFA gives the entity 
notice of intent to deny qualification and a summary of the basis for 
this preliminary finding.
    (2) Within 60 days from the date of the notice, the entity may 
respond in writing to the issues or other matters that were the basis 
for HCFA's preliminary finding, and may revise its application to 
remedy any defects identified by HCFA.
    (d) Denial and reconsideration of denial. (1) If HCFA denies an 
application for qualification under this subpart, HCFA gives the entity 
written notice of the denial and an opportunity to request 
reconsideration of that determination.
    (2) A request for reconsideration must--
    (i) Be submitted in writing, within 60 days following the date of 
the notice of denial;
    (ii) Be addressed to the HCFA officer or employee who denied the 
application; and
    (iii) Set forth the grounds upon which the entity requests 
reconsideration, specifying the material issues of fact and of law upon 
which the entity relies.

    (3) HCFA bases its reconsideration upon the record compiled during 
the qualification review proceedings, materials submitted in support of 
the request for reconsideration, and other relevant materials available 
to HCFA.

    (4) HCFA gives the entity written notice of the reconsidered 
determination and the basis for the determination.

    (e) Information on qualified HMOs--(1) Federal Register notices. In 
quarterly Federal Register notices, HCFA gives the names, addresses, 
and service areas of newly qualified HMOs and describes the expanded 
service areas of other qualified HMOs.

    (2) Listings. A cumulative list of qualified HMOs is available from 
the following office, which is open from 8:30 a.m. to 5 p.m., Monday 
through Friday: Office of Managed Care, Room 4360, Cohen Building, 400 
Independence Avenue SW., Washington, DC 20201.

    C. Subpart E is amended as set forth below.

Subpart E--Inclusion of Qualified Health Maintenance Organizations 
in Employee Health Benefits Plans

    1. Section 417.150 is amended to revise the introductory text, add 
definitions of ``agreement,'' ``contract,'' and ``qualified HMO,'' 
remove the definition of ``health benefits,'' and revise the 
definitions of ``bargaining representative,'' ``collective bargaining 
agreement,'' ``eligible employee,'' ``employer,'' ``health benefits 
plan,'' ``public entity,'' and ``to offer a health benefits plan'' to 
read as follows:


Sec. 417.150  Definitions.

    As used in this subpart, unless the context indicates otherwise--

    Agreement means a collective bargaining agreement.

    Bargaining representative means an individual or entity designated 
or selected, under any applicable Federal, State, or local law, or 
public entity collective bargaining agreement, to represent employees 
in collective bargaining, or any other employee representative 
designated or selected under any law.
* * * * *
    Collective bargaining agreement means an agreement entered into 
between an employing entity and the bargaining representative of its 
employees.
    Contract means an employer-employee or public entity-employee 
contract, or a contract for health benefits.
    Eligible employee means an employee who meets the employer's 
requirements for participation in the health benefits plan.
* * * * *
    Employer has the meaning given that term in section 3(d) of the 
Fair Labor Standards Act of 1938, except that it--
    (1) Includes non-appropriated fund instrumentalities of the United 
States Government; and
    (2) Excludes the following:
    (i) The governments of the United States, the District of Columbia 
and the territories and possessions of the United States, the 50 States 
and their political subdivisions, and any agencies or instrumentalities 
of any of the foregoing, including the United States Postal Service and 
Postal Rate Commission.
    (ii) Any church, or convention or association of churches, and any 
organization operated, supervised, or controlled by a church, or 
convention or association of churches that meets the following 
conditions:
    (A) Is an organization that is described in section 501(c)(3) of 
the Internal Revenue Code of 1954.
    (B) Does not discriminate, in the employment, compensation, 
promotion or termination of employment of any personnel, or in the 
granting of staff and other privileges to physicians or other health 
personnel, on the grounds that the individuals obtain health care 
through HMOs, or participate in furnishing health care through HMOs.
    Health benefits plan means any arrangement, to provide or pay for 
health services, that is offered to eligible employees, or to eligible 
employees and their eligible dependents, by or on behalf of an 
employing entity.
    Public entity means the 50 states, Puerto Rico, Guam, the Virgin 
Islands, the Northern Mariana Islands and American Samoa and their 
political subdivisions, the District of Columbia, and any agency or 
instrumentality of the foregoing, and political subdivisions include 
counties, parishes, townships, cities, municipalities, towns, villages, 
and incorporated villages.
    Qualified HMO means an HMO that has in effect a determination, made 
under subpart D of this part, that the HMO is an operational, 
preoperational, or transitional qualified HMO.
    To offer a health benefits plan means to make participation in a 
health benefits plan available to eligible employees, or to eligible 
employees and their eligible dependents regardless of whether the 
employing entity makes a financial contribution to the plan on behalf 
of these employees, directly or indirectly, for example, through 
payments on any basis into a health and welfare trust fund.
    2. Sections 417.151 through 417.156 are revised to read as follows:


Sec. 417.151  Applicability.

    (a) Basic rule. This subpart applies to any employer or public 
entity that offers a health benefits plan to its employees and meets 
the conditions specified in paragraphs (b) through (e) of this section.
    (b) Number of employees. During any calendar quarter of the 
preceding calendar year, the employer or public entity employed an 
average of not less than 25 employees.
    (c) Minimum wage. During any calendar quarter of the preceding 
calendar year, the employer was required to pay the minimum wage 
specified in section 6 of the Fair Labor Standards Act of 1938, or 
would have been required to pay that wage but for section 13(a) of that 
Act.
    (d) Federal assistance under section 317 of the PHS Act. The public 
entity has a pending application for, or is receiving, assistance under 
section 317 of the PHS Act.
    (e) Request for inclusion of qualified HMO. The employer or public 
entity has received, from at least one qualified HMO, a request to be 
included in the health benefits plan offered to employees, and the 
following conditions are met:
    (1) The request is in writing and meets the requirements of 
Sec. 417.152.
    (2) At least 25 of the employees of the employer or public entity 
reside within the HMO's service area.


Sec. 417.152  Request for inclusion of the HMO in a health benefits 
plan; employing entity's response.

    (a) Time limitations. (1) Unless otherwise agreed to by the HMO and 
the employing entity or its designee, an HMO's request for inclusion in 
a health benefits plan must be received by the employing entity or 
designee--
    (i) Not more than 365 nor less than 180 days before the expiration 
or renewal date of--
    (A) A health benefits contract or employing entity-employee 
contract; or
    (B) A collective bargaining agreement; or
    (ii) In the case of a public entity, any longer period prescribed 
by State law.
    (2) For purposes of this paragraph, the dates are considered to be 
as follows:
    (i) For a collective bargaining agreement that is automatically 
renewable or without fixed term, the expiration or renewal date is the 
earliest anniversary date of the agreement.
    (ii) For a collective bargaining agreement that is for a fixed term 
of more than 1 year and provides that its health benefits terms may be 
renegotiated during the term of the agreement, the expiration date is 
the date provided by the agreement for discussion of health benefits 
changes.
    (b) To whom the request must be addressed. The HMO must direct its 
written request for inclusion to--
    (1) The employer's managing official at the employer site being 
solicited or the employer's designee; or
    (2) The public entity's chief executive officer or designee.
    (c) Required information. The request must include the following:
    (1) Evidence showing that the HMO has been determined to be a 
qualified HMO in accordance with section 1310(d) of the PHS Act and 
subpart D of this part.
    (2) A description of the HMO's service area or proposed service 
area and the dates when the HMO will furnish basic and supplemental 
health services in the area.
    (3) Indication of whether the HMO furnishes the basic health 
services that are the services of health professionals--
    (i) Through health professionals who are--
    (A) Members of the HMO's staff;
    (B) Members of one or more medical groups;
    (C) Members of one or more individual practice associations (IPAs); 
or
    (D) Under direct contract with the HMO; or
    (ii) Through any combination of the foregoing.
    (4) If the HMO provides health services through IPAs, a listing of 
member physicians by name, specialty, and whether they are accepting 
new patients from the HMO enrollment. This listing must be current 
within 90 days of the date of the request for inclusion.
    (5) If the HMO provides health services other than through IPAs, 
for each ambulatory care facility the facility's address, days and 
hours of operation, a statement whether it is accepting new patients 
from the HMO enrollment, and the names and specialties of the 
facility's providers of basic and supplemental health services. This 
information must be current within 90 days of the date of the request 
for inclusion.
    (6) A list of the hospitals where HMO enrollees will be provided 
basic and supplemental health services.
    (7) Identification of the type of HMO entity specifying, for 
example, whether for profit or nonprofit, public or private, sole 
proprietorship, partnership or stock corporation; the members of the 
HMO's policymaking body; and the principal managing officer of the HMO.
    (8) A statement of the HMO's capacity to accept new enrollees and 
the likelihood of any future limitations on enrollment.
    (9) The HMO's most recently audited annual financial statement.
    (10) Proposed implementing agreements between the HMO and the 
employer, public entity, or designee for the HMO offering.
    (11) Sample copies of solicitation brochures and enrollment 
literature that will be used in the offer of the HMO option to 
employees.
    (12) The HMO's current rates, including copayments, for basic and 
uniformly included supplemental health services and the dates these 
rates became effective; or the HMO's estimated rates for these 
services.
    (d) Employing entity's response--(1) Timing. An employing entity or 
its designee must respond in writing to an HMO's request for inclusion 
no later than 60 days after receipt of the request.
    (2) Basic statement. The response must state whether the employing 
entity has 25 or more employees who reside within the HMO's service 
area.
    (3) Additional information: Public entities only. A public entity's 
response must specify the health benefits, including limitations and 
exclusions, that are required under State law or regulations for 
employees of the public entity.
    (4) Additional information: All employing entities. If the 
employing entity has 25 or more employees who reside within the HMO's 
service area, the response must include the following:
    (i) Expiration or renewal dates of contracts that cover those 
employees.
    (ii) The amount of the employing entity's current contribution and, 
if applicable, the employee's contribution, for health benefits, and 
the dates when those contribution levels became effective.
    (iii) The expiration dates of any collective bargaining agreements 
covering those employees.
    (e) Effect of inadequate request. If the request for inclusion does 
not meet the requirements of paragraphs (a) through (c) of this 
section, the following rules apply:
    (1) The employing entity is not required to include the HMO option 
in its employees' health benefits plan under Sec. 417.154 until the HMO 
makes its request in accordance with those paragraphs.
    (2) The employing entity or its designee must, within 60 days after 
receipt of the request, notify the HMO in writing of the basis for its 
conclusion that the request does not meet the requirements of 
paragraphs (a) through (c) of this section.
    (f) New request for inclusion. (1) If an employing entity includes 
the HMO option in a health benefits plan in accordance with a request 
meeting the requirements of paragraphs (a) through (c) of this section, 
the employing entity must offer the HMO option to all the eligible 
employees who reside in the HMO's service area during the entire health 
benefits year.
    (2) However, if no employees enroll during the health benefits 
year, the HMO seeking inclusion in the health benefits plan for 
subsequent enrollment periods must submit a new request in accordance 
with paragraphs (a) through (c) of this section.


Sec. 417.153   Offer of HMO option to employees.\1\
---------------------------------------------------------------------------

    \1\The statutory requirement for the employing entity to include 
the HMO option has a sunset date of October 24, 1995. Accordingly, 
the statutory requirement expires on that date unless Congress 
extends it.
---------------------------------------------------------------------------

    (a) Basic rule. An employing entity subject to this subpart must, 
at the time it offers a health benefits plan to its eligible employees, 
include in the plan the option of enrollment in qualified HMOs in 
accordance with this section.
    (b) Employees to whom the HMO option must be offered. Each 
employing entity must offer the option of enrollment in a qualified HMO 
to each eligible employee and his or her eligible dependents who reside 
in the HMO's service area.
    (c) Manner of offering the HMO option. (1) For employees who are 
represented by a bargaining representative, the option of enrollment in 
a qualified HMO----
    (i) Must first be presented to the bargaining representative; and
    (ii) If the representative accepts the option, must then be offered 
to each represented employee.
    (2) For employees not represented by a bargaining representative, 
the option must be offered directly to those employees.


Sec. 417.154  HMOs that must be included in a health benefits plan.

    (a) HMOs of different models--(1) Categories of HMO models. The 
following categories describe the manner in which an HMO furnishes the 
basic health services that are provided by physicians.
    (i) A ``staff/group model HMO'' provides more than one-half of 
those services through members of the HMO's staff or of a medical group 
or groups.
    (ii) An ``IPA/direct contract model HMO'' provides those services 
through----
    (A) An IPA or IPAs; or
    (B) A combination of IPAs, medical groups, staff, and individual 
physicians and other health professionals under contract with the HMO.
    (2) Requirement. If at least one HMO from each category described 
in paragraph (a)(1) of this section requests inclusion in a health 
benefits plan, the employing entity must include at least one HMO from 
each category.
    (3) Terms. For purposes of this paragraph (a), ``health 
professionals under contract'' does not include health professionals 
who are members of any of the following:
    (i) The HMO's staff.
    (ii) Medical groups.
    (iii) Entities that would be medical groups if they met the 
following requirements:
    (A) For the group members individually, the coordinated practice of 
their profession represents more than 50 percent of their professional 
activity.
    (B) For the group as a whole, the delivery of health services to 
HMO enrollees represents more than 35 percent of their professional 
activity.
    (b) Additional HMOs that must be included. An employing entity that 
is subject to this subpart must offer its eligible employees the option 
of enrollment in additional qualified HMOs if the HMOs demonstrate that 
at least 25 of those eligible employees reside in the HMO's service 
areas and meet either of the following conditions:
    (1) They do not reside in the service areas of other HMOs already 
included in the employing entity's health benefits plan.
    (2) They cannot enroll in any other HMO included in the plan 
because those HMOs have closed their enrollment to additional eligible 
employees of the employing entity.
    (c) Optional inclusion of alternative HMOs. An employing entity may 
include in its health benefits plan, instead of an HMO that made a 
timely request for inclusion, one or more other HMOs that may not have 
made a request within the established time limits but are willing to be 
included, if the following conditions are met:
    (1) The alternative HMOs are of the same type (as described in 
paragraph (a) of this section) as the HMO that submitted the timely 
request.
    (2) All of the eligible employees who reside in the service area of 
the HMO that made the timely request reside in the service areas of the 
alternative HMOs.


Sec. 417.155  How the HMO option must be included in the health 
benefits plan.

    (a) HMO access to employees--(1) Purpose and timing.
    (i) Purpose. The employing entity must provide each HMO included in 
its health benefits plan fair and reasonable access to all employees 
specified in Sec. 417.153(b), so that the HMO can explain its program 
in accordance with Sec. 417.124(b).
    (ii) Timing. The employing entity must provide access beginning at 
least 30 days before, and continuing during, the group enrollment 
period.
    (2) Nature of access. (i) Access must include, at a minimum, 
opportunity to distribute educational literature, brochures, 
announcements of meetings, and other relevant printed materials that 
meet the requirements of Sec. 417.124(b).
    (ii) Access may not be more restrictive or less favorable than the 
access the employing entity provides to other offerors of options 
included in the health benefits plan, whether or not those offerors 
elect to avail themselves of that access.
    (b) Review of HMO offering materials. (1) The HMO must give the 
employing entity or designee opportunity to review, revise, and approve 
HMO educational and offering materials before distribution.
    (2) Revisions must be limited to correcting factual errors and 
misleading or ambiguous statements, unless--
    (i) The HMO and the employing entity agree otherwise; or
    (ii) Other revisions are required by law.
    (3) The employing entity or designee must complete revision of the 
materials promptly so as not to delay or otherwise interfere with their 
use during the group enrollment period.
    (c) Group enrollment period; prohibition of restrictions; effective 
date of HMO coverage--(1) Prohibition of restrictions. If an employing 
entity or designee includes the option of enrollment in a qualified HMO 
in the health benefits plan offered to its eligible employees, it must 
provide a group enrollment period before the effective date of HMO 
coverage. The employing entity may not impose waiting periods as a 
condition of enrollment in the HMO or of transfer from HMO to non-HMO 
coverage, or exclusions, or limitations based on health status.
    (2) Effective date of coverage. Unless otherwise agreed to by the 
employing entity, or designee, and the HMO, coverage under the HMO 
contract for employees selecting the HMO option begins on the day the 
non-HMO contract expires or is renewed without lapse.
    (3) Coordination of benefits. Nothing in this subpart precludes the 
uniform application of coordination of benefits agreements between the 
HMOs and the other carriers that are included in the health benefits 
plan.
    (d) Continued eligibility for ``free-standing'' health benefits--
(1) Basic requirement. At the request of a qualified HMO, the employing 
entity or its designee must provide that employees selecting the option 
of HMO membership will not, because of this selection, lose their 
eligibility for free-standing dental, optical, or prescription drug 
benefits for which they were previously eligible or would be eligible 
if selecting a non-HMO option and that are not included in the services 
provided by the HMO to its enrollees as part of the HMO prepaid benefit 
package.
    (2) ``Free-standing'' defined. For purposes of this paragraph, the 
term ``free-standing'' refers to a benefit which--
    (i) Is not integrated or incorporated into a basic health benefits 
package or major medical plan, and
    (ii) Is--
    (A) Offered by a carrier other than the one offering the basic 
health benefits package or major medical plan; or
    (B) Subject to a premium separate from the premium for the basic 
health benefits package or major medical plan.
    (3) Examples of the employing entity's obligation with respect to 
the continued eligibility. (i) The health benefits plan includes a 
free-standing dental benefit. The HMO does not offer any dental 
coverage as part of its health services provided to members on a 
prepaid basis. The employing entity must provide that employees who 
select the HMO option continue to be eligible for dental coverage. (If 
the dental coverage is not optional for employees selecting the non-HMO 
option, nothing in this regulation requires that the coverage be made 
optional for employees selecting the HMO option. Conversely, if this 
coverage is optional for employees selecting the non-HMO option, 
nothing in this regulation requires that the coverage be mandatory for 
employees selecting the non-HMO option.) -
    (ii) The non-HMO option provides free-standing coverage for optical 
services (such as refraction and the provision of eyeglasses), and the 
HMO does not. The employing entity must provide that employees who 
select the HMO option continue to be eligible for optical coverage.
    (iii) The non-HMO option includes dental coverage in its major 
medical package, with a common deductible applied to dental as well as 
non-dental benefits. The HMO provides no dental coverage as part of its 
pre-paid health services. Because the dental coverage is not free-
standing, the employing entity is not required to provide that 
employees who select the HMO option continue to be eligible for dental 
coverage, but is free to do so.
    (e) Opportunity to select among coverage options: Requirement for 
affirmative written selection--(1) Opportunity other than during a 
group enrollment period. The employing entity or designee must provide 
opportunity (in addition to the group enrollment period) for selection 
among coverage options, by eligible employees who meet any of the 
following conditions:
    (i) Are new employees.
    (ii) Have been transferred or have changed their place of 
residence, resulting in--
    (A) Eligibility for enrollment in a qualified HMO for which they 
were not previously eligible by place of residence; or
    (B) Residence outside the service area of a qualified HMO in which 
they were previously enrolled.
    (iii) Are covered by any coverage option that ceases operation.
    (2) Prohibition of restrictions. When the employees specified in 
paragraph (e)(1) of this section are eligible to participate in the 
health benefits plan, the employing entity or designee must make 
available, without waiting periods or exclusions based on health status 
as a condition, the opportunity to enroll in an HMO, or transfer from 
HMO coverage to non-HMO coverage.
    (3) Affirmative written selection. The employing entity or designee 
must require that the eligible employee make an affirmative written 
selection in any of the following circumstances:
    (i) Enrollment in a particular qualified HMO is offered for the 
first time.
    (ii) The eligible employee elects to change from one option to 
another.
    (iii) The eligible employee is one of those specified in paragraph 
(e)(1) of this section.
    (f) Determination of copayment levels and supplemental health 
services. The selection of a copayment level and of supplemental health 
services to be contracted for must be made as follows:
    (1) For employees represented by a collective bargaining 
representative, the selection of copayment levels and supplemental 
health services is subject to the collective bargaining process.
    (2) For employees not represented by a bargaining representative, 
the selection of copayment levels and supplemental health services is 
subject to the same decisionmaking process used by the employing entity 
with respect to the non-HMO option in its health benefits plan.
    (3) In all cases, the HMO has the right to include, with the basic 
benefits package it provides to its enrollees for a basic health 
services payment, on a non-negotiable basis, those supplemental health 
services that meet the following conditions:
    (i) Are required to be offered under State law.
    (ii) Are included uniformly by the HMO in its prepaid benefit 
package.
    (iii) Are available to employees who select the non-HMO option but 
not available to those who select the HMO option.


Sec. 417.156  When the HMO must be offered to employees.

    (a) General rules. (1) The employing entity or designee must offer 
eligible employees the option of enrollment in a qualified HMO at the 
earliest date permitted under the terms of existing agreements or 
contracts.
    (2) If the HMO's request for inclusion in a health benefits plan is 
received at a time when existing contracts or agreements do not provide 
for inclusion, the employing entity must include the HMO option in the 
health benefits plan at the time that new agreements or contracts are 
offered or negotiated.
    (b) Specific requirements. Unless mutually agreed otherwise, the 
following rules apply:
    (1) Collective bargaining agreement. The employing entity or 
designee must raise the HMO's request during the collective bargaining 
process--
    (i) When a new agreement is negotiated;
    (ii) At the time prescribed, in an agreement with a fixed term of 
more than 1 year, for discussion of change in health benefits; or
    (iii) In accordance with a specific process for review of HMO 
offers.
    (2) Contracts. For employees not covered by a collective bargaining 
agreement, the employing entity or designee must include the HMO option 
in any health benefits plan offered to eligible employees when the 
existing contract is renewed or when a new health benefits contract or 
other arrangement is negotiated.
    (i) If a contract has no fixed term or has a term in excess of 1 
year, the contract must be treated as renewable on its earliest 
anniversary date.
    (ii) If the employing entity or designee is self-insured, the 
budget year must be treated as the term of the existing contract.
    (3) Multiple arrangements. In the case of a health benefits plan 
that includes multiple contracts or other arrangements with varying 
expiration or renewal dates, the employing entity must include the HMO 
option, in accordance with paragraphs (b)(1) and (b)(2) of this 
section,--
    (i) At the time each contract or arrangement is renewed or 
reissued; or
    (ii) The benefits provided under the contract or arrangement are 
offered to employees.
    3. Sections 417.158 and 417.159 are revised to read as follows:


Sec. 417.158  Payroll deductions.

    Each employing entity that provides payroll deductions as a means 
of paying employees' contributions for health benefits or provides a 
health benefits plan that does not require an employee contribution 
must, with the consent of an employee who selects the HMO option, 
arrange for the employee's contribution, if any, to be paid through 
payroll deductions.


Sec. 417.159  Relationship of section 1310 of the Public Health Service 
Act to the National Labor Relations Act and the Railway Labor Act.

    The obligation of an employing entity subject to this subpart to 
include the HMO option in any health benefits plan offered to its 
eligible employees must be carried out consistently with the 
obligations imposed on that employing entity under the National Labor 
Relations Act, the Railway Labor Act, and other laws of similar effect.
    D. Subpart F is amended as set forth below.

Subpart F--Continued Regulation of Federally Qualified Health 
Maintenance Organizations

    1. The heading of subpart F is revised to read as set forth above.
    2. Section 417.160 is revised to read as follows:


Sec. 417.160  Applicability.

    This subpart applies to any entity that has been determined to be a 
qualified HMO under subpart D of this part.
    3. Section 417.163 is revised to read as follows:


Sec. 417.163  Enforcement procedures.

    (a) Complaints. Any person, group, association, corporation, or 
other entity may file with HCFA a written complaint with respect to an 
HMO's compliance with assurances it gave under subpart D of this part. 
A complaint must--
    (1) State the grounds and underlying facts of the complaint;
    (2) Give the names of all persons involved; and
    (3) Assure that all appropriate grievance and appeals procedures 
established by the HMO and available to the complainant have been 
exhausted.
    (b) Investigations. (1) HCFA may initiate investigations when, 
based on a report, a complaint, or any other information, HCFA has 
reason to believe that a Federally qualified HMO is not in compliance 
with any of the assurances it gave under subpart D of this part.
    (2) When HCFA initiates an investigation, it gives the HMO written 
notice that includes a full statement of the pertinent facts and of the 
matters being investigated and indicates that the HMO may submit, 
within 30 days of the date of the notice, a written report concerning 
these matters.
    (3) HCFA obtains any information it considers necessary to resolve 
issues related to the assurances, and may use site visits, public 
hearings, or any other procedures that HCFA considers appropriate in 
seeking this information.
    (c) Determination and notice by HCFA--(1) Determination. (i) On the 
basis of the investigation, HCFA determines whether the HMO has failed 
to comply with any of the assurances it gave under subpart D of this 
part.
    (ii) HCFA publishes in the Federal Register a notice of each 
determination of non-compliance.
    (2) Notice of determination: Corrective action. (i) HCFA gives the 
HMO written notice of the determination.
    (ii) The notice specifies the manner in which the HMO has not 
complied with its assurances and directs the HMO to initiate the 
corrective action that HCFA considers necessary to bring the HMO into 
compliance.
    (iii) The HMO must initiate this corrective action within 30 days 
of the date of the notice from HCFA, or within any longer period that 
HCFA determines to be reasonable and specifies in the notice. The HMO 
must carry out the corrective action within the time period specified 
by HCFA in the notice.
    (iv) The notice may provide the HMO an opportunity to submit, for 
HCFA's approval, proposed methods for achieving compliance.
    (d) Remedy: Revocation of qualification. If HCFA determines that a 
qualified HMO has failed to initiate or to carry out corrective action 
in accordance with paragraph (c)(2) of this section--(1) HCFA revokes 
the HMO's qualification and notifies the HMO of this action.
    (2) In the notice, HCFA provides the HMO with an opportunity for 
reconsideration of the revocation, including, at the HMO's election, a 
fair hearing.
    (3) The revocation of qualification is effective on the tenth 
calendar day after the day of the notice unless HCFA receives a request 
for reconsideration by that date.
    (4) If after reconsideration HCFA again determines to revoke the 
HMO's qualification, this revocation is effective on the tenth calendar 
day after the date of the notice of reconsidered determination.
    (5) HCFA publishes in the Federal Register each determination it 
makes under this paragraph (d).
    (6) A revocation under this paragraph (d) has the effect described 
in Sec. 417.164.
    (e) Notice by the HMO. Within 15 days after the date HCFA issues a 
notice of revocation, the HMO must prepare a notice that explains, in 
readily understandable language, the reasons for the determination that 
it is not a qualified HMO, and send the notice to the following:
    (1) The HMO's enrollees.
    (2) Each employer or public entity that has offered enrollment in 
the HMO in accordance with subpart E of this part.
    (3) Each lawfully recognized collective bargaining representative 
or other representative of the employees of the employer or public 
entity.
    (f) Reimbursement of enrollees for services improperly denied, or 
for charges improperly imposed. (1) If HCFA determines, under paragraph 
(c)(1) of this section, that an HMO is out of compliance, HCFA may 
require the HMO to reimburse its enrollees for the following--
    (i) Expenses for basic or supplemental health services that the 
enrollee obtained from other sources because the HMO failed to provide 
or arrange for them in accordance with its assurances.
    (ii) Any amounts the HMO charged the enrollee that are inconsistent 
with its assurances. (Rules applicable to charges for all enrollees are 
set forth in Secs. 417.104 and 417.105. The additional rules applicable 
to Medicare enrollees are in Sec. 415.454.)
    (2) This paragraph applies regardless of when the HMO failed to 
comply with the appropriate assurances.
    (g) Remedy: Civil suit--(1) Applicability. This paragraph applies 
to any HMO or other entity to which a grant, loan, or loan guarantee 
was awarded, as set forth in subpart V of this part, on the basis of 
its assurances regarding the furnishing of basic and supplemental 
services or its operation and organization, as the case may be.
    (2) Basis for action. If HCFA determines that the HMO or other 
entity has failed to initiate or refuses to carry out corrective action 
in accordance with paragraph (c)(2) of this section, HCFA may bring 
civil action in the U.S. district court for the district in which the 
HMO or other entity is located, to enforce compliance with the 
assurances it gave in applying for the grant, loan, or loan guarantee.
    4. Section 417.164 is revised to read as follows:


Sec. 417.164   Effect of revocation of qualifiers on inclusion in 
employee's health benefit plans.

    When an HMO's qualification is revoked under Sec. 417.163(d), the 
following rules apply:
    (a) The HMO may not seek inclusion in employees health benefits 
plans under subpart E of this part.
    (b) Inclusion of the HMO in an employer's health benefits plan--
    (1) Is disregarded in determining whether the employer is subject 
to the requirements of subpart E of this part; and
    (2) Does not constitute compliance with subpart E of this part by 
the employer.
    5. Section 417.166 is revised to read as follows:


Sec. 417.166   Waiver of assurances.

    (a) General rule. HCFA may release an HMO from compliance with any 
assurances the HMO gives under subpart D of this part if--
    (1) The qualification requirements are change by Federal law; or
    (2) The HMO shows good cause, consistent with the purposes of title 
XIII of the PHS Act.
    (b) Basis for finding of good cause. (1) Grounds upon which HCFA 
may find good cause include but are not limited to the following:
    (i) The HMO has filed for reorganization under Federal bankruptcy 
provisions and the reorganization can only be approved with the waiver 
of the assurances.
    (ii) State laws governing the entity have been changed after it 
signed the assurances so as to prohibit the HMO from being organized 
and operated in a manner consistent with the signed assurances.
    (2) Changes in State laws do not constitute good cause to the 
extent that the changes are preempted by Federal law under section 1311 
of the PHS Act.
    (c) Consequences of waiver. If HCFA waives any assurances regarding 
compliance with section 1301 of the PHS Act, HCFA concurrently revokes 
the HMO's qualification unless the waiver is based on paragraph (a)(1) 
of this section.


Secs. 417.168 and 417.169   [Removed]

    6. Sections 417.168 and 417.169 are removed.
    E. Subpart V is amended as set forth below:

Subpart V--Administration of Outstanding Loans and Loan Guarantees

    1. Section 417.910 is revised to read as follows:


Sec. 417.910   Applicability.

    The regulations in this subpart apply, as appropriate, to public 
and private entities that have loans or loan guarantees that--
    (a) Were awarded to them before October 1986 under section 1304 or 
section 1305 of the PHS Act; and
    (b) Are still outstanding.
    2. Section 417.911 is amended to remove the definitions of any 12-
month period, health system agency (including State health planning and 
development agency), and nonprofit.


Secs. 417.912 through 417.919, 417.921 through 417.926, 417.932, 
417.933, 417.935, and 417.936   [Removed]

    3. Sections 417.912 through 417.919, 417.921 through 417.926, 
417.932, 417.933, 417.935, and 417.936 are removed.
    4. Sections 417.934 and 417.937 are revised to read as follows:


Sec. 417.934   Reserve requirement.

    (a) Timing. Unless the Secretary approved a longer period, an 
entity that received a loan or loan guarantee under section 1305 of the 
PHS Act was required to establish a restricted reserve account on the 
earlier of the following:
    (1) When the HMO's revenues and costs of operation reached the 
break-even point.
    (2) At the end of the 60-month period following the Secretary's 
endorsement of the loan or loan guarantee.
    (b) Purpose and amount of reserve. The reserve had to be 
constituted so as to accumulate, no later than 12 years after 
endorsement of the loan or loan guarantee, an amount equal to 1 year's 
principal and interest.


Sec. 417.937   Loan and loan guarantee provisions.

    (a) Disbursement of loan proceeds. The principal amount of any loan 
made or guaranteed by the Secretary under this subpart was disbursed to 
the entity in accordance with an agreement entered into between the 
parties to the loan and approved by the Secretary.
    (b) Length and maturity of loans. The principal amount of each loan 
or loan guarantee, together with interest thereon, is repayable over a 
period of 22 years, beginning on the date of endorsement of the loan, 
or loan guarantee by the Secretary. The Secretary could approve a 
shorter repayment period if he or she determined that a repayment 
period of less than 22 years is more appropriate to an entity's total 
financial plan.
    (c) Repayment. The principal amount of each loan or loan guarantee, 
together with interest thereon is repayable in accordance with a 
repayment schedule that is agreed upon by the parties to the loan or 
loan guarantee and approved by the Secretary before or at the time of 
endorsement of the loan. Unless otherwise specifically authorized by 
the Secretary, each loan made or guaranteed by the Secretary is 
repayable in substantially level combined installments of principal and 
interest to be paid at intervals not less frequently than annually, 
sufficient in amount to amortize the loan through the final year of the 
life of the loan. Principal repayment during the first 60 months of 
operation could be deferred with payment of interest only during that 
period. The Secretary could set rates of interest for each disbursement 
at a rate comparable to the rate of interest prevailing on the date of 
disbursement for marketable obligations of the United States of 
comparable maturities, adjusted to provide for appropriate 
administrative charges.
    5. A new Sec. 417.940 is added, to read as follows:


Sec. 417.940   Civil action to enforce compliance with assurances.

    The provisions of Sec. 417.163(g) apply to entities that have 
outstanding loans or loan guarantees administered under this subpart.
    F. Technical amendments.
    1. In Sec. 417.124, a new paragraph (e)(4) is added, to read as 
follows:


Sec. 417.124   Administration and management.

* * * * *
    (e) Conversion of enrollment. * * *
    (4) The HMO must offer the enrollment on the same terms and 
conditions that it makes available to other nongroup enrollees.


Sec. 417.150   [Amended]

    2. In Sec. 417.150, in the definitions of ``carrier'' and 
``designee'', ``membership'' is revised to read ``enrollment''.


Sec. 417.400   [Amended]

    3. In Sec. 417.400, in paragraph (a), ``as amended by section 114 
of public law 97-248. Section 1876 of the Act,'' is removed and 
``which'' is added in its place.


Sec. 417.436   [Amended]

    4. In Sec. 417.436, in paragraph (a)(11), ``Advanced directives'' 
is revised to read ``Advance directives''.


Sec. 417.460   [Amended]

    5. In Sec. 417.460, the heading of paragraph (a) is revised to read 
``Disenrollment of Medicare beneficiaries.''


Sec. 417.801   [Amended]

    6. In Sec. 417.801, in paragraph (b)(2), ``, a beneficiary,'' is 
removed, and ``individual'' is revised to read ``enrollee'' each time 
it appears.

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program; No. 93.773, Medicare Hospital Insurance Program; 
No. 93.774, Medicare Supplementary Medical Insurance Program)

    Dated: June 23, 1994.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.

    Dated: September 7, 1994.
Donna E. Shalala,
Secretary.
[FR Doc. 94-23281 Filed 9-29-94; 8:45 am]
BILLING CODE 4120-01-P