House Bill 2029
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Florida House of Representatives - 2000 HB 2029
By Representative Bloom
1 A bill to be entitled
2 An act relating to health care coverage;
3 amending s. 627.402, F.S.; providing a
4 definition; amending s. 627.410, F.S.;
5 prescribing requirements for determining
6 whether a health insurance policy provides
7 benefits that are reasonable in relation to
8 premium rates; providing disclosure
9 requirements regarding rates; revising certain
10 filing requirements regarding actuarial
11 justification; deleting certain provisions that
12 establish presumptions regarding the
13 reasonableness of rates; amending s. 627.411,
14 F.S.; authorizing the Department of Insurance
15 to disapprove forms, rate manuals, or rate
16 schedules because of certain rates or rate
17 increases; creating s. 627.42396, F.S.;
18 requiring certain health insurance policies to
19 allow insureds to obtain drugs that are not
20 included in the insurer's drug formulary;
21 amending s. 641.31, F.S.; providing
22 requirements for determining whether a health
23 maintenance contract provides benefits that are
24 reasonable in relation to premium rates;
25 providing disclosure requirements regarding
26 premium rates; authorizing the Department of
27 Insurance to disapprove rate changes that
28 exceed certain standards; requiring certain
29 health maintenance contracts to allow members
30 to obtain drugs that are not included in the
31 health maintenance organization's drug
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1 formulary; amending s. 641.315, F.S.;
2 prohibiting service providers from referring
3 collections of moneys for certain services to
4 collection agencies; providing an effective
5 date.
6
7 Be It Enacted by the Legislature of the State of Florida:
8
9 Section 1. Subsection (3) is added to section 627.402,
10 Florida Statutes, to read:
11 627.402 Definitions; specified certificates not
12 included.--As used in this part, the term:
13 (3) "Insurer conduct" means the following actions or
14 inactions of an insurer or health maintenance organization
15 with respect to a policy form which have resulted in
16 inadequate rates and the need for extraordinary rate
17 increases:
18 (a) Failure to make a filing in compliance with s.
19 627.410(7) or s. 627.6745(2);
20 (b) Failure to correct a rate filing when the
21 department presented information to the insurer or health
22 maintenance organization at the time the filing was approved
23 that suggested the rates were inadequate and the insurer or
24 health maintenance organization did not adequately resolve the
25 department's concerns;
26 (c) Violation of applicable actuarial standards of
27 practice at the time of a filing;
28 (d) Failure to have implemented the underwriting
29 standards assumed in the pricing assumptions of the form; or
30 (e) The use of pricing assumptions that have resulted
31 in a demonstrated pattern of product underpricing.
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1 Section 2. Subsections (6), (7), and (8) of section
2 627.410, Florida Statutes, are amended to read:
3 627.410 Filing, approval of forms.--
4 (6)(a) An insurer shall not deliver or issue for
5 delivery or renew in this state any health insurance policy
6 form until it has filed with the department a copy of every
7 applicable rating manual, rating schedule, change in rating
8 manual, and change in rating schedule; if rating manuals and
9 rating schedules are not applicable, the insurer must file
10 with the department applicable premium rates and any change in
11 applicable premium rates.
12 (b) The department may establish by rule, for each
13 type of health insurance form, procedures to be used in
14 ascertaining the reasonableness of benefits in relation to
15 premium rates and may, by rule, exempt from any requirement of
16 paragraph (a) any health insurance policy form or type thereof
17 (as specified in such rule) to which form or type such
18 requirements may not be practically applied or to which form
19 or type the application of such requirements is not desirable
20 or necessary for the protection of the public. With respect to
21 any health insurance policy form or type thereof which is
22 exempted by rule from any requirement of paragraph (a),
23 premium rates filed pursuant to ss. 627.640 and 627.662 shall
24 be for informational purposes.
25 (c) Every filing made pursuant to this subsection
26 shall be made within the same time period provided in, and
27 shall be deemed to be approved under the same conditions as
28 those provided in, subsection (2).
29 (d) Every filing made pursuant to this subsection,
30 except disability income policies and accidental death
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1 policies, shall be prohibited from applying the following
2 rating practices:
3 1. Select and ultimate premium schedules.
4 2. Premium class definitions which classify insured
5 based on year of issue or duration since issue.
6 3. Attained age premium structures on policy forms
7 under which more than 50 percent of the policies are issued to
8 persons age 65 or over.
9 (e) Except as provided in subparagraph 1., an insurer
10 shall continue to make available for purchase any individual
11 policy form issued on or after October 1, 1993. A policy form
12 shall not be considered to be available for purchase unless
13 the insurer has actively offered it for sale in the previous
14 12 months.
15 1. An insurer may discontinue the availability of a
16 policy form if the insurer provides to the department in
17 writing its decision at least 30 days prior to discontinuing
18 the availability of the form of the policy or certificate.
19 After receipt of the notice by the department, the insurer
20 shall no longer offer for sale the policy form or certificate
21 form in this state.
22 2. An insurer that discontinues the availability of a
23 policy form pursuant to subparagraph 1. shall not file for
24 approval a new policy form providing similar benefits as the
25 discontinued form for a period of 5 years after the insurer
26 provides notice to the department of the discontinuance. The
27 period of discontinuance may be reduced if the department
28 determines that a shorter period is appropriate.
29 3. The experience of all policy forms providing
30 similar benefits shall be combined for all rating purposes.
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1 (f) To satisfy the requirement that benefits be
2 reasonable in relationship to the premium rates, in addition
3 to any requirement established under paragraph (b), the
4 premium rate schedule must:
5 1. Reflect only the actual and reasonable
6 administrative expenses of the insurer for the efficient
7 administration and maintenance of the affected forms.
8 2. Reflect a reasonable profit and contingency margin.
9 3. For coverage sold to an individual who pays up to a
10 stated predetermined amount per day or per confinement for one
11 or more named conditions or named diseases, or for accidental
12 injury, or pays based on the costs of specified health care
13 services, be determined such that not less than 85 percent of
14 additional premiums charged an insured, which premiums are
15 charged at greater than the rate in effect when the coverage
16 was purchased, will apply to policyholder benefits. This
17 subparagraph does not apply to increases in premiums for
18 attained age based on an existing premium rate schedule, or to
19 policies for which 30 percent or more of the total initial
20 health insurance claim costs are attributable to benefits that
21 are based on costs of specified health care services.
22 (g) Each insurer shall provide the following
23 disclosure information to potential insureds at the time of
24 solicitation of coverage and to all insureds at the time of
25 any rate increase under the form in readily understandable
26 language and format: the current rate and any scheduled or
27 anticipated rate increases, an explanation of when the rates
28 may be changed, and a 10-year rate increase history on the
29 form and similar forms. The information must be filed with the
30 department with any form or rate filing made under this
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1 section. The department may adopt rules to administer this
2 paragraph.
3 (7)(a) Each insurer subject to the requirements of
4 subsection (6) shall make an annual filing with the department
5 no later than 12 months after its previous filing,
6 demonstrating the reasonableness of benefits in relation to
7 premium rates. The department, after receiving a request to
8 be exempted from the provisions of this section, may, for good
9 cause due to insignificant numbers of policies in force or
10 insignificant premium volume, exempt a company, by line of
11 coverage, from filing rates or rate certification as required
12 by this section.
13 (b) The filing required by this subsection shall be
14 satisfied by one of the following methods:
15 1. A rate filing prepared by an actuary which contains
16 documentation demonstrating the reasonableness of benefits in
17 relation to premiums charged in accordance with the applicable
18 rating laws and rules promulgated by the department.
19 2. If no rate change is proposed, a filing that which
20 consists of actuarial justification and a certification by an
21 actuary that benefits are reasonable in relation to premiums
22 currently charged in accordance with procedures that are
23 consistent with applicable laws and rules adopted promulgated
24 by the department.
25 (c) As used in this section, "actuary" means an
26 individual who is a member of the Society of Actuaries or the
27 American Academy of Actuaries. If an insurer does not employ
28 or otherwise retain the services of an actuary, the insurer's
29 certification shall be prepared by insurer personnel or
30 consultants with a minimum of 5 years' experience in insurance
31 ratemaking. The chief executive officer of the insurer shall
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1 review and sign the certification indicating his or her
2 agreement with its conclusions.
3 (d) If at the time a filing is required under this
4 section an insurer is in the process of completing a rate
5 review, the insurer may apply to the department for an
6 extension of up to an additional 30 days in which to make the
7 filing. The request for extension must be received by the
8 department in its offices in Tallahassee no later than the
9 date the filing is due.
10 (e) If an insurer fails to meet the filing
11 requirements of this subsection and does not submit the filing
12 within 60 days following the date the filing is due, the
13 department may, in addition to any other penalty authorized by
14 law, order the insurer to discontinue the issuance of policies
15 for which the required filing was not made, until such time as
16 the department determines that the required filing is properly
17 submitted.
18 (8)(a) For the purposes of subsections (6) and (7),
19 benefits of an individual accident and health insurance policy
20 form, including Medicare supplement policies as defined in s.
21 627.672, when authorized by rules adopted by the department,
22 and excluding long-term care insurance policies as defined in
23 s. 627.9404, and other policy forms under which more than 50
24 percent of the policies are issued to individuals age 65 and
25 over, are deemed to be reasonable in relation to premium rates
26 if the rates are filed pursuant to a loss ratio guarantee and
27 both the initial rates and the durational and lifetime loss
28 ratios have been approved by the department, and such benefits
29 shall continue to be deemed reasonable for renewal rates while
30 the insurer complies with such guarantee, provided the
31 currently expected lifetime loss ratio is not more than 5
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1 percent less than the filed lifetime loss ratio as certified
2 to by an actuary. The department shall have the right to
3 bring an administrative action should it deem that the
4 lifetime loss ratio will not be met. For Medicare supplement
5 filings, the department may withdraw a previously approved
6 filing which was made pursuant to a loss ratio guarantee if it
7 determines that the filing is not in compliance with ss.
8 627.671-627.675 or the currently expected lifetime loss ratio
9 is less than the filed lifetime loss ratio as certified by an
10 actuary in the initial guaranteed loss ratio filing. If this
11 section conflicts with ss. 627.671-627.675, ss.
12 627.671-627.675 shall control.
13 (b) The renewal premium rates shall be deemed to be
14 approved upon filing with the department if the filing is
15 accompanied by the most current approved loss ratio guarantee.
16 The loss ratio guarantee shall be in writing, shall be signed
17 by an officer of the insurer, and shall contain at least:
18 1. A recitation of the anticipated lifetime and
19 durational target loss ratios contained in the actuarial
20 memorandum filed with the policy form when it was originally
21 approved. The durational target loss ratios shall be
22 calculated for 1-year experience periods. If statutory
23 changes have rendered any portion of such actuarial memorandum
24 obsolete, the loss ratio guarantee shall also include an
25 amendment to the actuarial memorandum reflecting current law
26 and containing new lifetime and durational loss ratio targets.
27 2. A guarantee that the applicable loss ratios for the
28 experience period in which the new rates will take effect, and
29 for each experience period thereafter until new rates are
30 filed, will meet the loss ratios referred to in subparagraph
31 1.
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1 3. A guarantee that the applicable loss ratio results
2 for the experience period will be independently audited at the
3 insurer's expense. The audit shall be performed in the second
4 calendar quarter of the year following the end of the
5 experience period, and the audited results shall be reported
6 to the department no later than the end of such quarter. The
7 department shall establish by rule the minimum information
8 reasonably necessary to be included in the report. The audit
9 shall be done in accordance with accepted accounting and
10 actuarial principles.
11 4. A guarantee that affected policyholders in this
12 state shall be issued a proportional refund, based on the
13 premium earned, of the amount necessary to bring the
14 applicable experience period loss ratio up to the durational
15 target loss ratio referred to in subparagraph 1. The refund
16 shall be made to all policyholders in this state who are
17 insured under the applicable policy form as of the last day of
18 the experience period, except that no refund need be made to a
19 policyholder in an amount less than $10. Refunds less than $10
20 shall be aggregated and paid pro rata to the policyholders
21 receiving refunds. The refund shall include interest at the
22 then-current variable loan interest rate for life insurance
23 policies established by the National Association of Insurance
24 Commissioners, from the end of the experience period until the
25 date of payment. Payments shall be made during the third
26 calendar quarter of the year following the experience period
27 for which a refund is determined to be due. However, no
28 refunds shall be made until 60 days after the filing of the
29 audit report in order that the department has adequate time to
30 review the report.
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1 5. A guarantee that if the applicable loss ratio
2 exceeds the durational target loss ratio for that experience
3 period by more than 20 percent, provided there are at least
4 2,000 policyholders on the form nationwide or, if not, then
5 accumulated each calendar year until 2,000 policyholder years
6 is reached, the insurer, if directed by the department, shall
7 withdraw the policy form for the purposes of issuing new
8 policies.
9 (c) As used in this subsection:
10 1. "Loss ratio" means the ratio of incurred claims to
11 earned premium.
12 2. "Applicable loss ratio" means the loss ratio
13 attributable solely to this state if there are 2,000 or more
14 policyholders in the state. If there are 500 or more
15 policyholders in this state but less than 2,000, it is the
16 linear interpolation of the nationwide loss ratio and the loss
17 ratio for this state. If there are less than 500
18 policyholders in this state, it is the nationwide loss ratio.
19 3. "Experience period" means the period, ordinarily a
20 calendar year, for which a loss ratio guarantee is calculated.
21 Section 3. Subsection (1) of section 627.411, Florida
22 Statutes, is amended to read:
23 627.411 Grounds for disapproval.--
24 (1) The department may shall disapprove any form, rate
25 manual, or rate schedule filed under s. 627.410, or withdraw
26 any previous approval thereof, only if the form, manual, or
27 schedule:
28 (a) Is in any respect in violation of, or does not
29 comply with, this code.
30 (b) Contains or incorporates by reference, where such
31 incorporation is otherwise permissible, any inconsistent,
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1 ambiguous, or misleading clauses, or exceptions and conditions
2 which deceptively affect the risk purported to be assumed in
3 the general coverage of the contract.
4 (c) Has any title, heading, or other indication of its
5 provisions which is misleading.
6 (d) Is printed or otherwise reproduced in such manner
7 as to render any material provision of the form substantially
8 illegible.
9 (e) Is for health insurance, and provides benefits
10 that which are unreasonable in relation to the premium charged
11 or, contains provisions that which are unfair or inequitable,
12 or are contrary to the public policy of this state, are
13 unfairly discriminatory, or which encourage misrepresentation,
14 or which apply rating methods, assumptions, or practices that
15 result in:
16 1. Any rate increase as a result of insurer conduct,
17 as defined in s. 627.402, unless such increase is implemented
18 with an approved rate for new insureds and as to existing
19 insureds at the time of the increase, over a period of years
20 as follows:
21 a. For forms with benefits subject to medical
22 inflation, the premium schedule increase applicable to
23 existing insureds at the time of the filing shall be the
24 greater of 10 percent of the existing rate or 135 percent of
25 medical trend. Annual rate increases in subsequent years for
26 the new issue premium schedule shall be increased in
27 accordance with rules adopted by the department. The annual
28 increase for the existing insureds' premium schedule shall be
29 the greater of 10 percent of the new issue premium schedule or
30 135 percent of the rate increase approved for the new issue
31 premium schedule until the two premium schedules converge.
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1 b. For forms with benefits not subject to medical
2 inflation, the period of years for the two schedules to
3 converge shall be 2 years if the two rate increases are less
4 than 10 percent, otherwise 3 years;
5 2. Any rate increase as a result of multiple events of
6 insurer conduct unless a plan of corrective action is approved
7 by the department;
8 3. Any rate increase attributed to forms being closed
9 as to new sales, unless such increase is limited to the rate
10 increase being realized in the general insurance market of
11 current forms available for sale with similar benefits; or
12 4. For new forms, any rate schedule that is not
13 actuarially sustainable, except for medical trend increases
14 where applicable.
15
16 The department shall adopt rules to implement the provisions
17 of this paragraph practices which result in premium
18 escalations that are not viable for the policyholder market or
19 result in unfair discrimination in sales practices.
20 (f) Excludes coverage for human immunodeficiency virus
21 infection or acquired immune deficiency syndrome or contains
22 limitations in the benefits payable, or in the terms or
23 conditions of such contract, for human immunodeficiency virus
24 infection or acquired immune deficiency syndrome which are
25 different than those which apply to any other sickness or
26 medical condition.
27 Section 4. Section 627.42396, Florida Statutes, is
28 created to read:
29 627.42396 Coverage for prescription drugs.--A health
30 insurance policy that offers prescription drug coverage for
31 drugs included in a formulary must also contain a provision
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1 that allows an insured to obtain prescription drugs not
2 included in the insurer's drug formulary if the insured's
3 treating physician certifies that the drug is essential for
4 effective treatment of the insured's covered condition. The
5 insured's copayment may not exceed the amount payable by the
6 insured for nongeneric prescription drugs covered by the
7 formulary.
8 Section 5. Subsections (2) and (3) of section 641.31,
9 Florida Statutes, are amended, and subsection (39) is added to
10 said section, to read:
11 641.31 Health maintenance contracts.--
12 (2)(a) The rates charged by any health maintenance
13 organization to its subscribers shall not be excessive,
14 inadequate, or unfairly discriminatory or follow a rating
15 methodology that is inconsistent, indeterminate, or ambiguous
16 or encourages misrepresentation or misunderstanding. The
17 department, in accordance with generally accepted actuarial
18 practice as applied to health maintenance organizations, may
19 define by rule what constitutes excessive, inadequate, or
20 unfairly discriminatory rates and may require whatever
21 information it deems necessary to determine that a rate or
22 proposed rate meets the requirements of this subsection.
23 (b) To satisfy the requirement that benefits be
24 reasonable in relationship to the rates charged, in addition
25 to any requirement established under paragraph (a), the
26 premium rate schedule must:
27 1. Reflect only the actual and reasonable
28 administrative expenses of the health maintenance organization
29 for the efficient administration and maintenance of the
30 affected forms.
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1 2. Demonstrate a reasonable profit and contingency
2 margin.
3 (c) Each health maintenance organization shall provide
4 the following disclosure information to potential subscribers
5 at the time of solicitation of coverage and to all subscribers
6 at the time of any rate increase under the form in readily
7 understandable language and format: the current rate and any
8 scheduled or anticipated rate increases, an explanation of
9 when the rates may be changed, and a 10-year rate increase
10 history on the form and similar forms. The information must be
11 filed with the department with any form or rate filing made
12 under this section. The department may adopt rules to
13 administer this paragraph.
14 (3)(a) If a health maintenance organization desires to
15 amend any contract with its subscribers or any certificate or
16 member handbook, or desires to change any basic health
17 maintenance contract, certificate, grievance procedure, or
18 member handbook form, or application form where written
19 application is required and is to be made a part of the
20 contract, or printed amendment, addendum, rider, or
21 endorsement form or form of renewal certificate, it may do so,
22 upon filing with the department the proposed change or
23 amendment. Any proposed change shall be effective
24 immediately, subject to disapproval by the department.
25 Following receipt of notice of such disapproval or withdrawal
26 of approval, no health maintenance organization shall issue or
27 use any form disapproved by the department or as to which the
28 department has withdrawn approval.
29 (b) Any change in the rate is subject to paragraph (d)
30 and requires at least 30 days' advance written notice to the
31 subscriber. In the case of a group member, there may be a
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1 contractual agreement with the health maintenance organization
2 to have the employer provide the required notice to the
3 individual members of the group.
4 (c) The department shall disapprove any form filed
5 under this subsection, or withdraw any previous approval
6 thereof, if the form:
7 1. Is in any respect in violation of, or does not
8 comply with, any provision of this part or rule adopted
9 thereunder.
10 2. Contains or incorporates by reference, where such
11 incorporation is otherwise permissible, any inconsistent,
12 ambiguous, or misleading clauses or exceptions and conditions
13 which deceptively affect the risk purported to be assumed in
14 the general coverage of the contract.
15 3. Has any title, heading, or other indication of its
16 provisions which is misleading.
17 4. Is printed or otherwise reproduced in such a manner
18 as to render any material provision of the form substantially
19 illegible.
20 5. Contains provisions which are unfair, inequitable,
21 or contrary to the public policy of this state or which
22 encourage misrepresentation.
23 6. Excludes coverage for human immunodeficiency virus
24 infection or acquired immune deficiency syndrome or contains
25 limitations in the benefits payable, or in the terms or
26 conditions of such contract, for human immunodeficiency virus
27 infection or acquired immune deficiency syndrome which are
28 different than those which apply to any other sickness or
29 medical condition.
30 (d)1. Any change in rates charged for the contract
31 must be filed with the department not less than 30 days in
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1 advance of the effective date. At the expiration of such 30
2 days, the rate filing shall be deemed approved unless prior to
3 such time the filing has been affirmatively approved or
4 disapproved by order of the department. The approval of the
5 filing by the department constitutes a waiver of any unexpired
6 portion of such waiting period. The department may extend by
7 not more than an additional 15 days the period within which it
8 may so affirmatively approve or disapprove any such filing, by
9 giving notice of such extension before expiration of the
10 initial 30-day period. At the expiration of any such period as
11 so extended, and in the absence of such prior affirmative
12 approval or disapproval, any such filing shall be deemed
13 approved.
14 2. The department shall disapprove any change in rates
15 which applies rating methods, assumptions, or practices that
16 result in:
17 a. Any rate increase as a result of insurer conduct,
18 as defined in s. 627.402, unless such increase is implemented
19 with an approved rate for new insureds and as to existing
20 insureds at the time of the increase, over a period of years
21 as follows:
22 (I) For forms with benefits subject to medical
23 inflation, the premium schedule increase applicable to
24 existing insureds at the time of the filing shall be the
25 greater of 10 percent of the existing rate or 135 percent of
26 medical trend.
27 (II) Annual rate increases in subsequent years for the
28 new issue premium schedule shall be increased in accordance
29 with rules adopted by the department.
30 (III) The annual increase for the existing insureds'
31 premium schedule shall be the greater of 10 percent of the new
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1 issue premium schedule or 135 percent of the rate increase
2 approved for the new issue premium schedule until the two
3 premium schedules converge;
4 b. Any rate increase as a result of multiple events of
5 insurer conduct unless a plan of corrective action is approved
6 by the department;
7 c. Any rate increase attributed to forms being closed
8 as to new sales, unless such increase is limited to the rate
9 increase being realized in the general insurance market of
10 current forms available for sale with similar benefits; or
11 d. For new forms, rate schedules that are not
12 actuarially sustainable, except for medical trend increases
13 where applicable.
14
15 The department shall adopt rules to implement the provisions
16 of this subparagraph.
17 (e) It is not the intent of this subsection to
18 restrict unduly the right to modify rates in the exercise of
19 reasonable business judgment.
20 (39) A health maintenance organization contract form
21 that provides prescription drug coverage for drugs included in
22 a formulary must also contain a provision that allows a member
23 to obtain prescription drugs not included in the health
24 maintenance organization's drug formulary if the member's
25 treating physician certifies that the drug is essential for
26 effective treatment of the member's covered condition. The
27 member's copayment may not exceed the amount payable by the
28 member for nongeneric prescription drugs covered by the
29 formulary.
30 Section 6. Subsection (3) of section 641.315, Florida
31 Statutes, is amended to read:
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1 641.315 Provider contracts.--
2 (3) No provider of services or any representative of
3 such provider shall collect or attempt to collect from an HMO
4 subscriber any money for services covered by an HMO, or
5 contract with a debt collection agency for the collection of
6 such money. and No provider or representative of such provider
7 may maintain any action at law against a subscriber of an HMO
8 to collect money owed to such provider by an HMO.
9 Section 7. This act shall take effect July 1, 2000,
10 and apply to all policies, contracts, and policies issued or
11 renewed on or after that date.
12
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14 HOUSE SUMMARY
15
Revises various provisions relating to rates and rate
16 increases on health insurance policies and health
maintenance contracts. Establishes disclosure
17 requirements and provides rate increase guidelines.
Authorizes the Department of Insurance to disapprove
18 certain forms, rate manuals, and rate schedules. Provides
for insureds and members to obtain non-formulary drugs.
19 See bill for details.
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