No. 28118 (Repeal and Reenact): R590-152. Medical Discount Programs Rule

DAR File No.: 28118
Filed: 07/29/2005, 05:31
Received by: NL

 

RULE ANALYSIS

Purpose of the rule or reason for the change:

This rule is being changed to comply the creation of Chapter 8a of Title 31A, effective September 1, 2005, as a result of the passage of H.B. 70 (2005). (DAR NOTE: H.B. 70 is found at UT L 2005 Ch 58, and will be effective 09/01/2005.)

 

Summary of the rule or change:

Provisions lost as a result of the repeal are: 1) the scope of the rule is being changed to reference health discounts programs. Medical discount programs must now fall under the definition of a health discount program which will be more closely regulated; and 2) medical discount programs are no longer be exempt from Title 31A as a result of 2005 legislation and these changes to this rule. Significant new provisions are: 1) the new wording specifies what type of payment health discount programs may receive from health care provers; 2) adds requirements to provide individuals membership information, such as a list of providers and a toll-free number; 3) allows the commissioner to examine the company at the company's expense; 4) requires proof of actual savings to be provided to the commissioner upon request; 5) requires licensure; 6) restricts a company from changing its name without obtaining a new license; 7) requires advertisements to comply with Rule R590-130; 8) provides for required disclosures; 9) health discount program must have a written agreement with each provider; and 10) provides for a dispute resolution.

 

State statutory or constitutional authorization for this rule:

Sections 31A-2-201, 31A-8a-201, 31A-8a,203, and 31A-8a-210

 

Anticipated cost or savings to:

the state budget:

The department will experience increased filings submissions from Health Discount Programs. This will not require additional employees to handle. Also, the department, and ultimately the General Fund, will receive $1,077 for each Discount program that applies and is granted a new license. How many will apply for a license is not known at this time since they have not been regulated before.

 

local governments:

The changes to this rule will have no fiscal impact on local governments since the changes deal with the relationship between the State Insurance Department and their licensees only.

 

other persons:

Discount programs will now be required to file policy and application forms with the department. The cost is an annual global fee that is based on the annual earned premiums written by the program. The discount program is also required to give enrollees a list of their providers, which will cost them money to produce, publish and mail. The discount program will also be required to pay the cost of a department examiner reviewing their books and marketing programs. Examination fees average $35 per hour per examiner. The costs of doing business are often passed on to the consumer. It is anticipated that the result of increased regulation of these programs, their products will be more reliable and will more clearly disclose that the discount program is not insurance.

 

Compliance costs for affected persons:

Discount programs will now be required to file policy and application forms with the department. The cost is an annual global fee that is based on the annual earned premiums written by the program. The discount program is also required to give enrollees A list of their providers, which will cost them money to produce, publish and mail. The discount program will also be required to pay the cost of a department examiner reviewing their books and marketing programs. Examination fees average $35 per hour per examiner. The cost of doing business are often passed on to the consumer. It is anticipated that the result of increased regulation of these programs, their products will be more reliable and will more clearly disclose that the discount program is not insurance.

 

Comments by the department head on the fiscal impact the rule may have on businesses:

This new rule will increase costs to health discount programs in Utah. They will now need to be licensed and their forms reviewed and their books examined to be sure they meet the requirements of this rule. These requirements are much the same as those required of any other insurance company doing business in Utah. D. Kent Michie, Commissioner

 

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Insurance
Administration
Room 3110 STATE OFFICE BLDG
450 N MAIN ST
SALT LAKE CITY UT 84114-1201

 

Direct questions regarding this rule to:

Jilene Whitby at the above address, by phone at 801-538-3803, by FAX at 801-538-3829, or by Internet E-mail at [e-mail]

 

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

09/14/2005

 

Interested persons may attend a public hearing regarding this rule:

9/08/2005 at 10:30 PM, State Office Building, Room 3112, Salt Lake City, UT

 

This rule may become effective on:

09/15/2005

 

Authorized by:

Jilene Whitby, Information Specialist

 

 

RULE TEXT

R590. Insurance, Administration.

[R590-152. Medical Discount Programs Rule.

R590-152-1. Authority.

This rule is promulgated and adopted pursuant to Subsection 31A-1-103(3)(d) and Section 31A-2-201.

 

R590-152-2. Purpose.

The purpose of this rule is to exempt providers of certain medical discount programs from regulation under Chapter 8 of Title 31A and to define those so exempted.

 

R590-152-3. Definitions.

For the purposes of this rule, the following definition shall apply:

Medical Discount Program. A program established or operated by a third person which arranges for participating medical professionals to provide medical goods or services at a discount to a subscriber.

 

R590-152-4. Rule.

A. A medical discount program is a limited health plan as defined under 31A-8-101(6)(a) and must comply with the requirements of limited health plans unless otherwise exempted from regulation by this rule.

B. The commissioner, pursuant to 31A-1-103(3)(d), finds that medical discount programs that operate in accordance with all of the provisions of this rule, do not require regulation by the department for the protection of the interest of the residents of this state and that it would otherwise be impracticable to require compliance with the provisions of Title 31A.

C. An exempt medical discount program, pursuant to 31A-4-106 may not make any payments to providers for participation in the program or for the services performed, capitation payments, signing fees, bonuses, or other forms of compensation other than referral of the program subscribers to the provider.

D. An exempt medical discount program may provide discount or free services through its contracted providers to its subscribers in exchange for a periodic payment to the program or as a benefit in connection with membership in a particular group.

E. An exempt medical discount program must include the following disclosures in all contracts, booklets, advertising, and any presentations relating to the solicitation of the program:

(1) prominently state that the program is "Not Insurance" and that the program is a "Discount Program;"

(2) prominently state the following: "Note to Utah Residents: This contract is not protected by the Utah Life and Health Guaranty Association;" and

(3) prominently state that the program and the program administrators have no liability for providing or guaranteeing service and should state that they have no liability for the quality of service rendered.

F. A medical discount plan may not use in its title, name or description words usually associated with insurance, including "insurance," "premium," or "coverage," and may not refer to its sales representative as an "agent," "broker," "producer," or "consultant."

 

R590-152-5. Department Opinion.

Any program may request an opinion from the department as to whether it complies with the provisions of this rule and would, therefore, be exempt from the requirements of Title 31A.

 

R590-152-6. Enforcement Date.

The commissioner will begin enforcing the revised provision of this rule 45 days from the rule's effective date.

 

R590-152-7. Severability.

If any provision of this rule or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the rule and the application of such provision to other persons or circumstances shall not be affected thereby.

 

KEY: insurance, medical discount plans

July 16, 2003

Notice of Continuation November 27, 2002

31A-1-103

31A-2-201]

R590-152. Health Discount Programs Rule.

R590-152-1. Authority.

This rule is promulgated by the commissioner under 31A-2-201 to write rules to implement Title 31A, under 31A-8a-201(2)(ii) to set licensing requirements and filing forms, under 31A-8a-203(3) to set requirements on the type of information required to be filed with the department,12/09/2005 7:54 PMc interest.

 

R590-152-2. Purpose.

The purpose of this rule is to describe activities that may or may not be used in the business of a Health Discount Program.

 

R590-152-3. Definitions.

For the purposes of this rule, the following definitions shall apply:

(1) "Administrative procedures" means the process used by the health discount program to solicit members, enroll members, maintain the membership, handle complaints of the members and process of collecting fees.

(2) "Authority to do business in this state" means to have other applicable licenses as required by statute, and operating within the scope of such licenses. For example, a license with the Division of Professional Licensing authorizing a licensee to telemarket.

(3) "Marketer" means a person or entity, including a private label entity, which places its name on and markets or distributes a health discount program but does not operate the health discount program.

(4) "Medical Discount Program" and "Medical Re-pricing" means Health Discount Program as defined in 31A-8a-102(3).

(5) "Prominently" means not less than 14-point type or no smaller than the largest type on the page if larger than 14-point type.

 

R590-152-4. Rule.

(1) Marketers of health discount plans are subject to all requirements of this rule.

(2) A health discount program may provide discounts or free services through contracted providers to subscribers in exchange for a periodic payment to the program or as a benefit in connection with membership in a particular group.

(3) A health discount program may charge a reasonable one-time processing fee and a periodic charge. If a discount medical plan charges for a time period in excess of one month, the plan must, in the event of cancellation of the membership by either party, make a pro rata reimbursement of the fees to the member.

(4) A health discount program may not make any payments to providers for:

(i) participation in the program;

(ii) capitation payments;

(iii) signing fees;

(iv) bonuses; or

(v) other forms of compensation.

(5) A health discount program shall, prior to enrollment of any individuals into the program, make available to consumers all membership information, including a list of providers agreeing by written contract to accept the program.

(6) A health discount plan must have an active toll-free number for members to call.

(7) Health discount programs may not offer any value-added benefits unless licensed as a producer and appointed by the carrier.

(8) Any value-added benefit must actually exist and a copy of a contract verifying such existence may be requested by the commissioner.

(9) Prior to any offering a health discount programs shall file with the commissioner a list of the value-added benefits it offers. This list shall include the insurer's name, policy form numbers and description of benefits.

(10) Communications with clients or potential clients must state that the program is not insurance but a discount plan. These communications include, face-to-face, written, telephonic, and electronic.

(11) When a marketer or a health discount programs sells a health discount programs together with any other product, including insured benefits, an itemized list of the fees for each individual product must be provided in writing to the client at solicitation.

(12) A discount is calculated on the average claims of its customers. It may not be a straight discount arrangement where the discount remains the same but the cost can vary.

(13) The commissioner may examine or investigate the business and affairs of any health discount programs. The expenses incurred in conducting any examination or investigation shall be paid by the health discount programs or the applicant.

(14) Upon request of the commissioner the health discount programs shall provide to the commissioner, a statement showing actual savings to the participants with detailed description of how savings are calculated.

 

R590-152-5. License/Renewals.

(1) Insured benefits offered in conjunction with discounts must comply with producer licensing statutes as required in Section 31A-8a-103(2)(k).

(2) Information listed in licensing material must include:

(a) an actual physical address; and

(b) a toll free customer line and the hours of operation.

(3) A licensed carrier who establishes a health discount program must register that program with the commissioner prior to marketing.

(4) A change in the company's name requires a new license. For example, changing from Family Discount to Family Health Discount.

(5) Administrative procedures shall be submitted to the commissioner at the time of licensing.

(6) Investment management strategies for health discount funds must be submitted.

(7) If licensure occurs between September 1 2005 through December 31 2005, renewal will not be required until January 1, 2007.

 

R590-152-6. Advertising and Marketing.

(1) The format and content of any advertisement shall be sufficiently complete and clear as to avoid deceiving or misleading the reader, viewer, or listener.

(2) Advertisements of any type of insured product must comply with Rule R590-130 and Subsections 31A-23a-102(12), and (13).

(3) Marketers must have all advertisements, marketing materials, brochures, and discount cards approved in writing for such use by the health discount program. All approved materials must be made available to the commissioner upon request.

(4) The health discount program shall have an executed written agreement with a marketer prior to the marketer's marketing, promoting, selling, or distributing the health discount program. The health discount program shall be responsible and financially liable for all marketing, including non-affiliated marketers.

 

R590-152-7. Disclosures.

(1) A health discount program must include the following disclosures in contracts, booklets, advertising, and presentations relating to the solicitation of the program. These disclosures must be on the first page of the paper or electronic document and prominently state the following:

(a) "Note to Utah Residents: This contract is not protected by the Utah Life and Health Guaranty Association."

(b) "A Health Discount Program is not considered a plan for purposes of creditable coverage. A certificate of creditable coverage will NOT be issued upon termination of this discount program."

(2) Above the logo of the provider network membership card it should state in 12-point type: "This is not health insurance."

R590-152-8. Contracts.

(1) A provider agreement between a health discount program and a provider network shall require that the provider network have a written agreement with each provider that authorizes the provider network to contract with the health discount program on behalf of the provider. The health discount program is responsible for assuring that individual providers are knowledgeable about the health discount program.

(2) If membership in an association is required to receive the contracted discounts, the health discount program must meet the requirements of 31A-22-505 and 31A-22-701(2)(h).

 

R590-152-9. Notices.

A greater than 5% change of ownership in the health discount program must be reported to the commissioner prior to the change.

 

R590-152-10. Health Discount Program Application for Licensure.

(1) The application for licensure shall include:

(a) the name, address and phone numbers of each principle, operator and marketer with whom the health discount program has a contract; and

(b) the health discount program's web address.

(2) Applications shall clearly indicate the payment plan selected by the applicant.

(3) The following disclosure must appear in the application for enrollment: "Members acknowledge that equal or lower prices may be available through individual negotiation."

(4) The application process shall include the policy form numbers of insured benefits. When the underwriter for an insured benefit is changed or added, the commissioner shall be notified.

 

R590-152-11. Adverse Benefit Determination Reviews.

A health discount program must comply with its dispute resolution procedures as filed with the commissioner pursuant to 31A-8a-203(2)(c).

 

R590-152-12. Penalties.

A licensee who violates this rule may have its license revoked, suspended or put on probation or any other penalties or measures as are determined by the commissioner in accordance with insurance laws and rules.

 

R590-152-13. Enforcement Date.

The commissioner will begin enforcing the revised provision of this rule when they are put into effect.

 

R590-152-14. Severability.

If any provision of this rule or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the rule and the application of such provision to other persons or circumstances shall not be affected thereby.

 

KEY: insurance, medical discount programs

31A-2-201

31A-8a-201

31A-8a-203

31A-8a-210