Introduced by Representatives Keenan of St. Albans City and Young of Orwell
Subject: Health; health care administration; medical discount plans
Statement of purpose: This bill proposes to establish standards and consumer remedies relating to medical discount plans and marketers.
AN ACT RELATING TO MEDICAL DISCOUNT PLANS
It is hereby enacted by the General Assembly of the State of Vermont:
Sec. 1. PURPOSE
The purpose of this act is to promote the public interest by establishing standards for medical discount plan organizations to protect consumers from unfair or deceptive marketing, sales, or enrollment practices and to facilitate consumer understanding of the role and function of medical discount plan organizations in providing access to medical services.
Sec. 2. 18 V.S.A. chapter 221, subchapter 9 is added to read:
Subchapter 9. Medical Discount Plans
§ 9481. DEFINITIONS
As used in this subchapter:
(1) “Health care services” means any service or product used for the diagnosis, prevention, treatment, cure, or relief of a health condition, illness, injury, or disease, including physician care, inpatient care, hospital surgical services, emergency services, ambulance services, dental care services, vision care services, mental health services, substance abuse services, chiropractic services, podiatric care services, laboratory services, medical equipment and supplies, and pharmaceutical supplies and prescriptions.
(2) “Marketer” means a person or entity that markets, promotes, sells, or distributes a medical discount plan, including a private label entity that places its name on and markets or distributes a medical discount plan either pursuant to a marketing agreement with a medical discount plan organization or otherwise.
(3) “Medical discount plan” means a business arrangement or contract in which a person, in exchange for fees, dues, charges, or other consideration, provides access for its members to providers of health care services and the right to receive health care services from those providers at a discount. “Medical discount plan” does not include any product that is already subject to regulation under 8 V.S.A. Part 3 (Insurance).
(4) “Medical discount plan organization” means an entity that:
(A) Has established a medical discount plan; and
(B) Contracts with providers, provider networks, and other medical discount plan organizations to provide health care services at a discount to medical discount plan members and determines the charge to the purchaser.
(5) “Member” means any person who pays fees, dues, charges, or other consideration for the right to receive the purported benefits of a discount health plan.
(6) “Provider network” means an entity that negotiates with a medical discount plan organization on behalf of more than one provider to provide medical services to members.
(7) “Wholesale” means engaging in the sale of medical discount plans in large quantities for repackaging or resale.
§ 9482. APPLICABILITY AND SCOPE
This subchapter applies to all medical discount plan organizations doing business in this state.
§ 9483. LICENSING REQUIREMENTS
(a) Before doing business in this state as a medical discount plan organization, an entity:
(1) Shall be a business entity, organized under the laws of this state or, if a foreign business entity, authorized to transact business in this state as a foreign business entity under chapter 15 of Title 11; and
(2) Shall obtain a license from the commissioner to operate as a medical discount plan organization.
(b) Each application for a license to operate as a medical discount plan organization:
(1) Shall be in a form prescribed by the commissioner and verified by an officer or authorized representative of the applicant; and
(2) Shall demonstrate, set forth or be accompanied by the following:
(A) The payment of an annual license fee of $600.00;
(B) A copy of the organization documents of the applicant, such as the articles of incorporation, including all amendments;
(C) A copy of the business entity’s bylaws or other similar documents;
(D) The applicant’s federal identification number, corporate address, and mailing address;
(E)(i) A list of names, addresses, official positions, and biographical information of the individuals who are responsible for conducting the applicant’s affairs, including all members of the board of directors, board of trustees, executive committee or other governing board or committee, officers, contracted management company personnel, and any person or entity owning or having the right to acquire ten percent or more of the voting securities of the applicant; and
(ii) A disclosure in the listing of the extent and nature of any contracts or arrangements between any individual who is responsible for conducting the applicant’s affairs and the medical discount plan organization, including any possible conflicts of interest;
(F) A complete biographical statement, on forms prescribed by the commissioner, with respect to each individual identified under subdivision (E) of this subdivision (2);
(G) A statement generally describing the applicant, its facilities and personnel, and the medical services to be offered;
(H) A copy of the form of all contracts made or to be made between the applicant and any providers or provider networks regarding the provision of medical services to members;
(I) A copy of the form of any contract made or arrangement to be made between the applicant and any person listed in subdivision (E) of this subdivision (2);
(J) A copy of the form of any contract made or to be made between the applicant and any person, corporation, partnership, or other entity for the performance on the applicant’s behalf of any function, including marketing, administration, enrollment, investment management, and subcontracting for the provision of medical services to members;
(K) A copy of the applicant’s most recent financial statements audited by an independent certified public accountant;
(L) A description of the proposed method of marketing;
(M) A description of the member complaint procedures to be established and maintained by the applicant;
(N) The name and address of the applicant’s Vermont statutory agent for service of process, notice, or demand or, if not domiciled in this state, a power of attorney duly executed by the applicant, appointing the commissioner and duly authorized deputies as the true and lawful attorney of the applicant in and for this state upon whom all law process in any legal action or proceeding against the medical discount plan organization on a cause of action arising in this state may be served; and
(O) Any other information the commissioner may require.
(c) Within 90 days of receipt of a completed application, upon finding that the applicant will conform with the requirements of this subchapter and will promote the general good of the state, the commissioner shall issue a license or disapprove the application and state the grounds for disapproval.
(d) Prior to licensure by the commissioner, each medical discount plan organization shall establish an internet website in order to conform to the requirements of subdivision 9490(a)(5) of this title.
(e)(1) A license is effective for one year, unless prior to its expiration, the license is renewed in accordance with this subsection or suspended or revoked in accordance with section 9492 of this section.
(2) At least 90 days before a license expires, the medical discount plan organization shall submit:
(A) A renewal application form; and
(B) The renewal fee.
(3) The commissioner shall renew the license of each holder that meets the requirements of this subchapter and pays a renewal fee of $600.00.
(f) Nothing in this section requires a provider who provides discounts to his or her own patients to obtain and maintain a license under this subchapter as a medical discount plan organization.
§ 9484. MINIMUM CAPITAL REQUIREMENTS
(a) Before the commissioner issues a license in accordance with section 9483 of this title, an applicant seeking to operate a medical discount plan organization shall have a net worth of at least $150,000.00.
(b) Each medical discount plan organization shall at all times maintain a net worth of at least $150,000.00.
§ 9485. DEPOSIT REQUIREMENTS
(a) Each licensed medical discount plan organization shall deposit and maintain deposited with the commissioner, or at the discretion of the commissioner, with any organization or trustee acceptable to the commissioner through which a custodial or controlled account is utilized, cash, securities, or any combination of these, or otherwise maintain such other proofs of financial responsibility that are acceptable to the commissioner which at all times have a market value of not less than $35,000.00 or such other amount as the commissioner prescribes.
(b) All income from a deposit or other proof of financial responsibility made under subsection (a) of this section shall be an asset of the medical discount plan organization.
(c) The deposit or other proof of financial responsibility shall be used to protect the interest of the members of the medical discount plan organization.
(d) The assets or securities held in this state as a deposit under subsection (a) of this section shall not be subject to levy by a judgment creditor or other claimant, except for the commissioner, of the medical discount plan organization.
§ 9486. EXAMINATIONS AND INVESTIGATIONS
(a) The commissioner may examine and investigate the business and affairs of any medical discount plan organization as if the organization were an insurance company regulated by the commissioner under chapter 101 of Title 8.
(b) An examination or investigation conducted under this section shall be performed in accordance with the provisions of sections 3573 and 3574 and any other relevant provisions of Title 8.
(c) The commissioner may:
(1) Order any medical discount plan organization or applicant that operates a medical discount plan organization to produce any records, books, files, advertising and solicitation materials, or other information; and
(2) Take statements under oath to determine whether the medical discount plan organization or applicant is in violation of the law or is acting contrary to the public interest.
(d) The medical discount plan organization or applicant that is the subject of the examination or investigation shall pay the expenses incurred in conducting the examination or investigation. Failure by the medical discount plan organization or applicant to pay the expenses is grounds for denial of a license to operate as a medical discount plan organization or revocation of a license to operate as a medical discount plan organization.
§ 9487. FEES; FORMS; FILING REQUIREMENTS
(a) The fees or charges and forms of a medical discount plan shall be filed with the commissioner and shall be subject to the procedures for approval established by section 4062 of Title 8 and the payment of fees established by section 4062a of Title 8.
(b)(1) A medical discount plan organization may charge a periodic charge as well as a reasonable one-time processing fee for a medical discount plan.
(2) A medical discount plan organization shall file with the commissioner a list of all prospective member fees and charges associated with the medical discount plan.
(3) Any fee or charge to members that is greater than $30.00 per month or $360.00 per year shall be submitted to the commissioner for approval prior to its use.
(4) The medical discount plan organization has the burden of proof that a fee or charge bears a reasonable relationship to the benefits to be received by the member.
(c)(1) A medical discount plan organization shall have a written agreement between the organization and its members that specifies the benefits a member is to receive under the medical discount plan and that complies with the provisions of this subchapter.
(2) All forms designated by the commissioner, including the written agreement under subdivision (1) of this subsection, to be used by a medical discount plan organization shall first be filed with and approved by the commissioner.
(d) The commissioner shall disapprove any form that does not meet the requirements of this subchapter or contains any inconsistent, misleading, or ambiguous provisions or that is unfair, inequitable, or against public policy.
§ 9488. NOTICE OF CHANGE IN NAME OR ADDRESS
Each medical discount plan organization shall provide the commissioner at least 30 days’ advance notice of any change in the medical discount plan organization’s name, address, principal business address, or mailing address.
§ 9489. ANNUAL REPORTS
(a) Each medical discount plan organization shall file with the commissioner in the form prescribed by the commissioner, within three months after the end of each fiscal year, an annual report.
(b) The report shall include:
(1) Audited financial statements prepared in accordance with generally accepted accounting principles certified by an independent certified public accountant, including the organization’s balance sheet, income statement, and statement of changes in cash flow for the preceding year;
(2) A list of the names and residence addresses of all persons responsible for the conduct of the organization’s affairs, together with a disclosure of the extent and nature of any contracts or arrangements with these persons and the medical discount plan organization, including any possible conflicts of interest;
(3) The number of medical discount plan members; and
(4) Any other information relating to the performance of the medical discount plan organization that may be required by the commissioner.
§ 9490. STANDARDS OF CONDUCT; PROHIBITED ACTIVITIES
(a) Provider agreements; provider networks.
(1) All health care providers offering medical services to members shall provide the services in accordance with a written agreement entered into directly by the provider or indirectly by a provider network to which the provider belongs.
(2) A provider agreement shall provide the following:
(A) A list of the medical services and products to be provided at a discount;
(B) The amount or amounts of the discounts or, alternatively, a fee schedule that reflects the provider’s discounted rates; and
(C) That the provider will not charge members more than the discounted rates.
(3) A provider agreement between a medical discount plan organization and a provider network shall require that the provider network have written agreements with its providers that:
(A) Contain the provisions described in subdivision (2) of this subsection;
(B) Authorize the provider network to contract with the medical discount plan organization on behalf of the provider; and
(C) Require the provider network to maintain an up-to-date list of its contracted providers and to provide the list on a monthly basis to the medical discount plan organization.
(4) The medical discount plan organization shall maintain a copy of each active provider agreement.
(5) Each medical discount plan organization shall maintain an up‑to‑date list of the names and addresses of the providers with which it has contracted on an internet website page. The internet website address shall be prominently displayed on all of its advertisements, marketing materials, brochures, and discount cards.
(6) This subsection applies to those providers with which the medical discount plan organization has contracted directly as well as those providers that are members of a provider network with which the medical discount plan organization has contracted.
(7) Each discount health plan organization shall ensure to the satisfaction of the commissioner that all of its discount health plans that are offered or sold in Vermont provide the advertised discounts or other benefits for sufficient numbers and types of providers to provide adequate access to services and products, in accordance with standards established by rule by the commissioner.
(b) Consumer privacy. A discount medical plan organization shall be considered a health insurance company for the purpose of compliance with the department’s rules relating to the confidentiality of nonpublic personal information.
(1) A medical discount plan organization may:
(A) market directly or contract with other marketers for the distribution of its product; or
(B) sell at wholesale its product to other medical discount plan organizations.
(2) A medical discount plan organization shall have an executed written agreement with a marketer prior to the marketer’s marketing, promoting, selling, or distributing the medical discount plan;
(3) A medical discount plan organization shall be responsible and financially liable for any acts of its marketers that do not comply with the provisions of this subchapter.
(4) A medical discount plan organization shall approve in writing all advertisements, marketing materials, brochures, and discount cards used by marketers to market, promote, sell, or distribute the medical discount plan prior to their use.
(d) Misrepresentation. A medical discount plan organization shall not:
(1) Except as otherwise provided in this subchapter, use in its advertisements, marketing material, brochures, and medical discount plan cards the term “insurance”;
(2) Use in its advertisements, marketing material, brochures, and medical discount plan cards the terms “health plan,” “coverage,” “co‑pay,” “co‑payments,” “deductible,” “preexisting conditions,” “guaranteed issue,” “premium,” “enrollment,” “PPO,” “preferred provider organization,” or other terms that could reasonably mislead an individual into believing that the medical discount plan is health insurance;
(3) Use language in its advertisements, marketing material, brochures, and medical discount plan cards with respect to being “licensed” by the department in a manner that could reasonably mislead an individual into believing that the medical discount plan is health insurance.
(e) Access restrictions. A discount medical plan organization shall not have restrictions on free access to medical discount plan providers, including waiting periods and notification periods.
(f) Prohibition on prepayment. No discount medical plan organization or marketer shall require that consumers who enroll in a discount medical plan prepay the cost of medical or related goods or services as a condition of receiving any benefit under the plan.
(g) Provider fees. A discount medical plan organization shall not pay providers any fees for medical services.
(h) If a member cancels his or her membership in the medical discount plan organization within the first 30 days after the effective date of enrollment in the medical discount plan, the member shall receive a reimbursement of all charges upon return of the medical discount plan card to the medical discount plan organization.
(i) If the medical discount plan organization cancels a membership for any reason other than nonpayment of fees by the member, the medical discount plan organization shall make a pro rata reimbursement of all periodic charges to the member.
(j) When a marketer or medical discount plan organization sells a medical discount plan together with any other product, the fees for each individual medical discount plan product shall be provided in writing to the member and itemized.
(k) No medical discount plan organization or marketer shall represent that any medical services are discounted unless that representation is accompanied by a disclosure of the typical discount offered off the regular price of medical services, using the term “typical” or similar term. Such disclosure shall be clear and conspicuous and shall appear in the same medium as, with the same prominence as, and proximate to, the most prominent representation that medical services are discounted. For the purposes of this section, “typical discount” means the percentage discount off the regular price of medical services that consumers can reasonably expect to receive as a result of being a member of the medical discount plan in question.
§ 9491. CONTRACT FORMATION, CANCELLATION AND
(a) Contract required. No medical discount plan organization shall request or receive money or other consideration from a consumer for enrollment in a medical discount plan until the consumer has signed a contract with the organization that contains, at a minimum, the following information, disclosed in a clear and conspicuous manner:
(1) the name, true address, telephone number, and e‑mail address of the discount health plan organization;
(2) a detailed description of the plan, including the goods and services covered and all exemptions and discounts that apply to each category thereof;
(3) all costs associated with the plan, including any signup fee and any recurring costs;
(4) the date of the transaction;
(5) an internet website where the consumer can access the names and addresses of all providers in his or her geographic area;
(6) the disclosures required by this section that relate to the consumer’s right to cancel the transaction;
(7) a statement of the consumer’s right to terminate the plan as provided in this section;
(8) a statement to the effect that plan benefits may duplicate existing insurance or government health benefits; and
(9) how the consumer may contact the department and the Vermont attorney general’s consumer assistance program in the event of an inquiry or complaint concerning the plan.
(1) The following disclosures shall be made in writing to any prospective member of a medical discount plan and shall be on the first page of any advertisements, marketing materials, or brochures relating to a medical discount plan:
(A) That the plan is not a health insurance policy;
(B) That the plan provides discounts at certain providers for medical services;
(C) That the plan does not make payments directly to the providers of medical services;
(D) That the plan member is obligated to pay for all medical services but will receive a discount from those providers that have contracted with the medical discount plan organization;
(E) A toll-free telephone number for the licensed medical discount plan organization for members to obtain additional information about the medical discount plan and lists of providers participating in the medical discount plan; and
(F) The corporate name and the locations of the licensed medical discount plan organization.
(2) The disclosures shall be printed in not less than 12-point type or no smaller than the largest type on the page if larger than 12-point type.
(c) Right to cancel.
(1) As used in this subsection and subsection (d) of this section, “seller” means any medical discount plan organization or marketer that receives money or other consideration from a consumer for enrolling the consumer in a medical discount plan.
(2) In addition to any right otherwise to revoke an offer, a consumer or other person obligated for any part of the cost of a medical discount plan may cancel the purchase of the plan until midnight of the tenth business day after the day on which the consumer has received a completed contract relating to such plan which conforms to the requirements of this subchapter.
(3) Cancellation occurs when notice of cancellation is given to the seller.
(4) Notice of cancellation shall be deemed given when delivered in hand, deposited in a mailbox properly addressed and postage prepaid, or e‑mailed to the e‑mail address of the discount medical plan organization or marketer stated in the contract.
(5) Notice of cancellation need not take the form prescribed and shall be sufficient if it indicates the intention of the consumer not to be bound.
(6) Any contract required by this subchapter shall include, in immediate proximity to the space reserved for the signature of the consumer and in boldface type of a minimum size of 12 points, using an easily readable font style but not in all upper-case letters, a statement in substantially the following form:
You may cancel this transaction at any time prior to midnight of the 10th business day after the date you receive this contract. See the attached notice of cancellation for an explanation of this right.
(7)(A) In addition, the contract shall include two copies of the following notice, one of which shall be easily detachable and contain the following statements, printed in not less than 10-point boldface type, using an easily readable font style but not in all upper-case letters except for the heading:
NOTICE OF CANCELLATION
You may cancel this transaction, without any penalty or obligation, within 10 business days of the date you receive this contract.
If you cancel, any payments made by you will be returned within 10 business days following receipt by the seller of your cancellation notice. Notice of cancellation is considered given when delivered in hand, deposited in a mailbox, properly addressed and postage prepaid, or e‑mailed to the e‑mail address of the discount medical plan organization or marketer stated in this contract.
To cancel this transaction, mail or deliver a signed and dated copy of this cancellation notice or any other written notice to .………………………................. at
(name of seller)
……………………………… or e‑mail a notice of cancellation to
(seller’s e‑mail address)
not later than midnight of the 10th business day following the day you receive this contract. (Business days are Monday through Friday, except for legal holidays recognized by the State of Vermont.)
I hereby cancel this transaction.
(B) Before being given to the consumer, this “Notice of Cancellation” shall state the name of the seller and its mailing and e‑mail addresses.
(C) In addition to the written notice of cancellation, in the case of any medical discount plan offered over the telephone, the discount medical plan organization or other marketer shall orally inform the buyer of this right to cancel at the time of the transaction.
(8) Until this subsection has been complied with, the consumer or any other person obligated for any part of the cost of the plan may cancel the transaction by notifying the seller in any manner and by any means of the intention to cancel. The cancellation period of 10 days shall begin to run from the time the consumer receives the notices described in this subsection.
(9)(A) Within 10 days after enrollment, if a medical discount plan has been cancelled, the seller shall tender to the consumer any payments made by the consumer.
(B) If the seller has provided any medical discounts to a consumer pursuant to a medical discount plan sale prior to its cancellation, the seller shall be entitled to no compensation therefor.
(10) If a home solicitation sale is principally negotiated in a language other than English, all of the disclosures required by this section shall also be given in that language.
(d) Right to terminate. In addition to the right to cancel described in this subchapter, a consumer may terminate a medical discount plan at any time by providing notice to the medical discount plan organization by one of the methods described in subsection (c) of this section. In that case, the consumer shall not be obligated to make any further payments under the plan, nor shall the consumer be entitled to any benefits under the plan for any period of time after the last month for which payment has been made.
§ 9492. RULES; ENFORCEMENT; PENALTIES
(a) The commissioner shall adopt rules to carry out the purposes of this subchapter. The commissioner shall consult with the attorney general’s office during the adoption of initial rules.
(b)(1) Upon determining that a medical discount plan or any other person has violated a provision of this subchapter or a rule adopted pursuant to this subchapter or an order of the commissioner, the commissioner, after notice and opportunity for hearing may:
(A) Revoke or suspend the license of the plan;
(B) Order the plan or other person to cease and desist from further violations, to make restitution to consumers, or to take such other actions necessary to remediate a violation; and
(C) Impose a penalty of not more than $1,000.00 for each violation or $10,000.00 for each violation the commissioner finds to be willful.
(2) Failure to comply with section 9491 of this subchapter shall constitute also a violation of section 2453 of Title 9 (consumer protection), provided that the commissioner’s determinations concerning the interpretation and administration of the provisions of this chapter and any rules adopted hereunder shall carry a presumption of validity as to any person licensed or required to be licensed under this subchapter in connection with any action for violation of section 2453 of Title 9. The attorney general shall cooperate and consult with the commissioner prior to the commencement of any investigation or enforcement action with respect to any person licensed or required to be licensed under this subchapter.
(3) The rights, remedies, and powers conferred by this section shall be in addition to the rights, remedies, and powers conferred on the commissioner, the attorney general, or any other person by any other applicable law, including without limitation subchapter 1 of chapter 63 of Title 9 (consumer protection).
Sec. 3. EFFECTIVE DATE
This act shall take effect on January 1, 2006.
The Vermont General Assembly
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