AS Title 21, Chapter 86: Health Maintenance Organizations

Chapter 86. Health Maintenance Organizations. Sec. 21.86.010. Establishment of health maintenance organizations. (a) A person may apply to the director for and obtain a certificate of authority to establish and operate a health maintenance organization in compliance with this chapter. A person may not establish or operate a health maintenance organization in this state unless the person obtains a certificate of authority under this chapter. A foreign corporation may, subject to its registration, qualify under this chapter to do business in this state as a foreign corporation. (b) An application for a certificate of authority must be verified by an officer or authorized representative of the applicant, must be in a form prescribed by the director, and must contain or be accompanied by (1) a copy of the organizational documents of the applicant, including the articles of incorporation, articles of association, partnership agreement, trust agreement, or other applicable documents, and all amendments to the documents; (2) a copy of the bylaws, regulations, or similar document, if any, regulating the conduct of the internal affairs of the applicant; (3) a list of the names, addresses, and official positions of the persons who are responsible for the conduct of the affairs of the applicant, including all members of the board of directors, board of trustees, executive committee, or other governing board or committee, the principal officers in the case of a corporation, and the partners or members in the case of a partnership or association; (4) a copy of contracts made or to be made between the applicant and providers or between the applicant and persons listed in (3) of this subsection; (5) a copy of the form of evidence of coverage that is to be issued to the enrollees; (6) a copy of the form or group contract, if any, that is to be issued to employers, unions, trustees, or other organizations; (7) financial statements showing the applicant's assets, liabilities, and sources of financial support; if the applicant's financial affairs are audited by independent certified public accountants, a copy of the applicant's most recent certified financial statement satisfies the requirement of this paragraph unless the director finds that additional or more recent financial information is required for the proper administration of this chapter; (8) a description of the proposed method of marketing, a financial plan that includes a projection of operating results anticipated until the organization has had net income for at least one year, and a statement as to the sources of working capital as well as any other sources of funding; (9) a power of attorney executed by the applicant, if not domiciled in this state, appointing the director and the director's successors in office, and authorized deputies, as the true and lawful attorney of the applicant in and for this state, upon whom all lawful process in any legal action or proceeding against the health maintenance organization, on a cause of action arising in this state, may be served; (10) a statement reasonably describing the geographic area or areas to be served; (11) a description of the complaint procedures to be used, as required under AS 21.86.100 ; (12) as required by regulations adopted by the director, a description of the procedures and programs to be implemented to assure compliance with state and federal statutes and regulations regarding the quality of health care; (13) a description of the mechanism by which enrollees will be afforded an opportunity to participate in matters of policy and operation under AS 21.86.040 ; (14) the deposit required under AS 21.86.140 (b); (15) other information that the director requires in order to make a determination under AS 21.86.020 ; (16) the application fee prescribed under AS 21.06.250 . (c) An applicant, or a health maintenance organization holding a certificate of authority granted under this chapter, shall, unless otherwise provided for, file a notice describing any material modification of the organization's operation as described in the information submitted under (b) of this section. The notice shall be filed with the director before the modification. If the director does not disapprove the modification within 30 days after the filing of the notice, the modification is considered approved. The director may adopt regulations exempting from the filing requirements of this subsection those items that the director considers unnecessary to report. (d) An applicant, or a health maintenance organization holding a certificate of authority granted under this chapter, shall file with the director all contracts of reinsurance. An agreement between the organization and an insurer is subject to the laws of this state regarding reinsurance. All reinsurance agreements and modifications to a reinsurance agreement shall be filed with the director and must be approved by the director. A reinsurance agreement remains in full force and effect for at least 90 days following written notice to the director, by registered mail, of cancellation by either party. Sec. 21.86.020. Issuance of certificate of authority; approval of changes. (a) Within 10 days after receipt of an application for a certificate of authority, the director shall forward a copy of the application to the commissioner of health. Within 60 days after the commissioner of health receives the copy of the application, the commissioner shall make a recommendation regarding the granting of the certificate of authority. (b) The director shall either issue or deny a certificate of authority within 30 days after receipt of the commissioner of health's recommendation. However, the director may extend the time for issuance or denial of a certificate of authority if additional information is needed in order to make a decision, and notice of the extension is provided to the applicant by the 90th day after the director received the application. A certificate of authority shall be issued if the director determines that the following conditions are met: (1) the persons responsible for the conduct of the affairs of the applicant are competent and trustworthy; (2) the applicant will effectively provide or arrange for the provision of basic health care services on a prepaid basis, through insurance or otherwise, except to the extent of reasonable requirements for copayments; (3) the applicant is financially responsible and may reasonably be expected to meet its obligations to enrollees and prospective enrollees; in determining if this condition is met, the director may consider (A) the financial soundness of the arrangements for health care services and the schedule of charges used in connection with those services; (B) the adequacy of working capital; (C) an agreement with an insurer, a hospital or medical service corporation, a government, or other organization for ensuring the payment of the cost of health care services or providing for automatic applicability of an alternative coverage if the health maintenance organization is discontinued; (D) an agreement with providers for the provision of health care services; and (E) a deposit of cash or securities submitted under AS 21.86.140 ; (4) the enrollees will be afforded an opportunity to participate in matters of policy and operation as provided in AS 21.86.040 ; (5) nothing in the proposed method of operation, as shown by the information submitted under AS 21.86.010 or by independent investigation, is contrary to the public interest; (6) the information submitted under AS 21.86.010 (b)(12) indicates that the applicant will be able to comply with state and federal statutes and regulations regarding the quality of health care. (c) If a certificate of authority is denied under this section, the applicant may request a hearing under AS 21.86.200 . Sec. 21.86.030. Powers of a health maintenance organization. (a) A health maintenance organization may (1) purchase, lease, construct, renovate, operate, or maintain hospitals, other health care facilities, their ancillary equipment, and property reasonably required for its principal office or for purposes necessary in the transaction of the business of the organization; (2) make loans to a medical group under contract with it in furtherance of its program, or make loans to a corporation or corporations under its control for the purpose of acquiring or constructing medical facilities and hospitals or in furtherance of a program providing health care services to enrollees; (3) furnish health care services through providers that are under contract with or employed by the health maintenance organization; (4) contract with a person for the performance, on the organization's behalf, of certain functions such as marketing, enrollment, and administration; (5) contract with an insurance company licensed in this state, or with a hospital or medical service corporation authorized to do business in this state, for the provision of insurance, indemnity, or reimbursement against the cost of health care services provided by the health maintenance organization; (6) offer other health care services, in addition to basic health care services. (b) A health maintenance organization shall file a notice and adequate supporting information with the director before the exercise of a power granted in (a)(1), (2), or (4) of this section. The director may disapprove the exercise of a power only if, in the director's opinion, it would substantially and adversely affect the financial soundness of the health maintenance organization and endanger its ability to meet its obligations. If the director does not disapprove the exercise of power within 30 days after the filing of the notice, it is considered approved. The director may adopt regulations exempting from the filing requirement of this section those activities having a minimal effect on the health maintenance organization. (c) Nothing in this section relieves a health maintenance organization that wishes to exercise the power described in (a)(1) of this section from the requirements of (1) AS 18.07 , regarding obtaining a certificate of need; (2) AS 47.32 , regarding regulation of hospitals; and (3) other statutes applicable to hospitals or other health care facilities. Sec. 21.86.040. Governing body; enrollee participation. (a) The governing body of a health maintenance organization may include providers, or other individuals, or both. At least one-third of the governing body must consist of consumers who are substantially representative of enrollees. (b) The governing body of a health maintenance organization shall establish a mechanism to afford its enrollees an opportunity to participate in matters of policy and operation through the establishment of advisory panels, by the use of advisory referenda on major policy decisions, or through the use of other mechanisms. Sec. 21.86.045. Biographical affidavits. A domestic health maintenance organization shall file with the director a complete affidavit of biographical information not later than 30 days after the appointment of an officer or member of the governing body of the organization. If requested by the director, a foreign health maintenance organization shall file with the director an affidavit of biographical information for the appointment of an officer or member of the governing body of that organization. A filing under this section must be on a form approved by the director. A filing is not required if a biographical affidavit of the officer or member of the governing body of the organization has been submitted to the director within one year before the date of appointment. A biographical affidavit filed under this section is confidential and not subject to public inspection. Sec. 21.86.050. Fiduciary responsibility. (a) A director, officer, employee, or partner of a health maintenance organization who receives, collects, disburses, or invests money in connection with the activities of that organization is responsible for that money in a fiduciary relationship to the organization. (b) A health maintenance organization shall maintain in force a fidelity bond on employees and officers in an amount not less than $100,000 or another amount prescribed by the director. The bond must be written with at least a one-year discovery period and, if written with less than a three-year discovery period, must contain a provision that cancellation or termination of the bond, whether by or at the request of the insured or by the underwriter, does not take effect sooner than 90 days after written notice of cancellation or termination has been filed with the director, unless an earlier cancellation or termination date is approved by the director. Sec. 21.86.060. Provision of services. (a) A health maintenance organization may provide provider services directly, through provider employees, or may provide the services under arrangements with individual providers or one or more groups of providers. (b) In addition to basic health care services, a health maintenance organization may provide, or arrange for, other health care services on a prepayment or other financial basis. (c) Health care services may be provided only by appropriately licensed health care providers. Sec. 21.86.070. Evidence of coverage; charges for health care services. (a) An enrollee residing in this state is entitled to evidence of coverage. If an enrollee obtains coverage from an insurance policy or from a subscriber contract issued by a hospital or medical service corporation, whether by option or otherwise, the insurer or hospital or medical service corporation shall issue the evidence of coverage; otherwise, the health maintenance organization shall issue the evidence of coverage. Each subsequent change in coverage must be evidenced in a separate document issued to the enrollee. (b) Except as provided in (d) of this section, evidence of coverage, or an amendment or endorsement to coverage, may not be issued or delivered to a person in this state until a copy of the form of the evidence of coverage, amendment, or endorsement has been filed with and approved by the director. A filing shall be made not less than 30 days before the intended date of delivery or issuance. The form of evidence of coverage, amendment, or endorsement is considered approved 30 days after it was filed, unless it is affirmatively approved or disapproved by an order of the director before the expiration of the 30-day period. If the form of evidence of coverage, amendment, or endorsement is disapproved, the director's order must specify the reasons for disapproval. A hearing shall be granted to a person aggrieved by either an approval or disapproval under this subsection if a written request is made by that person to the director. The hearing shall be granted within 30 days after the receipt of the written request. (c) An evidence of coverage (1) may not contain a provision or statement that is unjust, unfair, inequitable, misleading, deceptive, or encourages misrepresentation, or that is untrue, misleading, or prohibited under AS 21.86.150 ; and (2) must contain a clear and concise statement if a contract, or a reasonably complete summary if a certificate, of (A) the health care services and the insurance or other benefits, if any, to which the enrollee is entitled; (B) limitations on the services, kind of services, benefits, or kind of benefits, to be provided, including a deductible or copayment feature; (C) where, and in what manner, information is available as to how services may be obtained; (D) the total amount of payment for health care services and the indemnity or service benefits, if any, that the enrollee is obligated to pay with respect to individual contracts; (E) the health maintenance organization's method for resolving enrollee complaints; and (F) guidelines explaining when treatment may be denied. (d) If a form of the evidence of coverage, or an amendment or endorsement to it, is subject to the jurisdiction of the director under AS 21.42.120 and 21.42.130, or under AS 21.87.180 , the filing requirements of (b) of this section do not apply. If a form of evidence of coverage, or an amendment or endorsement to it, is subject to AS 21.42.120 and 21.42.130, or to AS 21.87.180 , those applicable provisions, as well as (c) of this section, apply to the content of the form of evidence of coverage, amendment, or endorsement. (e) A schedule of charges for enrollee coverage for health care services, or an amendment or endorsement to it, may not be used until a copy of the schedule has been filed with and approved by the director. A filing shall be made not less than 30 days before its proposed use. The schedule of charges, amendment, or endorsement is considered approved 30 days after it was filed unless it was affirmatively approved or disapproved by an order of the director before the expiration of the 30-day period. If a schedule of charges, amendment, or endorsement is disapproved, the director's order must specify the reasons for disapproval. A hearing shall be granted to a person aggrieved by either an approval or disapproval under this subsection if a written request is made by that person to the director. The hearing shall be granted within 30 days after receipt of the written request. (f) A schedule of charges, or an amendment or endorsement to it, shall be established according to sound actuarial principles for various categories of enrollees, but charges applicable to an enrollee may not be individually determined based on that enrollee's health status. The charges may not be excessive, inadequate, nor unfairly discriminatory. Certification by an actuary who is a member in good standing of the American Academy of Actuaries or another person who is considered qualified by the director, as to the appropriateness of the application of the charges, based on reasonable assumptions, must accompany each filing under (e) of this section, along with adequate supporting information. (g) The director may require that additional relevant material considered necessary by the director be submitted in order to determine the acceptability of a filing made under either (b) or (e) of this section. Sec. 21.86.075. Chiropractic health care services. (a) An enrollee may use the services of a licensed chiropractor of the enrollee's choosing and may not be required to obtain the prior approval of the enrollee's health maintenance organization, a gatekeeper, or primary care physician. Within 10 days after an enrollee's first visit, a chiropractor shall transmit a report containing the enrollee's primary complaint, related history, examination findings, initial diagnosis, and treatment plan to the enrollee's health maintenance organization. If the enrollee and the enrollee's chiropractor determine that the condition of the enrollee has not improved within 30 days after the initial treatment, the chiropractor shall refer the enrollee back to the enrollee's health maintenance organization for examination and possible concurrent care. (b) If the enrollee's chiropractor recommends chiropractic treatment beyond 30 days, the chiropractor shall conduct a second examination and transmit the findings to the enrollee's health maintenance organization. The transmitted information must include the enrollee's current status regarding the primary complaint, the progress of a revised treatment plan, and the objectives for continued care. (c) After receiving a 30-day treatment report from a chiropractor under (b) of this section, the enrollee's health maintenance organization may request a review by another chiropractor. The reviewing chiropractor shall conduct a physical examination of the enrollee. The findings of the reviewing chiropractor must be disclosed to the enrollee and the enrollee's chiropractor. Charges for additional chiropractic care recommended by the reviewing chiropractor must be included as covered health care services provided by the health maintenance organization. (d) If the enrollee's treating chiropractor and the reviewing chiropractor determine that the enrollee's condition has stabilized, ongoing preventative or maintenance care is limited to two chiropractic visits a month. If the treating chiropractor and the reviewing chiropractor disagree on the enrollee's continued treatment, the enrollee and the health maintenance organization shall jointly select a third chiropractor to review the enrollee's chiropractic treatment. Selection of a third chiropractor must occur not more than 60 days after the date of the enrollee's initial treatment by the enrollee's treating chiropractor. Until the third chiropractor's opinion is received in writing by the enrollee and the health maintenance organization, the enrollee may receive chiropractic treatment recommended by the treating chiropractor. The opinion of the third chiropractor as to continued chiropractic treatment is binding on the enrollee and the health maintenance organization. This subsection does not apply if a new documented injury or a substantial exacerbation of the enrollee's previous primary complaint occurs. Sec. 21.86.078. Choice of health care provider. (a) A health maintenance organization shall offer to every enrollee a point-of-service plan option that would allow a covered person to receive covered services from an out-of-network health care provider without obtaining a referral or prior authorization from the health maintenance organization. The point-of-service plan option may require that an enrollee pay a higher deductible or copayment and higher premium for the plan. (b) A health maintenance organization shall provide each enrollee with an opportunity at the time of enrollment and during the annual open enrollment period to enroll in the point-of-service plan option. The health maintenance organization shall provide written notice of the point-of-service plan option to each enrollee and shall include in that notice a detailed explanation of the financial costs to be incurred by an enrollee who selects that option. Sec. 21.86.080. Annual statement; additional reports. (a) A health maintenance organization shall file an annual statement with the director under AS 21.09.200 and shall provide a copy to the commissioner of health. The annual statement shall be verified by at least two principal officers of the organization. The director may require additional reports that are reasonably necessary and appropriate in order for the director or the commissioner of health to carry out the duties prescribed by this chapter. (b) The director may require a health maintenance organization to file quarterly financial statements. If quarterly financial statements are required, the statements must follow for a given quarter the reporting specified in the quarterly financial statement blank form and instructions most recently approved by the National Association of Insurance Commissioners. (c) A filing under this section is subject to AS 21.09.200 and 21.09.205. Sec. 21.86.087. [Renumbered as AS 21.06.087 .] Sec. 21.86.090. Information to enrollees. A health maintenance organization shall promptly notify its enrollees of a material change in its operation that would directly affect the enrollees. Sec. 21.86.100. Complaint system; report. (a) A health maintenance organization shall establish and maintain a complaint system to provide reasonable procedures for the resolution of written complaints initiated by its enrollees. A complaint system must provide a procedure for forwarding to the commissioner of health a duplicate copy of a complaint relating to patient care or facility operation. (b) A health maintenance organization shall annually, on or before March 1, submit to the director, in a form prescribed by the director, a report covering the preceding calendar year. The health maintenance organization shall provide a copy of this report to the commissioner of health. The report submitted under this subsection must include (1) a description of the procedures used in its complaint system; (2) the total number of complaints handled through its complaint system and a compilation of the causes underlying the complaints filed; and (3) the number, amount, and disposition of malpractice claims made by an enrollee that were settled during the year by the health maintenance organization; information concerning malpractice claims shall be held confidential by the director and by the commissioner of health, and is not subject to public disclosure. (c) The director or the commissioner of health may, at any time during normal business hours, examine the complaint system in any place of business of the health maintenance organization in order to determine compliance with this section. Sec. 21.86.110. Recovery of health care costs. If a health maintenance organization determines that an enrollee has received health care services that the enrollee is not entitled to receive under the terms of the health maintenance agreement, the organization may not recover an amount above the actual cost of providing the health care service. This section does not apply if the enrollee gave or withheld information to the health maintenance organization with the intent to mislead or misinform the organization as to the enrollee's right to receive the health care services. Sec. 21.86.120. Return of agreement. A person who enters into a health maintenance agreement may return the agreement to the health maintenance organization or the agent from whom it was purchased within 10 days of the delivery of the agreement to the person if the person is not satisfied for any reason. Upon return of the agreement, the health maintenance organization shall promptly refund the fee paid for the agreement. Notice of the substance of this section must be printed on the face of the agreement. Sec. 21.86.130. Investments. With the exception of investments made under AS 21.86.030 , a health maintenance organization's money may only be invested as allowed by AS 21.21 for the investment of legal reserves of a life insurer. Sec. 21.86.140. Protection against insolvency. (a) Except as otherwise provided in this section, a health maintenance organization shall deposit with the director, or with an organization or trustee acceptable to the director through which a custodial or controlled account is used, cash, securities, or a combination of these or other means acceptable to the director in the manner and amount required by this section. (b) Except as provided in (d) and (e) of this section, the deposit amount for a health maintenance organization that begins operation after June 8, 1990 is the greater of 10 percent of its estimated expenditures for health care services for its first year of operation, twice its estimated average monthly uncovered expenditures for its first year of operation, or $250,000. Except as provided in (d) and (e) of this section, at the beginning of each succeeding year of operation, the organization shall deposit with the director, or organization or trustee, cash, securities, or a combination of these or other means acceptable to the director in an amount equal to four percent of its estimated annual uncovered expenditures for that year. Each year's estimate, after the first year of operation, shall reasonably reflect the prior year's operating experience and delivery arrangements. (c) Except as provided in (d) and (e) of this section, a health maintenance organization that is in operation on June 8, 1990 shall, on the first day of its fiscal year beginning six months or more after June 8, 1990, make a deposit equal to the greater of one percent of the preceding 12 months' uncovered expenditures or $250,000. The organization shall, at the beginning of its second fiscal year after June 8, 1990, deposit an amount equal to two percent of the organization's estimated annual uncovered expenditures for that year. At the beginning of its third fiscal year, the organization shall deposit an amount equal to three percent of its estimated annual uncovered expenditures for that year. At the beginning of the fourth fiscal year and subsequent years, the organization shall deposit an amount equal to four percent of its estimated annual uncovered expenditures for that year. Each year's estimate, after the first year of operation, must reasonably reflect the prior year's operating experience and delivery arrangements. (d) The director may waive the deposit requirements in (b) and (c) of this section if the director is satisfied that (1) the organization has sufficient net worth and an adequate history of generating net income to assure its financial viability for the next year; (2) the organization's performance and obligations are guaranteed by another organization that has sufficient net worth and an adequate history of generating net income; or (3) the assets of the organization, or its contracts with insurers, hospital or medical service corporations, governments, or other organizations, are reasonably sufficient to assure the performance of its obligations. (e) The annual deposit requirements of (b) and (c) of this section do not apply if (1) a health maintenance organization has achieved a net worth, not including land, buildings, and equipment, of at least $1,000,000 or has achieved a net worth, including land, buildings, and equipment, of at least $5,000,000; (2) the total amount of the health maintenance organization's accumulated deposit is equal to 25 percent of its estimated annual uncovered expenditures for the next calendar year, or is equal to the capital and surplus requirements for the formation for admittance of a health insurer in this state, whichever is less; (3) a health maintenance organization has a guaranteeing organization that (A) does not sponsor any other health maintenance organization; and (B) has been in operation for at least (i) five years and has a net worth, not including land, buildings, and equipment, of at least $1,000,000; or (ii) 10 years and has a net worth, including land, buildings, and equipment, of at least $5,000,000; or (4) a health maintenance organization has a guaranteeing organization that sponsors more than one health maintenance organization and that (A) has been in operation for at least (i) five years and has a net worth that is at least that required by (3)(B)(i) of this subsection multiplied by a number equal to the number of organizations sponsored; or (ii) 10 years and has a net worth that is at least that required by (3)(B)(ii) of this subsection multiplied by a number equal to the number of organizations sponsored; or (B) has, for each organization sponsored, a net worth at least equal to the capital and surplus requirement for a health insurer. (f) All deposit income belongs to the depositing health maintenance organization, and shall be paid to it as it becomes available. A health maintenance organization that has made a deposit of securities may withdraw that deposit, or any part of it, after making a substitute deposit of cash, securities, or a combination of these or other means of equal amount and value. Substitution of securities must have prior approval by the director. (g) In a year in which an annual deposit is not required of a health maintenance organization under this section, at the organization's request the director shall reduce the required, previously accumulated deposit by $100,000 for each $250,000 of net worth in excess of the amount that allows the organization not to make the annual deposit. If the amount of an organization's net worth is reduced to less than the amount that allowed a reduction in accumulated deposit, the organization shall immediately redeposit $100,000 for each $250,000 of reduction in net worth, except that the total deposit need not exceed the maximum required under this section. (h) A health maintenance organization that obtains a certificate of authority shall have and maintain a capital account of at least $100,000 in addition to deposit requirements under this section. The capital account must equal at least $100,000 after deducting accrued liabilities, and must be in the form of cash, securities, or a combination of these or other means acceptable to the director. Sec. 21.86.150. Prohibited practices. (a) A health maintenance organization or a representative of a health maintenance organization may not cause or knowingly permit a person to provide, on behalf of the health maintenance organization, health care services that the person is not licensed to provide. (b) A health maintenance organization, or a representative of a health maintenance organization, may not cause or knowingly permit the use of advertising that is untrue or misleading, solicitation that is untrue or misleading, or a form of evidence of coverage that is deceptive. For purposes of this chapter, (1) a statement or item of information is considered to be untrue if it does not conform to fact in any respect that is or might be significant to an enrollee of, or person considering enrollment with, a health maintenance organization; (2) a statement or item of information is considered to be misleading, whether or not it is untrue, if, in the total context in which the statement is made or the item of information is communicated, the statement or item of information might be understood by a reasonable person, not possessing special knowledge regarding health care coverage, as indicating a benefit or advantage or the absence of an exclusion, limitation, or disadvantage of possible significance to an enrollee of, or person considering enrollment in, a health maintenance organization if the benefit or advantage or absence of limitation, exclusion, or disadvantage does not exist; (3) an evidence of coverage is considered to be deceptive if the evidence of coverage taken as a whole, and with consideration given to typography and format, as well as to language, might cause a reasonable person, not possessing special knowledge regarding health maintenance organizations or an evidence of coverage, to expect benefits, services, charges, or other advantages that the evidence of coverage does not provide or that the health maintenance organization issuing the evidence of coverage does not regularly make available for an enrollee covered under the evidence of coverage. (c) AS 21.36 applies to health maintenance organizations and to an evidence of coverage except to the extent that the director determines that the nature of health maintenance organizations and the evidence of coverage renders that chapter clearly inappropriate. (d) A health maintenance organization may not cancel or refuse to review an enrollee, except for (1) reasons stated in the organization's regulations applicable to all enrollees; (2) failure to pay the charge for the enrollee's coverage; or (3) other reasons adopted by the director by regulation. (e) Unless it is licensed as an insurer, a health maintenance organization may not refer to itself as an insurer or use a name deceptively similar to the name or description of an insurance or surety corporation doing business in the state. (f) A person may not use the phrase “health maintenance organization” or “HMO” in the course of the person's operations unless the person possesses a valid certificate of authority issued under this chapter. (g) A health maintenance organization that offers, renews, issues for delivery, or delivers in this state a health care insurance plan in the group market that does not impose a preexisting condition exclusion with respect to a particular coverage option under the plan may impose an affiliation period for that coverage option only if the affiliation period (1) is applied uniformly without regard to a health status factor; (2) does not exceed two months for new enrollees and three months for late enrollees; (3) begins on the enrollment date; and (4) runs concurrently with any waiting period under the plan. (h) A health maintenance organization may use a method other than a preexisting condition exclusion or an affiliation period to lessen the risk of adverse selection only with prior written approval of the director. (i) A health maintenance organization, including a health maintenance organization operating a managed care plan, or a representative of a health maintenance organization may not cause, request, or knowingly permit (1) the imposition of limits regarding (A) criticism by a health care provider of health care services provided by the health maintenance organization; or (B) written or oral communications between a health care provider and an enrollee regarding health care services; (2) the employment of a health care provider to be terminated unless the provider receives written notice of the cause for the termination before being terminated; (3) denial of health care coverage for an enrollee unless the enrollee has been examined by at least two physicians; or (4) financial incentives to be given or offered to a provider for denying or delaying health care services. (j) A utilization review decision to deny, reduce, or terminate a health care benefit or to deny payment for a health care service because that service is not medically necessary may only be made by a health care provider trained in that specialty or subspecialty and licensed to practice in this state after consultation with the covered person's health care provider. Sec. 21.86.160. Regulation of agents. (a) The director may adopt regulations necessary to provide for the licensing of health maintenance organization agents. (b) The director may, by regulation, exempt certain classes of persons from the requirement of obtaining an agent license if (1) the function the class performs does not require special competence or trustworthiness, or the regulatory surveillance made possible by licensing; or (2) other existing safeguards make regulation through licensing unnecessary. Sec. 21.86.170. Powers of insurers and of hospital or medical service corporations. (a) An insurer licensed in this state, or a hospital or medical service corporation authorized to do business in this state, may, either directly or through a subsidiary or affiliate, organize and operate a health maintenance organization under the provisions of this chapter. Two or more insurance companies, hospitals or medical service corporations, or subsidiaries or affiliates of them, may jointly organize and operate a health maintenance organization. The business of insurance is considered to include providing health care by a health maintenance organization owned or operated by an insurer or subsidiary of an insurer. (b) An insurer or hospital or medical service corporation may contract with a health maintenance organization to provide insurance or similar protection against the cost of care provided through a health maintenance organization and to provide coverage in the event of the failure of the health maintenance organization to meet its obligations. The enrollees of a health maintenance organization constitute a permissible group under this title. Under a contract authorized by this subsection, the insurer or hospital or medical service corporation may make benefit payments to health maintenance organizations for health care services rendered by providers. Sec. 21.86.180. Examinations. (a) The director shall examine the affairs and transactions of a health maintenance organization in the same manner as prescribed for an insurer in AS 21.06.140 — 21.06.180. (b) As often as is reasonably necessary for the protection of the interests of the people of the state, but at least once every three years, the director shall require submission of an independent review of the quality of care provided by a health maintenance organization either directly or indirectly through contract, agreement, or other arrangement for provisions of health care services to enrollees of the health maintenance organization. The review required under this subsection shall be done by a review organization approved by the Department of Health and shall be done under regulations adopted by that department. The health maintenance organization shall pay the cost of the review. Sec. 21.86.190. Suspension or revocation of certificate of authority. (a) After compliance with AS 21.86.200 , the director may suspend or revoke a certificate of authority issued to a health maintenance organization under this chapter if (1) the health maintenance organization is operating significantly in contravention of its basic organizational document or in a manner contrary to that described in other information submitted under AS 21.86.010 or 21.86.020; (2) the health maintenance organization issues an evidence of coverage, or uses a schedule of charges for health care services, that does not comply with the requirements of AS 21.86.070 ; (3) the health maintenance organization does not provide or arrange for the provision of basic health care services; (4) the health maintenance organization is not in compliance with state and federal statutes and regulations as required under AS 21.86.010 (b)(12), or is unable to fulfill its obligations to furnish health care services; (5) the health maintenance organization is no longer financially responsible and may reasonably be expected to be unable to meet its obligations to enrollees or prospective enrollees; (6) the health maintenance organization has failed to implement a mechanism affording the enrollees an opportunity to participate in matters of policy and operation under AS 21.86.040 ; (7) the health maintenance organization has failed to implement the complaint system required by AS 21.86.100 in a reasonable manner to resolve valid complaints; (8) the health maintenance organization, or any person on its behalf, has advertised or merchandised its services in an untrue, misrepresentative, misleading, deceptive, or unfair manner; (9) the continued operation of the health maintenance organization would be hazardous to its enrollees; (10) the health maintenance organization has otherwise failed substantially to comply with this chapter. (b) If the certificate of authority of a health maintenance organization is suspended, the health maintenance organization may not, during the period of the suspension, enroll additional enrollees except newborn children or other newly acquired dependents of existing enrollees, and may not engage in advertising or solicitation. The director may, by written order, specify limitations in the operation of the organization during the period of suspension as the director finds to be in the best interests of enrollees. (c) If the certificate of authority of a health maintenance organization is revoked, the organization shall, immediately following the effective date of the order of revocation, proceed to wind up its affairs, and may not conduct further business except that essential to the orderly conclusion of the affairs of the organization. The organization may not engage in further advertising or solicitation. The director may, by written order, permit continued operation of the organization as the director finds to be in the best interest of enrollees, so that enrollees will be afforded the greatest practical opportunity to obtain continuing health care coverage. Sec. 21.86.200. Administrative procedures. (a) If the director has reason to believe that grounds for the denial, suspension, or revocation of a certificate of authority exist, the director shall notify the applicant or the health maintenance organization in writing, specifically stating the grounds for denial, suspension, or revocation. A person aggrieved by a decision of the director regarding denial, suspension, or revocation of a certificate of authority may request a hearing under AS 21.06.180 . If a hearing is requested, it shall be held under the procedures in AS 21.06.170 — 21.06.220, except that AS 21.06.190 does not apply in the case of a hearing regarding denial of a certificate. (b) After a hearing under (a) of this section, or upon the failure of an applicant or health maintenance organization to appear at such a hearing, the director shall make written findings and issue an order, that shall be mailed to the applicant or health maintenance organization and concurrently provided to the commissioner of health. An appeal of the director's order may be made in the manner provided by AS 21.06.230 . Sec. 21.86.210. Rehabilitation, liquidation, or conservation. (a) A rehabilitation, liquidation, or conservation of a health maintenance organization is considered to be a rehabilitation, liquidation, or conservation of an insurer, and shall be conducted under AS 21.78 . The director may apply to the superior court for an order directing the rehabilitation, liquidation, or conservation of a health maintenance organization upon one or more of the grounds contained in AS 21.78.040 , 21.78.050, or 21.78.060, or if, in the director's opinion, the continued operation of the organization would be hazardous to either enrollees or to the people of the state. (b) Enrollees of a health maintenance organization have the same priority in the event of liquidation or rehabilitation as AS 21.78 provides to policyholders of an insurer. A claim made by a health care provider in a liquidation or rehabilitation that pertains to services provided to an enrollee, has the same priority as an enrollee if the provider agrees not to assert the claim against an enrollee and if any payment fully discharges the obligation of the enrollee. Sec. 21.86.220. Regulations. The commissioner of health may adopt regulations necessary to carry out the commissioner's duties under this chapter. The director may adopt regulations necessary to carry out the director's duties under this chapter. Sec. 21.86.230. Fees. (a) A health maintenance organization shall pay fees to the director as provided under AS 21.06.250 . (b) A health maintenance organization shall pay to the commissioner of health fees, as established in regulations adopted by the commissioner of health, that relate to the regulatory functions performed by that department under this chapter. Sec. 21.86.240. Taxation. A health maintenance organization is taxed as provided under AS 21.09.210 (b)(1), and shall file the report required of an authorized insurer under AS 21.09.210 (a). Sec. 21.86.250. Penalties and enforcement. (a) Instead of, or in addition to, suspending or revoking a certificate of authority, the director may, in an order issued under AS 21.86.200 , impose an administrative penalty in an amount not less than $1,000 nor more than $25,000 for each violation of an applicable provision of this chapter or a regulation adopted under this chapter. (b) The director may issue an order directing a health maintenance organization or a person representing a health maintenance organization to stop engaging in an act or practice that is in violation of this chapter or a regulation adopted under this chapter. Within five days after service of a stop order under this subsection, the respondent may request, in writing, a hearing on the question of whether the act or practice has occurred in violation of this chapter or a regulation adopted by the director. The hearing shall commence within 10 days after the written request for the hearing has been received by the director unless the respondent requests that the hearing take place at a later date and the director agrees to the later hearing date. Sec. 21.86.260. Statutory construction and relationship to other law. (a) Except as provided in AS 21.36 , AS 21.42 , AS 21.54 , AS 21.56 , AS 21.79 , and in this chapter, this title does not apply to a health maintenance organization that obtains a certificate of authority under this chapter.

This subsection does not apply to an insurer licensed under AS 21.09 or a hospital or medical service corporation licensed under AS 21.87 except with respect to its health maintenance organization activities authorized by and regulated under this chapter. (b) Solicitation of enrollees by a health maintenance organization that has obtained a certificate of authority or by its licensed agents or authorized employee representatives, may not be construed to violate a law of this state relating to solicitation or advertising by health care professionals. (c) A health maintenance organization that obtains a certificate of authority under this chapter is not considered to be practicing medicine, and is exempt from a law of this state relating to the practice of medicine. However, this subsection does not exempt a health care provider from a licensing requirement, or from another law of this state regarding providers. Sec. 21.86.270. Filings and reports as public documents. Except for information described in AS 21.86.100 (b)(3) and except for trade secrets, privileged, confidential commercial, or financial information as determined by the director, all applications, filings, and reports required under this chapter, including annual financial statements that are required under AS 21.86.080 , are public documents. Sec. 21.86.280. Confidentiality of medical information. [Repealed, § 53 ch 96 SLA 2004.] Sec. 21.86.290. Contract authority for commissioner of health. In carrying out duties under this chapter, the commissioner of health may contract with qualified persons to make recommendations concerning the determinations required to be made by the commissioner. Recommendations made by a contractor may be accepted in full or in part by the commissioner of health. Sec. 21.86.300. Acquisition of control or merger of a health maintenance organization. (a) A person may not acquire control of the voting securities of a domestic health maintenance organization, if, after the consummation of the transaction, that person would, directly or indirectly, or by conversion or by exercise of any right to acquire, be in control of the health maintenance organization, or enter into an agreement to merge or consolidate with, or otherwise to acquire control of, a health maintenance organization. (b) Subsection (a) of this section does not apply to a person who at the time the offer, request, or invitation is made or the agreement is entered into, or before the acquisition of the securities if no offer or agreement is involved, has filed with the director and has sent to the health maintenance organization, information required by AS 21.22 and the offer, request, invitation, agreement, or acquisition has been approved by the director. Approval by the director under this subsection is governed by AS 21.22 . (c) In this section, (1) “acquire control of” means to make a tender for, make a request or invitation for tenders of, enter into an agreement to exchange securities for, or acquire in the open market or otherwise; (2) “domestic” means formed under the laws of this state. Sec. 21.86.310. Dual choice. (a) An employer in this state, whether public or private, that offers its employees a health benefit plan and employs 25 or more employees during any week of the calendar year, and an employee benefit fund in this state that offers its members any form of health benefit, shall make available to its employees or members the option to enroll in at least one health maintenance organization, holding a valid certificate of authority, that provides health care services in the geographic areas in which substantial numbers of the employees or members reside. If employees of the employer are members of a collective bargaining unit, the option of enrollment in a health maintenance organization shall first be submitted to the bargaining representative of the bargaining unit. If the option is approved by the bargaining representative, the option of enrollment shall then be made to each represented employee. (b) An employer in this state is not required to pay more for employee health benefits as a result of the application of this section than would be required if this section did not apply to the employer. If an employee chooses enrollment in a health maintenance organization, the employer is required to pay, on behalf of that employee, only an amount equal to the lesser of (1) the amount that would have to be paid to an insurer on behalf of its employees for substantially similar health benefits; or (2) the health maintenance organization's charge for coverage that is approved by the director under AS 21.86.070 . (c) This section does not apply to an employer whose employees or members reside in an area where health care services are not provided by a health maintenance organization. Sec. 21.86.900. Definitions. In this chapter, (1) “affiliation period” means a period of time under a contract with a health maintenance organization (A) that must expire before coverage becomes effective; (B) during which the health maintenance organization is not required to provide health care services or benefits; and (C) for which no premium is charged to the participant or beneficiary for coverage during the period; (2) “agent” means a person who is appointed by a health maintenance organization and who engages in solicitation of membership in the organization; “agent” does not include a person enrolling health maintenance organization members on behalf of an employer, a union, or other organization to whom a master subscriber contract has been issued, or an employee, who is not an independent contractor, of the health maintenance organization; (3) “basic health care services” means emergency care, inpatient hospital and physician care, and outpatient medical services, but does not include mental health services or services for alcohol or drug abuse; (4) “beneficiary” has the meaning given in AS 21.54.500 ; (5) “enrollee” means an individual who is enrolled in a health maintenance organization; (6) “enrollment date” has the meaning given in AS 21.54.500 ; (7) “evidence of coverage” means a certificate, agreement, or contract issued to an enrollee, setting out the coverage to which the enrollee is entitled; (8) “group market” has the meaning given in AS 21.54.500 ; (9) “health care services” means services for medical or dental care, or hospitalization, or services incident to the furnishing of that care or hospitalization, and includes services for the purpose of preventing, alleviating, curing, or healing human illness, injury, or physical disability; (10) “health maintenance organization” means a person that undertakes to provide or arrange for basic health care services to enrollees on a prepaid basis; (11) “health status factor” has the meaning given in AS 21.54.500 ; (12) “participant” has the meaning given in AS 21.54.500 ; (13) “person” has the meaning given in AS 01.10.060 and includes a joint venture; (14) “preexisting condition exclusion” has the meaning given in AS 21.54.500 ; (15) “provider” means a physician, hospital, or other person licensed or otherwise authorized in this state to furnish health care services; (16) “uncovered expenditures” means the costs of health care services that are covered by a health maintenance organization, but for which an enrollee would also be liable if the organization became insolvent; (17) “waiting period” has the meaning given in AS 21.54.500 .