CHAPTER 257
(SB 49)
Health insurance discount plan requirements modified.
ENTITLED, An Act to
modify the requirements for health discount plans.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
Section
1.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
For the purposes of this chapter, the term, affiliate, means a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under common control with,
the person specified. For the purposes of this section, the term, control, or controlled by, or under
common control with, means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a person, whether through the ownership of voting
securities, by contract other than a commercial contract for goods or nonmanagement services, or
otherwise, unless the power is the result of an official position with or corporate office held by the
person. Control is presumed to exist if any person, directly or indirectly, owns, controls, holds with
the power to vote, or holds proxies representing ten percent or more of the voting securities of any
other person. This presumption may be rebutted by a showing made in the manner provided by
§ 58-5A-29.
Section
2.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
For the purposes of this chapter, the term, discount medical plan, means a business
arrangement or contract in which a person, in exchange for fees, dues, charges, or other
consideration, offers access for its members to providers of medical or ancillary services and the
right to receive discounts on medical or ancillary services provided under the discount medical
plan from those providers. The term includes a prescription drug discount plan.
The term does not include:
(1) A plan that does not charge a membership or other fee to use the discount medical plan;
(2) Any product otherwise regulated under Title 58;
(3) A patient access program; or
(4) A medicare prescription drug plan.
Section
3.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
For the purposes of this chapter, the term, discount prescription drug plan, means a business
arrangement or contract in which a person, in exchange for fees, dues, charges, or other
consideration provides access for its plan members to providers of pharmacy services and the right
to receive discounts on pharmacy services provided under the discount prescription drug plan from
those providers.
Section
4.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
For the purposes of this section, discount medical plan organization, means an entity that, in
exchange for fees, dues, charges, or other consideration, provides access for discount medical plan
members to providers of medical or ancillary services and the right to receive medical or speciality
services from those providers at a discount. It is the organization that contracts with providers,
provider networks, or other discount medical plan organizations to offer access to medical or
speciality services at a discount and determines the charge to discount medical plan members.
Section
5.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
Terms used in this chapter mean:
(1) "Ancillary services," includes audiology, dental, vision, mental health, substance abuse,
chiropractic, and podiatry services;
(2) "Facility," an institution providing medical or ancillary services or a health care setting.
The term includes:
(a) A hospital or other licensed inpatient center;
(b) An ambulatory surgical or treatment center;
(c) A skilled nursing center;
(d) A residential treatment center;
(e) A rehabilitation center; and
(f) A diagnostic, laboratory or imaging center;
(3) "Health care professional," a physician, pharmacist, or other health care practitioner
who is licensed, accredited, or certified to perform specified medical or ancillary
services within the scope of his or her license, accreditation, certification, or other
appropriate authority consistent with state law;
(4) "Marketer," a person or entity that markets, promotes, sells, or distributes a discount
medical plan, including a private label entity that places its name on and markets or
distributes a discount medical plan pursuant to a marketing agreement with a discount
medical plan organization;
(5) "Medical services," any maintenance care of, or preventive care for, the human body,
or care, service, or treatment of an illness or dysfunction of, or injury to, the human
body. The term includes 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
services, laboratory services, medical equipment and supplies, pharmacy services or
ancillary services;
(6) "Medicare prescription drug plan," a plan that provides Medicare Part D prescription
drug benefit in accordance with the requirements of the federal Medicare Prescription
Drug, Improvement and Modernization Act of 2003;
(7) "Member," any individual who pays fees, dues, charges, or other consideration for the
right to receive the benefits of a discount medical plan. Member does not include any
individual who enrolls in a patient access program;
(8) "Patient access program," a voluntary program sponsored by a pharmaceutical
manufacturer or a consortium of pharmaceutical manufacturers, that provide free or
discounted health care products directly to low-income or uninsured individuals either
through a discount card or direct shipment;
(9) "Provider," any health care professional or facility that has contracted, directly or
indirectly, with a discount medical plan organization to provide medical or ancillary
services to members;
(10) "Provider network," an entity that negotiates directly or indirectly with a discount
medical plan organization on behalf of more than one provider to provide medical or
ancillary services to members.
Section
6.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
This Act applies to all discount medical plan organizations doing business in South Dakota.
Section
7.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
A discount medical plan organization that is a health carrier registered pursuant to Title 58:
(1) Is not required to register as a discount medical plan organization. However, any of its
affiliates that operate as a discount medical plan organization in this state shall comply
with all provisions of this Act and shall register as a discount medical plan organization;
(2) Is required to comply with sections 24 to 42, inclusive, of this Act.
Section
8.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
If a discount medical plan organization loses its registration, or other form of authority to
operate as a discount medical plan organization in another state, or is the subject of any
disciplinary administrative proceeding related to the organization's operating as a discount medical
plan organization in another state, the discount medical plan organization shall immediately notify
the director.
Section
9.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
After the receipt of an application filed pursuant to
§
58-17C-104, the director shall review the
application and notify the applicant of any deficiencies in the application.
Section
10.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
Prior to registration by the director, each discount medical plan organization shall establish an
internet website in order to conform to the requirements of section 31 of this Act.
Section
11.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
Any registration is effective for one year, unless prior to its expiration the registration is
renewed in accordance with this section or suspended or revoked in accordance with section 13
of this Act. At least ninety days before a registration expires, the discount medical plan
organization shall submit a renewal application form.
Section
12.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
The director shall renew the registration of each holder that meets the requirements of this Act.
Section
13.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
The director may suspend the authority of a discount medical plan organization to enroll new
members or refuse to renew or revoke a discount medical plan organization's registration if the
director finds that any of the following conditions exist:
(1) The discount medical plan organization is not operating in compliance with this Act;
(2) The discount medical plan organization has advertised, merchandised, or attempted to
merchandise its services in such a manner as to misrepresent its services or capacity for
service or has engaged in deceptive, misleading, or unfair practices with respect to
advertising or merchandising;
(3) The discount medical plan organization is not fulfilling its obligations as a discount
medical plan organization; or
(4) The continued operation of the discount medical plan organization would be hazardous
to its members.
Section
14.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
If the director has cause to believe that grounds for the nonrenewal, suspension, or revocation
of a registration exists, the director shall notify the discount medical plan organization in writing
specifically stating the grounds for the refusal to renew or suspension or revocation and may
pursue a hearing on the matter in accordance with the provisions of the chapter 1-26.
Section
15.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
If the registration of a discount medical plan organization is surrendered, revoked, or not
renewed, the discount medical plan organization shall proceed, immediately following the effective
date of the order of revocation or, in the case of a nonrenewal, the date of expiration of the
registration, to wind up its affairs transacted under the registration. The discount medical plan
organization may not engage in any further advertising, solicitation, collecting of fees or renewal
of contracts.
Section
16.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
The director shall, in its order suspending the authority of the discount medical plan
organization to enroll new members, specify the period during which the suspension is to be in
effect and the conditions, if any, that shall be met by the discount medical plan organization prior
to reinstatement of its registration to enroll members. The director may rescind or modify the order
of suspension prior to the expiration of the suspension period. No registration of a discount
medical plan organization may be reinstated unless requested by the discount medical plan
organization. The director may not grant the request for reinstatement if the director finds that the
circumstances for which the suspension occurred still exist or are likely to recur.
Section
17.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
In lieu of suspending or revoking a discount medical plan organization's registration pursuant
to section 13 of this Act, if the discount medical plan organization has been found to have violated
any provision of this Act, the director may enter into a consent order pursuant to
§
58-4-28.1.
Section
18.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
A provider who provides discounts to the provider's own patients without any cost or fee of
any kind to the patient is not required to obtain and maintain a registration under this Act as a
discount medical plan organization.
Section
19.
That
§
58-17C-108
be repealed.
Section
20.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
Each registered discount medical plan organization shall maintain in force a surety bond in its
own name in an amount not less than twenty thousand dollars and shall be in favor of any person
and the director of the Division of Insurance for the benefit of any person who is damaged by any
violation of
§
§
58-17C-104 to 58-17C-108, inclusive, including any violation by the supplier or
by any other person that markets, promotes, advertises, or otherwise distributes a discount card on
behalf of the supplier. The bond shall cover any violation occurring during the time period during
which the bond is in effect. The bond shall be issued by an insurance company licensed to do
business in this state. A copy of the bond or a statement identifying the depository, trustee, and
account number of the surety account, and thereafter proof of annual renewal of the bond or
maintenance of the surety account, shall be filed with the director.
Section
21.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
In lieu of the bond required by section 20 of this Act, a registered discount medical plan
organization may deposit and maintain deposited with the director, or at the discretion of the
director, with any organization or trustee acceptable to the director through which a custodial or
controlled account is utilized, cash, securities, or any combination of these or other measures that
are acceptable to the director which at all times have a market value of not less than thirty-five
thousand dollars. All income from the deposit is an asset of the discount medical plan organization.
Section
22.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
Except for the director, the assets or securities held in this state as a deposit pursuant to
sections 20 and 21 of this Act are not subject to levy by a judgment creditor or other claimant of
the discount medical plan organization.
Section
23.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
The director may examine or investigate the business and affairs of any discount medical plan
organization to protect the interests of the residents of this state based on the following reasons,
including complaint indices, recent complaints, information from other states, or as the director
deems necessary. An examination or investigation shall be performed in accordance with the
provisions of chapter 58-3. The discount medical plan organization that is the subject of the
examination or investigation shall pay the expenses incurred in conducting the examination or
investigation. Failure by the discount medical plan organization to pay the expenses is grounds for
denial of a registration to operate as a discount medical plan organization or revocation of a
registration to operate as a discount medical plan organization.
The discount medical plan organization is subject to the provisions of
§
58-33-66.
Section
24.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
If the discount medical plan organization cancels a membership for any reason other than
nonpayment of fees by the member, the discount medical plan organization shall make a pro rata
reimbursement of all periodic charges to the member.
Section
25.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
A discount medical plan organization shall prepare written materials for its members that
specifies the benefits a member is to receive under the discount medical plan and that complies
with sections 38 to 42, inclusive, of this Act.
Section
26.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
Any provider offering medical or ancillary 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.
Section
27.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
A provider agreement between a discount medical plan organization and a provider shall
provide the following:
(1) A list of the medical or ancillary services and products to be provided at a discount;
(2) The amount or amounts of the discounts or, alternatively, a fee schedule that reflects the
provider's discounted rates; and
(3) That the provider will not charge members more than the discounted rates.
Section
28.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
A provider agreement between a discount medical plan organization and a provider network
shall require that the provider network have written agreements with its providers that:
(1) Contain the provisions described in section 27 of this Act;
(2) Authorize the provider network to contract with the discount medical plan organization
on behalf of the provider; and
(3) 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 discount medical plan organization.
Section
29.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
A provider agreement between a discount medical plan organization and an entity that contracts
with a provider network shall require that the entity, in its contracts with the provider network,
require the provider network to have written agreements with its providers that comply with the
provisions of section 28 of this Act.
Section
30.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
The discount medical plan organization shall maintain a copy of each active provider
agreement into which it has entered.
Section
31.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
Each discount medical plan organization shall maintain on an internet website page an up-to-
date list of the names and addresses of the providers with which it has contracted directly or
through a provider network. The internet website address shall be prominently displayed on all of
its advertisements, marketing materials, brochures, and discount medical plan cards.
Section
32.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
The provisions of sections 26 to 31, inclusive, of this Act, apply to those providers with which
the discount medical plan organization has contracted with directly or indirectly as well as those
providers that are members of a provider network with which the discount medical plan
organization has contracted directly or indirectly.
Section
33.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
A discount medical plan organization may market directly or contract with other marketers for
the distribution of its product. The discount medical plan organization shall have an executed
written agreement with a marketer prior to the marketer's marketing, promoting, selling, or
distributing the discount medical plan.
Section
34.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
The agreement between the discount medical plan organization and the marketer shall prohibit
the marketer from using advertising, marketing materials, brochures, and discount medical plan
cards without the discount medical plan organization's approval in writing.
Section
35.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
The discount medical plan organization shall be bound by and is responsible for the activities
of a marketer that are within the scope of the marketer's contract with the organization, or are
otherwise approved by or under the direction and control of the organization.
Section
36.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
A discount medical plan organization shall approve in writing any advertisement, marketing
material, brochure, or discount card used by marketers to market, promote, sell, or distribute the
discount medical plan prior to their use.
Section
37.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
Upon request, a discount medical plan organization shall submit to the director any advertising,
marketing material, or brochure regarding a discount medical plan.
Section
38.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
Any advertisement of a discount medical plan organization shall be truthful and not misleading
in fact or in implication. An advertisement is misleading if it has a capacity or tendency to mislead
or deceive based on the overall impression that the advertisement is reasonably expected to create
within the segment of the public to which it is directed.
Section
39.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
No discount medical plan organization may:
(1) Except as otherwise provided in this Act or as a disclaimer of any relationship between
discount medical plan benefits and insurance, or as a description of an insurance product
connected with a discount medical plan, use the term, insurance, in any advertisement,
marketing material, brochure, or discount medical plan cards;
(2) Use in any advertisement, marketing material, brochure, or discount medical plan card,
the terms, health plan, coverage, co-pay, co-payments, deductible, preexisting
conditions, guaranteed issue, premium, PPO, preferred provider organization, or other
term in a manner that could reasonably mislead an individual into believing that the
discount medical plan is health insurance;
(3) Use language in any advertisement, marketing material, brochure, or discount medical
plan card with respect to being licensed or registered by the Division of Insurance in a
manner that could reasonably mislead an individual into believing that the discount
medical plan is insurance or has been endorsed by the state;
(4) Make misleading, deceptive, or fraudulent representations regarding the discount or
range of discounts offered by the discount medical plan or the access to any range of
discounts offered by the discount medical plan;
(5) Have restrictions on access to discount medical plan providers, including, except for
hospital services, waiting periods and notification periods; or
(6) Pay providers any fees for medical or ancillary services or collect or accept money from
a member to pay a provider for medical or ancillary services provided under the
discount medical plan, unless the discount medical plan organization has an active
certificate of authority to act as a third party administrator in accordance with chapter
58-29D.
Section
40.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
If the initial contact with a prospective member is by telephone, the disclosures required by
§
58-17C-106 shall be made orally and included in the initial written materials that describe the
benefits under the discount medical plan provided to the prospective or new member.
Section
41.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
In addition to the general disclosures required by
§
58-17C-106, each discount medical plan
organization shall provide to each new member a copy of the terms of the discount medical plan
in written materials.
Section
42.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
The written materials required under this Act shall be clear and include information on:
(1) The name of the member;
(2) The benefits to be provided under the discount medical plan;
(3) Any processing fees and periodic charges associated with the discount medical plan;
(4) The mode of payment of any processing fees and periodic charges, such as monthly,
quarterly, or otherwise, and procedures for changing the mode of payment;
(5) Any limitations, exclusions, or exceptions regarding the receipt of discount medical
plan benefits;
(6) Any waiting periods for certain medical or ancillary services under the discount medical
plan;
(7) Procedures for obtaining discounts under the discount medical plan, such as requiring
members to contact the discount medical plan organization to make an appointment
with a provider on the member's behalf;
(8) Cancellation procedures, including information on the member's thirty-day cancellation
rights and refund requirements and procedures for obtaining refunds;
(9) Renewal, termination, and cancellation terms and conditions;
(10) Procedures for adding new members to a family discount medical plan, if applicable;
(11) Procedures for filing complaints under the discount medical plan organization's
complaint system and information that, if the member remains dissatisfied after
completing the organization's complaint system, the plan member may contact the local
insurance department in the member's state; and
(12) The name and mailing address of the registered discount medical plan organization or
other entity where the member can make inquiries about the plan, send cancellation
notices, and file complaints.
Section
43.
That chapter
58-17C
be amended by adding thereto a NEW SECTION to read as
follows:
Each discount medical plan organization shall provide the director at least thirty days advance
notice of any change in the discount medical plan organization's name, principal business address,
mailing address, or internet website address.
Section
44.
That
§
58-17C-104
be amended to read as follows:
58-17C-104.
Any person, directly or indirectly, offering a plan or program providing a discount
on the fees of any provider of health care goods or services,
Any discount medical plan
organization
that is not offered directly by a health carrier as provided by this chapter, shall register
in a format as prescribed by the director and shall file reports and conduct business under the same
standards as required of utilization review organizations in accordance with provisions of §§ 58-
17C-65 to 58-17C-66, inclusive. No health carrier may offer or provide coverage through a person
not registered but required to be registered pursuant to §§ 58-17C-104 to 58-17C-108, inclusive.
Any plan or program that is registered pursuant to § 58-17C-20 is not required to maintain a
separate registration pursuant to §§ 58-17C-104 to 58-17C-108, inclusive.
A
Any
plan or program
of discounted goods or services that is offered by a health carrier in conjunction with a health
benefit plan, as defined in §§ 58-18-42 and 58-17-66(9),
or
a medicare supplement policy as
defined in § 58-17A-1,
or other insurance product that is offered by an authorized insurer and that
is subject to the jurisdiction of the director
is not required to be registered pursuant to §§ 58-17C-
104 to 58-17C-108, inclusive.
A plan or program offered by a health care provider as defined in
§ 34-12C-1 is not required to register pursuant to §§ 58-17C-104 to 58-17C-108, inclusive, if the
health care provider does not charge for the plan or program.
Section
45.
That
§
58-17C-106
be amended to read as follows:
58-17C-106.
No person subject to registration pursuant to § 58-17C-104 may receive personal
information, money, or other consideration for enrollment in a plan or program until the consumer
has signed a contract or agreement with the person and no later than at the time the contract is
signed, provides, at a minimum, the following information, disclosed in a clear and conspicuous
manner:
(1)
The name, true address, telephone number, and website address of the registered person
who is responsible for customer service;
(2)
A detailed description of the plan or program, including the goods and services covered
and all exemptions and discounts that apply to each category thereof;
(3)
All costs associated with the plan or program, including any sign-up fee and any
recurring costs;
(4)
An internet website that is updated regularly or a paper copy where the consumer can
access the names and addresses of all current participating providers in the consumer's
area;
(5)
A statement of the consumer's right to return the plan or program within thirty days of
its delivery to the person or agent through whom it was purchased and to have all costs
of the plan or program, excluding a nominal process fee refunded if, after examination
of the plan or program, the purchaser is not satisfied with it for any reason;
(6)
A statement of the consumer's right to terminate the plan or program at any time by
providing written notice or other notice, the form to be used for the termination notice,
and the address where the notice is to be sent if different than the address provided in
subdivision (1); and
(7)
Notice that the consumer is not obligated to make any further payments under the plan
or program, nor is the consumer entitled to any benefits under the plan or program for
any period of time after the last month for which payment has been made
;
(8) That the plan is not insurance;
(9) That the range of discounts for medical or ancillary services provided under the plan
will vary depending on the type of provider and medical or ancillary service received;
(10) That the plan does not make payments to providers for the medical or ancillary services
received under the discount medical plan;
(11) That the plan member is obligated to pay for all medical or ancillary services, but will
receive discount from those providers that have contracted with the discount medical
plan organization
.
The requirement that the contract or agreement be signed prior to any money or consideration
being obtained does not apply to a transaction in which payment by the consumer is made by credit
card or by means of a telephonic transaction so long as the disclosures required by this section are
provided to the consumer by way of postal mail, facsimile, or electronic mail within ten business
days of the consumer's enrollment.
Section
46.
Nothing in this Act may be construed to discharge any requirements imposed by
subdivision 37-24-6(12).
Signed February 28, 2006