HOUSE BILL No. 5151 November 30, 1999, Introduced by Rep. DeWeese and referred to the Committee on Employment Relations, Training and Safety. A bill to permit and regulate physicians negotiating with certain health benefit plans; to prescribe certain powers and responsibilities of certain state departments and agencies; and to regulate certain persons who negotiate on behalf of physicians. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 1. As used in this act: 2 (a) "Commissioner" means the state insurance commissioner. 3 (b) "Health benefit plan" means health coverage as defined 4 in section 3(1). 5 (c) "Physicians' representative" means a third party, 6 including a member of the physicians who will engage in joint 7 negotiations, who is authorized by physicians to negotiate on 8 their behalf with health benefit plans over contractual terms and 9 conditions affecting those physicians. 04473'99 DKH 2 1 Sec. 3. (1) This act applies only to a health benefit plan 2 that provides for expense-incurred hospital, medical, or surgical 3 benefits, including an individual, group, or nongroup policy, 4 certificate, or contract or individual, group, or nongroup evi- 5 dence of health coverage or similar coverage document offered by 6 any of the following: 7 (a) A health insurer operating under the insurance code of 8 1956, 1956 PA 218, MCL 500.100 to 500.8302, including a fraternal 9 benefit society operating under chapter 81a of the insurance code 10 of 1956, 1956 PA 218, MCL 500.8161 to 500.8199a, and a multiple 11 employer welfare agreement that holds a certificate of authority 12 under chapter 70 of the insurance code of 1956, 1956 PA 218, MCL 13 500.7001 to 500.7090. 14 (b) A health maintenance organization operating under part 15 210 of the public health code, 1978 PA 368, MCL 333.21001 to 16 333.21098. 17 (c) A nonprofit health care corporation operating under the 18 nonprofit health care corporation reform act, 1980 PA 350, MCL 19 550.1101 to 550.1704. 20 (d) A person operating a system of health care under section 21 21042 of the public health code, 1978 PA 368, MCL 333.21042. 22 (e) A medicaid managed care plan under the medicaid managed 23 care delivery system established under state law. 24 (f) The MIChild program established under state law. 25 (2) This act does not apply to any of the following: 26 (a) A plan that provides coverage for any of the following: 04473'99 3 1 (i) Only for a specified disease or other limited benefit. 2 (ii) Only for accidental death or dismemberment. 3 (iii) For wages or payments in lieu of wages for a period 4 during which an employee is absent from work because of sickness 5 or injury. 6 (iv) As a supplement to liability insurance. 7 (v) For credit insurance. 8 (vi) Only for dental or vision care. 9 (vii) Only for indemnity for hospital confinement. 10 (b) A medicare supplemental policy as defined by section 11 1882(g)(1) of part C of title XVIII of the social security act, 12 42 U.S.C. 1395ss. 13 (c) Worker's compensation insurance coverage. 14 (d) Medical payment insurance coverage issued as part of a 15 motor vehicle insurance policy. 16 (e) A long-term care policy, including a nursing home indem- 17 nity policy, unless the commissioner determines that the policy 18 provides benefit coverage so comprehensive that the policy is a 19 health benefit plan under this act. 20 Sec. 5. Competing physicians within the service area of a 21 health benefit plan may meet and communicate for the purpose of 22 jointly negotiating the following terms and conditions of con- 23 tracts with the health benefit plan: 24 (a) Practices and procedures to assess and improve the 25 delivery of effective, cost efficient preventive health care 26 services, including childhood immunizations, prenatal care, and 27 mammograms and other cancer screening tests or procedures. 04473'99 4 1 (b) Practices and procedures to encourage early detection 2 and effective, cost efficient management of diseases and ill- 3 nesses in children. 4 (c) Practices and procedures to assess and improve the 5 delivery of women's medical and health care, including menopause 6 and osteoporosis. 7 (d) Clinical criteria for effective, cost efficient disease 8 management programs, including diabetes, asthma, and cardiovascu- 9 lar disease. 10 (e) Practices and procedures to encourage and promote 11 patient education and treatment compliance, including parental 12 involvement with their children's health care. 13 (f) Practices and procedures to identify, correct, and pre- 14 vent potentially fraudulent activities. 15 (g) Practices and procedures for the effective, cost effi- 16 cient use of outpatient surgery. 17 (h) Clinical practice guidelines and coverage criteria. 18 (i) Administrative procedures, including methods and timing 19 of physician payment for services. 20 (j) Dispute resolution procedures relating to disputes 21 between health benefit plans and physicians. 22 (k) Patient referral procedures. 23 (l) Formulation and application of physician reimbursement 24 methodology. 25 (m) Quality assurance programs. 26 (n) Health service utilization review procedures. 04473'99 5 1 (o) Health benefit plan physician selection and termination 2 criteria. 3 (p) The inclusion or alteration of terms and conditions to 4 the extent they are the subject of government regulation prohib- 5 iting or requiring the particular term or condition in question, 6 provided, however, that such restriction does not limit physician 7 rights to jointly petition government for a change in this gov- 8 ernment regulation. 9 Sec. 7. Except as provided in section 9, competing physi- 10 cians shall not meet and communicate for the purposes of jointly 11 negotiating the following terms and conditions of contracts with 12 health benefit plans: 13 (a) The fees or prices for services, including those arrived 14 at by applying any reimbursement methodology procedures. 15 (b) The conversion factors in a resource-based relative 16 value scale reimbursement methodology or similar methodologies. 17 (c) The amount of any discount on the price of services to 18 be rendered by physicians. 19 (d) The dollar amount of capitation or fixed payment for 20 health services rendered by physicians to health benefit plan 21 enrollees. 22 Sec. 9. (1) Competing physicians within the service area of 23 a health benefit plan may jointly negotiate the terms and condi- 24 tions specified in section 7 if the health benefit plan has sub- 25 stantial market power and those terms and conditions have already 26 affected or threatened to adversely affect the quality and 04473'99 6 1 availability of patient care. The commissioner shall determine 2 what constitutes substantial market power. 3 (2) The commissioner in conjunction with the department of 4 community health and the department of consumer and industry 5 services may collect and investigate information necessary to 6 determine, on an annual basis, both of the following: 7 (a) The average number of covered lives per month per county 8 by every health benefit plan in the state. 9 (b) The annual impact of this act on average physician fees 10 in this state. 11 Sec. 11. Competing health care physicians' exercise of 12 joint negotiation rights under sections 5 and 9 shall conform to 13 the following criteria: 14 (a) Physicians may communicate with each other with respect 15 to the contractual terms and conditions to be negotiated with a 16 health benefit plan. 17 (b) Physicians may communicate with the third party who is 18 authorized to negotiate on their behalf with health benefit plans 19 over these contractual terms and conditions. 20 (c) The third party is the sole party authorized to negoti- 21 ate with health benefit plans on behalf of the physicians as a 22 group. 23 (d) At the option of each physician, the physicians may 24 agree to be bound by the terms and conditions negotiated by the 25 third party authorized to represent their interests. 26 (e) Health benefit plans communicating or negotiating with 27 the physicians' representative shall remain free to contract with 04473'99 7 1 or offer different contract terms and conditions to individual 2 competing physicians. 3 (f) The physicians' representative shall comply with section 4 13. 5 Sec. 13. (1) Before engaging in any joint negotiations with 6 health benefit plans on behalf of physicians, any person or 7 organization proposing to act or acting as a representative of 8 physicians under this act shall furnish, for the commissioner's 9 approval, a report identifying all of the following: 10 (a) The representative's name and business address. 11 (b) The names and addresses of the physicians who will be 12 represented by the identified representative. 13 (c) The relationship of the physicians requesting joint rep- 14 resentation to the total population of physicians in a geographic 15 service area. 16 (d) The health benefit plans with which the representative 17 intends to negotiate on behalf of the identified physicians. 18 (e) The proposed subject matter of the negotiations or dis- 19 cussions with the identified health benefit plans. 20 (f) The representative's plan of operation and procedures to 21 ensure compliance with this section. 22 (g) The expected impact of the negotiations on the quality 23 of patient care. 24 (h) The benefits of a contract between the identified health 25 benefit plan and physicians. 26 (2) After the parties identified in the initial filing have 27 reached an agreement, any person or organization proposing to act 04473'99 8 1 or acting as a representative of physicians under this act shall 2 furnish, for the commissioner's approval, a copy of the proposed 3 contract and plan of action. Within 14 days of a health benefit 4 plan decision declining negotiation, terminating negotiation, or 5 failing to respond to a request for negotiation, the representa- 6 tive shall report to the commissioner the end of negotiations. 7 If negotiations resume within 60 days of this notification to the 8 commissioner, the representative shall be permitted to renew the 9 previously filed report without submitting a new report for 10 approval. 11 Sec. 15. (1) The commissioner shall either approve or dis- 12 approve an initial filing, supplemental filing, or a proposed 13 contract within 30 days of each filing. If disapproved, the com- 14 missioner shall furnish a written explanation of any deficiencies 15 along with a statement of specific remedial measures as to how 16 the deficiencies could be corrected. A representative who fails 17 to obtain the commissioner's approval is considered to act out- 18 side the authority granted under this act. 19 (2) The commissioner shall approve a request to enter into 20 joint negotiations or a proposed contract if the commissioner 21 determines that the applicants have demonstrated that the likely 22 benefits resulting from the joint negotiation or proposed con- 23 tract outweigh the disadvantages attributable to a reduction in 24 competition that may result from the joint negotiation or pro- 25 posed contract. The joint negotiation shall represent no more 26 than 10% of the physicians in a health benefit plan's defined 27 geographic service area except in cases where in conformance with 04473'99 9 1 this subsection conditions support the approval of a greater or 2 lesser percentage. 3 (3) An approval of the initial filing by the commissioner is 4 effective for all subsequent negotiations between the parties 5 specified in the initial filing. 6 (4) If the commissioner does not issue a written approval or 7 rejection of an initial filing, supplemental filing, or proposed 8 contract as provided in subsection (1), the applicant shall have 9 the right to petition a district court for a mandamus order 10 requiring the commissioner to approve or disapprove the contents 11 of the filing immediately. 12 Sec. 17. (1) This act shall not be construed to enable phy- 13 sicians to jointly coordinate any cessation, reduction, or limi- 14 tation of health care services. The representative of the physi- 15 cians shall advise physicians of the provisions of this act and 16 shall warn physicians of the potential for legal action against 17 physicians who violate state or federal antitrust laws when 18 acting outside the authority of this act. 19 (2) This act shall not be construed to prohibit physicians 20 from negotiating the terms and conditions of contracts as permit- 21 ted by other state or federal law. 22 Sec. 19. Each person who acts as the representative of 23 negotiating parties under this act shall pay to the insurance 24 commissioner a fee to act as a representative. The commissioner, 25 by rule established under the administrative procedures act of 26 1969, 1969 PA 306, MCL 24.201 to 24.328, shall set fees in 27 amounts reasonable and necessary to cover the costs incurred by 04473'99 10 1 the state in administering this act. A fee collected under this 2 act shall be deposited in the state treasury to the credit of the 3 operating fund from which the expense was incurred. 4 Sec. 21. This act takes effect October 1, 2000. 04473'99 Final page. DKH