
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 23, 2000]
[Document not affected by Public Laws enacted between
  January 23, 2000 and December 4, 2001]
[CITE: 42USC1395w-25]

 
                 TITLE 42--THE PUBLIC HEALTH AND WELFARE
 
                       CHAPTER 7--SOCIAL SECURITY
 
        SUBCHAPTER XVIII--HEALTH INSURANCE FOR AGED AND DISABLED
 
                     Part C--Medicare+Choice Program
 
Sec. 1395w-25. Organizational and financial requirements for 
        Medicare+Choice organizations; provider-sponsored organizations
        

(a) Organized and licensed under State law

                           (1) In general

        Subject to paragraphs (2) and (3), a Medicare+Choice 
    organization shall be organized and licensed under State law as a 
    risk-bearing entity eligible to offer health insurance or health 
    benefits coverage in each State in which it offers a Medicare+Choice 
    plan.

     (2) Special exception for provider-sponsored organizations

        (A) In general

            In the case of a provider-sponsored organization that seeks 
        to offer a Medicare+Choice plan in a State, the Secretary shall 
        waive the requirement of paragraph (1) that the organization be 
        licensed in that State if--
                (i) the organization files an application for such 
            waiver with the Secretary by not later than November 1, 
            2002, and
                (ii) the Secretary determines, based on the application 
            and other evidence presented to the Secretary, that any of 
            the grounds for approval of the application described in 
            subparagraph (B), (C), or (D) has been met.

        (B) Failure to act on licensure application on a timely basis

            The ground for approval of such a waiver application 
        described in this subparagraph is that the State has failed to 
        complete action on a licensing application of the organization 
        within 90 days of the date of the State's receipt of a 
        substantially complete application. No period before August 5, 
        1997, shall be included in determining such 90-day period.

        (C) Denial of application based on discriminatory treatment

            The ground for approval of such a waiver application 
        described in this subparagraph is that the State has denied such 
        a licensing application and--
                (i) the standards or review process imposed by the State 
            as a condition of approval of the license imposes any 
            material requirements, procedures, or standards (other than 
            solvency requirements) to such organizations that are not 
            generally applicable to other entities engaged in a 
            substantially similar business, or
                (ii) the State requires the organization, as a condition 
            of licensure, to offer any product or plan other than a 
            Medicare+
            Choice plan.

        (D) Denial of application based on application of solvency 
                requirements

            With respect to waiver applications filed on or after the 
        date of publication of solvency standards under section 1395w-
        26(a) of this title, the ground for approval of such a waiver 
        application described in this subparagraph is that the State has 
        denied such a licensing application based (in whole or in part) 
        on the organization's failure to meet applicable solvency 
        requirements and--
                (i) such requirements are not the same as the solvency 
            standards established under section 1395w-26(a) of this 
            title; or
                (ii) the State has imposed as a condition of approval of 
            the license documentation or information requirements 
            relating to solvency or other material requirements, 
            procedures, or standards relating to solvency that are 
            different from the requirements, procedures, and standards 
            applied by the Secretary under subsection (d)(2) of this 
            section.

        For purposes of this paragraph, the term ``solvency 
        requirements'' means requirements relating to solvency and other 
        matters covered under the standards established under section 
        1395w-26(a) of this title.

        (E) Treatment of waiver

            In the case of a waiver granted under this paragraph for a 
        provider-sponsored organization with respect to a State--
            (i) Limitation to State

                The waiver shall be effective only with respect to that 
            State and does not apply to any other State.
            (ii) Limitation to 36-month period

                The waiver shall be effective only for a 36-month period 
            and may not be renewed.
            (iii) Conditioned on compliance with consumer 
                    protection and quality standards

                The continuation of the waiver is conditioned upon the 
            organization's compliance with the requirements described in 
            subparagraph (G).
            (iv) Preemption of State law

                Any provisions of law of that State which relate to the 
            licensing of the organization and which prohibit the 
            organization from providing coverage pursuant to a contract 
            under this part shall be superseded.

        (F) Prompt action on application

            The Secretary shall grant or deny such a waiver application 
        within 60 days after the date the Secretary determines that a 
        substantially complete waiver application has been filed. 
        Nothing in this section shall be construed as preventing an 
        organization which has had such a waiver application denied from 
        submitting a subsequent waiver application.

        (G) Application and enforcement of State consumer protection and 
                quality standards

            (i) In general

                A waiver granted under this paragraph to an organization 
            with respect to licensing under State law is conditioned 
            upon the organization's compliance with all consumer 
            protection and quality standards insofar as such standards--
                    (I) would apply in the State to the organization if 
                it were licensed under State law;
                    (II) are generally applicable to other 
                Medicare+Choice organizations and plans in the State; 
                and
                    (III) are consistent with the standards established 
                under this part.

          Such standards shall not include any standard preempted under 
            section 1395w-26(b)(3)(B) of this title.
            (ii) Incorporation into contract

                In the case of such a waiver granted to an organization 
            with respect to a State, the Secretary shall incorporate the 
            requirement that the organization (and Medicare+Choice plans 
            it offers) comply with standards under clause (i) as part of 
            the contract between the Secretary and the organization 
            under section 1395w-27 of this title.
            (iii) Enforcement

                In the case of such a waiver granted to an organization 
            with respect to a State, the Secretary may enter into an 
            agreement with the State under which the State agrees to 
            provide for monitoring and enforcement activities with 
            respect to compliance of such an organization and its 
            Medicare+Choice plans with such standards. Such monitoring 
            and enforcement shall be conducted by the State in the same 
            manner as the State enforces such standards with respect to 
            other Medicare+Choice organizations and plans, without 
            discrimination based on the type of organization to which 
            the standards apply. Such an agreement shall specify or 
            establish mechanisms by which compliance activities are 
            undertaken, while not lengthening the time required to 
            review and process applications for waivers under this 
            paragraph.

        (H) Report

            By not later than December 31, 2001, the Secretary shall 
        submit to the Committee on Ways and Means and the Committee on 
        Commerce of the House of Representatives and the Committee on 
        Finance of the Senate a report regarding whether the waiver 
        process under this paragraph should be continued after December 
        31, 2002. In making such recommendation, the Secretary shall 
        consider, among other factors, the impact of such process on 
        beneficiaries and on the long-term solvency of the program under 
        this subchapter.

        (3) Licensure does not substitute for or constitute 
                                certification

        The fact that an organization is licensed in accordance with 
    paragraph (1) does not deem the organization to meet other 
    requirements imposed under this part.

(b) Assumption of full financial risk

    The Medicare+Choice organization shall assume full financial risk on 
a prospective basis for the provision of the health care services for 
which benefits are required to be provided under section 1395w-22(a)(1) 
of this title, except that the organization--
        (1) may obtain insurance or make other arrangements for the cost 
    of providing to any enrolled member such services the aggregate 
    value of which exceeds such aggregate level as the Secretary 
    specifies from time to time,
        (2) may obtain insurance or make other arrangements for the cost 
    of such services provided to its enrolled members other than through 
    the organization because medical necessity required their provision 
    before they could be secured through the organization,
        (3) may obtain insurance or make other arrangements for not more 
    than 90 percent of the amount by which its costs for any of its 
    fiscal years exceed 115 percent of its income for such fiscal year, 
    and
        (4) may make arrangements with physicians or other health care 
    professionals, health care institutions, or any combination of such 
    individuals or institutions to assume all or part of the financial 
    risk on a prospective basis for the provision of basic health 
    services by the physicians or other health professionals or through 
    the institutions.

(c) Certification of provision against risk of insolvency for unlicensed 
        PSOs

                           (1) In general

        Each Medicare+Choice organization that is a provider-sponsored 
    organization, that is not licensed by a State under subsection (a) 
    of this section, and for which a waiver application has been 
    approved under subsection (a)(2) of this section, shall meet 
    standards established under section 1395w-26(a) of this title 
    relating to the financial solvency and capital adequacy of the 
    organization.

      (2) Certification process for solvency standards for PSOs

        The Secretary shall establish a process for the receipt and 
    approval of applications of a provider-sponsored organization 
    described in paragraph (1) for certification (and periodic 
    recertification) of the organization as meeting such solvency 
    standards. Under such process, the Secretary shall act upon such a 
    certification application not later than 60 days after the date the 
    application has been received.

(d) ``Provider-sponsored organization'' defined

                           (1) In general

        In this part, the term ``provider-sponsored organization'' means 
    a public or private entity--
            (A) that is established or organized, and operated, by a 
        health care provider, or group of affiliated health care 
        providers,
            (B) that provides a substantial proportion (as defined by 
        the Secretary in accordance with paragraph (2)) of the health 
        care items and services under the contract under this part 
        directly through the provider or affiliated group of providers, 
        and
            (C) with respect to which the affiliated providers share, 
        directly or indirectly, substantial financial risk with respect 
        to the provision of such items and services and have at least a 
        majority financial interest in the entity.

                     (2) Substantial proportion

        In defining what is a ``substantial proportion'' for purposes of 
    paragraph (1)(B), the Secretary--
            (A) shall take into account the need for such an 
        organization to assume responsibility for providing--
                (i) significantly more than the majority of the items 
            and services under the contract under this section through 
            its own affiliated providers; and
                (ii) most of the remainder of the items and services 
            under the contract through providers with which the 
            organization has an agreement to provide such items and 
            services,

        in order to assure financial stability and to address the 
        practical considerations involved in integrating the delivery of 
        a wide range of service providers;
            (B) shall take into account the need for such an 
        organization to provide a limited proportion of the items and 
        services under the contract through providers that are neither 
        affiliated with nor have an agreement with the organization; and
            (C) may allow for variation in the definition of substantial 
        proportion among such organizations based on relevant 
        differences among the organizations, such as their location in 
        an urban or rural area.

                           (3) Affiliation

        For purposes of this subsection, a provider is ``affiliated'' 
    with another provider if, through contract, ownership, or 
    otherwise--
            (A) one provider, directly or indirectly, controls, is 
        controlled by, or is under common control with the other,
            (B) both providers are part of a controlled group of 
        corporations under section 1563 of the Internal Revenue Code of 
        1986,
            (C) each provider is a participant in a lawful combination 
        under which each provider shares substantial financial risk in 
        connection with the organization's operations, or
            (D) both providers are part of an affiliated service group 
        under section 414 of such Code.

                             (4) Control

        For purposes of paragraph (3), control is presumed to exist if 
    one party, directly or indirectly, owns, controls, or holds the 
    power to vote, or proxies for, not less than 51 percent of the 
    voting rights or governance rights of another.

                (5) ``Health care provider'' defined

        In this subsection, the term ``health care provider'' means--
            (A) any individual who is engaged in the delivery of health 
        care services in a State and who is required by State law or 
        regulation to be licensed or certified by the State to engage in 
        the delivery of such services in the State, and
            (B) any entity that is engaged in the delivery of health 
        care services in a State and that, if it is required by State 
        law or regulation to be licensed or certified by the State to 
        engage in the delivery of such services in the State, is so 
        licensed.

                           (6) Regulations

        The Secretary shall issue regulations to carry out this 
    subsection.

(Aug. 14, 1935, ch. 531, title XVIII, Sec. 1855, as added Pub. L. 105-
33, title IV, Sec. 4001, Aug. 5, 1997, 111 Stat. 312.)

                       References in Text

    The Internal Revenue Code of 1986, referred to in subsec. (d)(3)(B), 
(D), is classified generally to Title 26, Internal Revenue Code.

                  Section Referred to in Other Sections

    This section is referred to in sections 1395w-21, 1395w-26, 1395w-
28, 1395cc of this title; title 26 section 501.
