It is enacted by the General Assembly as follows:

SECTION 1. Sections 27-41-2, 27-41-3, 27-41-19 of the General Laws in Chapter 27-41 entitled "Health Maintenance Organizations" are hereby amended to read as follows:

{ADD 27-41-2. Definitions. -- ADD} (a) "Covered health services" means the services that a health maintenance organization contracts with enrollees and enrolled groups to provide or otherwise make available to an enrolled participant.

(b) "Director" means the director of the department of business regulation or his or her duly appointed agents.

(c) "Employee" means any person who has entered into the employment of or works under a contract of service or apprenticeship with any employer. It shall not include a person who has been employed for less than thirty days by his or her employer, nor shall it include a person who works less than an average of 30 hours per week. For purposes of this chapter, the term "employee" shall mean a person employed by an "employer" as defined in subsection (d). Except as otherwise provided herein the terms "employee" and "employer" are to be defined according to the rules and regulations of the department of employment and training.

(d) "Employer" means any person, partnership, association, trust, estate, or corporation, whether foreign or domestic, or the legal representative, trustee in bankruptcy, receiver, or trustee thereof, or the legal representative of a deceased person, including the state of Rhode Island and each city and town therein, which has in its employ one or more individuals during any calendar year after May 17, 1983. For purposes of this section, the term "employer" shall refer only to an employer with persons employed within the state of Rhode Island.

(e) "Enrollee" means an individual who has been enrolled in a health maintenance organization.

(f) "Evidence of coverage" means any certificate, agreement, or contract issued to an enrollee setting out the coverage to which the enrollee is entitled.

(g) "Health care services" means any services included in the furnishing to any individual of medical, podiatric, or dental care, or hospitalization, or incident to the furnishing of that care or hospitalization, as well as the furnishing to any person of any and all other services for the purpose of preventing, alleviating, curing, or healing human illness, injury, or physical disability.

(h) "Health maintenance organization" means a single public or private organization which:

(1) Provides or otherwise makes available to enrolled participants health care services, including at least the following basic health care services: usual physician services, hospitalization, laboratory, x-ray, emergency, and preventive services, and out of area coverage, and the services of licensed midwives;

(2) Is compensated, except for copayments for the provision of the basic health care services listed in subsection (h)(1) of this section to enrolled participants on a predetermined periodic rate basis; and

(3)(i) Provides physicians' services primarily:

(A) Directly through physicians who are either employees or partners of the organization; or

(B) Through arrangements with individual physicians or one or more groups of physicians organized on a group practice or individual practice basis;

(ii) "Health maintenance organization" does not include prepaid plans offered by entities regulated under chapter 1, 2, 19, or 20 of this title which do not meet the criteria above and do not purport to be health maintenance organizations;

(4) Provides the services of licensed midwives primarily:

(i) Directly through licensed midwives who are either employees or partners of the organization; or

(ii) Through arrangements with individual licensed midwives or one (1) or more groups of licensed midwives organized on a group practice or individual practice basis.

(i) "Licensed midwife" means any midwife licensed pursuant to section 23-13-9.

(j) "Physician" shall include podiatrist as defined in chapter 29 of this title 5.

(k) "Private organization" means a legal corporation with a policy making and governing body.

(l) "Provider" means any physician, hospital, licensed midwife, or other person which is licensed or otherwise authorized in this state to furnish health care services.

(m) "Public organization" means an instrumentality of government.

(n) "Uncovered expenditures" means the costs of health care services that are covered by a health maintenance organization, but that are not guaranteed, insured, or assumed by a person or organization other than the health maintenance organization. Expenditures to a provider that agrees not to bill enrollees under any circumstances are excluded from this definition.

{ADD (o) "Material modification" means only systemic changes to the information filed under section 27-41-3 of this chapter. ADD}

{ADD 27-41-3. Establishment of health maintenance organizations. -- ADD} (a)(1) Notwithstanding chapter 5.1 of title 7, sections 27-2-22, 27-19-4, 27-20-4, 27-20.1-2, 27-20.2-2, or any other law of this state to the contrary, any public or private organization may apply to the director of business regulation for and obtain a license to establish and operate a health maintenance organization in compliance with this act. No public or private organization shall establish or operate a health maintenance organization in this state, without obtaining a license under this chapter. A foreign corporation may qualify under this chapter, subject to its registration to do business in this state as a foreign corporation under section 7-1.1-99;

(2) Notwithstanding anything to the contrary in section 7-6-4, a non-profit corporation may be organized for the purpose of a health maintenance organization and that corporation shall not be subject to limits in its assets except as provided herein.

(b) Each application for a license shall be verified by an officer or authorized representative of the applicant, shall be in a form prescribed by the director in consultation with the director of health, and shall set forth or be accompanied by the following:

(1) A copy of the organizational documents of the applicant, such as the articles of incorporation;

(2) A copy of the by-laws, rules and 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 to be 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 of the corporation;

(4) A copy of any contract made or to be made {ADD , including any revisions to such documentary ADD} between any providers or persons listed in subsection (b)(3) and the applicant;

(5) A copy of the form of evidence of coverage to be issued to the enrollees;

(6) A copy of the form of the group contract, if any, which 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 regular certified financial statement shall be deemed to satisfy this requirement unless the director directs 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 the health maintenance organization, a financial plan which includes a projection of the initial 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 duly executed by the applicant, if not domiciled in this state, appointing the director and his or her successors in office, and duly 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 utilized as required under section 27-41-11;

(12) A description of the procedures and programs to be implemented to meet the quality of health care requirements in section 27-41-4(a)(2);

(13) A description of the mechanism by which enrollees will be afforded an opportunity to participate in matters of policy and operation under section 27-41-6(b); and

{ADD (14) A description of the provider networks to be utilized to provide health care services to enrollees; ADD}

{DEL (14) DEL} {ADD (16) ADD} Such other information as the director in consultation with the director of health may require to make the determinations required in section 27-41-4.

(c) An applicant or a licensed health maintenance organization shall, unless otherwise provided for in this act, file a notice describing any material modification of the operation {ADD including but not limited to systematic changes in provider networks and mechanisms for the management and control of the use of covered services by enrollees, ADD} set out in the information required by subsection (b). The notice shall be filed with the director {ADD and with the director of health ADD} prior to the modification. If the director {ADD or the director of health ADD} does not disapprove within ninety (90) days of the filing, the modification shall be deemed approved.

(d) An applicant or a licensed health maintenance organization shall file all contracts of reinsurance. Any agreement between the organization and an insurer shall be subject to the laws of this state regarding reinsurance. All reinsurance agreements and any modifications thereto must be filed and approved. Reinsurance agreements shall remain in full force and effect for at least ninety (90) days following written notice by registered mail of cancellation by either party to the director.

{ADD 27-41-19. Rules and regulations. -- ADD} {ADD No later than January 1, 1996, ADD} {DEL T DEL} {ADD t ADD} he director of business regulation and the director of health {DEL may, DEL} {ADD shall ADD} after notice and hearing, promulgate reasonable rules and regulations, as are necessary or proper to carry out the provisions of this chapter. Those rules and regulations shall be subject to review in accordance with the provisions of chapter 35 of title 42.

SECTION 2. This act shall take effect upon passage.