Senate Bill No. 405
(By Senators Helmick, Schoonover, Jackson, Plymale, Ross and
[Introduced February 15, 1996; referred to the Committee
on Health and Human Resources; and then to the Committee on
A BILL to amend chapter sixteen of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, by adding
thereto a new article, designated article one-c, relating to
the formation, operation and regulation of health provider
cooperatives; construction of a health provider cooperative
as neither an insurer, health maintenance organization,
service or health care corporation nor the corporate
practice of medicine or other health care profession;
participation agreements; contracts with payors and
requirements for capitated or similar risk-sharing
contracts; review and approval of such contracts by the
commissioner of insurance and exemption from review by the health care cost review authority; evidence of financial
soundness to be filed with the commissioner of insurance and
termination of contracts if the health provider cooperative
is not solvent; prohibited practices and penalties therefor;
and enforcement and adoption of rules by the commissioner of
Be it enacted by the Legislature of West Virginia:
That chapter sixteen of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, be amended by
adding thereto a new article, designated article one-c, to read
ARTICLE 1C. HEALTH PROVIDER COOPERATIVES.
§16-1C-1. Legislative findings and intent.
The Legislature finds that:
(a) The goals of containing health care costs, improving
the quality of health care and increasing the access of this
state's citizens to health care services will be enhanced by the
expanded use of managed care and community-based delivery
(b) The use of both managed care and community-based
delivery systems will be expanded by the formation and operation of health provider networks.
(c) The formation and operation of health provider networks
is hindered by existing and proposed restrictions upon and
uncertainty regarding such networks' ability to contract with
third-party payors and self-insured persons to provide health
care services, including on a capitated basis.
(d) The citizens of this state subscribing to or benefiting
from subscriptions to or contracts with health provider networks
must be adequately protected against the insolvency of such
networks and assured of their continued coverage and receipt of
health care services.
(e) The formation, operation and regulation of health
provider cooperatives pursuant to this article will expand the
use of managed care and community-based delivery systems while
adequately protecting the citizens of this state.
(a) The term "capitation" means a fixed amount paid by a
payor to a health provider cooperative under contract with the
payor in exchange for the rendering of health care services.
(b) The term "commissioner" means the state commissioner of
(c) The term "enrollee," "member" or "subscriber" means an
individual who has been voluntarily enrolled in a managed care
plan provided by a health provider cooperative.
(d) The term "financially sound" or "fiscally sound" means
that, according to presently accepted actuarial standards of
practice, consistently applied and fairly stated, that the
payments to be made under a contract, together with estimated
investment earnings thereon, make adequate provision for the
anticipated cash flows required by the contractual obligations
and related expenses of the parties to the contract.
(e) The term "health care provider" means any physician,
hospital or other person or entity that is licensed or otherwise
authorized to provide health care services in this state.
(f) The term "health care services" means any services or
goods included in the furnishing to any individual of medical,
behavioral health or dental care, or hospitalization or incident
to the furnishing of the care or hospitalization, osteopathic
services, home health, health education or rehabilitation, as
well as the furnishing to any person of any and all other
services or goods for the purpose of preventing, alleviating,
curing or healing human illness or injury.
(g) The term "health provider cooperative" means a legal
entity organized and regulated under this article and operated to
provide health care services to enrollees of managed care plans
purchased by payors.
(h) The term "managed care plan" means the program or
programs of health care services offered to payors by a health
(i) The term "participant" means a health care provider or
an organization owned, controlled or affiliated with one or more
health care providers, including, without being limited to, a
professional corporation, partnership or other similar
(j) The term "payor" means any insurer or other person
responsible for providing payment for health care services,
including, but not limited to, the department of health and human
resources, the public employees insurance agency, the bureau of
workers' compensation or any other state agency, a health
maintenance organization or any self-insured person.
(k) The term "qualified independent actuary" means an
actuary who is a member of the American academy of actuaries or
the society of actuaries and has experience in establishing rates for entities similar to health provider cooperatives and who has
no financial or employment interest in the health provider
§16-1C-3. Organization; powers.
A health provider cooperative may be organized as a
corporation under article one, chapter thirty-one of this code,
as a limited liability company under article one-a, chapter
thirty-one of this code, or in any other form that constitutes a
legal entity under the laws of this state and shall have such
powers as are available under the applicable authorizing law. If
a provision of this article conflicts with such authorizing law,
the provision of this article shall apply. The state or federal
government or any agency or political subdivision of the state or
federal government may be a participant in a health provider
cooperative. A health provider cooperative shall not be
considered an insurer, health maintenance organization, hospital,
medical, dental or health service corporation, health care
corporation or any other person governed by chapter thirty-three
of this code. Operations of the health provider cooperative
shall not be construed as the corporate practice of medicine or
other health care profession prohibited by chapter thirty of this code: Provided, That each participant is licensed or otherwise
authorized under the laws of this state to provide the health
care services it is providing.
§16-1C-4. Participation agreements.
A health provider cooperative and its participants may
execute participation agreements permitting the participant to
provide some or all of their health care services through the
health provider cooperative to the enrollees of a managed care
§16-1C-5. Payor contracts.
A payor may execute contracts for the purchase of health
care services from a health provider cooperative in accordance
with this section. A contract between a health provider
cooperative and a payor may provide for payment by the payor on
a capitated or similar risk-sharing basis only if the following
(a) The contract shall be in writing;
(b) The contract shall provide:
(1) If the payor fails to pay for health care services as
set forth in the contract, the enrollee is not liable to the
health provider cooperative or the participant for any sums owed by the payor;
(2) A participant, agent, trustee or assignee thereof may
not maintain any action at law against an enrollee to collect
sums owed by the payor; and
(3) The health provider cooperative shall continue to
provide services to the enrollees for not less than thirty days
after a default by the payor under the payment provisions of the
(c) The contract shall be filed by the health provider
cooperative with the commissioner. Within thirty days of the
date the contract was filed, the commissioner shall review the
contract to determine if it includes evidence of the specific
procedures used to inform prospective enrollees of any
limitations imposed on the enrollee's right to receive care from
a health care provider of the enrollee's choice and if it
complies with the provisions of this section and section five of
this article. If the contract does not include such evidence or
does not so comply, the commissioner shall disapprove the
contract and shall notify the health provider cooperative of his
disapproval in writing not later than the forty-fifth day after
the date the contract was filed. If such disapproval has not been received by the forty-fifth day, the contract shall take
effect. The commissioner shall promulgate procedural rules
pursuant to chapter twenty-nine-a of this code to implement this
(d) Any contract approved under this section shall be
exempt from review by the health care cost review authority under
section twenty, article twenty-nine-b of this chapter.
§16-1C-6. Financial soundness.
(a) Prior to entering into any contract with a payor that
is not either licensed by the commissioner under chapter thirty-
three of this code or an agency of this state or the federal
government, which contract provides for capitation or any other
risk-sharing arrangement, the health provider cooperative shall
file with the commissioner evidence that it is financially sound.
For the purposes of this section a contract under which a health
provider cooperative assumes a corridor of risk not greater than
ten percent during its first year of operation and not greater
than twenty percent in any year thereafter shall not be
considered a risk-sharing arrangement. Such evidence shall
include, at a minimum, the following:
(1) Evidence that the health provider cooperative has positive working capital in the form of cash or equivalent liquid
assets at least equal to one month's claims;
(2) Either: (i) An opinion of a qualified independent
actuary, which states that the entry of the contract by the
health provider cooperative is financially sound, together with
an agreement to have a qualified independent actuary reexamine
the health provider cooperative's contract on not less than a
semiannual basis and provide the commissioner with an opinion
regarding such examination; or
(ii) Evidence that the health provider cooperative has
secured its performance under the contract with a policy of stop-
loss insurance or reinsurance of not less than two million
dollars, a letter of credit from a financial institution
satisfactory to the commission in an amount not less than two
million dollars, or a guarantee from an organization with a
surplus of at least two million dollars; and
(3) Audited financial statements from the most recent
fiscal year, together with an agreement to furnish such
statements to the commissioner each year, within ninety days of
the end of the fiscal year.
(b) If the commissioner determines at any time that a health provider cooperative is not solvent, all contracts shall
be terminated: Provided, That the participants of the insolvent
health provider cooperative shall continue to provide health care
services to the enrollees for sixty days after such termination.
§16-1C-7. Prohibited practices; penalties.
(a) It is unlawful for any person or any agent, officer or
employee thereof to coerce or require any person to agree, either
in writing or orally, not to join or become or remain a
participant in any health provider cooperative as a condition of
securing or retaining a contract for health care services with
(b) It is unlawful for any person or any combination of
persons or any agents, officers or employees thereof to engage in
acts or coercion, intimidation or boycott of, or any refusal to
deal with, any health care provider because that provider is
participating or may participate in a health provider
(c) It is unlawful for any health provider cooperative to
engage in any acts of coercion, intimidation or boycott of, or
any concerted refusal to deal with, any payor that can
demonstrate to the health provider cooperative, either through licensure by the commissioner or otherwise, that it is
financially stable, which payor seeks to contract with the
cooperative on a competitive, reasonable and nonexclusive basis.
(d) Nothing in this section shall be construed to require
a health provider cooperative to admit as a participant any
health care provider that applies and agrees to meet the
requirements of participation.
(e) Subject to subsections (a) through (c) of this section,
a health provider cooperative shall not be considered a
combination in restraint of trade, and any participation
agreements that contain provisions regarding the price the
cooperative will charge to payors or regarding the prices the
participants will charge to the cooperative, or regarding the
allocation of gains or losses among the participants, or
regarding the delivery, quality, allocation or location or health
care services to be provided, are not contracts that unreasonably
(f) Violation of any provision of this section shall be
considered a violation under section eighteen, chapter forty-
eight of this code.
§16-1C-8. Enforcement; rules.
This article shall be enforced by the commissioner, who
shall have all the powers with respect thereto provided by
article two, chapter thirty-three of this code. The commissioner
may adopt rules to implement this article but shall not expand
the restrictions upon health provider cooperatives set forth in
this article and shall amend any rules in existence on the date
of enactment of this article in conflict with this article.
NOTE: The purpose of this bill is to authorize the
formation, operation and regulation of health provider
cooperatives, which are neither insurers or health maintenance
organizations nor the corporate practice of medicine; to
authorize participation agreements among the participants in the
cooperative; to set forth requirements for payor contracts that
provide for payment on a capitated or similar risk-sharing basis;
to require such payor contracts to be filed with and approved by
the Insurance Commissioner but exempt from review by the Health
Care Cost Review Authority; to require a health provider
cooperative to provide the Insurance Commissioner with evidence
of its financial soundness and annual financial statements; to
provide for termination of contracts of an insolvent cooperative
but continued services for 60 days; to set forth prohibited
practices and the penalties therefor; and to provide for
enforcement of the article and the adoption of rules for its
implementation by the Insurance Commissioner.
This is a new article; therefore, underlining and strike-
throughs have been omitted.