Senate Bill 2496
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Florida Senate - 2000 SB 2496
By Senator Forman
32-812A-00
1 A bill to be entitled
2 An act relating to health care coverage;
3 amending s. 627.402, F.S.; defining the term
4 "insurer conduct"; amending s. 627.410, F.S.;
5 prescribing requirements for determining
6 whether a health insurance policy provides
7 benefits that are reasonable in relation to
8 premium rates; providing disclosure
9 requirements regarding rates; revising certain
10 filing requirements regarding actuarial
11 justification; deleting certain provisions that
12 establish presumptions regarding the
13 reasonableness of rates; amending s. 627.411,
14 F.S.; authorizing the Department of Insurance
15 to disapprove forms, rate manuals, or rate
16 schedules because of certain rates or rate
17 increases; creating s. 627.42396, F.S.;
18 requiring certain health insurance policies to
19 allow insureds to obtain drugs that are not
20 included in the insurer's drug formulary;
21 amending s. 641.31, F.S.; providing
22 requirements for determining whether a health
23 maintenance contract provides benefits that are
24 reasonable in relation to premium rates;
25 providing disclosure requirements regarding
26 premium rates; authorizing the Department of
27 Insurance to disapprove rate changes that
28 exceed certain standards; requiring certain
29 health maintenance contracts to allow members
30 to obtain drugs that are not included in the
31 health maintenance organization's drug
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1 formulary; amending s. 641.315, F.S.;
2 prohibiting certain referrals to collection
3 agencies; providing an effective date.
4
5 Be It Enacted by the Legislature of the State of Florida:
6
7 Section 1. Subsection (3) is added to section 627.402,
8 Florida Statutes, to read:
9 627.402 Definitions; specified certificates not
10 included.--As used in this part, the term:
11 (3) "Insurer conduct" means the following actions or
12 inactions of an insurer or health maintenance organization
13 with respect to a policy form which result in inadequate rates
14 and the need for extraordinary rate increases:
15 (a) Failure to make a filing in compliance with s.
16 627.410(7) or s. 627.6745(2);
17 (b) Failure to correct a rate filing when the
18 department has presented information to the company at the
19 time the filing is approved which suggests that the rates are
20 inadequate and the company fails to adequately resolve the
21 department's concerns;
22 (c) Violation of applicable actuarial standards of
23 practice at the time of a filing;
24 (d) Failure to implement the underwriting standards
25 assumed in the pricing assumptions of the form; or
26 (e) The use of pricing assumptions that demonstrate a
27 pattern of product underpricing.
28 Section 2. Subsections (6), (7), and (8) of section
29 627.410, Florida Statutes, are amended to read:
30 627.410 Filing, approval of forms.--
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1 (6)(a) An insurer shall not deliver or issue for
2 delivery or renew in this state any health insurance policy
3 form until it has filed with the department a copy of every
4 applicable rating manual, rating schedule, change in rating
5 manual, and change in rating schedule; if rating manuals and
6 rating schedules are not applicable, the insurer must file
7 with the department applicable premium rates and any change in
8 applicable premium rates.
9 (b) The department may establish by rule, for each
10 type of health insurance form, procedures to be used in
11 ascertaining the reasonableness of benefits in relation to
12 premium rates and may, by rule, exempt from any requirement of
13 paragraph (a) any health insurance policy form or type thereof
14 (as specified in such rule) to which form or type such
15 requirements may not be practically applied or to which form
16 or type the application of such requirements is not desirable
17 or necessary for the protection of the public. With respect to
18 any health insurance policy form or type thereof which is
19 exempted by rule from any requirement of paragraph (a),
20 premium rates filed pursuant to ss. 627.640 and 627.662 shall
21 be for informational purposes.
22 (c) Every filing made pursuant to this subsection
23 shall be made within the same time period provided in, and
24 shall be deemed to be approved under the same conditions as
25 those provided in, subsection (2).
26 (d) Every filing made pursuant to this subsection,
27 except disability income policies and accidental death
28 policies, shall be prohibited from applying the following
29 rating practices:
30 1. Select and ultimate premium schedules.
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1 2. Premium class definitions which classify insured
2 based on year of issue or duration since issue.
3 3. Attained age premium structures on policy forms
4 under which more than 50 percent of the policies are issued to
5 persons age 65 or over.
6 (e) Except as provided in subparagraph 1., an insurer
7 shall continue to make available for purchase any individual
8 policy form issued on or after October 1, 1993. A policy form
9 shall not be considered to be available for purchase unless
10 the insurer has actively offered it for sale in the previous
11 12 months.
12 1. An insurer may discontinue the availability of a
13 policy form if the insurer provides to the department in
14 writing its decision at least 30 days prior to discontinuing
15 the availability of the form of the policy or certificate.
16 After receipt of the notice by the department, the insurer
17 shall no longer offer for sale the policy form or certificate
18 form in this state.
19 2. An insurer that discontinues the availability of a
20 policy form pursuant to subparagraph 1. shall not file for
21 approval a new policy form providing similar benefits as the
22 discontinued form for a period of 5 years after the insurer
23 provides notice to the department of the discontinuance. The
24 period of discontinuance may be reduced if the department
25 determines that a shorter period is appropriate.
26 3. The experience of all policy forms providing
27 similar benefits shall be combined for all rating purposes.
28 (f) To satisfy the requirement that benefits are
29 reasonable in relationship to the premium rates, in addition
30 to any requirement established under paragraph (b), the
31 premium rate schedule must:
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1 1. Reflect only the actual and reasonable
2 administrative expenses of the insurer for the efficient
3 administration and maintenance of the affected forms;
4 2. Reflect a reasonable profit and contingency margin;
5 and
6 3. For coverage sold to an individual who pays up to a
7 stated predetermined amount per day or per confinement for one
8 or more named conditions, named diseases, or accidental
9 injury, or pays based on the costs of specified health care
10 services, be determined such that not less than 85 percent of
11 additional premiums charged an insured, which premiums are
12 charged at greater than the rate in effect when the coverage
13 was purchased, will apply to policyholder benefits. This
14 subparagraph does not apply to increases in premiums for
15 attained age based on an existing premium rate schedule, nor
16 to policies for which 30 percent or more of the total initial
17 health insurance claim costs are attributable to benefits that
18 are based on costs of specified health care services.
19 (g) Each insurer shall provide the following
20 disclosure information to potential insureds at the time of
21 solicitation of coverage and to all insureds at the time of
22 any rate increase under the form in readily understandable
23 language and format. The disclosure must include the current
24 rate and any scheduled or anticipated rate increases, an
25 explanation of when the rates may be changed, and a 10-year
26 rate increase history on the form and similar forms. The
27 information must be filed with the department with any form or
28 rate filing made under this section. The department may adopt
29 rules to administer this paragraph.
30 (7)(a) Each insurer subject to the requirements of
31 subsection (6) shall make an annual filing with the department
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1 no later than 12 months after its previous filing,
2 demonstrating the reasonableness of benefits in relation to
3 premium rates. The department, after receiving a request to
4 be exempted from the provisions of this section, may, for good
5 cause due to insignificant numbers of policies in force or
6 insignificant premium volume, exempt a company, by line of
7 coverage, from filing rates or rate certification as required
8 by this section.
9 (b) The filing required by this subsection shall be
10 satisfied by one of the following methods:
11 1. A rate filing prepared by an actuary which contains
12 documentation demonstrating the reasonableness of benefits in
13 relation to premiums charged in accordance with the applicable
14 rating laws and rules promulgated by the department.
15 2. If no rate change is proposed, a filing that which
16 consists of actuarial justification and a certification by an
17 actuary that benefits are reasonable in relation to premiums
18 currently charged in accordance with procedures that are
19 consistent with applicable laws and rules adopted promulgated
20 by the department.
21 (c) As used in this section, "actuary" means an
22 individual who is a member of the Society of Actuaries or the
23 American Academy of Actuaries. If an insurer does not employ
24 or otherwise retain the services of an actuary, the insurer's
25 certification shall be prepared by insurer personnel or
26 consultants with a minimum of 5 years' experience in insurance
27 ratemaking. The chief executive officer of the insurer shall
28 review and sign the certification indicating his or her
29 agreement with its conclusions.
30 (d) If at the time a filing is required under this
31 section an insurer is in the process of completing a rate
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1 review, the insurer may apply to the department for an
2 extension of up to an additional 30 days in which to make the
3 filing. The request for extension must be received by the
4 department in its offices in Tallahassee no later than the
5 date the filing is due.
6 (e) If an insurer fails to meet the filing
7 requirements of this subsection and does not submit the filing
8 within 60 days following the date the filing is due, the
9 department may, in addition to any other penalty authorized by
10 law, order the insurer to discontinue the issuance of policies
11 for which the required filing was not made, until such time as
12 the department determines that the required filing is properly
13 submitted.
14 (8)(a) For the purposes of subsections (6) and (7),
15 benefits of an individual accident and health insurance policy
16 form, including Medicare supplement policies as defined in s.
17 627.672, when authorized by rules adopted by the department,
18 and excluding long-term care insurance policies as defined in
19 s. 627.9404, and other policy forms under which more than 50
20 percent of the policies are issued to individuals age 65 and
21 over, are deemed to be reasonable in relation to premium rates
22 if the rates are filed pursuant to a loss ratio guarantee and
23 both the initial rates and the durational and lifetime loss
24 ratios have been approved by the department, and such benefits
25 shall continue to be deemed reasonable for renewal rates while
26 the insurer complies with such guarantee, provided the
27 currently expected lifetime loss ratio is not more than 5
28 percent less than the filed lifetime loss ratio as certified
29 to by an actuary. The department shall have the right to
30 bring an administrative action should it deem that the
31 lifetime loss ratio will not be met. For Medicare supplement
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1 filings, the department may withdraw a previously approved
2 filing which was made pursuant to a loss ratio guarantee if it
3 determines that the filing is not in compliance with ss.
4 627.671-627.675 or the currently expected lifetime loss ratio
5 is less than the filed lifetime loss ratio as certified by an
6 actuary in the initial guaranteed loss ratio filing. If this
7 section conflicts with ss. 627.671-627.675, ss.
8 627.671-627.675 shall control.
9 (b) The renewal premium rates shall be deemed to be
10 approved upon filing with the department if the filing is
11 accompanied by the most current approved loss ratio guarantee.
12 The loss ratio guarantee shall be in writing, shall be signed
13 by an officer of the insurer, and shall contain at least:
14 1. A recitation of the anticipated lifetime and
15 durational target loss ratios contained in the actuarial
16 memorandum filed with the policy form when it was originally
17 approved. The durational target loss ratios shall be
18 calculated for 1-year experience periods. If statutory
19 changes have rendered any portion of such actuarial memorandum
20 obsolete, the loss ratio guarantee shall also include an
21 amendment to the actuarial memorandum reflecting current law
22 and containing new lifetime and durational loss ratio targets.
23 2. A guarantee that the applicable loss ratios for the
24 experience period in which the new rates will take effect, and
25 for each experience period thereafter until new rates are
26 filed, will meet the loss ratios referred to in subparagraph
27 1.
28 3. A guarantee that the applicable loss ratio results
29 for the experience period will be independently audited at the
30 insurer's expense. The audit shall be performed in the second
31 calendar quarter of the year following the end of the
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1 experience period, and the audited results shall be reported
2 to the department no later than the end of such quarter. The
3 department shall establish by rule the minimum information
4 reasonably necessary to be included in the report. The audit
5 shall be done in accordance with accepted accounting and
6 actuarial principles.
7 4. A guarantee that affected policyholders in this
8 state shall be issued a proportional refund, based on the
9 premium earned, of the amount necessary to bring the
10 applicable experience period loss ratio up to the durational
11 target loss ratio referred to in subparagraph 1. The refund
12 shall be made to all policyholders in this state who are
13 insured under the applicable policy form as of the last day of
14 the experience period, except that no refund need be made to a
15 policyholder in an amount less than $10. Refunds less than $10
16 shall be aggregated and paid pro rata to the policyholders
17 receiving refunds. The refund shall include interest at the
18 then-current variable loan interest rate for life insurance
19 policies established by the National Association of Insurance
20 Commissioners, from the end of the experience period until the
21 date of payment. Payments shall be made during the third
22 calendar quarter of the year following the experience period
23 for which a refund is determined to be due. However, no
24 refunds shall be made until 60 days after the filing of the
25 audit report in order that the department has adequate time to
26 review the report.
27 5. A guarantee that if the applicable loss ratio
28 exceeds the durational target loss ratio for that experience
29 period by more than 20 percent, provided there are at least
30 2,000 policyholders on the form nationwide or, if not, then
31 accumulated each calendar year until 2,000 policyholder years
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1 is reached, the insurer, if directed by the department, shall
2 withdraw the policy form for the purposes of issuing new
3 policies.
4 (c) As used in this subsection:
5 1. "Loss ratio" means the ratio of incurred claims to
6 earned premium.
7 2. "Applicable loss ratio" means the loss ratio
8 attributable solely to this state if there are 2,000 or more
9 policyholders in the state. If there are 500 or more
10 policyholders in this state but less than 2,000, it is the
11 linear interpolation of the nationwide loss ratio and the loss
12 ratio for this state. If there are less than 500
13 policyholders in this state, it is the nationwide loss ratio.
14 3. "Experience period" means the period, ordinarily a
15 calendar year, for which a loss ratio guarantee is calculated.
16 Section 3. Subsection (1) of section 627.411, Florida
17 Statutes, is amended to read:
18 627.411 Grounds for disapproval.--
19 (1) The department may shall disapprove any form, rate
20 manual, or rate schedule filed under s. 627.410, or withdraw
21 any previous approval thereof, only if the form, manual, or
22 schedule:
23 (a) Is in any respect in violation of, or does not
24 comply with, this code.
25 (b) Contains or incorporates by reference, where such
26 incorporation is otherwise permissible, any inconsistent,
27 ambiguous, or misleading clauses, or exceptions and conditions
28 which deceptively affect the risk purported to be assumed in
29 the general coverage of the contract.
30 (c) Has any title, heading, or other indication of its
31 provisions which is misleading.
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1 (d) Is printed or otherwise reproduced in such manner
2 as to render any material provision of the form substantially
3 illegible.
4 (e) Is for health insurance, and provides benefits
5 that which are unreasonable in relation to the premium charged
6 or, contains provisions that which are unfair or inequitable,
7 or are contrary to the public policy of this state, are
8 unfairly discriminatory, or which encourage misrepresentation,
9 or which apply rating methods, assumptions, or practices that
10 result in:
11 1. Rate increases because of insurer conduct as
12 defined in s. 627.402, unless such increase is implemented
13 with an approved rate for new insureds and as to existing
14 insureds at the time of the increase, over a period of years
15 as follows:
16 a. For forms with benefits subject to medical
17 inflation, the premium schedule increase applicable to
18 existing insureds at the time of the filing must be the
19 greater of 10 percent or 135 percent of medical trend. Annual
20 rate increases in subsequent years for the new issue premium
21 schedule must be increased in accordance with rules adopted by
22 the department. The annual increase for the existing insureds,
23 premium schedule must be the greater of 10 percent of the new
24 issue premium schedule or 135 percent of the rate increase
25 approved for the new issue premium schedule until the two
26 premium schedules converge.
27 b. For forms with benefits not subject to medical
28 inflation, the period of years for the two schedules to
29 converge must be 2 years if the two rate increases are less
30 than 10 percent, otherwise 3 years;
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1 2. Rate increases because of multiple events of
2 insurer conduct unless a plan of corrective action is approved
3 by the department;
4 3. Rate increases attributed to forms being closed to
5 new sales, unless such increase is limited to the rate
6 increase being realized in the general insurance market of
7 current forms available for sale with similar benefits; or
8 4. For new forms, rate schedules that are not
9 actuarially sustainable, except for medical-trend increases
10 where applicable.
11
12 The department shall adopt rules to implement this paragraph.
13 practices which result in premium escalations that are not
14 viable for the policyholder market or result in unfair
15 discrimination in sales practices.
16 (f) Excludes coverage for human immunodeficiency virus
17 infection or acquired immune deficiency syndrome or contains
18 limitations in the benefits payable, or in the terms or
19 conditions of such contract, for human immunodeficiency virus
20 infection or acquired immune deficiency syndrome which are
21 different than those which apply to any other sickness or
22 medical condition.
23 Section 4. Section 627.42396, Florida Statutes, is
24 created to read:
25 627.42396 Coverage for prescription drugs.--A health
26 insurance policy that offers prescription drug coverage for
27 drugs included in a formulary must also contain a provision
28 that allows insureds to obtain prescription drugs not included
29 in the insurer's drug formulary, if the insured's treating
30 physician certifies that the drug is essential for effective
31 treatment of the insured's covered condition. The insured's
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1 copayment may not exceed the amount payable by the insured for
2 nongeneric prescription drugs covered by the formulary.
3 Section 5. Subsections (1), (2), and (3) of section
4 641.31, Florida Statutes, are amended and subsection (39) is
5 added to that section to read:
6 641.31 Health maintenance contracts.--
7 (1) Any entity issued a certificate and otherwise in
8 compliance with this part may enter into contracts in this
9 state to provide an agreed-upon set of comprehensive health
10 care services to subscribers in exchange for a prepaid per
11 capita sum or a prepaid aggregate fixed sum. Each subscriber
12 shall be given a copy of the applicable health maintenance
13 contract, certificate, or member handbook. Whichever document
14 is provided to a subscriber shall contain all of the
15 provisions and disclosures required by this section.
16 (2)(a) The rates charged by any health maintenance
17 organization to its subscribers shall not be excessive,
18 inadequate, or unfairly discriminatory or follow a rating
19 methodology that is inconsistent, indeterminate, or ambiguous
20 or encourages misrepresentation or misunderstanding. The
21 department, in accordance with generally accepted actuarial
22 practice as applied to health maintenance organizations, may
23 define by rule what constitutes excessive, inadequate, or
24 unfairly discriminatory rates and may require whatever
25 information it deems necessary to determine that a rate or
26 proposed rate meets the requirements of this subsection.
27 (b) To satisfy the requirement that benefits are
28 reasonable in relationship to the rates charged, in addition
29 to any requirement established under paragraph (a), the
30 premium rate schedule must:
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1 1. Reflect only the actual and reasonable
2 administrative expenses of the health maintenance organization
3 for the efficient administration and maintenance of the
4 affected forms; and
5 2. Demonstrate a reasonable profit and contingency
6 margin.
7 (c) Each health maintenance organization shall provide
8 the following disclosure information to potential subscribers
9 at the time of solicitation of coverage and to all subscribers
10 at the time of any rate increase under the form in readily
11 understandable language and format. The disclosure must
12 include the current rate and any scheduled or anticipated rate
13 increases, an explanation of when the rates may be changed,
14 and a 10-year rate increase history on the form and similar
15 forms. The information must be filed with the department with
16 any form or rate filing made under this section. The
17 department may adopt rules to administer this paragraph.
18 (3)(a) If a health maintenance organization desires to
19 amend any contract with its subscribers or any certificate or
20 member handbook, or desires to change any basic health
21 maintenance contract, certificate, grievance procedure, or
22 member handbook form, or application form where written
23 application is required and is to be made a part of the
24 contract, or printed amendment, addendum, rider, or
25 endorsement form or form of renewal certificate, it may do so,
26 upon filing with the department the proposed change or
27 amendment. Any proposed change shall be effective
28 immediately, subject to disapproval by the department.
29 Following receipt of notice of such disapproval or withdrawal
30 of approval, no health maintenance organization shall issue or
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1 use any form disapproved by the department or as to which the
2 department has withdrawn approval.
3 (b) Any change in the rate is subject to paragraph (d)
4 and requires at least 30 days' advance written notice to the
5 subscriber. In the case of a group member, there may be a
6 contractual agreement with the health maintenance organization
7 to have the employer provide the required notice to the
8 individual members of the group.
9 (c) The department shall disapprove any form filed
10 under this subsection, or withdraw any previous approval
11 thereof, if the form:
12 1. Is in any respect in violation of, or does not
13 comply with, any provision of this part or rule adopted
14 thereunder.
15 2. Contains or incorporates by reference, where such
16 incorporation is otherwise permissible, any inconsistent,
17 ambiguous, or misleading clauses or exceptions and conditions
18 which deceptively affect the risk purported to be assumed in
19 the general coverage of the contract.
20 3. Has any title, heading, or other indication of its
21 provisions which is misleading.
22 4. Is printed or otherwise reproduced in such a manner
23 as to render any material provision of the form substantially
24 illegible.
25 5. Contains provisions which are unfair, inequitable,
26 or contrary to the public policy of this state or which
27 encourage misrepresentation.
28 6. Excludes coverage for human immunodeficiency virus
29 infection or acquired immune deficiency syndrome or contains
30 limitations in the benefits payable, or in the terms or
31 conditions of such contract, for human immunodeficiency virus
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1 infection or acquired immune deficiency syndrome which are
2 different than those which apply to any other sickness or
3 medical condition.
4 (d)1. Any change in rates charged for the contract
5 must be filed with the department not less than 30 days in
6 advance of the effective date. At the expiration of such 30
7 days, the rate filing shall be deemed approved unless prior to
8 such time the filing has been affirmatively approved or
9 disapproved by order of the department. The approval of the
10 filing by the department constitutes a waiver of any unexpired
11 portion of such waiting period. The department may extend by
12 not more than an additional 15 days the period within which it
13 may so affirmatively approve or disapprove any such filing, by
14 giving notice of such extension before expiration of the
15 initial 30-day period. At the expiration of any such period as
16 so extended, and in the absence of such prior affirmative
17 approval or disapproval, any such filing shall be deemed
18 approved.
19 2. The department shall disapprove any change in rates
20 which applies rating methods, assumptions, or practices that
21 result in:
22 a. Rate increases because of insurer conduct, as
23 defined in s. 627.402, unless such increase is implemented
24 with an approved rate for new insureds and as to existing
25 insureds at the time of the increase, over a period of years,
26 so that for forms with benefits subject to medical inflation,
27 the premium schedule increase applicable to existing insureds
28 at the time of the filing is the greater of 10 percent or 135
29 percent of medical trend. Annual rate increases in subsequent
30 years for the new issue premium schedule must be increased in
31 accordance with rules adopted by the department. The annual
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1 increase for the existing insureds' premium schedule must be
2 the greater of 10 percent of the new issue premium schedule or
3 135 percent of the rate increase approved for the new issue
4 premium schedule until the two premium schedules converge;
5 b. Rate increases because of multiple events of
6 insurer conduct unless a plan of corrective action is approved
7 by the department;
8 c. Rate increases attributed to forms being closed to
9 new sales, unless such increase is limited to the rate
10 increase being realized in the general insurance market of
11 current forms available for sale with similar benefits; or
12 d. For new forms, rate schedules that are not
13 actuarially sustainable, except for medical-trend increases
14 where applicable.
15
16 The department shall adopt rules to implement this
17 subparagraph.
18 (e) It is not the intent of this subsection to
19 restrict unduly the right to modify rates in the exercise of
20 reasonable business judgment.
21 (39) A health maintenance organization contract form
22 that provides prescription drug coverage for drugs included in
23 a formulary must also contain a provision that allows members
24 to obtain prescription drugs not included in the health
25 maintenance organization's drug formulary if the member's
26 treating physician certifies that the drug is essential for
27 effective treatment of the member's covered condition. The
28 member's copayment may not exceed the amount payable by the
29 member for nongeneric prescription drugs covered by the
30 formulary.
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1 Section 6. Subsection (3) of section 641.315, Florida
2 Statutes, is amended to read:
3 641.315 Provider contracts.--
4 (3) No provider of services or any representative of
5 such provider shall collect or attempt to collect from an HMO
6 subscriber any money for services covered by an HMO, including
7 referral to a collection agency, and no provider or
8 representative of such provider may maintain any action at law
9 against a subscriber of an HMO to collect money owed to such
10 provider by an HMO.
11 Section 7. This act shall take effect July 1, 2000,
12 and apply to all policies, contracts, and policies issued or
13 renewed on or after that date.
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16 SENATE SUMMARY
17 Revises numerous provisions relating to rates and rate
increases on health insurance policies and health
18 maintenance contracts. Establishes disclosure
requirements and provides rate increase guidelines.
19 Authorizes the Department of Insurance to disapprove
certain forms, rate manuals, and rate schedules. Provides
20 for insureds and members to obtain non-formulary drugs.
Defines the term "insurer conduct." Prohibits HMO's from
21 referring certain debts to collection agencies. (See bill
for details.)
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