§ 4406. Health maintenance organizations; regulation of contracts. 1.
The contract between a health maintenance organization and an enrollee
shall be subject to regulation by the superintendent as if it were a
health insurance subscriber contract, and shall include, but not be
limited to, all mandated benefits required by article forty-three of the
insurance law. Such contract shall fully and clearly state the benefits
and limitations therein provided or imposed, so as to facilitate
understanding and comparisons, and to exclude provisions which may be
misleading or unreasonably confusing. Such contract shall be issued to
any individual and dependents of such individual and any group of one
hundred or fewer employees or members, exclusive of spouses and
dependents, or to any employee or member of the group, including
dependents, applying for such contract at any time throughout the year.
An individual direct payment contract shall be issued only in accordance
with section four thousand three hundred twenty-eight of the insurance
law. The superintendent may, after giving consideration to the public
interest, exempt a health maintenance organization from the requirements
of this section provided that another health insurer or health
maintenance organization within the health maintenance organization's
same holding company system, as defined in article fifteen of the
insurance law, including a health maintenance organization operated as a
line of business of a health service corporation licensed under article
forty-three of the insurance law, offers coverage that, at a minimum,
complies with this section and provides all of the consumer protections
required to be provided by a health maintenance organization pursuant to
this chapter and regulations, including those consumer protections
contained in sections four thousand four hundred three and four thousand
four hundred eight-a of this chapter. The requirements shall not apply
to a health maintenance organization exclusively serving individuals
enrolled pursuant to title eleven of article five of the social services
law, title eleven-D of article five of the social services law, title
one-A of article twenty-five of this chapter or title eighteen of the
federal Social Security Act, and, further provided, that such health
maintenance organization shall not discontinue a contract for an
individual receiving comprehensive-type coverage in effect prior to
January first, two thousand four who is ineligible to purchase policies
offered after such date pursuant to this section or section four
thousand three hundred twenty-eight of the insurance law due to the
provision of 42 U.S.C. 1395ss in effect prior to January first, two
thousand four.

2. (a) Upon approval of the commissioner, an organization may
implement an out-of-plan benefits system that allows enrollees to use
providers not participating in the plan pursuant to a contract,
employment or other association. The commissioner, in consultation with
the superintendent, shall not approve an organization to implement an
out-of-plan benefits system unless the organization demonstrates that:

(i) the requirements of this article and any regulations promulgated
thereunder have been met and will continue to be met;

(ii) it can establish and maintain a contingent reserve fund of not
less than two percent of the entire net premium income for the calendar
year of the organization in addition to any other contingent reserve
fund required by the commissioner in regulations subject to the approval
of the superintendent; and

(iii) it has established mechanisms to ensure and monitor compliance
with the provisions of paragraph (b) of this subdivision.

(b) Except as provided in paragraph (c) of this subdivision, an
organization may not permit the benefits provided pursuant to such
out-of-plan system to exceed ten percent of the total health care
expenditures of the organization, as determined on a quarterly basis,
but such limitation shall not apply to individual direct payment
contracts issued pursuant to section forty-three hundred twenty-two of
the insurance law. In determining the amount of benefits provided in
connection with the use of such providers, an organization shall not
include benefits provided pursuant to a referral made by a participating
provider or benefits provided in emergency situations.

(c) An organization may exceed the ten percent level by up to two
percent in any given quarter provided that the organization does not
exceed the ten percent level by the end of the following quarter.

(d) If the commissioner determines that an organization has permitted
the benefits provided pursuant to an out-of-plan system to exceed ten
percent, except as permitted by paragraph (b) or (c) of this
subdivision, the commissioner may, where appropriate, assess an
organization a civil penalty not to exceed the amount determined by
multiplying the percentage permitted in excess of ten percent by the
amount, in dollars, of the difference between what the organization paid
all inpatient hospitals for such year and the amount such organization
would have paid such hospitals had it been a payor within the categories
specified in paragraph (b) of subdivision one of section twenty-eight
hundred seven-c of this chapter and not authorized to negotiate hospital
rates. The commissioner, in consultation with the superintendent, may
revoke, suspend or limit an approval issued pursuant to this subdivision
for non-compliance by the organization with any of the provisions of
this article or the rules and regulations promulgated thereunder.

(e) The indemnification of enrollees of the services of a
non-participating provider may be subject to deductibles, copayments
and/or coinsurance approved by the superintendent.

(f) Nothing in this subdivision shall be construed to limit an
organization's ability to manage the care of enrollees or the types of
health services covered, to conduct utilization review of quality
assurance activities.

(g) The commissioner may prohibit an organization determined to have
an inadequate network of participating providers from permitting new
elections pursuant to this subdivision as of the date of notification of
such determination by the commissioner. Notification of such action
shall be given by the organization to each enrollee.

(h) An organization providing comprehensive health services under one
or more assumed names shall be deemed to be offering its plan through a
line of business corresponding to each such assumed name. An
organization may, pursuant to the provisions of this subdivision, permit
enrollees of one or more lines of business to elect to receive services
from providers not participating in such line or lines of business
provided, however, that with respect to each line of business such
elections shall be permitted only to the extent authorized pursuant to
paragraphs (b) and (c) of this subdivision.

(i) Nothing herein shall be deemed to prohibit a health maintenance
organization from offering services in connection with a company
appropriately licensed pursuant to the insurance law.

3. (a) No contract issued pursuant to this section shall provide that
services of a participating hospital will be covered as out-of-network
services solely on the basis that the health care provider admitting or
rendering services to the enrollee is not a participating provider.

(b) No contract issued pursuant to this section shall provide that
services of a participating health care provider will be covered as
out-of-network services solely on the basis that the services are
rendered in a non-participating hospital.

(c) For purposes of this subdivision, a "health care provider" is a
health care professional licensed, registered or certified pursuant to
title eight of the education law or a health care professional
comparably licensed, registered or certified by another state.

4. Nothing in this section shall be construed to require a health
maintenance organization in its provision of a comprehensive health
services plan to meet the requirements of an insurer under the insurance
law.

5. If an enrollee requires nursing facility placement and is a
resident of a continuing care retirement community authorized under
article forty-six of this chapter, the enrollee's primary care
practitioner must refer the enrollee to that community's nursing
facility if medically appropriate; if the facility agrees to be
reimbursed at the health maintenance organization's contract rate
negotiated with similar providers for similar services and supplies, or
negotiates a mutually agreed upon rate; and if the facility meets the
health maintenance organization's guidelines and standards for the
delivery of medical services.