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Minnesota Legislature

Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

  

                         Laws of Minnesota 1984 

                        CHAPTER 464-H.F.No. 1561
           An act relating to health; health maintenance 
          organizations; providing continued coverage upon 
          replacement of an insurance carrier; including health 
          maintenance organization contracts in certain 
          statutorily mandated coverages; providing for the 
          disclosure and reporting by the organization of 
          detailed financial, administrative and ownership 
          information; providing for reporting of changes in 
          provider agreements; granting the commissioner 
          authority to adopt rules regarding the content of 
          provider and other agreements; requiring certain 
          deposits against insolvency; authorizing organizations 
          to enter into certain health services contracts; 
          requiring certain consumer rights information in 
          evidences of coverage and annual information 
          statements; providing for reimbursement of, and direct 
          payments to, enrollees; providing for examination by 
          the commissioner of health; specifying the examination 
          powers of the commissioner; classifying certain data 
          used for review purposes; prescribing penalties; 
          amending Minnesota Statutes 1982, sections 60A.082; 
          62A.041; 62A.042; 62A.044; 62A.14; 62A.147; 62D.02, 
          subdivision 8, and by adding subdivisions; 62D.04; 
          62D.05, subdivision 3; 62D.07, subdivisions 1, 3, and 
          by adding subdivisions; 62D.08, subdivisions 1, 3, and 
          by adding subdivisions; 62D.09; 62D.10, subdivision 3, 
          and by adding a subdivision; 62D.101, subdivisions 2 
          and 2a; 62D.12, subdivisions 1, 2, 4, 9, 10, and by 
          adding subdivisions; 62D.14; 62D.15, subdivision 1; 
          62D.17, subdivisions 1 and 4; 62D.19; 62D.22, 
          subdivision 5, and by adding a subdivision; amending 
          Minnesota Statutes 1983 Supplement, sections 62A.17, 
          subdivision 6; 62D.03, subdivision 4; proposing new 
          law coded in Minnesota Statutes, chapter 62D; 
          repealing Minnesota Statutes 1982, sections 62D.10, 
          subdivision 2; 62D.12, subdivision 7; 62D.22, 
          subdivision 9; and 62D.27. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1982, section 60A.082, is 
amended to read:  
    60A.082 [GROUP INSURANCE; BENEFITS CONTINUED IF INSURER 
CHANGED.] 
    A person covered under group life, group accidental death 
and dismemberment, group disability income or group medical 
expense insurance, shall not be denied benefits to which he is 
otherwise entitled solely because of a change in the insurance 
company writing the coverage or in the group contract applicable 
to the person.  In the case of one or more carriers replacing or 
remaining in place after one or more plans have been 
discontinued, each carrier shall accept any person who was 
covered under the discontinued plan or plans without denial of 
benefits to which other persons in the group covered by that 
carrier are entitled.  "Insurance Company" shall include a 
service plan corporation under chapter 62C or 62D.  
    The commissioner shall promulgate rules to carry out this 
section.  Nothing in this section shall preclude an employer, 
union or association from reducing the level of benefits under 
any group insurance policy or plan. 
    Sec. 2.  Minnesota Statutes 1982, section 62A.041, is 
amended to read:  
    62A.041 [MATERNITY BENEFITS; UNMARRIED WOMEN.] 
    Each group policy of accident and health insurance issued 
or renewed after June 4, 1971, and each group health maintenance 
contract issued or renewed after the effective date of this 
section shall provide the same coverage for maternity benefits 
to unmarried women and minor female dependents that it provides 
to married women including the wives of employees choosing 
dependent family coverage.  If an unmarried insured or an 
unmarried enrollee is a parent of a dependent child, each group 
policy issued or renewed after July 1, 1976, and each group 
contract issued or renewed after the effective date of this 
section shall provide the same coverage for that child as that 
provided for the child of a married employee choosing dependent 
family coverage if the insured or the enrollee elects dependent 
family coverage. 
    Each individual policy of accident and health insurance and 
each individual health maintenance contract shall provide the 
same coverage for maternity benefits to unmarried women and 
minor female dependents as that provided for married women.  If 
an unmarried insured or an unmarried enrollee is a parent of a 
dependent child, each individual policy issued or renewed after 
July 1, 1976, and each individual contract issued or renewed 
after the effective date of this section shall also provide the 
same coverage for that child as that provided for the child of a 
married insured or a married enrollee choosing dependent family 
coverage if the insured or the enrollee elects dependent family 
coverage. 
    For the purposes of this section, the term "maternity 
benefits" shall not include elective, induced abortion whether 
performed in a hospital, other abortion facility, or the office 
of a physician. 
     Sec. 3.  Minnesota Statutes 1982, section 62A.042, is 
amended to read:  
    62A.042 [FAMILY COVERAGE; COVERAGE OF NEWBORN INFANTS.] 
    Subdivision 1.  [INDIVIDUAL FAMILY POLICIES; RENEWALS.] No 
policy of individual accident and sickness insurance which 
provides for insurance for more than one person under section 
62A.03, subdivision 1, clause (3), and no individual health 
maintenance contract which provides for coverage for more than 
one person under chapter 62D, shall be renewed to insure or 
cover any person in this state or be delivered or issued for 
delivery to any person in this state unless such policy or 
contract includes as insured or covered members of the family 
any newborn infants immediately from the moment of birth and 
thereafter which insurance or contract shall provide coverage 
for illness, injury, congenital malformation or premature birth. 
    Subd. 2.  [GROUP POLICIES; RENEWALS.] No group accident and 
sickness insurance policy and no group health maintenance 
contract which provides provide for coverage of family members 
or other dependents of an employee or other member of the 
covered group shall be renewed to cover members of a group 
located in this state or delivered or issued for delivery in 
this state unless such policy or contract includes as insured or 
covered family members or dependents any newborn infants 
immediately from the moment of birth and thereafter which 
insurance or contract shall provide coverage for illness, 
injury, congenital malformation or premature birth.  
     Sec. 4.  Minnesota Statutes 1982, section 62A.044, is 
amended to read:  
    62A.044 [PAYMENTS TO GOVERNMENTAL INSTITUTIONS.] 
    No group or individual policy of accident and sickness 
insurance issued or renewed after May 22, 1973 pursuant to this 
chapter, and no group or individual service plan or subscriber 
contract issued or renewed after May 22, 1973 pursuant to 
chapter 62C, and no group or individual health maintenance 
contract issued or renewed after the effective date of this 
section pursuant to chapter 62D, shall contain any provision 
denying or prohibiting payments for covered and authorized 
services rendered by a hospital or medical institution owned or 
operated by the federal, state, or local government or 
practitioners therein in any instance wherein charges for such 
services are imposed against the policy holder or, subscriber, 
or enrollee.  The unit of government operating the institution 
may maintain an action for recovery of such charges.  
    Sec. 5.  Minnesota Statutes 1982, section 62A.14, is 
amended to read:  
    62A.14 [HANDICAPPED CHILDREN.] 
    Subdivision 1.  [INDIVIDUAL FAMILY POLICIES.] An individual 
hospital or medical expense insurance policy delivered or issued 
for delivery in this state more than 120 days after May 16, 
1969, or an individual health maintenance contract delivered or 
issued for delivery in this state after the effective date of 
this section, which provides that coverage of a dependent child 
shall terminate upon attainment of the limiting age for 
dependent children specified in the policy or contract shall 
also provide in substance that attainment of such limiting age 
shall not operate to terminate the coverage of such child while 
the child is and continues to be both (a) incapable of 
self-sustaining employment by reason of mental retardation or 
physical handicap and (b) chiefly dependent upon the 
policyholder for support and maintenance, provided proof of such 
incapacity and dependency is furnished to the insurer or health 
maintenance organization by the policyholder or enrollee within 
31 days of the child's attainment of the limiting age and 
subsequently as may be required by the insurer or organization 
but not more frequently than annually after the two year period 
following the child's attainment of the limiting age.  
    Subd. 2.  [GROUP POLICIES.] A group hospital or medical 
expense insurance policy delivered or issued for delivery in 
this state more than 120 days after May 16, 1969, or a group 
health maintenance contract delivered or issued for delivery in 
this state after the effective date of this section, which 
provides that coverage of a dependent child of an employee or 
other member of the covered group shall terminate upon 
attainment of the limiting age for dependent children specified 
in the policy or contract shall also provide in substance that 
attainment of such limiting age shall not operate to terminate 
the coverage of such child while the child is and continues to 
be both (a) incapable of self-sustaining employment by reason of 
mental retardation or physical handicap and (b) chiefly 
dependent upon the employee or member for support and 
maintenance, provided proof of such incapacity and dependency is 
furnished to the insurer or organization by the employee or 
member within 31 days of the child's attainment of the limiting 
age and subsequently as may be required by the insurer or 
organization but not more frequently than annually after the two 
year period following the child's attainment of the limiting age.
    Sec. 6.  Minnesota Statutes 1982, section 62A.147, is 
amended to read:  
    62A.147 [DISABLED EMPLOYEES' BENEFITS; DEFINITIONS.] 
    Subdivision 1.  For the purposes of this section and 
section 62A.148, the terms defined in this section shall have 
the meanings here given them.  
    Subd. 2.  "Covered employee" means any person who, at the 
time he suffered an injury resulting in total disability or 
became totally disabled by reason of illness, was employed by 
and receiving a salary, commission, hourly wage, or other 
remuneration for his services by any employer providing, 
offering or contributing to group insurance coverage or group 
coverage through a health maintenance contract, for that 
employee who was so enrolled for the coverage.  
    Subd. 3.  "Total disability" means (a) the inability of an 
injured or ill employee to engage in or perform the duties of 
his regular occupation or employment within the first two years 
of such disability and (b) after the first two years of such 
disability, the inability of the employee to engage in any paid 
employment or work for which he may, by his education and 
training, including rehabilitative training, be or reasonably 
become qualified.  
    Subd. 4.  "Group insurance" means any policy or contract of 
accident and health protection, including health maintenance 
contracts, regardless of by whom underwritten, which provides 
benefits, including cash payments for reimbursement of expenses 
or the provision of usual needed health care and medical 
services as the result of any injury, sickness, disability or 
disease suffered by a group of employees, or any one of them, 
and which protection is paid for or otherwise provided in full 
or in part by an employer.  
    Subd. 5.  "Employer" means any natural person, company, 
corporation, partnership, association, firm, or franchise which 
employs any employee.  
    Subd. 6.  "Insurer" means any person, company, corporation 
including a nonprofit corporation and a health maintenance 
organization, partnership, association, firm or franchise which 
underwrites or is by contract or other agreement obligated to 
provide accident and health protection benefits to any group of 
employees of any employer.  
    Sec. 7.  Minnesota Statutes 1983 Supplement, section 
62A.17, subdivision 6, is amended to read:  
    Subd. 6.  [CONVERSION TO INDIVIDUAL POLICY.] A group 
insurance policy that provides post termination or lay off 
coverage as required by this section shall also include a 
provision allowing a covered employee, surviving spouse, or 
dependent at the expiration of the post termination or lay off 
coverage provided by subdivision 2 to obtain from the insurer 
offering the group policy or group subscriber contract, at the 
employee's, spouse's, or dependent's option and expense, without 
further evidence of insurability and without interruption of 
coverage, an individual policy of insurance or an individual 
subscriber contract providing at least the minimum benefits of a 
qualified plan as prescribed by section 62E.06 and the option of 
a number three qualified plan, a number two qualified plan, and 
a number one qualified plan as provided by section 62E.06, 
subdivisions 1 to 3.  A health maintenance contract issued by a 
health maintenance organization that provides post-termination 
or layoff coverage as required by this section shall also 
include a provision allowing a former employee, surviving 
spouse, or dependent at the expiration of the post-termination 
or layoff coverage provided in subdivision 2 to obtain from the 
health maintenance organization, at the former employee's, 
spouse's, or dependent's option and expense, without further 
evidence of insurability and without interruption of coverage, 
an individual health maintenance contract.  Effective January 1, 
1985, enrollees who have become nonresidents of the health 
maintenance organization's service area shall be given the 
option, to be arranged by the health maintenance organization, 
of a number three qualified plan, a number two qualified plan, 
or a number one qualified plan as provided by section 62E.06, 
subdivisions 1 to 3 if an arrangement with an insurer can 
reasonably be made by the health maintenance organization.  This 
option shall be made available at the enrollee's expense, 
without further evidence of insurability and without 
interruption of coverage.  
    A policy providing reduced benefits at a reduced premium 
rate may be accepted by the employee, the spouse, or a dependent 
in lieu of the optional coverage otherwise required by this 
subdivision. 
    The individual policy or contract shall be renewable at the 
option of the individual as long as the individual is not 
covered under another qualified plan as defined in section 
62E.02, subdivision 4, up to age 65 or to the day before the 
date of eligibility for coverage under title XVIII of the Social 
Security Act, as amended.  Any revisions in the table of rate 
for the individual policy shall apply to the covered person's 
original age at entry and shall apply equally to all similar 
policies issued by the insurer. 
    Sec. 8.  Minnesota Statutes 1982, section 62D.02, 
subdivision 8, is amended to read:  
    Subd. 8.  "Health maintenance contract" means any contract 
whereby a health maintenance organization agrees to provide 
comprehensive health maintenance services to enrollees, provided 
that the contract may contain reasonable enrollee copayment 
provisions.  Copayment provisions in group contracts shall not 
discriminate on the basis of age, sex, race, length of 
enrollment in the plan, or economic status; and during every 
open enrollment period in which all offered health benefit 
plans, including those subject to the jurisdiction of the 
commissioners of commerce or health, fully participate without 
any underwriting restrictions, copayment provisions shall not 
discriminate on the basis of preexisting health status.  In no 
event shall the annual copayment exceed the maximum 
out-of-pocket expenses allowable for a number three qualified 
insurance policy under section 62E.06.  Where sections 62D.01 to 
62D.30 permit a health maintenance organization to contain 
reasonable copayment provisions for preexisting health status, 
these provisions may vary with respect to length of enrollment 
in the plan.  Any contract may provide for health care services 
in addition to those set forth in subdivision 7.  
    Sec. 9.  Minnesota Statutes 1982, section 62D.02, is 
amended by adding a subdivision to read:  
    Subd. 12.  "Participating entity" means any of the 
following persons, providers, companies, or other organizations 
with which the health maintenance organization has contracts or 
other agreements:  
    (1) a health care facility licensed under sections 144.50 
to 144.56, a nursing home licensed under sections 144A.02 to 
144A.11, and any other health care facility otherwise licensed 
under the laws of this state or registered with the commissioner 
of health;  
    (2) a health care professional licensed under 
health-related licensing boards, as defined in section 214.01, 
subdivision 2, and any other health care professional otherwise 
licensed under the laws of this state or registered with the 
commissioner of health;  
    (3) a group, professional corporation, or other 
organization which provides the services of individuals or 
entities identified in (2), including but not limited to a 
medical clinic, a medical group, a home health care agency, an 
urgent care center, and an emergent care center;  
    (4) any person or organization providing administrative, 
financial, or management services to the health maintenance 
organization if the total payment for all services exceeds three 
percent of the gross revenues of the health maintenance 
organization.  
    "Participating entity" does not include (a) another health 
maintenance organization with which a health maintenance 
organization has made contractual arrangements or (b) any entity 
with which a health maintenance organization has contracted 
primarily in order to purchase or lease equipment or space or 
(c) employees of the health maintenance organization or (d) 
employees of any participating entity identified in clause (3) 
of this subdivision.  
    Sec. 10.  Minnesota Statutes 1982, section 62D.02, is 
amended by adding a subdivision to read: 
    Subd. 13.  "Major participating entity" shall include the 
following:  
    (1) a participating entity that receives from the health 
maintenance organization as compensation for services a sum 
greater than 30 percent of the health maintenance organization's 
gross annual revenues;  
    (2) a participating entity providing administrative, 
financial, or management services to the health maintenance 
organization, if the total payment for all services provided by 
the participating entity exceeds three percent of the gross 
revenue of the health maintenance organization;  
    (3) a participating entity that nominates or appoints 30 
percent or more of the board of directors of the health 
maintenance organization.  
    Sec. 11.  Minnesota Statutes 1982, section 62D.02, is 
amended by adding a subdivision to read:  
    Subd. 14.  "Separate health services contracts" means 
prepaid dental services contracts and other similar types of 
prepaid health services agreements in which services are 
provided by participating entities or employees of the health 
maintenance organization, but does not include contracts subject 
to chapter 62A or 62C.  
    Sec. 12.  Minnesota Statutes 1983 Supplement, section 
62D.03, subdivision 4, is amended to read:  
    Subd. 4.  Each application for a certificate of authority 
shall be verified by an officer or authorized representative of 
the applicant, and shall be in a form prescribed by the 
commissioner of health.  Each application shall include the 
following: 
    (a) a copy of the basic organizational document, if any, of 
the applicant and of each major participating entity; such as 
the articles of incorporation, or other applicable documents, 
and all amendments thereto; 
    (b) a copy of the bylaws, rules and regulations, or similar 
document, if any, and all amendments thereto which regulate the 
conduct of the affairs of the applicant and of each major 
participating entity; 
    (c) a list of the names, addresses, and official positions 
of the following persons:  
    All members of the board of directors or governing body of 
the local governmental unit, and the principal officers of the 
organization; which shall contain a full disclosure in the 
application of the extent and nature of any contract or 
financial arrangements between them and the health maintenance 
organization, including a full disclosure of any financial 
arrangements between them and any provider or other person 
concerning any financial relationship with the health 
maintenance organization;  
    (1) all members of the board of directors, or governing 
body of the local government unit, and the principal officers 
and shareholders of the applicant organization; and 
    (2) all members of the board of directors, or governing 
body of the local government unit, and the principal officers of 
the major participating entity and each shareholder beneficially 
owning more than ten percent of any voting stock of the major 
participating entity;  
    The commissioner may by rule identify persons included in 
the term "principal officers";  
    (d) a full disclosure of the extent and nature of any 
contract or financial arrangements between the following:  
    (1) the health maintenance organization and the persons 
listed in clause (c)(1);  
    (2) the health maintenance organization and the persons 
listed in clause (c)(2);  
    (3) each major participating entity and the persons listed 
in clause (c)(1) concerning any financial relationship with the 
health maintenance organization; and 
    (4) each major participating entity and the persons listed 
in clause (c)(2) concerning any financial relationship with the 
health maintenance organization;  
    (e) the name and address of each participating entity and 
the agreed upon duration of each contract or agreement;  
    (f) a copy of the form of each contract binding the 
participating entities and the health maintenance organization. 
Contractual provisions shall be consistent with the purposes of 
sections 62D.01 to 62D.29 in regard to the services to be 
performed under the contract, the manner in which payment for 
services is determined, the nature and extent of 
responsibilities to be retained by the health maintenance 
organization, the nature and extent of risk sharing permissible, 
and contractual termination provisions;  
    (g) a copy of each contract binding major participating 
entities and the health maintenance organization. Upon the 
request of the health maintenance organization, contract 
information filed with the commissioner may be nonpublic and 
subject to the provisions of section 13.37, subdivision 1(b).  
    Upon initial filing of each contract, the health 
maintenance organization shall file a separate document 
detailing the projected annual expenses to the major 
participating entity in performing the contract and the 
projected annual revenues received by the entity from the health 
maintenance organization for such performance.  The commissioner 
shall disapprove any contract with a major participating entity 
if the contract will result in an unreasonable expense under 
section 62D.19.  The commissioner shall notify a major 
participating entity within 30 days if a contract may be 
disapproved.  
    Within 120 days of the anniversary of the implementation of 
each contract, the health maintenance organization shall file a 
document detailing the actual expenses incurred by the major 
participating entity in performing the contract in the preceding 
year and the actual revenues received from the health 
maintenance organization by the entity in payment for the 
performance.  
    Contracts implemented prior to the effective date of this 
subdivision shall be filed within 90 days of such effective date.
Commencing with the next anniversary of the implementation of 
each of these contracts immediately following filing, the health 
maintenance organization shall, as otherwise required by this 
subdivision, file annual actual expenses and revenues.  These 
contracts are subject to the provisions of section 62D.19, but 
are not subject to the prospective review prescribed by this 
clause, unless or until the terms of the contract are modified.  
    (d) (h) a statement generally describing the health 
maintenance organization, its health care plan or plans 
maintenance contracts and separate health service contracts, 
facilities, and personnel, including a statement describing the 
manner in which the applicant proposes to provide enrollees with 
comprehensive health maintenance services and separate health 
services; 
    (e) (i) a copy of the form of each evidence of coverage to 
be issued to the enrollees; 
    (f) (j) a copy of the form of each individual or group 
health maintenance contract and each separate health service 
contract which is to be issued to enrollees or their 
representatives; 
    (g) (k) 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 certified financial statement may be deemed to satisfy 
this requirement; 
    (h) (1) (l) a description of the proposed method of 
marketing the plan, (2) a schedule of proposed charges, and (3) 
a financial plan which includes a three year projection of the 
expenses and income and other sources of future capital; 
    (i) (m) a statement reasonably describing the geographic 
area or areas to be served and the type or types of enrollees to 
be served; 
    (j) (n) a description of the complaint procedures to be 
utilized as required under section 62D.11; 
    (k) (o) a description of the procedures and programs to be 
implemented to meet the requirements of section 62D.04, 
subdivision 1, clauses (b) and (c) and to monitor the quality of 
health care provided to enrollees; 
    (l) (p) a description of the mechanism by which enrollees 
will be afforded an opportunity to participate in matters of 
policy and operation under section 62D.06; 
    (q) a copy of any agreement between the health maintenance 
organization and an insurer or nonprofit health service 
corporation regarding reinsurance, stop-loss coverage, or any 
other type of coverage for potential costs of health services, 
as authorized in section 62D.04, subdivision 1(f) and section 
62D.13; and 
    (m) (r) other information as the commissioner of health may 
reasonably require to be provided. 
    Sec. 13.  Minnesota Statutes 1982, section 62D.04, is 
amended to read: 
    62D.04 [ISSUANCE OF CERTIFICATE AUTHORITY.] 
    Subdivision 1.  Upon receipt of an application for a 
certificate of authority, the commissioner of health shall 
determine whether the applicant for a certificate of authority 
has: 
    (a) Demonstrated the willingness and potential ability to 
assure that health care services will be provided in such a 
manner as to enhance and assure both the availability and 
accessibility of adequate personnel and facilities; 
    (b) Arrangements for an ongoing evaluation of the quality 
of health care; 
    (c) A procedure to develop, compile, evaluate, and report 
statistics relating to the cost of its operations, the pattern 
of utilization of its services, the quality, availability and 
accessibility of its services, and such other matters as may be 
reasonably required by regulation of the commissioner of health; 
    (d) Reasonable provisions for emergency and out of area 
health care services; 
    (e) Demonstrated that it is financially responsible and may 
reasonably be expected to meet its obligations to enrollees and 
prospective enrollees.  In making this determination, the 
commissioner of health may consider either the standards of 
clauses (1) and (2), or the standards of clauses (3) and (4), 
whichever the applicant shall elect: 
    (1) the financial soundness of its arrangements for health 
care services and the proposed schedule of charges used in 
connection therewith; 
    (2) the adequacy of its working capital; 
    (3) arrangements which will guarantee for a reasonable 
period of time the continued availability or payment of the cost 
of health care services in the event of discontinuance of the 
health maintenance organization; and 
    (4) agreements with providers for the provision of health 
care services; and 
    (5) any deposit of cash or securities submitted in 
accordance with section 19.  
    (f) Demonstrated that it will assume full financial risk on 
a prospective basis for the provision of comprehensive health 
maintenance services, including hospital care; provided, 
however, that the requirement in this paragraph shall not 
prohibit a health maintenance organization from obtaining 
insurance or making other arrangements (i) for the cost of 
providing to any enrollee comprehensive health maintenance 
services, the aggregate value of which exceeds $5,000 in any 
year, (ii) for the cost of providing comprehensive health care 
services to its members on a non-elective emergency basis, or 
while they are outside the area served by the organization, or 
(iii) for not more than 95 percent of the amount by which the 
health maintenance organization's costs for any of its fiscal 
years exceed 105 percent of its income for such fiscal years; 
and 
    (g) Otherwise met the requirements of sections 62D.01 to 
62D.29. 
    Subd. 2.  Within 90 days after the receipt of the 
application for a certificate of authority, the commissioner of 
health shall determine whether or not the applicant meets the 
requirements of this section.  If the commissioner of health 
determines that the applicant meets the requirements of sections 
62D.01 to 62D.29, he shall issue a certificate of authority to 
the applicant.  If the commissioner of health determines that 
the applicant is not qualified, he shall so notify the applicant 
and shall specify the reason or reasons for such 
disqualification. 
    Subd. 3.  Except as provided in section 62D.03, subdivision 
2, no person who has not been issued a certificate of authority 
shall use the words "health maintenance organization" or the 
initials "HMO" in its name, contracts or literature.  Provided, 
however, that persons who are operating under a contract with, 
operating in association with, enrolling enrollees for, or 
otherwise authorized by a health maintenance organization 
licensed under sections 62D.01 to 62D.29 to act on its behalf 
may use the terms "health maintenance organization" or "HMO" for 
the limited purpose of denoting or explaining their association 
or relationship with the authorized health maintenance 
organization.  No health maintenance organization which has a 
minority of consumers as members of its board of directors shall 
use the words "consumer controlled" in its name or in any way 
represent to the public that it is controlled by consumers. 
    Subd. 4.  Upon being granted a certificate of authority to 
operate as a health maintenance organization, the organization 
must continue to operate in compliance with the standards set 
forth in subdivision 1.  Noncompliance may result in the 
imposition of a fine or the suspension or revocation of the 
certificate of authority, in accordance with sections 62D.15 to 
62D.17.  
    Sec. 14.  [62D.041] [PROTECTION AGAINST INSOLVENCY.] 
    Subdivision 1.  [DEFINITION.] For the purposes of this 
section, the term "uncovered expenditures" means the costs of 
health care services that are covered by a health maintenance 
organization for which an enrollee would also be liable in the 
event of the organization's insolvency, including out-of-area 
services, referral services, and any other expenditures for 
health care services for which the health maintenance 
organization is at risk.  
    Subd. 2.  [REQUIRED DEPOSIT.] Unless otherwise provided in 
this section, each health maintenance organization shall deposit 
with any organization or trustee acceptable to the commissioner 
through which a custodial or controlled account is utilized, 
cash, freely alienable securities, or any combination of these 
or other measures that is acceptable to the commissioner in the 
amount set forth in this section.  If a health maintenance 
organization does not have the required reserves or its reserves 
are not properly computed, operations shall be adjusted to 
correct the condition, according to a written plan proposed by 
the health maintenance organization and approved by the 
commissioner.  If a health maintenance organization does not 
propose measures to correct its reserves or surplus within a 
reasonable time, if a corporation violates the plan which has 
been approved, or if there is evidence that an improper reserve 
or surplus status cannot be corrected within a reasonable time, 
the commissioner of commerce may take action against the 
corporation under chapter 60B.  
    Subd. 3.  [AMOUNT FOR BEGINNING ORGANIZATIONS.] The amount 
for an organization that is beginning operation shall be the 
greater of:  (a) five percent of its estimated expenditures for 
health care services for its first year of operation; (b) twice 
its estimated average monthly uncovered expenditures for its 
first year of operation; or (c) $100,000.  
    At the beginning of each succeeding year, unless not 
applicable, the organization shall deposit with the organization 
or trustee, cash, freely alienable securities, or any 
combination of these or other measures acceptable to the 
commissioner in an amount equal to four percent of its estimated 
annual uncovered expenditures for that year.  
    Subd. 4.  [AMOUNT FOR EXISTING ORGANIZATIONS.] Unless not 
applicable, an organization that is in operation on the 
effective date of this section shall make a deposit equal to the 
larger of:  
    (a) one percent of the preceding 12 months' uncovered 
expenditures; or 
    (b) $100,000 on the first day of the fiscal year beginning 
six months or more after the effective date of this section.  
    In the second fiscal year, if applicable, the amount of the 
additional deposit shall be equal to two percent of its 
estimated annual uncovered expenditures.  In the third year, if 
applicable, the additional deposit shall be equal to three 
percent of its estimated annual uncovered expenditures for that 
year.  In the fourth fiscal year and subsequent years, if 
applicable, the additional deposit shall be equal to four 
percent of its estimated annual uncovered expenditures for each 
year.  Each year's estimate, after the first year of operation, 
shall reasonably reflect the prior year's operating experience 
and delivery arrangements.  
    Subd. 5.  [WAIVER.] The commissioner may waive any of the 
deposit requirements set forth in subdivisions 2 and 3 whenever 
satisfied that the organization has sufficient net worth and an 
adequate history of generating net income to assure its 
financial viability for the next year, or its performance and 
obligations are guaranteed by an organization with sufficient 
net worth and an adequate history of generating net income, or 
the assets of the organization or its contracts with insurers, 
hospital, or medical service corporations, governments, or other 
organizations are reasonably sufficient to assure the 
performance of its obligations.  
    Subd. 6.  [FINANCIAL EXEMPTIONS.] When an organization has 
achieved a net worth not including land, buildings, and 
equipment of at least $1,000,000 or has achieved a net worth 
including organization-related land, buildings, and equipment of 
at least $5,000,000, the annual deposit requirement does not 
apply.  
    The annual deposit requirement does not apply to an 
organization if the total amount of the accumulated deposit is 
equal to 25 percent of its estimated annual uncovered 
expenditures for the next calendar year, or the capital and 
surplus requirements for the formation for admittance of an 
accident and health insurer in this state, whichever is less.  
    If the organization has a guaranteeing organization which 
has been in operation for at least five years and has a net 
worth not including land, buildings, and equipment of at least 
$1,000,000 or which has been in operation for at least ten years 
and has a net worth including organization-related land, 
buildings, and equipment of at least $5,000,000, the annual 
deposit requirement does not apply.  If the guaranteeing 
organization is sponsoring more than one organization, the net 
worth requirement shall be increased by $400,000 not including 
organization-related land, buildings, and equipment, for each 
additional organization, for guaranteeing organizations that 
have been in operation for at least five years, and by 
$2,000,000 including organization-related land, buildings, and 
equipment, for each additional organization, for guaranteeing 
organizations that have been in operation for at least ten 
years.  This requirement to maintain a deposit in excess of the 
deposit required of an accident and health insurer does not 
apply during any time that the guaranteeing organization 
maintains for each organization it sponsors a net worth at least 
equal to the capital and surplus requirements for an accident 
and health insurer.  
    Subd. 7.  [CONTROL OF OVER DEPOSITS.] All income from 
deposits shall belong to the depositing organizations and shall 
be paid to it as it becomes available.  A health maintenance 
organization that has made a securities deposit may withdraw 
that deposit or any part thereof after making a substitute 
deposit of cash, freely alienable securities, or any combination 
of these or other measures of equal amount and value.  Any 
securities shall be approved by the commissioner before being 
substituted.  
    Subd. 8.  [REDUCTION BY COMMISSIONER.] In any year in which 
an annual deposit is not required of an organization's request 
the commissioner shall reduce the required, previously 
accumulated deposit by $100,000 for each $250,000 of net worth 
in excess of the amount that allows the organization not to make 
the annual deposit.  If the amount of net worth no longer 
supports a reduction of its required deposit, the organization 
shall immediately redeposit $100,000 for each $250,000 of 
reduction in net worth, provided that its total deposit shall 
not exceed the maximum required under this section.  
    Sec. 15.  Minnesota Statutes 1982, section 62D.05, 
subdivision 3, is amended to read: 
    Subd. 3.  A health maintenance organization may contract 
with providers of health care services to render the services 
the health maintenance organization has promised to provide 
under the terms of its health maintenance contracts, may, 
subject to section 62D.12, subdivision 11, enter into separate 
prepaid dental contracts, or other separate health service 
contracts, may, subject to the limitations of section 62D.04, 
subdivision 1, clause (f), contract with insurance companies and 
nonprofit health service plan corporations for insurance, 
indemnity or reimbursement of its cost of providing health care 
services for enrollees or against the risks incurred by the 
health maintenance organization, and may contract with insurance 
companies and nonprofit health service plan corporations to 
insure or cover the enrollees' costs and expenses in the health 
maintenance organization, including the customary prepayment 
amount and any co-payment obligations.  
    Sec. 16.  Minnesota Statutes 1982, section 62D.07, 
subdivision 1, is amended to read: 
    Subdivision 1.  Every enrollee residing in this state is 
entitled to evidence of coverage under a health care plan 
maintenance contract.  The health maintenance organization or 
its designated representative shall issue the evidence of 
coverage. 
    Sec. 17.  Minnesota Statutes 1982, section 62D.07, 
subdivision 3, is amended to read: 
    Subd. 3.  An evidence of coverage shall contain: 
    (a) No provisions or statements which are unjust, unfair, 
inequitable, misleading, deceptive, or which are untrue, 
misleading or deceptive as defined in section 62D.12, 
subdivision 1; and 
    (b) A clear, concise and complete statement of: 
    (1) The health care services and the insurance or other 
benefits, if any, to which the enrollee is entitled under the 
health care plan maintenance contract; 
    (2) Any exclusions or limitations on the services, kind of 
services, benefits, or kind of benefits, to be provided, 
including any deductible or copayment feature; 
    (3) Where and in what manner information is available as to 
how services, including emergency and out of area services, may 
be obtained; 
    (4) The total amount of payment and copayment, if any, for 
health care services and the indemnity or service benefits, if 
any, which the enrollee is obligated to pay with respect to 
individual contracts, or an indication whether the plan is 
contributory or noncontributory with respect to group 
certificates; and 
    (5) A description of the health maintenance organization's 
method for resolving enrollee complaints and a statement 
identifying the commissioner as an external source with whom 
grievances may be registered.  
    (c) On the cover page of the evidence of coverage, a clear 
and complete statement of enrollees' rights as consumers, 
including but not limited to a description of each of the 
following:  
    (1) based upon the delivery system of each health 
maintenance organization, a statement which describes any type 
of health care professional as defined in section 145.61, whose 
services may be available only by referral of the health 
maintenance organization's participating staff;  
    (2) the right to available and accessible services which 
can be secured as promptly as appropriate for the symptoms 
presented, in a manner which assures continuity and, when 
medically necessary, the right to emergency services available 
24 hours a day and 7 days a week;  
    (3) the consumer's right to be informed of his or her 
health problems, and to receive information regarding treatment 
alternatives and risks which is sufficient to assure informed 
choice;  
    (4) the right to refuse treatment;  
    (5) the right to privacy of medical and financial records 
maintained by the health maintenance organization and its health 
care providers, in accordance with existing law;  
    (6) the right to file a grievance with the health 
maintenance organization and the commissioner when experiencing 
a problem with the health maintenance organization or its health 
care providers;  
    (7) the right to initiate a legal proceeding when 
dissatisfied with the health maintenance organization's final 
determination regarding a grievance;  
    (8) the right of the enrollee and his or her dependents to 
continue group coverage in the event the enrollee is terminated 
or laid off from employment, provided that the cost of such 
coverage is paid by the enrollee and furthermore, the right of 
the enrollee to convert to an individual contract at the end of 
the continuation period;  
    (9) the right for notification of enrollees regarding the 
cancellation or termination of contracts with participating 
primary care professionals, and the right to choose from among 
remaining participating primary care professionals;  
    (10) the right to cancel an individual health maintenance 
contract within ten days of its receipt and to have premiums 
paid refunded if, after examination of the contract, the 
individual is not satisfied with it for any reason.  The 
individual is responsible for repaying the health maintenance 
organization for any services rendered or claims paid by the 
health maintenance organization during the ten days; and 
    (11) the right to a grace period of 31 days for the payment 
of each premium for an individual health maintenance contract 
falling due after the first premium during which period the 
contract shall continue in force.  
    Sec. 18.  Minnesota Statutes 1982, section 62D.07, is 
amended by adding a subdivision to read: 
    Subd. 5.  A grace period of 31 days shall be granted for 
payment of each premium for an individual health maintenance 
contract falling due after the first premium, during which 
period the contract shall continue in force.  
    Sec. 19.  Minnesota Statutes 1982, section 62D.07, is 
amended by adding a subdivision to read: 
    Subd. 6.  Any person entering into an individual health 
maintenance contract may cancel the contract within ten days of 
its receipt and to have premium paid refunded if, after 
examination of the contract, the individual is not satisfied 
with it for any reason.  The individual is responsible for 
repaying the health maintenance organization for any services 
rendered or claims paid by the health maintenance organization 
during the ten days.  
    Sec. 20.  Minnesota Statutes 1982, section 62D.08, 
subdivision 1, is amended to read: 
    Subdivision 1.  A health maintenance organization shall, 
unless otherwise provided for by regulations adopted by the 
commissioner of health, file notice with the commissioner of 
health prior to any modification of the operations or documents 
described in the information submitted under clauses (a), (b), 
(e), (f), (g), (i), (j), (k), (l), and (m), (n), (o), (p), (q) 
and (r) of section 62D.03, subdivision 4.  If the commissioner 
of health does not disapprove of the filing within 30 days, it 
shall be deemed approved and may be implemented by the health 
maintenance organization.  
    Sec. 21.  Minnesota Statutes 1982, section 62D.08, 
subdivision 3, is amended to read: 
    Subd. 3.  Such report shall be on forms prescribed by the 
commissioner of health, and shall include: 
    (a) A financial statement of the organization, including 
its balance sheet and receipts and disbursements for the 
preceding year certified by an independent certified public 
accountant, reflecting at least (1) all prepayment and other 
payments received for health care services rendered, (2) 
expenditures to all providers, by classes or groups of 
providers, and insurance companies or nonprofit health service 
plan corporations engaged to fulfill obligations arising out of 
the health maintenance contract, and (3) expenditures for 
capital improvements, or additions thereto, including but not 
limited to construction, renovation or purchase of facilities 
and capital equipment; 
    (b) The number of new enrollees enrolled during the year, 
the number of enrollees as of the end of the year and the number 
of enrollees terminated during the year; 
    (c) A summary of information compiled pursuant to section 
62D.04, subdivision 1, clause (c) in such form as may be 
required by the commissioner of health; 
    (d) A report of the names and residence addresses of all 
persons set forth in section 62D.03, subdivision 4, clause (c) 
who were associated with the health maintenance organization or 
the major participating entity during the preceding year, and 
the amount of wages, expense reimbursements, or other payments 
to such individuals for services to the health maintenance 
organization or the major participating entity, as those 
services relate to the health maintenance organization, 
including a full disclosure of all financial arrangements during 
the preceding year required to be disclosed pursuant to section 
62D.03, subdivision 4, clause (c) (d); and 
    (e) Such other information relating to the performance of 
the health maintenance organization as is reasonably necessary 
to enable the commissioner of health to carry out his duties 
under sections 62D.01 to 62D.29. 
    Sec. 22.  Minnesota Statutes 1982, section 62D.08, is 
amended by adding a subdivision to read: 
    Subd. 4.  Any health maintenance organization which fails 
to file a verified report with the commissioner on or before 
April 1 of the year due shall be subject to the levy of a fine 
up to $500 for each day the report is past due.  This failure 
will serve as a basis for other disciplinary action against the 
organization, including suspension or revocation, in accordance 
with sections 62D.15 to 62D.17.  The commissioner may grant an 
extension of the reporting deadline upon good cause shown by the 
health maintenance organization.  Any fine levied or 
disciplinary action taken against the organization under this 
subdivision is subject to the contested case and judicial review 
provisions of sections 14.57 to 14.69.  
    Sec. 23.  Minnesota Statutes 1982, section 62D.08, is 
amended by adding a subdivision to read: 
    Subd. 5.  Every health maintenance organization shall 
inform the commissioner of any change in the information 
described in section 62D.03, subdivision 4, clause (e), 
including any change in address, any modification of the 
duration of any contract or agreement, and any addition to the 
list of participating entities, within ten working days of the 
notification of the change.  Any cancellation or discontinuance 
of any contract or agreement listed in section 62D.03, 
subdivision 4, clause (e), or listed subsequently in accordance 
with this subdivision, shall be reported to the commissioner 
within seven working days of the date the health maintenance 
organization sends out or receives the notice of cancellation or 
discontinuance.  Any health maintenance organization which fails 
to notify the commissioner within the time periods prescribed in 
this subdivision shall be subject to the levy of a fine up to 
$100 per contract for each day the notice is past due, accruing 
up to the date the organization notifies the commissioner of the 
cancellation or discontinuance.  Any fine levied under this 
subdivision is subject to the contested case and judicial review 
provisions of chapter 14.  
    Sec. 24.  Minnesota Statutes 1982, section 62D.09, is 
amended to read: 
    62D.09 [INFORMATION TO ENROLLEES.] 
    Subdivision 1.  Any written marketing materials which may 
be directed toward potential enrollees and which includes a 
detailed description of benefits provided by the health 
maintenance organization shall include a statement of consumer 
rights as described in section 62D.07, subdivision 3(c).  
     Subd. 2.  The application for coverage by the health 
maintenance organization shall be accompanied by the statement 
of consumer rights as described in section 62D.07, subdivision 
3(c).  
    Subd. 3.  Every health maintenance organization or its 
representative shall annually, before April June 1, provide to 
its enrollees the following:  (1) a summary of: its most recent 
annual financial statement including a balance sheet and 
statement of receipts and disbursements; (2) a description of 
the health maintenance organization, its health care plan or 
plans, its facilities and personnel, any material changes 
therein since the last report, and (3) the current evidence of 
coverage; and (4) a statement of consumer rights as described in 
section 62D.07, subdivision 3, paragraph (c). 
    Sec. 25.  Minnesota Statutes 1982, section 62D.10, 
subdivision 3, is amended to read: 
    Subd. 3.  A health plan providing health maintenance 
services or reimbursement for health care costs to a specified 
group or groups may limit the open enrollment in each group plan 
to members of such group or groups, but after it has been in 
operation 24 months shall have an annual open enrollment period 
of at least one month 14 days during which it accepts enrollees 
from the members of each group up to a minimum of five percent 
of its current enrollment in each group plan shall accept all 
otherwise eligible individuals in the order in which they apply 
for enrollment in a manner which does not discriminate on the 
basis of age, sex, race, health, or economic status.  The health 
maintenance organization shall notify potential enrollees of any 
limitations on the number of new enrollees to be accepted.  
"Specified groups" may include, but shall not be limited to: 
    (a) Employees of one or more specified employers; 
    (b) Members of one or more specified labor unions; 
    (c) Members of one or more specified associations; 
    (d) Patients of physicians providing services through a 
health care plan who had previously provided services outside 
the health care plan; and 
    (e) Members of an existing group insurance policy. 
    Sec. 26.  Minnesota Statutes 1982, section 62D.10, is 
amended by adding a subdivision to read: 
    Subd. 5.  Any fee charged by a health maintenance 
organization for the process of determining an applicant's 
eligibility, and any other application fee charged, shall be 
refunded with interest to the applicant if the applicant is not 
accepted for enrollment in the health maintenance organization, 
or credited with interest to the applicant's premiums due if the 
applicant is accepted for enrollment in the organization.  
    Sec. 27.  Minnesota Statutes 1982, section 62D.101, 
subdivision 2, is amended to read: 
    Subd. 2.  [CONVERSION PRIVILEGE.] Every health maintenance 
contract, other than a contract whose continuance is contingent 
upon continued employment or membership, which contains a 
provision for termination of coverage of the spouse upon 
dissolution of marriage as described in subdivision 1 shall 
contain a provision allowing a former spouse and dependent 
children of an enrollee, without providing evidence of 
insurability, to obtain from the health maintenance organization 
at the expiration of any continuation of coverage required under 
subdivision 2a or section 62A.146, or upon termination of 
coverage by reason of an entry of a valid decree of dissolution 
which does not require the health maintenance organization to 
provide continued coverage for the former spouse, an individual 
health maintenance contract providing at least the minimum 
benefits of a qualified plan as prescribed by section 62E.06 and 
the option of a number three qualified plan, a number two 
qualified plan, a number one qualified plan as provided by 
section 62E.06, subdivisions 1 to 3, provided application is 
made to the health maintenance organization within 30 days 
following notice of the expiration of the continued coverage and 
upon payment of the appropriate fee.  A contract providing 
reduced benefits at a reduced fee may be accepted by the former 
spouse and dependent children in lieu of the optional coverage 
otherwise required by this subdivision.  The individual health 
maintenance contract shall be renewable at the option of the 
former spouse as long as the former spouse is not covered under 
another qualified plan as defined in section 62E.02, subdivision 
4, up to age 65 or to the day before the date of eligibility for 
coverage under Title XVIII of the Social Security Act, as 
amended.  Any revisions in the table of rate for the individual 
contract shall apply to the former spouse's original age at 
entry, and shall apply equally to all similar contracts issued 
by the health maintenance organization. 
    Sec. 28.  Minnesota Statutes 1982, section 62D.101, 
subdivision 2a, is amended to read: 
    Subd. 2a.  [CONTINUATION PRIVILEGE.] Every health 
maintenance contract, other than a contract whose continuance is 
contingent upon continued employment or membership, as described 
in subdivision 1 shall contain a provision which permits 
continuation of coverage under the contract for the enrollee's 
former spouse and children upon entry of a valid decree of 
dissolution of marriage, if the decree requires the enrollee to 
provide continued coverage for those persons.  The coverage may 
be continued until the earlier of the following dates:  
    (a) The date of remarriage of either the enrollee or the 
enrollee's former spouse; or 
    (b) The date coverage would otherwise terminate under the 
health maintenance contract.  
    Sec. 29.  [62D.103] [SECOND OPINION RELATED TO CHEMICAL 
DEPENDENCY AND MENTAL HEALTH.] 
    A health maintenance organization shall promptly evaluate 
the treatment needs of any enrollee who is seeking treatment for 
a problem related to chemical dependency or mental health 
conditions.  In the event that the health maintenance 
organization or a participating provider determines that no type 
of treatment, either inpatient or outpatient, is necessary, the 
enrollee shall immediately be entitled to a second opinion by a 
health care professional qualified in diagnosis and treatment of 
the problem.  An enrollee who seeks a second opinion from a 
health care professional not affiliated with the health 
maintenance organization must do so at his or her own expense. 
The health maintenance organization or participating provider 
shall consider the second opinion but is not obligated to accept 
the conclusion of the second opinion.  The health maintenance 
organization or participating provider shall document its 
consideration of the second opinion.  
    Sec. 30.  Minnesota Statutes 1982, section 62D.12, 
subdivision 1, is amended to read:  
    Subdivision 1.  No health maintenance organization or 
representative thereof may cause or knowingly permit the use of 
advertising or solicitation which is untrue or misleading, or 
any form of evidence of coverage which is deceptive.  Any 
written advertising is misleading if it fails to disclose that 
there are limitations on the services of some health care 
professionals.  This general disclosure is not required on 
billboards.  Each health maintenance organization shall be 
subject to sections 72A.17 to 72A.321, relating to the 
regulation of trade practices, except (a) to the extent that the 
nature of a health maintenance organization renders such 
sections clearly inappropriate and (b) that enforcement shall be 
by the commissioner of health and not by the commissioner of 
insurance.  Every health maintenance organization shall be 
subject to sections 325.79 325F.69 and 325.907 8.31. 
    Sec. 31.  Minnesota Statutes 1982, section 62D.12, 
subdivision 2, is amended to read: 
    Subd. 2.  No health maintenance organization may cancel or 
fail to renew the coverage of an enrollee except for (a) failure 
to pay the charge for health care coverage; (b) termination of 
the health care plan; (c) termination of the group plan; (d) 
enrollee moving out of the area served, subject to section 
62A.17, subdivisions 1 and 6; (e) enrollee moving out of an 
eligible group, subject to section 62A.17, subdivisions 1 and 6; 
(f) failure to make copayments required by the health care plan; 
or (g) other reasons established in regulations promulgated by 
the commissioner of health.  An enrollee shall be given 30 days 
notice of any cancellation or nonrenewal. 
    Sec. 32.  Minnesota Statutes 1982, section 62D.12, 
subdivision 4, is amended to read: 
    Subd. 4.  No health maintenance contract or evidence of 
coverage shall provide for the reimbursement of an enrollee 
other than through a policy of insurance, except to refund 
payments made by or on behalf of an enrollee; or, with the prior 
approval of the commissioner of health, payments to enrollees 
for obligations incurred for non-elective emergency or 
out-of-area services received; or with prior approval, direct 
payments to providers for out-of-area, non-elective emergency or 
referral medical, hospital, or other health services rendered to 
enrollees as stated in this subdivision:  
    (a) the health maintenance organization may refund payments 
made by or on behalf of an enrollee;  
    (b) the health maintenance organization may make direct 
payments to enrollees or providers for obligations incurred for 
nonelective emergency or out-of-area services received. 
    Sec. 33.  Minnesota Statutes 1982, section 62D.12, 
subdivision 9, is amended to read: 
    Subd. 9.  All net earnings of the health maintenance 
organization shall be devoted to the nonprofit purposes of the 
health maintenance organization in providing comprehensive 
health care.  No health maintenance organization shall provide 
for the payment, whether directly or indirectly, of any part of 
its net earnings, to any person as a dividend or rebate; 
provided, however, that authorized expenses of a health 
maintenance organization shall include:  
    (a) cash rebates to enrollees, or to persons who have made 
payments on behalf of enrollees; or, when approved by the 
commissioner of health as provided in subdivision 4, direct 
payments to enrollees for obligations incurred for non-elective 
emergency or out-of-area services received; or, with prior 
approval, direct payments to providers for out-of-area, 
non-elective emergency or referral medical, hospital, or other 
health services rendered to enrollees;  
    (b) free or reduced cost health service to enrollees; or 
    (c) payments to providers or other persons based upon the 
efficient provision of services or as incentives to provide 
quality care.  All net earnings shall be devoted to the 
nonprofit purposes of the health maintenance organization in 
providing comprehensive health care. health maintenance 
organizations may make payments to providers or other persons 
based upon the efficient provision of services or as incentives 
to provide quality care.  The commissioner of health shall, 
pursuant to sections 62D.01 to 62D.29, revoke the certificate of 
authority of any health maintenance organization in violation of 
this subdivision. 
    Sec. 34.  Minnesota Statutes 1982, section 62D.12, is 
amended by adding a subdivision to read: 
    Subd. 9a.  Authorized expenses of a health maintenance 
organization shall include:  
    (1) cash rebates to enrollees, or to persons who have made 
payments on behalf of enrollees;  
    (2) direct payments to enrollees or providers as provided 
in subdivision 4, clause (b);  
    (3) free or reduced cost health service to enrollees;  
    (4) payments to any organization or organizations selected 
by the health maintenance organization which are operated for 
charitable, educational, or religious or scientific purposes.  
    Sec. 35.  Minnesota Statutes 1982, section 62D.12, 
subdivision 10, is amended to read: 
    Subd. 10.  No health maintenance contract or evidence of 
coverage entered into, issued, amended, renewed or delivered on 
or after January 1, 1976 shall contain any provision offsetting, 
or in any other manner reducing, any benefit to an enrollee or 
other beneficiary by the amount of, or in any proportion to, any 
increase in disability benefits received or receivable under the 
federal Social Security Act, as amended subsequent to the date 
of commencement of such benefit, the Railroad Retirement Act, 
any Veteran's Disability Compensation and Survivor Benefits Act, 
workers' compensation, or any similar federal or state law, as 
amended subsequent to the date of commencement of that benefit. 
    Sec. 36.  Minnesota Statutes 1982, section 62D.12, is 
amended by adding a subdivision to read: 
    Subd. 13.  No health maintenance organization offering an 
individual or group health maintenance contract shall refuse to 
provide or renew the coverage because the applicant or enrollee 
has an option to elect workers' compensation coverage pursuant 
to section 176.012.  
    Sec. 37.  Minnesota Statutes 1982, section 62D.14, is 
amended to read: 
    62D.14 [EXAMINATIONS.] 
    Subdivision 1.  The commissioner of health may make an 
examination of the financial affairs of any health maintenance 
organization and its contracts, agreements, or other 
arrangements with providers any participating entity as often as 
the commissioner of health deems necessary for the protection of 
the interests of the people of this state, but not less 
frequently than once every three years, provided that 
examinations of participating entities pursuant to this 
subdivision shall be limited to their dealings with the health 
maintenance organization and its enrollees. 
    Subd. 2.  The commissioner of health may make an 
examination concerning the quality of health care services 
provided to enrollees by any health maintenance organization and 
providers with whom such organization has contracts, agreements, 
or other arrangements pursuant to its health care plan as often 
as the commissioner of health deems necessary for the protection 
of the interests of the people of this state, but not less 
frequently than once every three years.  Provided, that 
examinations of providers pursuant to this subdivision shall be 
limited to their dealings with the health maintenance 
organization and its enrollees will notify the organization and 
any involved participating entity in writing when an examination 
has been initiated.  The commissioner will include in this 
notice a full statement of the pertinent facts and of the 
matters being examined, and may include a statement that the 
organization or participating entity must submit to the 
commissioner within 30 days from the date of the notice a 
complete written report concerning those matters. 
    Subd. 3.  In order to accomplish his duties under this 
section with respect to the dealings of the participating 
entities with the health maintenance organization, the 
commissioner of health shall have the right to: 
    (a) inspect or otherwise evaluate the quality, 
appropriateness, and timeliness of services performed under such 
contract; and 
    (b) audit and inspect any books and records of a health 
maintenance organization and a participating entity which 
pertain to services performed and determinations of amounts 
payable under such contract;  
    (c) require persons or organizations under examination to 
be deposed and to answer interrogatories, regardless of whether 
an administrative hearing or other civil proceeding has been or 
will be initiated; and 
    (d) employ site visits, public hearings, or any other 
procedures considered appropriate to obtain the information 
necessary to determine the issues.  
    Subd. 4.  Any data or information pertaining to the 
diagnosis, treatment, or health of any enrollee, or any 
application obtained from any person, shall be confidential 
private as defined in chapter 13 and shall not be disclosed to 
any person except (a) to the extent that it may be necessary to 
carry out the purposes of sections 62D.01 to 62D.29, the 
commissioner and his or her designee shall have access to the 
above data or information but the data removed from the health 
maintenance organization or participating entity shall not 
identify any particular patient or client by name or contain any 
other unique personal identifier; (b) upon the express consent 
of the enrollee or applicant; (c) pursuant to statute or court 
order for the production of evidence or the discovery thereof; 
or (d) in the event of claim or litigation between such person 
and the provider or health maintenance organization wherein such 
data or information is pertinent.  In any case involving a 
suspected violation of a law applicable to health maintenance 
organizations in which access to health data maintained by the 
health maintenance organization or participating entity is 
necessary, the commissioner and his or her agents, while 
maintaining the privacy rights of individuals and families, 
shall be permitted to obtain data that identifies any particular 
patient or client by name.  A health maintenance organization 
shall be entitled to claim any statutory privileges against such 
disclosure which the provider who furnished such information to 
the health maintenance organization is entitled to claim. 
    Subd. 5.  The commissioner of health shall have the power 
to administer oaths to and examine witnesses, and to issue 
subpoenas. 
    Subd. 6.  Reasonable expenses of examinations under this 
section shall be assessed by the commissioner of health against 
the organization being examined, and shall be remitted to the 
commissioner of health for deposit in the general fund of the 
state treasury. 
    Subd. 7.  Failure to provide relevant information necessary 
for conducting examinations pursuant to this section shall be 
subject to the levy of a fine up to $200 for each day the 
information is not provided.  A fine levied under this 
subdivision shall be subject to the contested case and judicial 
review provisions of chapter 14.  In the event a timely request 
for review is made, accrual of a fine levied shall be stayed 
pending completion of the contested case and judicial review 
proceeding.  
    Sec. 38.  Minnesota Statutes 1982, section 62D.15, 
subdivision 1, is amended to read: 
    Subdivision 1.  The commissioner of health may suspend or 
revoke any certificate of authority issued to a health 
maintenance organization under sections 62D.01 to 62D.29 if he 
finds that: 
    (a) The health maintenance organization is operating 
significantly in contravention of its basic organizational 
document, its health care plan maintenance contract, or in a 
manner contrary to that described in and reasonably inferred 
from any other information submitted under section 62D.03, 
unless amendments to such submissions have been filed with and 
approved by the commissioner of health; 
    (b) The health maintenance organization issues evidences of 
coverage which do not comply with the requirements of section 
62D.07; 
    (c) The health maintenance organization is unable to 
fulfill its obligations to furnish comprehensive health 
maintenance services as required under its health care plan 
maintenance contract; 
    (d) The health maintenance organization is no longer 
financially responsible and may reasonably be expected to be 
unable to meet its obligations to enrollees or prospective 
enrollees; 
    (e) The health maintenance organization has failed to 
implement a mechanism affording the enrollees an opportunity to 
participate in matters of policy and operation under section 
62D.06; 
    (f) The health maintenance organization has failed to 
implement the complaint system required by section 62D.11 in a 
manner designed to reasonably resolve valid complaints; 
    (g) The health maintenance organization, or any person 
acting with its sanction, has advertised or merchandised its 
services in an untrue, misrepresentative, misleading, deceptive, 
or unfair manner; 
    (h) The continued operation of the health maintenance 
organization would be hazardous to its enrollees; or 
    (i) The health maintenance organization has otherwise 
failed to substantially comply with sections 62D.01 to 62D.29 or 
with any other statute or administrative rule applicable to 
health maintenance organizations, or has submitted false 
information in any report required hereunder. 
    Sec. 39.  Minnesota Statutes 1982, section 62D.17, 
subdivision 1, is amended to read: 
    Subdivision 1.  The commissioner of health may, for any 
violation of statute or rule applicable to a health maintenance 
organization, or in lieu of suspension or revocation of a 
certificate of authority under section 62D.15, levy an 
administrative penalty in an amount not less than $100 nor more 
than up to $10,000 for each violation. In the case of contracts 
or agreements made pursuant to section 62D.05, subdivisions 2 to 
4, each contract or agreement entered into or implemented in a 
manner which violates sections 62D.01 to 62D.29 shall be 
considered a separate violation.  Reasonable notice in writing 
to the health maintenance organization shall be given of the 
intent to levy the penalty and the reasons therefor, and the 
health maintenance organization shall may have a reasonable time 
within which to remedy the defect in its operations which gave 
rise to the penalty citation, or have an administrative hearing 
and review of the commissioner of health's determination.  Such 
administrative hearing shall be subject to judicial review 
pursuant to chapter 14. 
    Sec. 40.  Minnesota Statutes 1982, section 62D.17, 
subdivision 4, is amended to read: 
    Subd. 4.  (a) The commissioner of health may issue an order 
directing a health maintenance organization or a representative 
of a health maintenance organization to cease and desist from 
engaging in any act or practice in violation of the provisions 
of sections 62D.01 to 62D.29. 
    (b) Within 20 days after service of the order to cease and 
desist, the respondent may request a hearing on the question of 
whether acts or practices in violation of sections 62D.01 to 
62D.29 have occurred.  Such hearings shall be subject to 
judicial review as provided by chapter 14. 
    If the acts or practices alleged involve violation of the 
reporting requirements under section 62D.08, or if the 
commissioner of commerce has ordered the rehabilitation, 
liquidation, or conservation of the health maintenance 
organization in accordance with section 62D.18, there shall be 
no automatic stay of the cease and desist order.  If a timely 
request for a hearing is made, the respondent may show cause why 
the order should be stayed pending completion of the 
administrative contested case process.  Written arguments on 
this issue shall be filed with the commissioner no later than 15 
days from the date the hearing is requested.  The commissioner 
has 15 days from the date the written arguments are filed to 
render a decision regarding the requested stay.  
    To the extent the acts or practices alleged do not involve 
violations of section 62D.08, if a timely request for a hearing 
is made, the cease and desist order shall be stayed for a period 
of 30 days from the date the hearing is requested.  During this 
stay, the respondent may show cause why the order should not 
become effective upon the expiration of the stay.  Arguments on 
this issue shall be made through briefs filed with the 
commissioner no later than ten days prior to the expiration of 
the stay.  
    Sec. 41.  Minnesota Statutes 1982, section 62D.19, is 
amended to read: 
    62D.19 [UNREASONABLE EXPENSES.] 
    No health maintenance organization shall incur or pay for 
any expense of any nature which is unreasonably high in relation 
to the value of the service or goods provided.  The commissioner 
of insurance shall, pursuant to the administrative procedures 
act, promulgate rules to implement and enforce this section.  
    In an effort to achieve the stated purposes of 62D.01 to 
62D.29; in order to safeguard the underlying nonprofit status of 
health maintenance organizations; and to ensure that the payment 
of health maintenance organization moneys to major participating 
entities results in a corresponding benefit to the health 
maintenance organization and its enrollees, when determining 
whether an organization has incurred an unreasonable expense in 
relation to a major participating entity, due consideration 
shall be given to, in addition to any other appropriate factors, 
whether the officers and trustees of the health maintenance 
organization have acted with good faith and in the best 
interests of the health maintenance organization in entering 
into, and performing under, a contract under which the health 
maintenance organization has incurred an expense.  
    Sec. 42.  Minnesota Statutes 1982, section 62D.22, 
subdivision 5, is amended to read: 
    Subd. 5.  Except as otherwise provided in sections 62A.01 
to 62A.42 and 62D.01 to 62D.29, and except as they eliminate 
elective, induced abortions, wherever performed, from health or 
maternity benefits, provisions of the insurance laws and 
provisions of nonprofit health service plan corporation laws 
shall not be applicable to any health maintenance organization 
granted a certificate of authority under sections 62D.01 to 
62D.29. 
    Sec. 43.  Minnesota Statutes 1982, section 62D.22, is 
amended by adding a subdivision to read: 
    Subd. 10.  Any person or committee conducting a review of a 
health maintenance organization or a participating entity, 
pursuant to sections 62D.01 to 62D.29, shall have access to any 
data or information necessary to conduct the review.  All data 
or information is subject to admission into evidence in any 
civil action initiated by the commissioner of health against the 
health maintenance organization.  The data and information are 
subject to chapter 13.  
    Sec. 44.  [INTERAGENCY AGREEMENT.] 
    In order to implement the provisions of 62D.01 to 62D.30, 
the commissioner of health and commissioner of commerce shall 
enter into an agreement for coordinated enforcement of laws 
pertaining to health maintenance organizations.  The agreement 
shall contain procedures whereby each commissioner, to the 
extent resources are available, shall provide technical 
assistance to the other in those policy matters which each 
commissioner has unique, specialized expertise.  
     Sec. 45.  [STUDY OF COPAYMENT RESTRICTION.] 
     The commissioner shall solicit information from consumers, 
health maintenance organizations, insurers, employers, and other 
interested parties concerning the impact of restrictions on 
copayment discrimination based upon preexisting health status. 
The commissioner shall report a summary of the information along 
with an analysis and recommendation concerning the need to 
continue the restrictions on copayment discrimination upon 
preexisting health status by March 1, 1986.  
    Sec. 46.  [REPEALER.] 
    Minnesota Statutes 1982, sections 62D.10, subdivision 2; 
62D.12, subdivision 7; 62D.22, subdivision 9; and 62D.27, are 
repealed.  
    Sec. 47.  [EFFECTIVE DATE.] 
    Section 12 is effective the day following final enactment. 
Sections 17 and 24 are effective January 1, 1985.  The 
prohibition against discrimination on the basis of preexisting 
health status contained in section 8, is effective for contracts 
effective on or after January 1, 1985. 
    Approved April 24, 1984