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(2) To pay (directly or through another carrier or carriers) to providers of personal health services all or part of their costs or charges for specified personal health services furnished to specified beneficiaries or a class or classes of beneficiaries: Provided, That if (A) such payments are to be made in accordance with a contract or arrangement between the carrier and the provider of such services (or between the carrier and another carrier through whom such payments are to be mad and (B) such contract or arrangement fixes the basis upon which the amount of such payments shall be determined, such contract or arrangement shall be deemed to be an integral part of the plan ;

(3) To provide, wholly or partly through its own staff or facilities, specified personal health services to specified beneficiaries or a class or

classes of beneficiaries; (f) The term “personal health services” includes any services rendered to individuals by licensed health personnel, or, under the supervision of such personnel by auxiliary personnel for the improvement or preservation of physical or mental health or for the diagnosis and treatment of disease or injury; the use by such licensed or auxiliary personnel of any and all apparatus or machines designed to aid in the diagnosis or treatment of disease or injury; the provision of bed and board in general or special hospitals, convalescent homes, nursing homes, sanatoria, or other institutions licensed or designated as such by a State when care in such institutions is prescribed by such licensed personnel; the provision of drugs and medicines, dressings and supplies, prostheses and appliances (including eyeglasses), when prescribed by such licensed personnel; and ambulance service;

(g) The term “Secretary”, except as otherwise specified, means the Secretary of Health, Education, and Welfare; and

(h) The term "State" includes the District of Columbia, Alaska, Hawali, Puerto Rico, and possessions of the United States.

NATIONAL ADVISORY COUNCIL AND OTHER COMMITTEES

SEC. 102. (a) There is hereby established within the Department of Health, Education, and Welfare a National Advisory Council on Health Service Prepayment Plans, which shall meet at the call of the Secretary but not less often than four times each year. The Council shall consist of twelve members appointed by the Secretary without regard to the civil-service laws, who shall be familiar with the need for, or the availability of, personal health services, and not less than four of whom shall be experienced in the administration of health service prepayment plans. The Secretary shall, from time to time, designate one of such members to serve as Chairman of the Council.

(b) The Council shall advise, consult with, and make recommendations to, the Secretary on matters of policy relating to the activities and functions of the Secretary under this Act.

(c) The Secretary is authorized to utilize the services of any member or members of the Council, or of any member or members of a special advisory committee appointed by him, for advisory or consultative purposes in connection with matters related to the administration of this Act, for such periods, in addition to conference periods, as he may determine.

(d) Appointed members of the Council and of other advisory and technical committees, while attending conferences or meetings of the Council or of their respective committees or subcommittees or while otherwise serving at the request of the Secretary, shall be entitled to receive compensation at a rate to be fixed by the Secretary but not exceeding $50 per diem, including travel time, and while away from their homes or regular places of business they may be allowed travel expenses, including per diem in lieu of subsistence, as authorized by law (5 U. S. C. 731-2) for persons in the Government service employed intermittently.

CONSULTANTS Sec. 103. The Secretary is authorized, to the extent he deems it necessary and appropriate in order to carry out the provisions of this Act, to employ experts and consultants or organizations thereof, as authorized by section 15 of the Administrative Expenses Act of 1946 (5 U. S. C. 55a). Individuals so employed may be compensated at rates not in excess of $50 per diem, including travel time, and while away from their homes or regular places of business they may be allowed travel expenses, including per diem in lieu of subsistence, as authorized by law (5 U. S. C. 73b-2) for persons in the Government service employed intermittently.

UTILIZATION OF OTHER AGENCIES

Sec. 104. (a) In administering the provisions of this Act, the Secretary is authorized to utilize the services and facilities of any agency of the Federal Government and, without regard to section 3709, as amended, of the Revised Statutes, of any other public or nonprofit agency or institution, in accordance with agreements between the Secretary and the head thereof. Payment for such services and facilities shall be made in advance or by way of reimbursement as may be agreed upon by the Secretary and the head of the agency or institution concerned.

(b) In administering the provisions of title III, the Secretary shall utilize to the optimum extent, in accordance with arrangements entered into pursuant to subsection (a) of this section, the services and facilities of State agencies engaged pursuant to State law in supervising carriers of health service prepayment plans with respect to such plans or with respect to policies or subscriber contracts issued pursuant thereto. The Secretary shall, in particular, endeavor to make arrangements for utilization of the appropriate agency of the carrier's home State in connection with determining compliance with the terms and conditions prescribed by the Secretary pursuant to section 303, and in determining, in accordance with criteria established by the Secretary, whether, as required by section 304, the carrier is financially sound and entitled to public confidence; and such determinations pursuant to section 304 may be accepted by the Secretary as conclusive. As used in this subsection, the term “home State" means the State under the laws of which the carrier is organized or, if the carrier's principal place of business is in a different State, then either of such States as the Secretary may determine, except that in the case of a carrier not organized under the laws of any State, the term “home State” means the State in which the carrier's principal place of business in the United States is situated.

VOLUNTARY AND UNCOMPENSATED SERVICES

SEC. 105. In carrying out the provisions of this Act, the Secretary may, notwithstanding any other provision of law providing for payment for services, accept and utilize voluntary and uncompensated services of individuals, or of public or nonprofit agencies, institutions, or organizations.

EXEMPTION FROM OONFLICT-OF-INTEREST STATUTES

SEO. 106. (a) Any person appointed, employed, or utilized in an advisory or consultative capacity under section 102 or 103 of this Act is hereby exempted, with respect to such appointment, employment, or utilization, from the operation of sections 281, 283, 284, and 1914 of title 18 of the United States Code, except as otherwise specified in subsection (b) of this section.

(b) (1) The exemption granted by subsection (a) of this section shall not extend to the following acts performed as an officer or employee of the United States by any person so appointed, employed, or utilized : (A) The negotiation or execution of, or (B) the making of any recommendation with respect to, or (C) the taking of any other action with respect to, any individual application or contract for reinsurance of a health service prepayment plan operated or sponsored by the private employer of such person or by any corporation, joint stock company, association, firm, partnership, or other business entity in the pecuniary profits or contracts of which such person has any direct or indirect interest.

(2) The exemption granted by subsection (a) of this section shall, during the period of such appointinent, employment, or utilization and the further period of two years after the termination thereof, not extend to the prosecution or participation in the prosecution, by any person so appointed, employed, or utilized, of any claim against the Government involving any individual application or contract for reinsurance concerning which the appointee had any responsibility during the period of such appointment, employment, or utilization.

REGULATIONS

SEC. 107. (a) The Secretary shall make such regulations as he may deem necessary to carry out the purposes of this Act.

(b) Except as may be specifically provided for in this Act, nothing in this Act shall be construed to authorize the exercise of any supervisory or regulatory control over any carrier or over any hospital or other health facility or personnel furnishing personal health services covered by a participating health service prepayment plan.

TITLE II-STUDIES AND ADVISORY AND INFORMATIONAL SERVICES

SEC. 201. The Secretary is authorized to conduct studies and collect information concerning the organizational, actuarial, operational, and other problems of health service prepayment plans and their carriers, make available through publications and other appropriate means the information so collected and the results of such studies, and provide to carriers and sponsors of health service prepayment plans, on request and without charge, organizational and other technical advice and information, including information on morbidity and organizational methods.

Sec. 202. There are hereby authorized to be appropriated for the purposes of this title such sums as may be necessary. TITLE III-REINSURANCE OF HEALTH SERVICE PREPAYMENT PLANS

AUTHORITY TO REINSURE

SEC. 301. (a) If, in the judgment of the Secretary, reinsurance with respect to any kind or type of health service prepayment plan, upon terms and conditions and at premium rates comparable to those offered pursuant to this title, is needed to promote the purposes of this Act and is not available from private sources to an extent adequate to promote such purposes, the Secretary is authorized, subject to the provisions of this title and to such terms and conditions as may be pre scribed under the authority of this title, to reinsure, on behalf of the United States, any carrier with respect to such a health service prepayment plan submitted by it.

(b) For the purpose of this title, the term "health service prepayment plan" shall not include so much of any plan, or of any risk insured pursuant to such plan, as is covered by reinsurance other than reinsurance granted pursuant to this title.

APPLICATIONS FOR REINSURANCE SEC. 302. (a) Any carrier desiring reinsurance under this title with respect to a health service prepayment plan shall file with the Secretary an application for such reinsurance. Such application shall be in such form and contain or be sup ported by the information required pursuant to section 305 and such additional information as the Secretary may require, and shall contain or be accompanied by a full description of the plan, including specimen copies of the kinds of insurance policies or subscriber contracts covered by the plan, and including, in the case of a plan within the scope of the proviso to section 101 (e) (2), any applicable contract or arrangement between the applicant carrier an dthe provider or providers to whom payments for personal health services covered by the plan are to be made (or between the applicant carrier and another carrier through whom payments to such provider or providers are to be made), which contract or arrangement fixes the basis upon which such payments are to be made.

(b) Such application shall, further, contain or be supported by an agreement by the applicant undertaking, in the event of approval of the plan for reinsurance, (1) to pay the premium charges for such reinsurance required under this title when due, (2) to comply at all times with applicable provisions of State law gov. erning the operations of the carrier with respect to the plan, (3) to make such reports concerning its operations under the plan, in such form, and containing such information related thereto as the Secretary may from time to time reasonably require, and (4) to comply with the applicable provisions of the reinsurance contract.

(c) Any carrier desiring a renewal of reinsurance under this title shall file with the Secretary an application for such renewal, which application shall, except as otherwise provided by or pursuant to regulation, contain or be supported by such information, and such agreements and assurances as are required in the case of an initial application for reinsurance.

TERMS AND CONDITIONS OF APPROVAL FOR REINSURANCE

SEC. 303. (a) The Secretary may prescribe such terms and conditions governing the approval, for reinsurance, of health service prepayment plans under this title as he finds will best promote the purposes specified in section 1, including, but not limited to, such reasonable requirements, provisions, or limitations as he may from time to time by regulation prescribe for all carriers or particular classes of such carriers, or for all or particular classes of health service prepay. ment plans or policies or subscriber contracts issued pursuant thereto, or both, with respect to

(1) the kinds and types of health service prepayment plans which will be eligible for reinsurance, taking in consideration the purposes declared in section 1, with special demphasis upon the objective of encouraging experimentation designed to extend or adapt the prepayment method to substantive problem areas or geographic areas for which that method is in any significant respect new, untried, or not yet fully effective or widely available on reasonable terms, such as (A) coverage of classes of individuals for which protection through such health service prepayment plans appears to be feasible but is not adequate, or (B) the offering of protection in communities or areas in which such protection (in the respects in which it is offered) is not adequately available on a prepayment basis, or (C) a coverage of benefits or services which, either as to type, range, amount, or duration of such benefits or services, is not otherwise (generally or in a given area) widely available through such plans on an adequate basis;

(2) minimum ranges of health conditions to be covered by the plan, minimum provisions as to the kind, quantity, and duration of health services to be covered or provided under the plan, and safeguards against undue exclusions of health services or health conditions from coverage or against any other undue exclusions or limitations ;

(3) deductible amounts and maximum liability amounts, if any, provided or to be provided for in the plan;

(4) waiting periods as a condition of entitlement to health service benefits;

(5) plan provisions which require that a given portion of the cost of personal health services or of expenditures therefor, covered by the plan, be borne by the policy holder, subscriber, or beneficiary;

(6) plan provisions, in the case of plans within the scope of the proviso to section 101 (e) (2), as to costs or charges of providers of personal health services payable by the carrier, to the extent that, in the judgment of the Secretary, such regulations are necessary to protect the Fund against abuses or arbitrary cost increases during a reinsurance term;

(7) The duration, cancellability, and renewability of policies or subscriber contracts issued pursuant to the plan; and

(8) other policy provisions bearing on the need for limiting reinsurance under this title to plans which will promote the purposes of this Act. (b) Notwithstanding the provisions of subsection (a) or any other provision of this Act, the Secretary shall not exercise any control whatsoever over the carrier's premium or subscription charges under a health service prepayment plan, except that he shall not approve for reinsurance any such plan if in the Secretary's judgment (1) the carrier's premium or subscription charges thereunder are such as to cause the plan to be financially unsound or are otherwise arbitrary or unreasonable, or (2) the allocation of such premium charges by the carrier pursuant to section 305 (c) as between risks to be reinsured and risks not to be reinsured is arbitrary or unreasonable.

(c) No term, condition, requirement, provisions, or limitation, or amendment thereto, prescribed pursuant to subsection (a), shall, if initially effective less than ninety days prior to the date of approval of an application for initial reinsurance with respect to a plan, or less than ninety days prior to the date of approval of an application for renewal of such reinsurance, be applicable to such plan, without the carrier's consent, during the term of such initial reinsurance or of such renewal, as the case may be, but the same shall be applicable to any subsequent renewal of such reinsurance.

(d) The Secretary shall not approve for reinsurance any health service prepayment plan which contemplates that medical or dental care or treatment be furnished by the applicant for reinsurance through salaried physicians or dentists in the employ of such applicant unless the Secretary is satisfied that such applicant has an organizational structure which vests control over the manner in which medicine and dentistry are practiced, in connection with the health services concerned, solely in duly licensed members of the professions involved.

REINSURANCE CERTIFICATE

SEC. 304. If the Secretary finds (a) that the applicant carrier is operating and proposes to operate according to law; (b) that the carrier is financially sound and that financial policies and manner of operation or proposed operation entitle it to public confidence; (c) that the application, the health service prepayment plan submitted for reinsurance (or for renewal of reinsúrance), the policies and contracts the carrier proposes to issue or has already issued under the plan, and the carrier's proposed method of operations comply with the requirements of this title and with the terms, conditions, requirements, provisions, or limitations prescribed pursuant to this title; (d) that the plan is sound ; (e) that the carrier has agreed to the premium rates for reinsurance fixed with respect to such plan pursuant to section 306 for the term of reinsurance covered by the application; and (f) that reinsurance of such plan pursuant to this title will promote the purposes of this title, the Secretary is authorized to approve the application for reinsurance (or for renewal of reinsurance) and, in the event of such approval, to issue to the carrier a certificate stating that, with respect to the health service prepayment plan described in the application, the carrier is reinsured to the extent provided in this title and in accordance with the tenor of, and for the period specified in, the certificate: Provided, That, if the carrier has outstanding health service policies or contracts under the plan at the time of such approval, the certificate of reinsurance shall not be issued unless and until the initial premium for reinsurance as specified in section 306 has been paid.

SCOPE AND EXTENT OF REINSURANCE OBLIGATION

SEC. 305. (a) (1) The issuance of a certificate of reinsurance pursuant to this title shall give rise to a contract between the applicant carrier and the United States, whereby the United States is obligated, upon payment of all reinsurance premium charges required pursuant to this title and upon compliance by the carrier with the other applicable terms, conditions, and requirements specified in or pursuant to this title, to pay to such carrier, for each year during the term of such reinsurance, from the fund (or from the appropriate account established under section 307), 75 per centum of the carrier's reinsured costs incurred in such year under the plan covered by the certificate of reinsurance.

(2) Except as otherwise provided in and pursuant to subsection (b) for certain plans and carriers, the carrier's reinsured costs incurred under a reinsured plan in a given year shall be that amount, if any, by which

(A) the carrier's aggregate benefit costs, incurred during such year under its health service prepayment policies or subscriber contracts issued under and in conformity with the reinsured plan, exceed

(B) (i) the carrier's aggregate premium income earned under the re insured plan in such year, as reduced by (ii) the amount of the applicable

administrative-expense allowance. The administrative-expense allowance applicable to a given year with respect to a reinsured plan shall be dtermined by multiplying the carrier's aggregate premium income earned during such year under the reinsured plan by the applicable administrative-expense-allowance factor predetermined for such plan under paragraph (3) of this subsection.

(3) (A) The “administrative-expense-allowance factor” applicable to a given carrier and health service prepayment plan with respect to a given initial or renewal term of reinsurance shall be seven-eighths of that ratio, approved by the Secretary, which the carrier, as a part of its application for initial reinsurance or renewal of reinsurance of such plan, as the case may be, estimates to be the ratio which its annual administrative expenses, to be incurred in connection with the plan, will bear to its annual premium income to be earned under the plan : Provided, That, when so required by the Secretary in order to prevent distortion, such ratio shall be an average ratio estimated with respect to such period of years, not in excess of three, as may be specified in regulations.

(B) The Secretary shall approve the carrier's estimate of the ratio of its annual incurred administrative expenses to its annual earned premium income, submitted under subparagraph (A) of this paragraph, unless in the Secretary's judgment the carrier's estimate or the method by which such estimate was made is not a reasonable or bona fide one, in which event the Secretary shall not give such approval and shall not issue or renew such reinsurance, but such ap

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