Chapter 0033

Chapter 33 Oregon Laws 2003

AN ACT

SB 353

Relating to health care service contractors; amending ORS 735.605, 743.556, 750.005, 750.015 and 750.045 and section 5, chapter 318, Oregon Laws 2001; and declaring an emergency.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 750.005 is amended to read:

750.005. As used in ORS 750.005 to 750.095:

(1) “Claims” means any amount incurred by the insurer covering contracted benefits.

(2) “Complementary health services” means the following health care services:

(a) Chiropractic as defined in ORS 684.010;

(b) Naturopathic medicine as defined in ORS 685.010;

(c) Massage therapy as defined in ORS 687.011; or

(d) Acupuncture as defined in ORS 677.757.

[(1)] (3) “Doctor” means any person lawfully licensed or authorized by statute to render any health care services.

[(2)] (4) “Health care service contractor” means:

(a) Any corporation that is sponsored by or otherwise intimately connected with a group of doctors licensed by this state, or by a group of hospitals licensed by this state, or both, under contracts with groups of doctors or hospitals [which] that include conditions holding the subscriber harmless in the event of nonpayment by the health care service contract as provided in ORS 750.095, and [which] that accepts prepayment for health care services; or

(b) Any person referred to in ORS 750.035.

(5) “Health care services” means the furnishing of medicine, medical or surgical treatment, nursing, hospital service, dental service, optometrical service, complementary health services or any or all of the enumerated services or any other necessary services of like character, whether or not contingent upon sickness or personal injury, as well as the furnishing to any person of any and all other services and goods for the purpose of preventing, alleviating, curing or healing human illness, physical disability or injury.

[(3)] (6) “Health maintenance organization” means any health care service contractor operated on a for-profit or not for-profit basis which:

(a) Qualifies under Title XIII of the Public Health Service Act; or

(b)(A) Provides or otherwise makes available to enrolled participants health care services, including at least the following basic health care services:

(i) Usual physician services;

(ii) Hospitalization;

(iii) Laboratory;

(iv) X-ray;

(v) Emergency and preventive services; and

(vi) Out-of-area coverage;

(B) Is compensated, except for copayments, for the provision of basic health care services listed in subparagraph (A) of this paragraph to enrolled participants on a predetermined periodic rate basis;

(C) Provides physicians' services primarily directly through physicians who are either employees or partners of such organization, or through arrangements with individual physicians or one or more groups of physicians organized on a group practice or individual practice basis; and

(D) Employs the terms “health maintenance organization” or “HMO” in its name, contracts, literature or advertising media on or before July 13, 1985.

[(4) “Health care services” means the furnishing of medicine, medical or surgical treatment, nursing, hospital service, dental service, optometrical service or any or all of the enumerated services or any other necessary services of like character, whether or not contingent upon sickness or personal injury, as well as the furnishing to any person of any and all other services and goods for the purpose of preventing, alleviating, curing, or healing human illness, physical disability or injury.]

[(5) “Claims” means any amount incurred by the insurer covering contracted benefits.]

SECTION 2. ORS 750.045 is amended to read:

750.045. (1) A health care service contractor that is a for-profit or not-for-profit corporation shall possess and thereafter maintain capital or surplus, or any combination thereof, of not less than $2.5 million.

(2) A health care service contractor that is a for-profit or not-for-profit corporation shall file a surety bond or such other bond or securities in the sum of $250,000 as are authorized by the Insurance Code as a guarantee of the due execution of the policies to be entered into by such contractor in accordance with ORS 750.005 to 750.095. In lieu of such bond or securities, a health care service contractor may file an irrevocable letter of credit issued by an insured institution as defined in ORS 706.008 in the sum of $250,000. This subsection does not apply to a health care service contractor that has at least 75 percent of its assets invested in health care service facilities pursuant to ORS 733.700.

(3) Subsections (1) and (2) of this section do not apply to a health care service contractor furnishing only complementary health services, dental service or optometrical service operated on a for-profit or not-for-profit basis if:

(a) The services referred to in this subsection maintain capital or surplus, or any combination thereof, of not less than $1 million.

(b) The services referred to in this subsection file a surety bond or other such bond or securities in the sum of $50,000 as are authorized by the Insurance Code as a guarantee of the due execution of the policies to be entered into by such contractor in accordance with ORS 750.005 to 750.095.

(4) A health care service contractor that is a for-profit or not-for-profit corporation applying for its original certificate of authority in this state shall possess, when first so authorized, additional capital or surplus, or any combination thereof, of not less than $500,000.

(5) For the protection of the public, the Director of the Department of Consumer and Business Services may require a health care service contractor to possess and maintain capital or surplus, or any combination thereof, in excess of the amount otherwise required under this section owing to the type, volume and nature of insurance business transacted by the health care service contractor, if the director determines that the greater amount is necessary for maintaining the health care service contractor's solvency according to standards established by rule. In developing such standards, the director shall consider model standards adopted by the National Association of Insurance Commissioners or its successor organization. For the purpose of determining the reasonableness and adequacy of a health care service contractor's capital and surplus, the director must consider at least the following factors, as applicable:

(a) The size of the health care service contractor, as measured by its assets, capital and surplus, reserves, premium writings, insurance in force and other appropriate criteria.

(b) The number of lives insured.

(d) The nature and extent of the reinsurance program of the health care service contractor.

(e) The quality, diversification and liquidity of the investment portfolio of the health care service contractor.

(f) The recent past and projected future trend in the size of the investment portfolio of the health care service contractor.

(g) The combined capital and surplus maintained by comparable health care service contractors.

(h) The adequacy of the reserves of the health care service contractor.

(i) The quality and liquidity of investments in affiliates. The director may treat any such investment as a disallowed asset for purposes of determining the adequacy of combined capital and surplus whenever in the judgment of the director the investment so warrants.

(j) The quality of the earnings of the health care service contractor and the extent to which the reported earnings include extraordinary items.

SECTION 3. Section 5, chapter 318, Oregon Laws 2001, is amended to read:

Sec. 5. (1) To qualify for authority to transact insurance in this state on and after [the effective date of this 2001 Act] January 1, 2002, an insurer that is not authorized to transact insurance in this state on the day before [the effective date of this 2001 Act] January 1, 2002, must possess and thereafter maintain the applicable capital and surplus required by ORS 731.554, 731.562 and 731.566, as amended by sections 1 to 3, chapter 318, Oregon Laws 2001 [of this 2001 Act].

(2) To qualify for authority to transact health care services in this state on and after [the effective date of this 2001 Act] January 1, 2002, a health care service contractor that is not authorized to transact health care services in this state on the day before [the effective date of this 2001 Act] January 1, 2002,must possess and thereafter maintain the applicable capital and surplus required by ORS 750.045, as amended by section 6, chapter 318, Oregon Laws 2001 [of this 2001 Act].

(3) An insurer that is authorized to transact insurance in this state on the day before [the effective date of this 2001 Act] January 1, 2002, and that possesses on that date the applicable capital and surplus required under ORS 731.554, 731.562 and 731.566, as amended by sections 1 to 3, chapter 318, Oregon Laws 2001 [of this 2001 Act], must thereafter maintain that capital and surplus.

(4) A health care service contractor that is authorized to transact health care services in this state on the day before [the effective date of this 2001 Act] January 1, 2002, and that possesses on that date the applicable capital and surplus required under ORS 750.045, as amended by section 6, chapter 318, Oregon Laws 2001 [of this 2001 Act], must thereafter maintain that capital and surplus.

(5) Notwithstanding the effective date of [this 2001 Act] chapter 318, Oregon Laws 2001, an insurer that is authorized to transact insurance in this state on the day before [the effective date of this 2001 Act] January 1, 2002, and that does not possess on [the effective date of this 2001 Act] January 1, 2002, the applicable capital and surplus required under ORS 731.554 (1) and (2), 731.562 and 731.566, as amended by sections 1 to 3, chapter 318, Oregon Laws 2001 [of this 2001 Act], must possess and maintain at least the amounts of capital and surplus as follows:

(a) For insurers other than insurers transacting workers' compensation insurance:

(A) $1,300,000, not later than December 31, 2002.

(B) $1,600,000, not later than December 31, 2003.

(D) $2,200,000, not later than December 31, 2005.

(E) $2,500,000, not later than December 31, 2006.

(b) For insurers transacting workers' compensation insurance:

(A) $3,400,000, not later than December 31, 2002.

(B) $3,800,000, not later than December 31, 2003.

(D) $4,600,000, not later than December 31, 2005.

(E) $5,000,000, not later than December 31, 2006.

(6) Notwithstanding the effective date of [this 2001 Act] chapter 318, Oregon Laws 2001, a health care service contractor that is authorized to transact health care services in this state on the day before [the effective date of this 2001 Act] January 1, 2002, and that does not possess on [the effective date of this 2001 Act] January 1, 2002, the applicable capital and surplus required under ORS 750.045, as amended by section 6, chapter 318, Oregon Laws 2001 [of this 2001 Act], must possess and maintain at least the amounts of capital and surplus as follows:

(a) As of each date specified in this paragraph, a health care service contractor other than one to which ORS 750.045 (3) applies shall possess and maintain capital or surplus, or any combination thereof, of not less than the minimum amount specified in connection with the date or an amount equal to 50 percent of the average claims as defined in ORS 750.005 [(5)] for the preceding 12-month period, whichever is greater. The required amount of capital and surplus for each date, however, shall not be more than the maximum amount specified in connection with that date. The dates and minimum and maximum required amounts of capital and surplus are as follows:

(A) As of December 31, 2002, not less than $650,000 and not more than $1,300,000.

(B) As of December 31, 2003, not less than $800,000 and not more than $1,600,000.

(D) As of December 31, 2005, not less than $1,100,000 and not more than $2,200,000.

(E) As of December 31, 2006, not less than $2,500,000.

(b) As of each date specified in this paragraph, a health care service contractor to which ORS 750.045 (3) applies shall possess and maintain capital or surplus, or any combination thereof, of not less than the minimum amount specified in connection with the date or an amount equal to 50 percent of the average claims as defined in ORS 750.005 [(5)] for the preceding 12-month period, whichever is greater. The required amount of capital and surplus for each date, however, shall not be more than the maximum amount specified in connection with that date. The dates and minimum and maximum required amounts of capital and surplus are as follows:

(A) As of December 31, 2002, not less than $300,000 and not more than $600,000.

(B) As of December 31, 2003, not less than $350,000 and not more than $700,000.

(D) As of December 31, 2005, not less than $450,000 and not more than $900,000.

(E) As of December 31, 2006, not less than $1 million.

(7) An insurer authorized to transact insurance in this state on the day before [the effective date of this 2001 Act] January 1, 2002, shall not be granted authority to transact any other or additional class of insurance until the insurer complies with the applicable provisions of ORS 731.554, 731.562 or 731.566, as amended by sections 1 to 3, chapter 318, Oregon Laws 2001 [of this 2001 Act].

(8) An insurer or health care service contractor authorized to transact insurance or health care services in this state on the day before [the effective date of this 2001 Act] January 1, 2002,that reapplies for a certificate of authority after having a certificate of authority revoked for any cause shall not be granted authority to transact any insurance or health care services until the insurer or health care service contractor complies with the applicable provisions of ORS 731.554, 731.562, 731.566 or 750.045, as amended by sections 1 to 3 and 6, chapter 318, Oregon Laws 2001 [of this 2001 Act].

(9) If an insurer to which subsection (5) of this section applies or a health care service contractor to which subsection (6) of this section applies does not possess and maintain the minimum amount of capital and surplus required by ORS 731.554 (1) and (2), 731.562, 731.566 and 750.045, as amended by sections 1 to 3 and 6, chapter 318, Oregon Laws 2001 [of this 2001 Act], on or before December 31, 2006, the insurer or health care service contractor may apply to the Director of the Department of Consumer and Business Services for an extension of time within which to attain the amount. The application must state the reasons for the failure to attain the required minimum amount, the date by which the amount is expected to be attained and the means and likelihood of attaining the amount by that date. The director may grant the extension if the director determines that the extension is reasonable and appropriate in the circumstances, taking into account factors that include but are not limited to the following:

(a) Whether the insurer or health care service contractor has made reasonable progress toward attaining the required minimum amount during the time periods specified in this section; and

(b) Whether the insurer or health care service contractor is likely to attain the required minimum amount by the date proposed by the insurer or health care service contractor.

SECTION 4. ORS 735.605 is amended to read:

735.605. As used in ORS 735.600 to 735.650:

(1) “Benefits plan” means the coverages to be offered by the pool to eligible persons pursuant to ORS 735.600 to 735.650.

(2) “Board” means the Oregon Medical Insurance Pool Board.

(3) “Insured” means any individual resident of this state who is eligible to receive benefits from any insurer.

(4) “Insurer” means:

(a) Any insurer as defined in ORS 731.106 or fraternal benefit society as defined in ORS 748.106 required to have a certificate of authority to transact health insurance business in this state, and any health care service contractor as defined in ORS 750.005 [(2)], issuing medical insurance in this state on or after September 27, 1987.

(b) Any reinsurer reinsuring medical insurance in this state on or after September 27, 1987.

(c) To the extent consistent with federal law, any self-insurance arrangement covered by the Employee Retirement Income Security Act of 1974, as amended, that provides health care benefits in this state on or after September 27, 1987.

(d) All self-insurance arrangements not covered by the Employee Retirement Income Security Act of 1974, as amended, that provides health care benefits in this state on or after September 27, 1987.

(5) “Medical insurance” means any health insurance benefits payable on the basis of hospital, surgical or medical expenses incurred and any health care service contractor subscriber contract. Medical insurance does not include accident only, disability income, hospital confinement indemnity, dental or credit insurance, coverage issued as a supplement to liability insurance, coverage issued as a supplement to Medicare, insurance arising out of a workers' compensation or similar law, automobile medical-payment insurance or insurance under which benefits are payable with or without regard to fault and which is statutorily required to be contained in any liability insurance policy or equivalent self-insurance.

(6) “Medicare” means coverage under both part A and part B of Title XVIII of the Social Security Act, 42 U.S.C. 1395 et seq., as amended.

(7) “Plan of operation” means the plan of operation of the pool, including articles, bylaws and operating rules, adopted by the board pursuant to ORS 735.600 to 735.650.

(8) “Pool” means the Oregon Medical Insurance Pool as created by ORS 735.610.

(9) “Reinsurer” means any insurer as defined in ORS 731.106 from whom any person providing medical insurance to Oregon insureds procures insurance for itself in the insurer, with respect to all or part of the medical insurance risk of the person.

(10) “Self-insurance arrangement” means any plan, program, contract or any other arrangement under which one or more employers, unions or other organizations provide health care services or benefits to their employees or members in this state, either directly or indirectly through a trust or third party administrator, unless the health care services or benefits are provided by an insurance policy issued by an insurer other than a self-insurance arrangement.

SECTION 5. ORS 743.556 is amended to read:

743.556. A group health insurance policy providing coverage for hospital or medical expenses shall provide coverage for expenses arising from treatment for chemical dependency including alcoholism and for mental or nervous conditions. The following conditions apply to the requirement for such coverage:

(1) The coverage may be made subject to provisions of the policy that apply to other benefits under the policy, including but not limited to provisions relating to deductibles and coinsurance. Deductibles and coinsurance for treatment in health care facilities or residential programs or facilities shall be no greater than those under the policy for expenses of hospitalization in the treatment of illness. Deductibles and coinsurance for outpatient treatment shall be no greater than those under the policy for expenses of outpatient treatment of illness.

(2) Treatment provided in health care facilities, residential programs or facilities, day or partial hospitalization programs or outpatient services shall be considered eligible for reimbursement if it is provided by:

(a) Programs or providers described in ORS 430.010 or approved by the Department of Human Services under subsection (3) of this section.

(b) Programs accredited for the particular level of care for which reimbursement is being requested by the Joint Commission on Accreditation of Hospitals or the Commission on Accreditation of Rehabilitation Facilities.

(c) Inpatient programs provided by health care facilities as defined in ORS 442.015. Residential, outpatient, or day or partial hospitalization programs offered by or through a health care facility must meet the requirements of either paragraph (a) or (b) of this subsection in order to be eligible for reimbursement.

(d) Residential programs or facilities described in subsection (3) of this section if the patient is staying overnight at the facility and is involved in a structured program at least eight hours per day, five days per week.

(e) Programs in which staff are directly supervised or in which individual client treatment plans are approved by a person described in ORS 430.010 (4)(a) and which meet the standards established under subsection (3) of this section.

(3) Subject to ORS 430.065, the Department of Human Services shall adopt rules relating to the approval, for insurance reimbursement purposes, of noninpatient chemical dependency programs that are not related to the department or any county mental health program. The department shall adopt rules relating to the approval, for insurance reimbursement purposes, of noninpatient programs for mental or nervous conditions that are not related to the department or any county mental health program.

(4) A program that provides services for persons with both a chemical dependency diagnosis and a mental or nervous condition shall be considered to be a distinct and specialized type of program for both chemical dependency and mental or nervous conditions. The Department of Human Services shall develop specific standards related to such programs for program approval purposes and shall adopt rules relating to the approval, for insurance reimbursement purposes, of such noninpatient programs that are not related to the department and any county mental health program.

(5) As used in this section:

(a) “Chemical dependency” means the addictive relationship with any drug or alcohol characterized by either a physical or psychological relationship, or both, that interferes with the individual's social, psychological or physical adjustment to common problems on a recurring basis. For purposes of this section, chemical dependency does not include addiction to, or dependency on, tobacco, tobacco products or foods.

(b) “Child or adolescent” means a person who is 17 years of age or younger.

(c) “Facility” means a corporate or governmental entity or other provider of services for the treatment of chemical dependency or for the treatment of mental or nervous conditions.

(d) “Program” means a particular type or level of service that is organizationally distinct within a facility.

(6) Notwithstanding the limits for particular types of services specified in this section, a policy shall not limit the total of payments for all treatment of any kind under this section for chemical dependency, together with payments for all treatment of any kind for mental or nervous conditions, to less than $13,125 for adults and $15,625 for children or adolescents. For persons requesting payments for treatment of any kind for chemical dependency, but not requesting payments for treatment of any kind of mental or nervous condition, a policy shall not limit the total of payments for all treatment to less than $8,125 for adults and $13,125 for children and adolescents.

(7) The limits for mental or nervous conditions specified in this section shall apply to persons with diagnoses of both chemical dependency and mental or nervous conditions, who are being treated for both types of diagnosis, as well as persons with only a diagnosis of a mental or nervous condition.

(8) The higher benefit levels in this section for children or adolescents are in recognition of the longer period of treatment and the greater levels of staffing that may be required for children or adolescents and are intended to permit more services to meet the needs of children and adolescents.

(9) Payments shall not be made under this section for educational programs to which drivers are referred by the judicial system, nor for volunteer mutual support groups.

(10) Except as permitted by subsections (1), (6) and (12) of this section, the policy shall not limit payments for inpatient treatment in hospitals and other health care facilities thereunder:

(a) For chemical dependency to an amount less than $5,625 for adults and $5,000 for children or adolescents; and

(b) For mental or nervous conditions to an amount less than $5,000 for adults and $7,500 for children or adolescents.

(11) Except as permitted by subsections (1), (6) and (12) of this section, the policy shall not limit payments for treatment in residential programs or facilities or day or partial hospitalization programs:

(a) For chemical dependency to an amount less than $4,375 for adults and $3,750 for children or adolescents; and

(b) For mental or nervous conditions to an amount less than $1,250 for adults and $3,125 for children or adolescents.

(12) Notwithstanding the minimum benefits for particular types of services specified in subsections (10) and (11) of this section, and except as permitted by subsection (1) of this section, the policy shall not limit total payments for inpatient, residential and day or partial hospitalization program care or treatment:

(a) For chemical dependency to an amount less than $10,625 for children or adolescents; and

(b) For mental or nervous conditions to an amount less than $10,625 for adults and $13,125 for children or adolescents.

(13) Except as permitted by subsections (1) and (6) of this section, in the case of benefits for outpatient services, the policy shall not limit payments:

(a) For chemical dependency to an amount less than $1,875 for adults and $2,500 for children or adolescents; and

(b) For mental or nervous conditions to an amount less than $2,500.

(14) If so specified in the policy, outpatient coverage may include follow-up in-home service associated with any health care facility, residential, day or partial hospitalization or outpatient services. The policy may limit coverage for in-home service to persons who have completed their initial health care facility, residential, day or partial hospitalization or outpatient treatment and did not terminate that initial treatment against advice. The policy may also limit coverage for in-home service by defining the circumstances of need under which payment will or will not be made.

(15) Under ORS 430.021 and 430.315, the Legislative Assembly has found that health care cost containment is necessary and intends to encourage insurance policies designed to achieve cost containment by assuring that reimbursement is limited to appropriate utilization under criteria incorporated into such policies, either directly or by reference.

(16) A group health insurance policy may provide, with respect to treatment for chemical dependency or mental or nervous conditions, that any one or more of the following cost containment methods shall be in effect and the method or methods used by an insurer in one part of the state may be different from the method or methods used by that insurer in another part of the state:

(a) Proportion of coinsurance required for treatment in residential programs or facilities, day or partial hospitalization programs or outpatient services less than the proportion of coinsurance required for treatment in health care facilities.

(b) Subject to the patient or client confidentiality provisions of ORS 40.235 relating to physicians, ORS 40.240 relating to nurse practitioners, ORS 40.230 relating to psychologists and ORS 40.250 and 675.580 relating to licensed clinical social workers, review for level of treatment of admissions and continued stays for treatment in health care facilities, residential programs or facilities, day or partial hospitalization programs and outpatient services by either insurer staff or personnel under contract to the insurer, or by a utilization review contractor, who shall have the authority to certify for or deny level of payment:

(A) This review shall be made according to criteria made available to providers in advance upon request.

(B) To facilitate implementation of utilization review programs by insurers, the Director of Human Services shall draft an advisory or model set of criteria for appropriate utilization of inpatient, residential, day or partial hospitalization, and outpatient facilities, programs and services by adults, children and adolescents, and persons with both a chemical dependency diagnosis and a mental or nervous condition. These criteria shall be consistent with this section and shall not be binding on any insurer or other party. However, at the time of contract negotiation or amendment, with the agreement of the parties to the contract, any insurer may adopt the criteria or similar criteria with or without modification. The director shall revise these criteria at least every two years. In developing and revising these criteria, the director shall organize a technical advisory panel including representatives of the Department of Consumer and Business Services, the Department of Human Services, the insurance industry, the business community and providers of each level of care. The director shall place substantial weight on the advice of this panel.

(C) Review shall be performed by or under the direction of a medical or osteopathic physician licensed by the Board of Medical Examiners for the State of Oregon; a psychologist licensed by the State Board of Psychologist Examiners; a nurse practitioner registered by the Oregon State Board of Nursing; or a clinical social worker licensed by the State Board of Clinical Social Workers, with physician consultation readily available. The reviewer shall have expertise in the evaluation of mental or nervous condition services or chemical dependency services.

(D) Review may involve prior approval, concurrent review of the continuation of treatment, post-treatment review or any combination of these. However, if prior approval is required, provision shall be made to allow for payment of urgent or emergency admissions, subject to subsequent review. If prior approval is not required, insurers shall permit treatment providers, policyholders or persons acting on their behalf to make advance inquiries regarding the appropriateness of a particular admission to a treatment program. Insurers shall provide a timely response to such inquiries. Approval of a particular admission does not represent a guarantee of future payment.

(E) An appeals process shall be provided.

(F) An insurer may choose to review all providers on a sampling or audit basis only; or to review on a less frequent basis those providers who consistently supply full documentation, consistent with confidentiality statutes on each case in a timely fashion to the insurer.

(17) For purposes of subsection (16)(b) of this section, a utilization review contractor is a professional review organization or similar entity which, under contract with an insurance carrier, performs certification of reimbursability of level of treatment for admissions and maintained stays in treatment programs, facilities or services.

(18) For purposes of subsection (16)(b) of this section, when implemented through an insurance contract, reimbursability of inpatient treatment requires demonstration that medical circumstances require 24-hour nursing care, or physician or nurse assessment, treatment or supervision that cannot be readily made available on an outpatient basis, or in:

(a) The current living situation;

(b) An alternative, nontreatment living situation;

(d) A day or partial hospitalization program.

(19) For purposes of subsection (16)(b) of this section, when implemented through an insurance contract, reimbursability of treatment at the residential, day or partial hospitalization level of treatment shall require demonstration that outpatient services, if appropriate and less costly than residential, day or partial hospitalization services:

(a) Are not presently appropriate and available;

(b) Cannot be readily and timely made available; and

(c) Cannot meet documented needs for nonmedical supervision, protection, assistance and treatment, either in the current living situation or in a readily and timely available alternative, nontreatment living situation, taking into account the extent of both the available positive support and existing negative influences in the occupational, social and living situations; risks to self or others; and readiness to participate consistently in treatment.

(20) For purposes of subsection (16)(b) of this section, reimbursability of treatment at the level for outpatient facility, service or program shall require demonstration that treatment is justified, considering the individual's history, and the current medical, occupational, social and psychological situation, and the overall prognosis.

(21) Discrete medical or neurologic diagnostic or treatment services including any professional component of that service, costing in excess of $300, occurring concurrently with but not directly related to treatment of mental or nervous conditions shall not be charged against the inpatient benefit level.

(22) The benefits described in this section shall renew in full either on the first day of the 25th month of coverage following the first use of services for the treatment of chemical dependency or mental or nervous conditions, or both, or on the first day following two consecutive contract years.

(23) Health maintenance organizations, as defined in ORS 750.005 [(3)], shall be subject to the following conditions and requirements in their provision of benefits for chemical dependency or mental or nervous conditions to enrollees:

(a) Notwithstanding the provisions of subsection (1) of this section, health maintenance organizations may establish reasonable provisions for enrollee cost-sharing, so long as the amount the enrollee is required to pay does not exceed the amount of coinsurance and deductible customarily required by other insurance policies which are subject to the provisions of this chapter for that type and level of service.

(b) Nothing in this section prevents health maintenance organizations from establishing durational limits which are actuarially equivalent to the benefits required by this section.

(c) Health maintenance organizations may limit the receipt of covered services by enrollees to services provided by or upon referral by providers associated with the health maintenance organization.

(d) The Department of Human Services shall make rules establishing objective and quantifiable criteria for determining when a health maintenance organization meets the conditions and requirements of this subsection.

(24) Nothing in this section shall prevent an insurer or health care service contractor other than a health maintenance organization, except as provided in subsection (23) of this section, from contracting with providers of health care services to furnish services to policyholders or certificate holders according to ORS 743.531 or 750.005, subject to the following conditions:

(a) An insurer or health care service contractor may establish limits for contracted services which are actuarially equivalent to the benefits required by this section, so long as the same range of treatment settings is made available.

(b) An insurer or health care service contractor, other than a health maintenance organization, may negotiate with contracting providers as to the cost of actuarially equivalent benefits, and such actuarially equivalent benefits for services of contracting providers shall be deemed to equal the minimum benefit levels specified in this section.

(c) An insurer or health care service contractor is not required to contract with all eligible providers, and payment for covered services of contracting providers may be in alternative methods or amounts rather than as specified in this section.

(d) Insurers and health care service contractors other than health maintenance organizations shall pay benefits toward the covered charges of noncontracting providers of services for the treatment of chemical dependency or mental or nervous conditions at the same level of deductible or coinsurance as would apply to covered charges of noncontracting providers of other health services under the same group policy or contract. The insured shall have the right to use the services of a noncontracting provider of services for the treatment of chemical dependency or mental or nervous conditions. Policies described in this subsection shall be subject to the provisions of subsection (1) of this section, whether or not the services for chemical dependency or mental or nervous conditions are provided by contracting or noncontracting providers.

(e) The department shall make rules establishing objective and quantifiable criteria for determining that a contract meets the conditions and requirements of this subsection and that actuarially equivalent services of contracting providers equal or exceed services obtainable with the minimum benefits specified in this section.

(25) The intent of the Legislative Assembly in adopting this section is to reserve benefits for different types of care to encourage cost effective care and to assure continuing access to levels of care most appropriate for the insured's condition and progress.

(26) The director, after notice and hearing, may adopt reasonable rules not inconsistent with this section that are considered necessary for the proper administration of these provisions.

SECTION 6. ORS 750.015 is amended to read:

750.015. (1) Except as provided in subsection (2) of this section, not less than one-third of the group of persons vested with the management of the affairs of a health care service contractor, as defined in ORS 750.005 [(2)(a)] (4)(a), shall be representatives of the public who are not practicing doctors or employees or trustees of a participant hospital.

(2)(a) Notwithstanding subsection (1) of this section, the group of persons vested with the management of the affairs of a nonprofit private organization described in this subsection shall have at least two representatives of the public who are not practicing doctors, as defined in ORS 750.005, or employees or trustees of a participant hospital.

(b) This subsection applies to a nonprofit private organization that is a health maintenance organization, as defined in ORS 442.015, that is controlled by a single nonprofit hospital or by a group of nonprofit hospitals under common ownership and that operates in a county with a population of 200,000 or more.

SECTION 7. This 2003 Act being necessary for the immediate preservation of the public peace, health and safety, an emergency is declared to exist, and this 2003 Act takes effect on its passage.

Approved by the Governor March 28, 2003

Filed in the office of Secretary of State April 1, 2003

Effective date March 28, 2003

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