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The following Advisory Opinion is to advise the
reader of the current position of the Kentucky Department of
Insurance ("The Department") on the specified issue. The Advisory
Opinion is not legally binding on either the Department or the
reader
Kentucky Department of
Insurance
Advisory Opinion
98-03
In re: Health Care Discount
Programs
RELEVANT FACTS AND STATUTES:
It has come to my attention that the regulation by the Department of
Insurance of health care discount programs is an issue. In general,
these plans offer access to a network of providers by virtue of the
member paying a monthly fee. The network of providers charge the
member a discounted fee for the service they perform.
KRS 304.38-030(5) defines health maintenance
organization. The statute says:
"Health maintenance organization" means
any person who undertakes to provide,
directly or through arrangements with
others, health care services to
individuals
voluntarily enrolled with such an
organization on a per capita or a
predetermined, fixed prepayment
basis.
THE DEPARTMENT'S POSITION:
If a product covers health care services of its members, rendered by
a provider on a prepaid or capitated basis, the entity offering the
product must obtain an HMO certificate of authority. This involves a
transfer of risk from the member to the entity. However, a product
that offers discount provider services is not subject to this
requirement if four conditions are met: 1) the providers in the
network do not get paid from the entity offering the product (except
the entity can pay a nominal fee up front to providers); 2) the
product only offers access to a network of providers that give
members discounts on their services; 3) the solicitation material
clearly states the product is not insurance; and 4) the entity accepts no
risk.
Questions regarding this Advisory Opinion may be
directed to Shaun T. Orme, Counsel for the Department, (502)
564-6032.
_________________________
George Nicholas III
Commissioner
Date: 9/16/98
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