NORTH CAROLINA GENERAL ASSEMBLY

1979 SESSION

 

 

CHAPTER 876

HOUSE BILL 1127

 

 

AN ACT TO REWRITE THE HEALTH MAINTENANCE ORGANIZATION ACT OF 1977.

 

The General Assembly of North Carolina enacts:

 

Section 1.  Chapter 57A of the General Statutes is rewritten to read:

"Chapter 57A.

"Health Maintenance Organization Act.

"§ 57A-1.  Short title. — This Chapter may be cited as the Health Maintenance Organization Act of 1979.

"§ 57A-2.  Definitions. — (a) 'Commissioner' means the Commissioner of Insurance.

(b)        'Enrollee' means an individual who has been enrolled in a health care plan.

(c)        'Evidence of coverage' means any certificate, agreement, or contract issued to an enrollee setting out the coverage to which he is entitled.

(d)        'Health care plan' means any arrangement whereby any person undertakes on a prepaid basis to provide, arrange for, pay for, or reimburse any part of the cost of any health care services and at least part of such arrangement consists of arranging for or the provision of health care services, as distinguished from mere indemnification against the cost of such services on a prepaid basis through insurance or otherwise.

(e)        'Health care services' means any services included in the furnishing to any individual of medical or dental care, or hospitalization or incident to the furnishing of such care of hospitalization, as well as the furnishing to any person of any and all other services for the purpose of preventing, alleviating, curing, or healing human illness or injury.

(f)         'Health maintenance organization' means any person who undertakes to provide or arrange for one or more health care plans.

(g)        'Person' includes associations, trusts, or corporations, but does not include professional associations, or individuals.

(h)        'Provider' means any physician, hospital, or other person that is licensed or otherwise authorized in this State to furnish health care services.

"§ 57A-3.  Establishment of health maintenance organizations. — (a) Notwithstanding any law of this State to the contrary, any person may apply to the Commissioner for and obtain a certificate of authority to establish and operate a health maintenance organization in compliance with this Chapter. No person shall establish or operate a health maintenance organization in this State, nor sell or offer to sell, or solicit offers to purchase or receive advance or periodic consideration in conjunction with a health maintenance organization without obtaining a certificate of authority under this Chapter. A foreign corporation may qualify under this Chapter, subject to its registration to do business in this State as a foreign corporation under Article 17 of Chapter 58.

(b)        (1)        It is specifically the intention of this section to permit such persons as were providing health services on a prepaid basis on July 1, 1977, or receiving federal funds under Section 254(c) of Title 42, U.S. Code, as a community health center, continue to operate in the manner which they have heretofore operated.

(2)        Notwithstanding anything contained in this Chapter to the contrary, any person can provide health services on a fee for service basis to individuals who are not enrollees of the organization, and to enrollees for services not covered by the contract, provided that the volume of services in this manner shall not be such as to affect the ability of the health maintenance organization to provide on an adequate and timely basis those services to its enrolled members which it has contracted to furnish under the enrollment contract.

(3)        This Chapter shall not apply to any employee benefit plan to the extent that the Federal Employee Retirement Income Security Act of 1974 preempts State regulation thereof.

(4)        Except as provided in paragraphs (1), (2), and (3) of this subsection, the persons to whom these paragraphs are applicable shall be required to comply with all provisions contained in this Chapter.

(c)        Each application for a certificate of authority shall be verified by an officer or authorized representative of the applicant, shall be in a form prescribed by the Commissioner, and shall be set forth or be accompanied by the following:

(1)        a copy of the basic organizational document, if any, of the applicant such as the articles of incorporation, articles of association, partnership agreement, trust agreement, or other applicable documents, and all amendments thereto;

(2)        a copy of the bylaws, rules and regulations, or similar document, if any, regulating the conduct of the internal affairs of the applicant;

(3)        a list of the names, addresses, and official positions of persons who are to be responsible for the conduct of the affairs of the applicant, including all members of the board of directors, board of trustees, executive committee, or other governing board or committee, the principal officers in the case of a corporation, and the partners or members in the case of a partnership or association;

(4)        a copy of any contract made or to be made between any providers or persons listed in paragraph (3) and the applicant;

(5)        a statement generally describing the health maintenance organization, its health care plan or plans, facilities, and personnel;

(6)        a copy of the form of evidence of coverage to be issued to the enrollees;

(7)        a copy of the form of the group contract, if any, which is to be issued to employers, unions, trustees, or other organizations;

(8)        financial statements showing he 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 regular certified financial statement shall be deemed to satisfy this requirement unless the Commissioner directs that additional or more recent financial information is required for the proper administration of this Chapter;

(9)        a description of the proposed method of marketing the plan, a financial plan which includes a three-year projection of the initial operating results anticipated, and a statement as to the sources of working capital as well as any other sources of funding;

(10)      a power of attorney duly executed by such applicant, if not domiciled in this State, appointing the Commissioner and his successors in office, and duly authorized deputies, as the true and lawful attorney of such applicant in and for this State upon whom all lawful process in any legal action or proceeding against the health maintenance organization on a cause of action arising in this State may be served;

(11)      a statement reasonably describing the geographic area or areas to be served;

(12)      such other information as the Commissioner may require to make the determinations required in G.S. 57A-4.

(d)        (1)        A health maintenance organization shall, unless otherwise provided for in this Chapter, file a notice describing any modification of the operation set out in the information required by subsection (c). Such notice shall be filed with the Commissioner prior to the modification. If the Commissioner does not disapprove within 30 days of filing, such modification shall be deemed approved.

(2)        The Commissioner may promulgate rules and regulations exempting from the filing requirements of subdivision (1) those items he deems unnecessary.

"§ 57A-4.  Issuance of certificate. — (a) Before issuing any such certificate, the Commissioner of Insurance may make such an examination or investigation as he deems expedient. The Commissioner of Insurance shall issue a certificate of authority upon the payment of the application fee prescribed in G.S. 57A-23 and upon being satisfied on the following points:

(1)        the applicant is established as a bona fide health maintenance organization as defined by this Chapter;

(2)        the rates charged and benefits to be provided are fair and reasonable;

(3)        the amounts provided as working capital are repayable only out of earned income in excess of amounts paid and payable for operating expenses and expenses of providing services and such reserve as the Department of Insurance deems adequate, as provided hereinafter;

(4)        that the amount of money actually available for working capital be sufficient to carry all acquisition costs and operating expenses for a reasonable period of time from the date of the issuance of the certificate and that the health maintenance organization is financially responsible and may reasonably be expected to meet its obligations to enrollees and prospective enrollees.

(b)        In making the determinations required under this section, the Commissioner may consider:

(1)        the financial soundness of the health care plan's arrangements for health care services and the schedule of premiums used in connection therewith;

(2)        the adequacy of working capital;

(3)        any agreement with an insurer, a hospital or medical service corporation, a government, or any other organization for insuring the payment of the cost of health care services or the provision for automatic applicability of alternative coverage in the event of discontinuance of the plan;

(4)        any agreement with providers for the provision of health care services; and

(5)        any firm commitment of federal funds to the health maintenance organization in the form of a grant, even though such funds have not been paid to the health maintenance organization, provided that the health maintenance organization certifies to the Commissioner that such funds have been committed, that such funds are to be paid to the health maintenance organization with a current fiscal year and that such funds may be used directly for operating purposes and for the benefit of enrollees of the health maintenance organization.

(c)        A certificate of authority shall be denied only after compliance with the requirements of G.S. 57A-19.

"§ 57A-5.  Powers of health maintenance organizations. — (a) The powers of a health maintenance organization include, but are not limited to the following:

(1)        the purchase, lease, construction, renovation, operation, or maintenance of hospitals, medical facilities, or both, and their ancillary equipment, and such property as may reasonably be required for its principal office or for such other purposes as may be necessary in the transaction of the business of the organization;

(2)        the making of loans to a medical group under contract with it in furtherance of its program or the making of loans to a corporation or corporations under its control for the purpose of acquiring or constructing medical facilities and hospitals or in furtherance of a program providing health care services to enrollees;

(3)        the furnishing of health care services through providers which are under contract with or employed by the health maintenance organization;

(4)        the contracting with any person for the performance on its behalf of certain functions such as marketing, enrollment and administration;

(5)        the contracting with an insurance company licensed in this State, or with a hospital or medical service corporation authorized to do business in this State, for the provision of insurance, indemnity, or reimbursement against the cost of health care services provided by the health maintenance organization;

(6)        the offering and contracting for the provision or arranging of, in addition to health care services, of:

a.         additional health care services;

b.         indemnity benefits, covering out-of-area or emergency services; and

c.         indemnity benefits, in addition to those relating to out-of-area and emergency services, provided through insurers or hospital or medical service corporations.

(b)        (1)        A health maintenance organization shall file notice, with adequate supporting information, with the Commissioner prior to the exercise of any power granted in subsections (a)(1) or (2). The Commissioner shall disapprove such exercise of power if in his opinion it would substantially and adversely affect the financial soundness of the health maintenance organization and endanger its ability to meet its obligations. If the Commissioner does not disapprove within 30 days of the filing, it shall be deemed approved.

(2)        The Commissioner may promulgate rules and regulations exempting from the filing requirement of subdivision (1) those activities having a de minimis effect.

"§ 57A-6.  Reserves. — Every health maintenance organization after the first full year of doing business after the passage of this section shall accumulate and maintain, in addition to proper reserves for current administrative liabilities and whatever reserves are deemed adequate and proper by the Commissioner of Insurance for unpaid bills, and unearned membership dues, a special contingent surplus or reserve at the following rates annually of its gross annual collections from membership dues, until said reserve shall equal theree times its average monthly expenditures:

(1)        First $200,000                               4%

(2)        Next $200,000                               2%

(3)        All above $400,000                        1%

Any such health maintenance organization may accumulate and maintain a contingent reserve in excess of the reserve hereinabove provided for, not to exceed an amount equal to six times the average monthly expenditures.

In the event the Commissioner of Insurance finds that special conditions exist warranting a decrease in the reserves or schedule of reserves, hereinabove provided for, it may be modified by the Commissioner of Insurance accordingly.

"§ 57A-7.  Fiduciary responsibilities. — Any director, officer or partner of a health maintenance organization who receives, collects, disburses, or invests funds in connection with the activities of such organization shall be responsible for such funds in a fiduciary relationship to the enrollees.

"§ 57A-8.  Evidence of coverage and premiums for health care services. — (a)

(1)        Every enrollee residing in this state is entitled to evidence of coverage under a health care plan. If the enrollee obtains coverage under a health care plan through an insurance policy or a contract issued by a hospital or medical service corporation, whether by option or otherwise, the insurer or the hospital or medical service corporation shall issue the evidence of coverage. Otherwise, the health maintenance organization shall issue the evidence of coverage.

(2)        No evidence of coverage, or amendment thereto, shall be issued or delivered to any person in this State until a copy of the form of the evidence of coverage, or amendment thereto, has been filed with and approved by the Commissioner.

(3)        An evidence of coverage shall contain:

a.         no provisions or statements which are unjust, unfair, inequitable, misleading, deceptive, which encourage misrepresentation, or which are untrue, misleading or deceptive as defined in G.S. 57A-12(a); and

b.         a clear and complete statement, if a contract, or a reasonably complete summary, if a certificate of:

1.         the health care services and insurance or other benefits, if any, to which the enrollee is entitled under the health care plan;

2.         any limitations on the 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 may be obtained;

4.         the total amount of payment 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;

5.         a clear and understandable description of the health maintenance organization's method of resolving enrollee complaints.

      Any subsequent change may be evidenced in a separate document issued to the enrollee.

(4)        A copy of the form of the evidence of coverage to be used in this State, and any amendment thereto, shall be subject to the filing and approval requirements of subsection (b) unless it is subject to the jurisdiction of the Commissioner under the laws governing health insurance or hospital or medical service corporations in which event the filing and approval provisions of such laws shall apply. To the extent, however, that such provisions do not apply the requirements in subsection (c) shall be applicable.

(b)        (1)        No schedule of premiums for enrollee coverage for health care services, or amendment thereto, may be used in conjunction with any health care plan until a copy of such schedule, or amendment thereto, has been filed with and approved by the Commissioner.

(2)        Such premiums may be established in accordance with actuarial principles for various categories of enrollees, provided that premiums applicable to an enrollee shall not be individually determined based on the status of his health. However, the premiums shall not be excessive, inadequate, or unfairly discriminatory.

(c)        The Commissioner shall, within a reasonable period, approve any form if the requirements of paragraph (1) are met and any schedule of premiums if the requirements of paragraph (2) are met. It shall be unlawful to issue such form or to use such schedule of premiums until approved. If the Commissioner disapproves such filing, he shall notify the filer. In the notice, the Commissioner shall specify the reasons for his disapproval. A hearing will be granted within 30 days after a request in writing by the person filing. If the Commissioner does not approve or disapprove any form or schedule of premiums within 30 days of the filing of such forms or premiums, they shall be deemed approved.

(d)        The Commissioner may require the submission of whatever relevant information he deems necessary in determining whether to approve or disapprove a filing made pursuant to this section.

"§ 57A-9.  Annual report — Every such health maintenance organization shall annually on or before the first day of March of each year, file in the office of the Commissioner of Insurance a sworn statement verified by at least two of the principal officers of the health maintenance organization showing its condition on the thirty-first day of December, then next preceding; which shall be in such form as the Commissioner of Insurance shall prescribe. In case any such health maintenance organization shall fail to file any such annual statement as herein required, the said Commissioner of Insurance shall be authorized and empowered to suspend the certificate of authority issued to such health maintenance organization until such statement shall be properly filed.

"§ 57A-10.  Investments. — With the exception of investments made in accordance with G.S. 57A-5(a)(1) and (2) and G.S. 57A-5(b), the investable funds of a health maintenance organization shall be invested only in securities or other investments permitted by the laws of this State for the investment of assets constituting the legal reserves of life insurance companies or such other securities or investments as the Commissioner may permit.

"§ 57A-11.  Dual choice. — (a) The State government, or any agency, board, commission, institution, or political subdivision thereof, and any city or county, or board of education, which offers its employees a health benefits plan may make available to and inform its employees or members of the option to enroll in at least one health maintenance organization holding a valid certificate of authority which provides health care services in the geographic areas in which such employees or members reside.

(b)        The first time a prepaid health plan is offered, each covered employee must make an affirmative choice between the two or more plans. Thereafter, those who wish to change from one plan to another will be allowed to do so annually.

(c)        This section shall impose no responsibilities or duties upon State government or any agency, board, commission, institution or political subdivision thereof or any other employer, either public or private to offer health maintenance organization coverage when no health maintenance organization exists for the purpose of providing health care services in the geographic areas in which the employees or members reside.

(d)        No employer in this State shall in any way be required to pay more for health benefits as a result of the application of this section than would otherwise be required by any prevailing collective bargaining agreement or other legally enforceable contract of obligation for the provision of health benefits between such employer and its employees, or in any plan provided voluntarily by an employer.

(e)        In the event of election to become subscribers of the health maintenance organization plan or to return to the alternative plan, this shall be done without, any penalty as to waiting period, pre-existing conditions provisions, or any other provisions which would otherwise effect the credit for the period.

"§ 57A-12.  Prohibited practices. — (a) No health maintenance organization, or representative thereof, may cause or knowingly permit the use of advertising which is untrue or misleading, solicitation which is untrue or misleading, or any form of evidence of coverage which is deceptive. For purposes of this Chapter:

(1)        A statement or item of information shall be deemed to be untrue if it does not conform to fact in any respect which is or may be significant to an enrollee of, or person considering enrollment in, a health care plan.

(2)        A statement or item of information shall be deemed to be misleading, whether or not it may be literally untrue, if, in the total context in which such statement is made or such item of information is communicated, such statement or item of information may be reasonably understood by a reasonable person, not possessing special knowledge regarding health care coverage, as indicating any benefit or advantage or the absence of any exclusion, limitation, or disadvantage of possible significance to an enrollee of, or person considering enrollment in a health care plan, if such benefit or advantage or absence of limitation, exclusion or disadvantage does not in fact exist.

(3)        An evidence of coverage shall be deemed to be deceptive if the evidence of coverage taken as a whole, and with consideration given to typography and format, as well as language, shall be such as to cause a reasonable person, not possessing special knowledge regarding health care plans and evidences of coverage therefor, to expect benefits, services, premiums, or other advantages which the evidence of coverage does not provide or which the health care plan issuing such evidence of coverage does not regularly make available for enrollees covered under such evidence of coverage.

(b)        The provisions of Article 3A of Chapter 58 of the General Statutes shall be construed to apply to health maintenance organizations, health care plans and evidences of coverage except to the extent that the Commissioner determines that the nature of health maintenance organizations, health care plans and evidences of coverage render such sections clearly inappropriate.

(c)        An enrollee may not be cancelled or not renewed because of any deterioration in the health of the enrollee.

(d)        No health maintenance organization, unless licensed as an insurer, may use in its name, contracts, or literature any of the words 'insurance', 'casualty', 'surety', 'mutual', or any other words descriptive of the insurance, casualty, or surety business or deceptively similar to the name or description of any insurance or surety corporation doing business in this State.

(e)        The HMO shall not refuse to enroll employees except when they can demonstrate they are unable to arrange adequate services.

"§ 57A-13.  Regulation of agents. — The Commissioner may, after notice and hearing, promulgate such reasonable rules and regulations as are necessary to provide for the licensing of agents.

"§ 57A-14.  Powers of insurers and hospital and medical service corporations. — (a) An insurance company licensed in this State, or a hospital or medical service corporation authorized to do business in this State, may either directly or through a subsidiary or affiliate organize and operate a health maintenance organization under the provisions of this Chapter. Notwithstanding any other law which may be inconsistent herewith, any two or more such insurance companies, hospital or medical service corporations, or subsidiaries or affiliates thereof, may jointly organize and operate a health maintenance organization. The business of insurance is deemed to include the arranging of health care by a health maintenance organization owned or operated by an insurer or a subsidiary thereof.

(b)        Notwithstanding any provision of the insurance and hospital or medical service corporation laws contained in Chapters 57 and 58 of the General Statutes, an insurer or a hospital or medical service corporation may contract with a health maintenance organization to provide insurance or similar protection against the cost of care provided through health maintenance organizations and to provide coverage in the event of the failure of the health maintenance organization to meet its obligations. The enrollees of a health maintenance organization constitute a permissible group under such laws. Among other things, under such contracts, the insurer or hospital or medical service corporation may make benefit payments to health maintenance organizations for health care services rendered by providers pursuant to the health care plan.

"§ 57A-15.  Examinations. — (a) The Commissioner may make an examination of the affairs of any health maintenance organization and the contracts, agreements or other arrangements pursuant to its health care plan as often as he deems it necessary for the protection of the interests of the people of this State but not less frequently than once every three years.

(b)        Every health maintenance organization shall submit its books and records relating to the health care plan to such examinations and in every way facilitate them. For the purpose of examinations, the Commissioner may administer oaths to, and examine the officers and agents of the health maintenance organization concerning their business.

(c)        The expenses of examinations under this section shall be assessed against the organization being examined and remitted to the Commissioner for whom the examination is being conducted.

(d)        In lieu of such examination, the Commissioner may accept the report of an examination made by the Commissioner of Insurance or Commissioner of Public Health of another state.

"§ 57A-16.  Suspension or revocation of certificate of authority — (a) The Commissioner may suspend or revoke any certificate of authority issued to a health maintenance organization under this Chapter if he finds that any of the following conditions exist:

(1)        The health maintenance organization is operating significantly in contravention of its basic organizational document, or in a manner contrary to that described in and reasonably inferred from any other information submitted under G.S. 57A-3, unless amendments to such submissions have been filed with and approved by the Commissioner.

(2)        The health maintenance organization issues evidence of coverage or uses a schedule of premiums for health care services which do not comply with the requirements of G.S. 57A-8.

(3)        The health maintenance organization no longer maintains the financial reserve specified in G.S. 57A-6 or is no longer financially responsible and may reasonably be expected to be unable to meet its obligations to enrollees or prospective enrollees.

(4)        The health maintenance organization, or any person on its behalf, has advertised or merchandised its services in an untrue, misrepresentative, misleading, deceptive or unfair manner.

(5)        The continued operation of the health maintenance organization would be hazardous to its enrollees.

(6)        The health maintenance organization has otherwise failed to substantially comply with this Chapter.

(b)        A certificate of authority shall be suspended or revoked only after compliance with the requirements of G.S. 57A-19.

(c)        When the certificate of authority of a health maintenance organization is suspended, the health maintenance organization shall not, during the period of such suspension, enroll any additional enrollees except newborn children or other newly acquired dependents of existing enrollees, and shall not engage in any advertising or solicitation whatsoever.

(d)        When the certificate of authority of a health maintenance organization is revoked, such organization shall proceed, immediately following the effective date of the order of revocation, to wind up its affairs, and shall conduct no further business except as may be essential to the orderly conclusion of the affairs of such organization. It shall engage in no advertising or solicitation whatsoever. The Commissioner may, by written order, permit such further operation of the organization as he may find to be in the best interest of enrollees, to the end that enrollees will be afforded the greatest practical opportunity to obtain continuing health care coverage.

"§ 57A-17.  Rehabilitation, liquidation, or conservation of health maintenance organization. — Any rehabilitation, liquidation or conservation of a health maintenance organization shall be deemed to be the rehabilitation, liquidation, or conservation of an insurance company and shall be conducted under the supervision of the Commissioner pursuant to the law governing the rehabilitation, liquidation, or conservation of insurance companies, except that the provisions of Articles 17B and 17C of Chapter 58 of the General Statutes shall not apply to health maintenance organizations. The Commissioner may apply for an order directing him to rehabilitate, liquidate, or conserve a health maintenance organization upon one or more grounds set out in Article 17A of Chapter 58 of the General Statutes or when in his opinion the continued operation of the health maintenance organization would be hazardous either to the enrollees or to the people of this State.

"§ 57A-18.  Regulations. — The Commissioner may, after notice and hearing, promulgate reasonable rules and regulations as are necessary or proper to carry out the provisions of this Chapter. Such rules and regulations shall be subject to review in accordance with G.S. 57A‑19.

"§ 57A-19.  Administrative procedures. — (a) When the Commissioner has cause to believe that grounds for the denial of an application for a certificate of authority exist, or that grounds for the suspension or revocation of a certificate of authority exist, he shall notify the health maintenance organization in writing specifically stating the grounds for denial, suspension, or revocation and fixing a time of at least 30 days thereafter for a hearing on the matter.

(b)        After such hearing, or upon the failure of the health maintenance organization to appear at such hearing, the Commissioner shall take action as is deemed advisable on written findings which shall be mailed to the health maintenance organization. The action of the Commissioner shall be subject to review by the Superior Court of Wake County. The court may, in disposing of the issue before it, modify, affirm, or reverse the order of the Commissioner in whole or in part.

(c)        The provisions of Chapter 150A of the General Statutes of this State shall apply to proceedings under this section to the extent that they are not in conflict with subsections (a) and (b).

"§ 57A-20.  Fees. — Every health maintenance organization subject to this Chapter shall pay to the Commissioner the following fees:

(1)        for filing an application for a certificate of authority or amendment thereto, twenty dollars ($20.00);

(2)        for filing each annual report, ten dollars ($10.00).

"§ 57A-21.  Penalties and enforcement — (a) The Commissioner may, in lieu of suspension or revocation of a certificate of authority under G.S. 57A-16, levy an administrative penalty in an amount not less than one hundred dollars ($100.00) nor more than five hundred dollars ($500.00), if reasonable notice in writing is given of the intent to levy the penalty and the health maintenance organization has a reasonable time within which to remedy the defect in its operations which gave rise to the penalty citation.

(b)        Any person who violates this Chapter shall be guilty of a misdemeanor and on conviction may be punished by a fine not to exceed five hundred dollars ($500.00) or by imprisonment for a period not exceeding two years or both, at the discretion of the court.

(c)        (1)        If the Commissioner shall for any reason have cause to believe that any violation of this Chapter has occurred or is threatened, the Commissioner may give notice to the health maintenance organization and to the representatives or other persons who appear to be involved in such suspected violation to arrange a conference with the alleged violators or their authorized representatives for the purpose of attempting to ascertain the facts relating to such suspected violation, and, in the event it appears that any violation has occurred or is threatened, to arrive at an adequate and effective means of correcting or preventing such violation.

(2)        Proceedings under this subsection shall not be governed by any formal procedural requirements, and may be conducted in such manner as the Commissioner may deem appropriate under the circumstances.

(d)        (1)        The Commissioner 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 this Chapter.

(2)        Within 30 days after service of the order of cease and desist, the respondent may request a hearing on the question of whether acts or practices in violation of this Chapter have occurred. Such hearings shall be conducted pursuant to Chapter 150A of the General Statutes, and judicial review shall be available as provided by the said Chapter 150A.

(e)        In the case of any violation of the provisions of this Chapter, if the Commissioner elects not to issue a cease and desist order, or in the event of noncompliance with a cease and desist order issued pursuant to subsection (d), the Commissioner may institute a proceeding to obtain injunctive relief, or seeking other appropriate relief, in the Superior Court of Wake County.

"§ 57A-22.  Statutory construction and relationship to other laws. — (a) Except as otherwise provided in this Chapter, provisions of the insurance laws and provisions of hospital or medical service corporation laws shall not be applicable to any health maintenance organization granted a certificate of authority under this Chapter. This provision shall not apply to an insurer or hospital or medical service corporation licensed and regulated pursuant to the insurance laws or the hospital or medical service corporation laws of this State except with respect to its health maintenance organization activities authorized and regulated pursuant to this Chapter.

(b)        Solicitation of enrollees by a health maintenance organization granted a certificate of authority, or its representatives, shall not be construed to violate any provision of law relating to solicitation or advertising by health professionals.

(c)        Any health maintenance organization authorized under this Chapter shall not be deemed to be practicing medicine and shall be exempt from the provisions of Chapter 90 of the General Statutes relating to the practice of medicine.

"§ 57A-23.  Filings and reports as public documents. — All applications, filings and reports required under this Chapter shall be treated as public documents.

"§ 57A-24.  Confidentiality of medical information. — Any data or information pertaining to the diagnosis, treatment, or health of any enrollee or applicant obtained from such person or from any provider by any health maintenance organization shall be held in confidence and shall not be disclosed to any person except to the extent that it may be necessary to carry out the purposes of this Chapter; or upon the express consent of the enrollee or applicant; or pursuant to statute or court order for the production of evidence or the discovery thereof; or in the event of claim or litigation between such person and the health maintenance organization wherein such data or information is pertinent. 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.

"§ 57A-25.  Severability. — If any section, term, or provision of this Chapter shall be adjudged invalid for any reason, such judgments shall not affect, impair, or invalidate any other section, term, or provision of this Chapter, but the remaining sections, terms, and provisions shall be and remain in full force and effect."

Sec. 2.  G.S. 131-178(b) is amended by adding the following new language at the end of the subsection:

"A health maintenance organization is subject to review only when new institutional health services are offered in hospitals controlled directly or indirectly by health maintenance organizations. A health maintenance organization is also subject to review when diagnostic or therapeutic equipment is purchased by a health maintenance organization or hospital controlled by a health maintenance organization under circumstances defined by G.S. 131‑176(10) or G.S. 131-176(17)."

Sec. 3.  This act shall become effective July 1, 1979.

In the General Assembly read three times and ratified, this the 8th day of June, 1979.