[Code of Federal Regulations]
[Title 42, Volume 2]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 42CFR417.124]

[Page 694-696]
 
                         TITLE 42--PUBLIC HEALTH
 
                             HUMAN SERVICES
 
PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL PLANS, AND HEALTH CARE PREPAYMENT PLANS--Table of Contents
 
Subpart C--Qualified Health Maintenance Organizations: Organization and 
                                Operation
 
Sec. 417.124  Administration and management.

    (a) General requirements. Each HMO must have administrative and 
managerial arrangements satisfactory to CMS,

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as demonstrated by at least the following:
    (1) A policymaking body that exercises oversight and control over 
the HMO's policies and personnel to ensure that management actions are 
in the best interest of the HMO and its enrollees.
    (2) Personnel and systems sufficient for the HMO to organize, plan, 
control and evaluate the financial, marketing, health services, quality 
assurance program, administrative and management aspects of the HMO.
    (3) At a minimum, management by an executive whose appointment and 
removal are under the control of the HMO's policymaking body.
    (b) Full and fair disclosure--(1) Basic rule. Each HMO must prepare 
a written description of the following:
    (i) Benefits (including limitations and exclusions).
    (ii) Coverage (including a statement of conditions on eligibility 
for benefits).
    (iii) Procedures to be followed in obtaining benefits and a 
description of circumstances under which benefits may be denied.
    (iv) Rates.
    (v) Grievance procedures.
    (vi) Service area.
    (vii) Participating providers.
    (viii) Financial condition including at least the following most 
recently audited information: Current assets, other assets, total 
assets; current liabilities, long term liabilities; and net worth.
    (2) Requirements for the description. (i) The description must be 
written in a way that can be easily understood by the average person who 
might enroll in the HMO.
    (ii) The description of benefits and coverage may be in general 
terms if reference is made to a detailed statement of benefits and 
coverage that is available without cost to any person who enrolls in the 
HMO or to whom the opportunity for enrollment is offered.
    (iii) The HMO must provide the description to any enrollee or person 
who is eligible to elect the HMO option and who requests the material 
from the HMO or the administrator of a health benefits plan. For 
purposes of this requirement, ``administrator'' (of a health benefits 
plan) has the meaning it is given in the Employment Retirement Income 
Security Act of 1974 (ERISA) at 29 U.S.C. 1002(16)(A).
    (iv) If the HMO provides health services through individual practice 
associations (IPAs), the HMO must specify the number of member 
physicians by specialty, and a listing of the hospitals where HMO 
enrollees will receive basic and supplemental health services.
    (v) If the HMO provides health services other than through IPAs, the 
HMO must specify, for each ambulatory care facility, the facility's 
address, days and hours of operation, and the number of physicians by 
specialty, and a listing of the hospitals where HMO enrollees will 
receive basic and supplemental health services.
    (c) Broadly representative enrollment. (1) Each HMO must offer 
enrollment to persons who are broadly representative of the various age, 
social, and income groups within its service area.
    (2) If an HMO has a medically underserved population located in its 
service area, not more than 75 percent of its enrollees may be from the 
medically underserved population unless the area in which that 
population resides is a rural area.
    (d) Health status and enrollment. (1) The HMO may not, on the basis 
of health status, health care needs, or age of the individual--
    (i) Expel or refuse to reenroll any enrollee; or
    (ii) Refuse to enroll individual members of a group.
    (2) For purposes of this paragraph, a ``group'' is composed of 
individuals who enroll in the HMO under a contract or other arrangement 
that covers two or more subscribers. Examples of groups are employees 
who enroll under a contract between their employer and the HMO, or 
members of an organization that arranges coverage for its membership.
    (3) Nothing in this subpart prohibits an HMO from requiring that, as 
a condition for continued eligibility for enrollment, enrolled dependent 
children, upon reaching a specified age, convert to individual 
enrollment, consistent with paragraph (e) of this section.

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    (e) Conversion of enrollment. (1) Each HMO must offer individual 
enrollment to the following:
    (i) Each enrollee (and his or her enrolled dependents) leaving a 
group.
    (ii) Each enrollee who would otherwise cease to be eligible for HMO 
enrollment because of his or her age, or the death or divorce of an 
enrollee.
    (2) The individual enrollment offered must meet the conditions of 
subpart B of this part and this subpart C.
    (3) The HMO is not required to offer individual enrollment except to 
the enrollees specified in this paragraph.
    (4) The HMO must offer the enrollment on the same terms and 
conditions that it makes available to other nongroup enrollees.
    (f) [Reserved]
    (g) Grievance procedures. Each HMO must have and use meaningful 
procedures for hearing and resolving grievances between the HMO's 
enrollees and the HMO, including the HMO staff and medical groups and 
IPAs that furnish services. These procedures must ensure that:
    (1) Grievances and complaints are transmitted in a timely manner to 
appropriate HMO decisionmaking levels that have authority to take 
corrective action; and
    (2) Appropriate action is taken promptly, including a full 
investigation if necessary and notification of concerned parties as to 
the results of the HMO's investigation.
    (h) Certification of institutional providers. Each HMO must ensure 
that its affiliated institutional providers meet one of the following 
conditions:
    (1) In the case of hospitals, are either accredited by the Joint 
Commission on Accreditation of Health Care Organizations, or certified 
by Medicare.
    (2) In the case of laboratories, are either CLIA-exempt, or have in 
effect a valid certificate of one of the following types, issued by CMS 
in accordance with section 353 of the PHS Act and part 493 of this 
chapter:
    (i) Registration certificate.
    (ii) Certificate.
    (iii) Certificate of waiver.
    (iv) Certificate of accreditation.
    (3) In the case of other affiliated institutional providers, are 
certified for participation in Medicare and Medicaid in accordance with 
part 405, 416, 418, 488, or 491 of this chapter, as appropriate.

[58 FR 38068, July 15, 1993, as amended at 59 FR 49843, Sept. 30, 1994]