[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: 42CFR417.157]

[Page 706-707]
 
                         TITLE 42--PUBLIC HEALTH
 
                             HUMAN SERVICES
 
PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL PLANS, AND HEALTH CARE PREPAYMENT PLANS--Table of Contents
 
 Subpart E--Inclusion of Qualified Health Maintenance Organizations in 
                     Employee Health Benefits Plans
 
Sec. 417.157  Contributions for the HMO alternative.

    (a) General principles--(1) Nondiscrimination. The employer 
contribution to an HMO must be in an amount that does not discriminate 
financially against an employee who enrolls in an HMO. A contribution 
does not discriminate financially if the method of determining the 
contribution is reasonable and is designed to ensure that employees have 
a fair choice among health benefits plan alternatives.
    (2) Effect of agreements or contracts. The employing entity or 
designee is not required to pay more for health benefits as a result of 
offering the HMO alternative than it would otherwise be required to pay 
under a collective bargaining agreement or contract that provides for 
health benefits and is in effect at the time the HMO alternative is 
included.
    (3) Examples of acceptable employer contributions. The following are 
methods that are considered nondiscriminatory:
    (i) The employer contribution to the HMO is the same, per employee, 
as the contribution to non-HMO alternatives.
    (ii) The employer contribution reflects the composition of the HMO's 
enrollment in terms of enrollee attributes that can reasonably be used 
to predict utilization, experience, costs, or risk. For each enrollee in 
a given class established on the basis of those attributes, the employer 
contributes an equal amount, regardless of the health benefits plan 
chosen by the employee.
    (iii) The employer contribution is a fixed percentage of the premium 
for each of the alternatives offered.
    (iv) The employer contribution is determined under a mutually 
acceptable arrangement negotiated by the HMO and the employer. In 
negotiating the arrangement, the employer may not insist on terms that 
would cause the HMO to violate any of the requirements of this part.
    (4) Adjustment of employer contribution. An employer contribution 
determined by an acceptable method may in some cases be adjusted if it 
would result in a nominal payment or no payment at all by HMO enrollees 
(because the HMO premium is lower than the premiums for the other 
alternatives offered). If, for example the employer has a policy of 
requiring all employees to contribute to their health benefits plan, the 
employer may require HMO enrollees who would otherwise pay little or 
nothing at all, to make a payment that does not exceed 50 percent of the 
employee contribution to the principal non-HMO alternative. The 
principal non-HMO alternative is the one that covers the largest number 
of enrollees from the particular employer.
    (b) Administrative expenses. (1) In determining the amount of its 
contribution to the HMO, the employing entity or designee may not 
consider administrative expenses incurred in connection with offering 
any alternative in the health benefits plan.
    (2) However, if the employing entity or designee has special 
requirements for other than standard solicitation brochures and 
enrollment literature, it

[[Page 707]]

must, in the case of the HMO alternative, determine and distribute any 
administrative costs attributable to those requirements in a manner 
consistent with its method of determining and distributing those costs 
for the non-HMO alternatives.
    (c) Exclusion for contribution for certain benefits. In determining 
the amount of the employing entity's contribution or the designee's cost 
for the HMO alternative, the employing entity or designee may exclude 
those portions of the contribution allocable to benefits (such as life 
insurance or insurance for supplemental health benefits)--
    (1) For which eligible employees and their eligible dependents are 
covered notwithstanding selection of the HMO alternative; and
    (2) That are not offered on a prepayment basis by the HMO to the 
employing entity's employees.
    (d) Contributions determined by agreements or contracts or by law. 
If the specific amount of the employing entity's contribution for health 
benefits is fixed by an agreement or contract, or by law, that amount 
constitutes the employing entity's obligation for contribution toward 
the HMO premiums.
    (e) Allocation of portion of a contribution determined by an 
agreement. In some cases, the employing entity's contribution for health 
benefits is determined by an agreement that also provides for benefits 
other than health benefits. In that case, the employing entity must 
determine, or instruct its designee to determine, what portion of its 
contribution is applicable to health benefits.
    (f) Retention and availability of data. Each employing entity or 
designee must retain the following data for three years and make it 
available to CMS upon request:
    (1) The data used to compute the level of contribution for each of 
the plans offered to employees.
    (2) Related data about the employees who are eligible to enroll in a 
plan.
    (3) A description of the methodology for computation.
    (g) CMS review of data. (1) CMS may request and review the data 
specified in paragraph (f) of this section on its own initiative or in 
response to requests from HMOs or employees.
    (2) The purpose of CMS's review is to determine whether the 
methodology and the level of contribution comply with the requirements 
of this subpart.
    (3) HMOs and employees that request CMS to review must set forth 
reasonable grounds for making the request.

[61 FR 27287, May 31, 1996]