GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1997

H	1 

HOUSE BILL 1223

Short Title:  Family Health Care Program.	(Public)

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Sponsors: Representatives Luebke; Blue, Boyd-McIntyre, Braswell, Cunningham, Earle, Easterling, Fitch, Gamble, Hardaway, H. Hunter, Insko, Jeffus, Michaux, Mosley, Sutton, Wainwright, Womble, and Wright.

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Referred to:  Insurance, if favorable, Appropriations.

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May 5, 1997

A BILL TO BE ENTITLED
AN ACT TO ENACT THE NORTH CAROLINA FAMILY HEALTH CARE ACT, AND TO APPROPRIATE FUNDS THEREFOR.
The General Assembly of North Carolina enacts:
TITLE I. FAMILY HEALTH CARE PROGRAM.
Section 1.  Chapter 58 of the General Statutes is amended by adding the following new Article to read:
"ARTICLE 67A.
"North Carolina Family Health Care Act.
"Part 1.  North Carolina Family Health Care Program.
"§ 58-67A-1.  Short title; legislative findings and intent.
(a)	This act shall be known as the North Carolina Family Health Care Act.
(b)	The General Assembly makes the following findings:
(1)	North Carolinians have a responsibility to themselves, their family, and society to act in a manner that promotes good personal health and well-being.
(2)	The increasing numbers of uninsured and underinsured individuals in North Carolina and the escalating costs of health care are so interrelated that it is not possible to guarantee access to health care for all North Carolinians without containing health care costs.
(3)	It has been documented that the lack of access to medically necessary and affordable health care leads to a decline in health status, including birth defects, lifelong disabilities, uncontrolled diabetes, hypertension, and untreated chronic conditions.
(4)	Lack of access to health care also results in unnecessary pain and suffering and premature death, and often leads to overuse of expensive health care services.
(5)	Providing preventive health care will efficiently and effectively improve the health of all North Carolinians and can significantly reduce the need for more expensive health care services later in life.
(6)	The health and well-being of individuals are directly related to their ability to obtain necessary and affordable preventive and primary medical care and health related support services for emergency, chronic, and long-term conditions.
(c)	It is the intent of the General Assembly to do the following:
(1)	Enact a comprehensive health care program to provide medically necessary care specific to individual needs, including preventive and primary care, for all residents of North Carolina.
(2)	Enact a means and method for financing the program that better utilizes the money that is now being spent on health care by the public and private sectors.
(3)	Ensure that the burden of financing the program is allocated equitably among citizens based on ability to pay, and that administration of the program and the allocation of moneys under it are carried out in a manner that is efficient, equitable, and effective.
"§ 58-67A-5. Definitions.
As used in this Article, unless the context clearly requires otherwise:
(1)	'Accountable Health Plan' means any health maintenance or preferred provider organization, independent practice association, or any other mode of delivery of care approved by the Commission to provide health care services to individuals in exchange for a prescribed capitated payment from the Program.
(2)	'Commission' means the North Carolina Family Health Care Planning Commission established under Article 71 of Chapter 143 of the General Statutes.
(3)	'Director' means the health care director of the North Carolina Family Health Care Program.
(4)	'Eligible resident' means an individual who has been legally domiciled in this State for a period of 30 days.  For purposes of this Article, legal domicile is established by living in this State and:
a.	Obtaining a North Carolina motor vehicle operator's license, or
b.	Registering to vote in North Carolina, or
c.	Filing a North Carolina income tax return, or
d.	Obtaining a North Carolina identification card from the North Carolina Division of Motor Vehicles.
		A child is legally domiciled in this State if the child lives in this State and if at least one of the child's parents or the child's guardian is legally domiciled in this State for a period of 30 days.
		A person with a developmental disability or other disability or circumstance which prevents the person from obtaining a North Carolina motor vehicle operator's license, registering to vote in North Carolina, or filing a North Carolina income tax return, is legally domiciled in this State by living in the State for 30 days.
(5)	'Federal poverty income level' means the federal official poverty line, as defined by the federal Office of Management and Budget, based on Bureau of Census data, and revised annually by the Secretary of Health and Human Services pursuant to section 9902(2) of Title 42 of the United States Code.
(6)	'Fund' means the North Carolina Family Health Care Trust Fund established under this Article.
(7)	'Global budget' or ‘global health budget' means a comprehensive, binding annual budget setting forth in advance the aggregate compensation all health care providers will receive from the Program for provision of all covered services.
(8)	'Health Plan Purchasing Cooperative' means an organization established to implement the Program in geographic areas of the State.
(9)	'Program' means the North Carolina Family Health Care Program.
(10)	'Provider' means a health care provider participating in the Program through the State Plan or through an Accountable Health Plan.
(11)	'State Plan' means that portion of the Program in which eligible persons may elect to receive services either from a private or public provider on a fee-for-service basis or from a hospital based on a negotiated annual budget.
"§ 58-67A-10. North Carolina Family Health Care Program established; purpose; components; administration.
(a)	There is established the North Carolina Family Health Care Program.  The purpose of the Program is to provide all eligible residents with access to health care services by enabling them to enroll in one of the health services plans established under the Program.
(b)	The Program shall be comprised of the following health services plans:
(1)	A State Plan providing health care services to eligible residents wherein providers are paid on a fee-for-service or negotiated budget basis; and
(2)	An Accountable Health Plan providing health care services wherein providers are paid on a capitated payment basis.
(c)	The Program shall be administered by the North Carolina Family Health Care Planning Commission established under Article 64 of Chapter 143 of the General Statutes.
"§ 58-67A-15. Program eligibility; coverage secondary and supplemental to certain other coverage; transfer of retiree coverage; expenditure limitations; nonresident eligibility.
(a)	Eligibility. – Any eligible resident of this State may receive health care services under the Program.
(b)	Coverage Secondary to Certain Other Coverage. – Program benefits shall be secondary to any health care benefits for which the following persons are eligible or to which they are entitled:
(1)	Residents eligible for the federal Medicare program, as defined by the federal Social Security Act (42 U.S.C. § 1395, et seq.); and
(2)	Persons on active military duty or otherwise receiving benefits under the CHAMPUS program (10 U.S.C.A. § 1071, et seq.) and their dependents; and
(3)	Federal employees entitled to health care benefits, and their dependents.
The health care benefits provided under the Program shall be supplemental to benefits provided under Medicare Parts A and B and shall include health care benefits not provided by Medicare Parts A and B, including prescription drugs, preventive care, and Medigap benefits.
Coverage provided under the Program shall be secondary to any retirement health coverage for which a resident or the resident's dependents are eligible.  The Commission shall hold public hearings regarding the integration of benefits provided under the Program with retirement health benefit plans in the private and public sectors.  Based on the hearings, the Commission shall conduct a comparison of the benefits available to residents under the Program with those typically available to retirees and their dependents and shall adopt rules defining benefits under the Program which residents with retiree health coverage are entitled to receive.  In adopting rules, the Commission shall consider establishing a maintenance of effort for private and public retiree health benefit plans in order to avoid creating incentives for private and public employers to reduce retiree health benefits.
(c)	Transfer of Benefits. – The Commission may negotiate with private and public employers for the transfer of responsibility for providing health benefits to retirees and their dependents from the employer to the Commission.  Any private or public employer may negotiate with the Commission for the transfer of the responsibility for providing retiree health benefits to the Commission to the extent allowed by retiree health benefit agreements.
(d)	Expenditure Limitations. – The amount that shall be used for the baseline for setting limits on expenditures for the first year of the operation of the Program shall be the amount spent in North Carolina for health care covered under this Article during the most recent calendar year in which data is available.
(e)	Nonresident Eligibility. – Persons who are not residents of this State but who work in North Carolina may receive benefits under the Program, including benefits for dependents, if all payments, surcharges, and premiums required to be paid by or on behalf of residents under the Program have been paid to the Program by or on behalf of such nonresidents.
If a person who is not a resident of this State and is not eligible for Program benefits pursuant to this subsection receives medical treatment in North Carolina, the person is subordinated to the State of North Carolina for reimbursement from a third-party payer for the medical treatment.
(f)	The Commission shall estimate the expenditures and revenues required to provide services under the Program and shall report that information to the General Assembly on or before January 1, 1998, and annually thereafter.
(g)	Coverage and benefits provided under the Program shall be secondary to any coverage provided under a workers' compensation, automobile insurance, or liability insurance policy.
"§ 58-67A-20. Copayments.
(a)	The Director may require copayments for services under the State Plan of not more than ten percent (10%) of the cost of the services, not to exceed two hundred fifty dollars ($250.00) per year in copayments for individuals, and not to exceed five hundred dollars ($500.00) per year in copayments for families.
(b)	Persons who have income below two hundred fifty percent (250%) of the federal poverty income level shall not be required to pay any copayments under the State Plan or under an Accountable Health Plan.
(c)	No copayments may be required that create a barrier to medically necessary care under the State Plan or under an Accountable Health Plan.
(d)	An Accountable Health Plan may impose copayments from its members no greater than five percent (5%) of the cost of services, and not more than one hundred dollars ($100.00) per year per individual or two hundred fifty dollars ($250.00) per year per family.
(e)	No individual enrolled in either the State Plan or an Accountable Health Plan shall be required to meet a deductible as a condition for receiving health care services.
(f)	No copayments may be required under the State Plan or under an Accountable Health Plan for prenatal care, well-child care, periodic physical examinations, and other health screenings and services as recommended by the U.S. Preventive Services Task Force ‘Guide to Clinical Preventive Services'.
"Part 2.  Program Benefits.
"§ 58-67A-25. General benefits.
(a)	The benefits listed in this section shall be covered benefits under this Article.  The Program shall provide all of the following:
(1)	Comprehensive medical care benefits specified in this Article, including preventive care, primary and tertiary health care for acute and chronic conditions and rehabilitative care.
(2)	Limited mental health services and prescription drugs, as specified in this Article.
The Program shall provide the benefits specified in this Article through the State Plan or the Accountable Health Plan.
"§ 58-67A-30. Medical benefits.
Covered benefits in this section shall include, but are not limited to, the following when determined to be medically necessary:
(1)	Inpatient and outpatient hospital services;
(2)	Inpatient and outpatient professional  provider services, including home health care;
(3)	Diagnostic X ray and laboratory services;
(4)	Family planning, perinatal, and maternity care;
(5)	Children's preventive care, including, but not limited to, well-child care, routine dental, hearing, and vision checkups, and immunizations;
(6)	Adult preventive care including, but not limited to, periodic mammograms and pap smears;
(7)	Durable medical equipment;
(8)	Podiatry;
(9)	Unreplaced blood;
(10)	Dialysis;
(11)	Emergency transportation;
(12)	Rehabilitative care;
(13)	Alcohol and drug abuse or addiction treatment, or both;
(14)	Prescription drugs;
(15)	Periodic physical examinations, and other health screenings and services as recommended by the U.S. Preventive Services Task Force ‘Guide to Clinical Preventive Services';
(16)	Chiropractic.
"§ 58-67A-35. Mental health benefits.
(a)	The following mental health benefits are covered benefits under the Program:
(1)	Fifty-two outpatient visits per year; and
(2)	Inpatient care, other than for substance abuse, not exceeding 45 days per year.
(b)	The Commission shall encourage the use of services, service coordination, and case management which will enable the individual to remain in the least restrictive setting.  Services may be provided through community-based, residential, or institutional programs.
(c)	Not later than January 1, 1998, the Commission shall appoint an independent advisory board of mental health experts and representatives of health care consumers to develop a plan for providing all necessary mental health care through the Program.
"§ 58-67A-40. Expansion of benefits .
The benefits provided under this Article may be expanded by the Commission the expansion meets the intent of this Article and when there are sufficient revenues to cover expansion costs.
"Part 3.  Program Providers.
"§ 58-67A-45. Choice of health care providers; enrollment periods.
(a)	Any eligible resident may choose to receive services from the Program either from a private or public health care provider or from a hospital through enrollment in the State Plan or in an Accountable Health Plan.
(b)	An Accountable Health Plan may use any of the following methods of health care service delivery:
(1)	A staff model, in which services are provided by salaried health care professionals;
(2)	A group model, in which a professional group is paid for services rendered at a capitation rate;
(3)	An independent practice association model, in which health care professionals are paid fees; or
(4)	Any other model for delivery of care approved by the Director.
(c)	Individuals enrolled in an Accountable Health Plan are entitled to an open enrollment period of not less than one month, during which period an individual may enroll in another Accountable Health Plan or may change to the State Plan option.  The open enrollment period for an Accountable Health Plan shall be offered annually.
(d)	Individuals enrolled in the State Plan may enroll in any available Accountable Health Plan at any time.
"§ 58-67A-50. Accountable Health Plan requirements.
(a)	Any Accountable Health Plan providing services under, and receiving payment from, the Program shall do all of the following:
(1)	Allow any eligible resident to enroll in order of time of application, up to a reasonable limit determined by capacity of the Accountable Health Plan to provide services;
(2)	As a condition of approval to participate in the Program, demonstrate that the Accountable Health Plan will provide, or arrange and pay for, all of the benefits required for the capitation payment set by the Commission;
(3)	If an Accountable Health Plan does not have its own hospital facility, that Accountable Health Plan shall contract with a hospital or hospitals for the provisions of care for those enrolled in that Accountable Health Plan;
(4)	Demonstrate that the Accountable Health Plan will do all of the following:
a.	Provide, or arrange and pay for, all the benefits required for the payment set by the Program;
b.	Provide services of a level of quality acceptable to the Commission;
c.	Charge no additional fees, premiums, or copayments other than those allowed by the Commission for the provision of benefits under this Article;
d.	Provide a grievance procedure that allows patient complaints pertaining to coverage under the Program to be heard, and appeals from the decision regarding those complaints to be heard by the Health Plan Purchasing Cooperative;
e.	Make reports as required by the Commission; and
f.	Meet any other requirements the Commission determines to be necessary to ensure that the Accountable Health Plans participating in the Program are financially viable and will provide quality health care to enrollees in the Accountable Health Plans.
(b)	As a condition of participation in the Program, no Accountable Health Plan may refuse to enroll or serve any eligible individual because of that individual's economic status, health history, preexisting health condition, age, sex, race, national origin, ancestry, sexual orientation, disability, ethnicity, or religion.
(c)	Nothing in this section shall prohibit an Accountable Health Plan from offering additional benefits beyond those set forth in this Article.  The additional benefits shall be clearly set forth in disclosure and Accountable Health Plan description materials provided to persons eligible to enroll in the Program.
"Part 4.  Program Administration .
"§ 58-67A-55. Program administered by Commission; implementation; monitoring.
(a)	Administration. – The Commission shall administer the Program in accordance with this Article and with Article 71 of Chapter 143 of the General Statutes.  The Commission shall ensure that the Program is structured and administered in the most efficient and effective manner possible.
(b)	Implementation. – The Program shall be implemented through health plan purchasing cooperatives in accordance with an implementation schedule established by the Commission. Implementation shall be phased in beginning not later than January 1, 1999.  In developing the phase-in schedule, the Commission shall ensure that services are expanded for underserved populations.  Implementation of the Program shall be carried out only to the extent that funds are available for this purpose.
(c)	Monitoring. – The Commission, in consultation with such other experts as it deems appropriate, shall develop an evaluation and monitoring system which considers, at a minimum, the quality of care and access to care provided by the Program. Monitoring and evaluation shall include the geographic distribution of health care resources under the Program, and the extent to which the needs of special populations including low-income persons, persons living in medically underserved areas, and persons with disabilities or chronic or unusual medical needs will be met.
"§ 58-67A-60. Duties of health plan purchasing cooperative.
Health plan purchasing cooperatives shall implement the Program in each cooperative's geographic area, and in carrying out the implementation, shall do the following:
(1)	Certify private health plans as Accountable Health Plans for participation in the system of universal health coverage on the basis of ability to deliver the State-guaranteed package of comprehensive, medically necessary health services in accordance with criteria defined by the Commission for quality and service.
(2)	Pay each Accountable Health Plan the same, risk-adjusted per capita amount for all eligible persons, except that the Commission shall have the authority to ensure accessibility to health care in rural and medically underserved areas by enhancing provider payments, requiring an Accountable Health Plan to provide services throughout the area, or by any other reasonable means.
(3)	Ensure that no Accountable Health Plan charges an additional premium.
(4)	Jointly with the Commission and where necessary to meet the needs of underserved areas or special populations, organize the delivery of health care to ensure that every individual has a choice of Accountable Health Plans.
(5)	Assist eligible residents in choosing among Accountable Health Plans by providing consumer education, including uniform information about all Accountable Health Plans available through the health plan purchasing cooperative such as quality indicators and choice of providers.
(6)	Provide a mechanism for enrolling all eligible residents in their chosen Accountable Health Plans and for automatically enrolling in the State Plan all eligible residents who fail to choose a plan.
(7)	Monitor and enforce standards concerning access, consumer satisfaction, and quality of care in all Accountable Health Plans.
(8)	Jointly with the Commission and the North Carolina Medical Database Commission, collect data from all Accountable Health Plans and sponsor research into health outcomes and practice guidelines.
"§ 58-67A-65. Efficiency of Program operations.
(a)	The Director shall set standards and conduct retrospective review of the utilization of Program benefits to ensure that health care services are rendered in an effective, cost-efficient, and appropriate manner.
(b)	The Director shall make timely payments to providers, including Accountable Health Plans and hospitals, and shall establish a payment system which is efficient for health care providers and the Commission to administer and which eliminates unnecessary administrative costs.  Administrative costs shall not exceed the limits set under G.S. 58-67A-35.
(c)	In addition to other duties assigned by the Commission and by this Article and Article 71 of Chapter 143 of the General Statutes, the Director shall do the following to ensure efficiency of Program operation:
(1)	Establish uniform reporting requirements for all health care providers participating in the Program;
(2)	To the extent permitted by federal law, develop and implement standardized claims, reporting methods, and utilization review criteria under the Program;
(3)	Require all recipients of funds under the Program to periodically report information which the Director determines to be necessary for the planning, budgeting, and quality assurance of care provided under the Program; and
(4)	Make any information and reports submitted pursuant to this section, including the analysis of data contained in those reports, available to the public.
"§ 58-67A-70. Confidentiality of records .
The confidentiality of communications between a recipient of services under Program and the health care provider, and the confidentiality of medical records and communications between the patient and the health care provider, shall remain confidential to the same extent that such records and communications are protected as confidential under other provisions of law of this State.
"Part 5.  Allocation of Funds and Provider Reimbursement .
"§ 58-67A-75. Allocation of Program funds.
(a)	Not more than seven percent (7%) of the funds appropriated for the Program may be used for Program administration.
(b)	That amount of funds appropriated for the Program remaining after allocation for administrative costs and reserves, shall be divided based on the proportion of individuals enrolled in the State Plan or an Accountable Health Plan, adjusted for health risk variations, and may be increased to encourage providers to practice in medically underserved areas.
(c)	The cost of any necessary research and education related to medicine and health, other than patient and consumer education, shall not be paid from Program funds.
"§ 58-67A-80. Provider reimbursement .
(a)	An Accountable Health Plan may reimburse providers by any method  authorized under G.S. 58-67A-45.
(b)	Providers may not charge any fee for services covered under Part 2 of this Article which exceeds the rate set or negotiated under the Program.
(c)	Providers shall be reimbursed for services provided under the Program as follows:
(1)	The Program shall reimburse individual providers, other than hospitals, for the provision of covered services in the State Plan pursuant to a resource-based relative value fee schedule established by the Director, based on the total amount of funds available in the State Plan.
(2)	The Commission may adjust downward the increase in fees for any procedure or service or group of procedures for the year following any year in which the expenditure target for that procedure is exceeded and this excess cannot be accounted for by increases in epidemics, disasters, other changes in the health status of the covered population, or other factors deemed relevant by the Commission and occurring after the establishment of the expenditure target.
(3)	As a condition of providing services under the Program, providers shall accept the fees established by the Commission as payment in full and shall not bill patients for any additional charges.
(4)	Hospitals shall be reimbursed on the basis of an annual budget for all covered services rendered under the Program to eligible residents, based on the hospital's census, location, the acuity of its patient population, and other relevant factors.
(5)	The Director shall negotiate the budget specified in subdivision (4) of this subsection with each participating hospital on an annual basis, with adjustments made for epidemics and other unforeseen catastrophic changes in the general health status of a patient population, and adjustments that take into account the number of persons enrolled in Accountable Health Plans.
(6)	The Director shall reimburse Accountable Health Plans on a capitated basis, for each patient, based on the following:
a.	Total funds available to all Accountable Health Plans reimbursed under the Program,
b.	The number of persons enrolling in the Accountable Health Plan, adjusted for health risk variations of enrollees, and
c.	Adjustments to encourage providers to serve in medically underserved areas.
(7)	Accountable Health Plans shall be responsible for covering the costs of its enrollees through negotiated fee-for-service, prospective annual budget, or any other means negotiated between the parties.
(d)	The Commission may impose reimbursement mechanisms which have as their purpose reducing unnecessary referrals and utilization of health benefits among providers in the State Plan, including, but not limited to, all of the following:
(1)	Payment incentives to limit patient self-referrals to specialists and to encourage greater review and screening of those referrals by primary care providers.
(2)	Capitation payments to groups or associations of providers.
(3)	Targeted case management for high-cost or high-risk cases.
(4)	Use of expenditure targets.
(5)	Retrospective utilization review.
(6)	Enhanced payments to primary care providers whose services result in reductions in inpatient admissions and superior health outcomes.
(7)	Other mechanisms which, upon deliberation, the Commission deems to be appropriate to control unnecessary utilization of services.
"Part 6.  Reserves .
"§ 58-67A-85. Reserves.
(a)	The Director shall establish and retain a reserve account of one percent (1%) of the total revenues collected for the support of the Program during budgetary shortfalls or epidemics as defined by the Commission.
(b)	Whenever the Director determines that the reserve account exceeds one percent (1%) of the total revenues collected for the support of the Program, the Director shall report to the Commission and the General Assembly on the appropriate options available, which shall include, but are not limited to:
(1)	Increasing benefits,
(2)	Adjusting rates of reimbursement,
(3)	Improving access to the Program,
(4)	Reducing surcharges and taxes imposed and earmarked for the purpose of supporting the Program, and
(5)	Expanding the reserve.
(c)	The Commission shall review and adjust its budget, fee schedules, and capitation rates on a regular basis, according to a review schedule established by the Commission, to ensure that the Program remains solvent and that the payments to providers are equitable, prompt, and within the Program budget.
"Part 7.  Family Health Care Trust Fund .
"§ 58-67A-90. Fund established.
(a)	Effective July 1, 1998, there is established in the State Treasurer's Office the North Carolina Family Health Care Trust Fund.  The Fund shall consist of the following:
(1)	All revenues collected from taxes and other sources enacted for the purpose of funding the Program.
(2)	All federal payments received as a result of any waiver of requirements granted by the United States Secretary of Health and Human Services under health care programs established under Title XIX of the Social Security Act, as amended; and
(3)	All moneys appropriated by the North Carolina General Assembly for carrying out the purposes of the Program.
(b)	Moneys shall be deposited in the Fund beginning with the 1998-99 fiscal year.
(c)	Moneys held in the Fund are not subject to appropriation or allotment by the State or any political subdivision of the State, except to the Commission for administration and implementation of the Program.
(d)	The Fund shall include a preventive care account for the purpose of ensuring that moneys are allocated for community-based disease prevention and health promotion efforts.  These efforts shall be  targeted to population groups with the greatest unmet needs and shall emphasize programs to reduce or eliminate causes of illnesses and to provide outreach to underserved populations. The Fund shall also contain such other discrete accounts as the Commission deems appropriate for the effective and efficient administration of the Program.
(e)	The State Treasurer shall administer and invest Fund moneys in accordance with his authority under State law.
"Part 8.  General Provisions.
"§ 58-67A-95. Reporting requirements.
(a)	Commencing January 1, 2000, the Commission shall make a report to the general public, to the General Assembly, and to the Governor.  The report shall be made every five years and shall contain a comprehensive evaluation of the Program.  The report shall include all of the following:
(1)	A description of the Commission's evaluation and monitoring of the Program.
(2)	A description of the successes and problems in the areas of quality of and access to health care.
(3)	The results of surveys of consumer and provider satisfaction with the Program.
(b)	The Commission shall report annually to the General Assembly and to the Governor summarizing information about health needs, health services, health expenditures, revenues, and other issues relevant to the efficient and effective administration and operation of the Program.  The Commission's annual report shall also contain any recommendations it has for legislation necessary to maintain or improve the Program's performance.
"§ 58-67A-100.  Waivers from federal requirements; options for additional federal participation.
(a)	The Commission shall seek all necessary federal waivers, exemptions, agreements, or legislation which will allow that all  federal payments for health and mental health made to this State will be paid directly to the Fund for the purposes of the Program, and for the assumption, by the Program, of the responsibility for all benefits previously paid for by the federal government.
(b)	The Commission shall, in all cases, seek to maximize federal contributions and payments for health and mental health services provided in this State, and, in obtaining the waivers, exemptions, agreements, or legislation required under subsection (a) of this section, the Commission shall ensure that the contributions of the federal government for health and mental health services in North Carolina will not decrease in relation to other states as a result of the waivers, exemptions, agreements, or legislation.
(c)	When directed to do so by the Commission, the Director shall petition the federal government for a waiver pursuant to section 1315 of Title 42 of the United States Code for the purpose of providing medical services to Medicaid beneficiaries.  The State shall, at a minimum, continue to match federal financial participation at the same rate at which the match was made during the 1998-99 fiscal year.
(d)	The Department of Human Resources shall report to the Commission, not later than July 1, 1998, regarding all of the following:
(1)	All federal Medicaid options and other federal options which the State has not exercised but would allow greater federal participation in the provision of health care services pursuant to this Article.
(2)	The amount of potential federal participation relating to each option.
(3)	The amount of expanded federal participation which could be expected if outreach and other efforts were initiated to expand participation to present programs, including the medically needy program.
"§ 58-67A-105.  Private coverage may not duplicate Program benefits.
Insurance companies may sell, subject to the approval of the Commissioner of Insurance, health insurance to cover benefits not provided by the Program.  However, no private insurance may be sold to cover benefits which eligible residents are entitled to receive from the Program. Not later than March 1, 1998, the Commissioner of Insurance shall report to the General Assembly on the need for community rating and limitations on medical underwriting under the Program."
Section 2. Chapter 143 of the General Statutes is amended by adding the following new Article to read:
"ARTICLE 71.
"The North Carolina Family Health Care Planning Commission.
"§ 143-675. Purpose.
The purpose of this Article is to establish the North Carolina Family Health Care Planning Commission.  The Commission will administer the North Carolina Family Health Care Program established under Article 68A of Chapter 58 of the General Statutes.
"§ 143-676. Definitions.
As used in this Article, unless the context clearly requires otherwise:
(1)	'Accountable Health Plan' means any health maintenance organization, independent practice association, or any other mode of delivery of care approved by the Commission to provide health care services to individuals in exchange for a prescribed capitated payment from the Program.
(2)	'Commission' means the North Carolina Family Health Care Planning Commission.
(3)	'Director' means the health care director of the North Carolina Family Health Care Program.
(4)	'Eligible resident' means an individual who has been legally domiciled in this State for a period of 30 days.  For purposes of this Article, legal domicile is established by living in this State and
a.	Obtaining a North Carolina motor vehicle operator's license, or
b.	Registering to vote in North Carolina, or
c.	Filing a North Carolina income tax return, or
d.	Obtaining a North Carolina identification card issued by the North Carolina Division of Motor Vehicles.
		A child is legally domiciled in this State if the child lives in this State and if at least one of the child's parents or the child's guardian is legally domiciled in this State for a period of 30 days.
		A person with a developmental disability or other disability which prevents the person from obtaining a North Carolina motor vehicle operator's license, registering to vote in North Carolina, or filing a North Carolina income tax return, is legally domiciled in this State by living in the State for 30 days.
(5)	'Federal poverty income level' means the federal official poverty line, as defined by the Federal Office of Management and Budget, based on Bureau of Census data, and revised annually by the Secretary of Health and Human Services pursuant to section 9902(2) of Title 42 of the United States Code.
(6)	'Fund' means the North Carolina Family Health Care Trust Fund established under this Article.
(7)	'Global budget' or 'global health budget' means a comprehensive, binding annual budget setting forth in advance the aggregate compensation all health care providers will receive from the Program for provision of all covered services.
(8)	'Health plan purchasing cooperative' means an organization established to implement the Program in geographic areas of the State.
(9)	'Program' means the North Carolina Family Health Care Program.
(10)	'Provider' means a health care provider participating in the Program through the State Plan or an Accountable Health Plan.
(11)	'State Plan' means that portion of the Program in which eligible persons may elect to receive services either from a private or public provider on a fee-for-service basis or from a hospital, based on a negotiated annual budget.
"§ 143-677. Commission established; members; terms of office; quorum; compensation.
(a)	Establishment. – Effective January 1, 1998, there is established the North Carolina Family Health Care Planning Commission with the powers and duties specified in this Article and in Article 68A of Chapter 58 of the General Statutes, and with the power to adopt, amend, and repeal rules necessary to carry out this Article.  The Commission shall be a commission within the Department of Insurance for organizational, budgetary, and administrative purposes only.  The Commission shall be responsible for the development, implementation, and administration of the North Carolina Family Health Care Program established under Article 68A of Chapter 58 of the General Statutes.
(b)	Membership and Terms. – The Commission shall consist of 15 members who shall be appointed as follows:
(1)	Five persons appointed by the Governor, one of whom shall represent the labor force, one of whom shall be a physician licensed to practice medicine in this State, one of whom shall be a representative of a business with 50 or more employees, and one of whom is a consumer. Two of the persons initially appointed under this subdivision shall serve a five-year initial term; two shall serve a three-year initial term; and one shall serve a one-year initial term; thereafter, the terms of the Governor's appointees shall be for six years.
(2)	Five persons appointed by the General Assembly upon the recommendation of the Speaker of the House of Representatives, two of whom shall represent the beneficiaries whose right to health care under the Program is guaranteed pursuant to this act, one of whom is a nurse licensed under Chapter 90 of the General Statutes, one of whom represents a prepaid health plan, and one of whom is an academic expert in the field of health care. Two of the persons initially appointed under this subdivision shall serve a six-year initial term; two shall serve a four-year initial term; and one shall serve a two-year initial term; thereafter, the terms of appointees under this subdivision shall be for six years.
(3)	Five persons appointed by the General Assembly upon the recommendation of the President Pro Tempore of the Senate, one of whom represents a business with less than 50 employees, one of whom is a hospital administrator, one of whom represents an insurance company authorized to do business in this State, one consumer, and one representative of a nonprofit community health clinic.  Two of the persons initially appointed under this subdivision shall serve a six-year initial term; two shall serve a four-year initial term; and one shall serve a two-year initial term; thereafter, the terms of appointees under this subdivision shall be for six years.
No member may be appointed to serve more than two consecutive terms.  A member whose term has expired may serve until his or her successor is appointed.
When making appointments to the Commission, the Governor and the General Assembly shall ensure that the membership fairly represents the regions of the State and also fairly represents minority persons, women, and membership of the political party to which the largest minority of the membership of the General Assembly belongs.
(c)	Member Association. –
(1)	No person may be appointed to or remain a member of the Commission if the person or the person's spouse is associated with a health care business in either of the following ways:
a.	As a director, employee, officer, owner, or partner; or
b.	As a holder, either individually or collectively, of securities worth ten thousand dollars ($10,000) or more at fair market value as of December 31 of the preceding year, or constituting five percent (5%) or more of the outstanding stock of the business.
(2)	For purposes of this subsection, the term ‘health care business':
a.	Does not include a widely held investment fund, regulated investment company, or pension or deferred compensation plan if the prospective employee or member or spouse neither exercises nor has the authority to exercise control over the financial interests held by the fund, and the fund is publicly traded or the fund assets are widely diversified.
b.	Includes an association, corporation, enterprise, joint venture, organization, partnership, proprietorship, trust, and every other business interest that provides or insures human health care or that depends upon a provider or insurer of human health care for twenty-five percent (25%) or more of its annual income.
(d)	Compensation. – The salary of Commission members shall be set by the General Assembly.
(e)	Officers. – The Commission shall have a chair and vice-chair.  The chair shall be appointed by the Governor from among the membership.  The vice-chair shall be elected by the members.  The terms of officers shall be for two years.
(f)	Meetings. – Meetings may be called by the chair or vice-chair.  The Commission shall meet as often as necessary, but not less than six times a year.
(g)	Quorum. – Eight members of the Commission shall constitute a quorum for the transaction of business.  The affirmative vote of a majority of the members present at meetings of the Commission shall be necessary for action to be taken by the Commission.
"§ 143-678. Powers and duties of the Commission .
(a)	The Commission shall have the following powers and duties:
(1)	Employ such staff as it deems necessary and fix their compensation.  Staff employed by the Commission shall be subject to the State Personnel Act;
(2)	Enter into contracts to carry out the purposes of this Article and Article 68A of Chapter 58 of the General Statutes;
(3)	Conduct investigations and inquiries and compel the submission of information and records the Commission deems necessary;
(4)	Adopt rules necessary for administration of the Program;
(5)	Annual preparation of a budget for the administration of the Program, including personnel costs;
(6)	Act directly, or through one or more contractors, as the single payor for all claims for services provided under the Program;
(7)	Establish global budgeting and rate-setting mechanisms with annual review of the effectiveness and sufficiency of budgets and rates.  Global budgets shall be tied to the consumer price index and may be adjusted upward to account for increases in epidemics, disasters, other changes in the health status of the covered population, or other factors deemed relevant by the Commission and occurring after establishment of the global budget;
(8)	Establish an enrollment system which ensures that all eligible persons are aware of their right to health care and are formally enrolled;
(9)	Investigate and implement annual cost-containment measures, within the Commission's authority, to meet established global budgets;
(10)	Recommend annually to the General Assembly the amount of any appropriation needed to finance the Program;
(11)	Develop methodology to be used in making risk-adjusted payments to Accountable Health Plans;
(12)	Establish one or more advisory panels as the Commission deems appropriate for the effective and timely conduct of its duties;
(13)	Appoint a director of the Program who shall perform such duties as the Commission may assign;
(14)	Ensure accessibility to health care in rural and medically underserved areas by enhancing provider payments, requiring services of an Accountable Health Plan to be provided throughout a geographic area, or by any other reasonable means;
(15)	Ensure that supplemental health benefits are available to all eligible residents including employees of business entities;
(16)	Determine the economic impacts of implementing the Program, including overall costs to the State economy, costs to the State's business economy, costs to the State, impact on real wages of employees, impact on future State economic development, immediate effects on the job market in the State, and a 10-year projection of these items if the Program is not implemented;
(17)	Study and make recommendations to the General Assembly concerning the following:
a.	Options for financing the Program;
b.	Legislation needed to finance the Program;
c.	The mechanisms for ensuring that the State Plan and all Accountable Health Plans available to eligible residents will provide appropriate access to quality medical services;
d.	The means by which the Program will ensure that the needs of special populations of eligible residents such as low-income persons, people living in rural and underserved areas, and people with disabilities and chronic or unusual medical needs will be met;
e.	The appropriate means of financing medical education and medical research;
f.	Whether medical malpractice tort reforms are needed, and, if so, the tort reforms needed; and
g.	Methods to ensure adequate primary care for all eligible residents, and appropriate compensation for primary care services to achieve that end;
(18)	Exercise administrative authority over Certificate of Need requirements under Article 9 of Chapter 131E of the General Statutes and the Medical Database Commission as established under Article 11 of Chapter 131E of the General Statutes, as amended; and
(19)	Such other duties as are required for the effective and efficient implementation of the Program.
(b)	The Commission may contract with nonrisk-bearing intermediaries for services related to administering the Program, including, but not limited to, the dissemination of materials and information about the Program and coverage choices and options, enrollment of persons eligible for services in the Program, selection and designation of primary care providers, utilization review, and payment of claims.
(c)	The Commission may accept grants, contributions, devises, bequests, and gifts for the purpose of providing financial support to the Program.  Such funds shall be deposited by the Commission into the Fund.
(d)	The Commission shall periodically study the impact of migration to the State on the ability of the Program to provide necessary health care for beneficiaries of the Program.  If the Commission finds, based on credible evidence, that migration to the State is imposing a significant financial burden on the Program, the Commission shall make recommendations to the General Assembly on mitigating the financial burden.
(e)	On or before January 1, 1998, the Commission shall identify health and mental health programs administered by State and local governments whose benefits and services substantially duplicate those provided under the Program and shall make recommendations to the General Assembly for phasing out those programs and transferring funding for them to the Fund.
(f)	The Commission shall establish an ongoing system for monitoring patterns of practice.  The Commission shall establish a system of peer education for providers responsible for aberrant patterns of practice.  If the Commission determines that peer educational efforts have failed, the Commission may refer the matter to the appropriate professional licensing board.
(g)	The Commission shall review and adopt professional practice guidelines developed by the State and national medical and specialty organizations, the National Institute of Health, the United States Agency for Health Care Policy and Research, and other organizations as it deems necessary to promote the quality and cost-effectiveness of services provided under the Program.
"§ 143-679. Health Care Director.
(a)	The Commission shall appoint a Health Care Director, who shall function as the chief executive officer for the administration of the Program.
(b)	The Director shall serve a minimum of four years, unless he or she receives a vote of no confidence by not less than two-thirds of the membership of the Commission.
(c)	The Director shall be exempt from the State Personnel Act."
Section 3.  As the first step in implementation of the Program, the Commission shall, on or before the first day of the 1997 General Assembly, Regular Session 1998, produce and deliver to the President Pro Tempore of the Senate and the Speaker of the House of Representatives a detailed report concerning implementation of the Program.  The report shall contain the following:
(1)	Detailed analysis and recommendations pertaining to Program financing options;
(2)	Independent actuarial cost estimates for the benefit package;
(3)	Possible options for phasing in the Program;
(4)	Whether there is a need to begin immediate data collection and, if so, the data needed and methods to begin data collection;
(5)	The economic impacts of implementing the Program, including overall costs to the State economy, costs to the State's business economy, costs to the State, impact on future State economic development, immediate effects on the job market in the State, and a 10-year projection of these items if the Program is not implemented;
(6)	The steps necessary to include the populations served by Medicaid, including a statement of any necessary federal waivers;
(7)	The need for and steps necessary to obtain a waiver from the federal Employee Retirement and Income Security Act; and
(8)	The steps necessary to include the North Carolina Teachers' and State Employees' Comprehensive Major Medical Plan.
TITLE II. FAMILY HEALTH CARE PROGRAM FINANCING.
Subtitle 1. Health Care Surcharges.
Section 4.  The General Assembly intends to enact legislation imposing the following surcharges to take effect July 1, 1998, for the purpose of financing the implementation of the North Carolina Family Health Care Act.
(1)	Except as provided in subdivision (2) of this section, a surcharge on employers at the rate of      percent (%) on the wages paid by every employer in the State.  As used in this subdivision, the term "wages" shall have the same definition as applied to that term under G.S. 96-8.
(2)	For employers who have fewer than 50 employees and who have been in business five years or less, a graduated surcharge on wages paid as follows: at the rate of      percent (%) in the first two years of operation,      percent (%) in the second two years of operation, and      percent (%) in the fifth year of operation.
(3)	For self-employed individuals, a surcharge at the rate of      percent (%) on the amount of net earnings from self-employment.  This surcharge amount shall be deductible as a trade or business expense in determining adjusted gross income.
(4)	For all residents, a surcharge at the rate of        percent (%) of the sum of the resident's North Carolina adjusted gross income plus social security.
Subtitle 2. Taxes.
Section 5. The General Assembly intends to enact legislation increasing specified taxes, the revenues from which shall be earmarked for deposit into the preventive care account of the North Carolina Family Health Care Trust Fund.
TITLE III. CONFORMING CHANGES, APPROPRIATIONS,
OTHER.
Subtitle 1. Transfer of Certificate of Need and
Medical Database Commission.
Section 6.  Effective July 1, 1998, the administration of the Certificate of Need requirements under Article 9 of Chapter 131E are transferred by a Type I transfer in accordance with G.S. 143A-6(a) from the Department of Human Resources to the North Carolina Family Health Care Planning Commission as established under G.S. 143-592.  All powers, duties, functions, records, and unexpended balances of appropriations, allocations, or other funds, including the functions of budgeting and purchasing as these elements pertain to administration of Article 9 of Chapter 131E, are transferred from the Department of Human Resources to the North Carolina Family Health Care Planning Commission in accordance with G.S. 143A-6(a).
Section 7.  Effective July 1, 1998, the Medical Database Commission, established under Article 11 of Chapter 131E of the General Statutes, is transferred by a Type I transfer in accordance with G.S. 143A-6(a) from the Department of Human Resources to the North Carolina Family Health Care Planning Commission established under Article 64 of Chapter 143 of the General Statutes. All powers, duties, functions, records, and unexpended balances of appropriations, allocations, or other funds, including the functions of budgeting and purchasing as these elements pertain to administration of Article 11 of Chapter 131E, are transferred from the Department of Human Resources to the North Carolina Family Health Care Planning Commission in accordance with G.S. 143A-6(a).
Section 8. Effective July 1, 1998, the phrase "Department of Human Resources" is deleted and replaced by the phrase "North Carolina Family Health Care Planning Commission" wherever it occurs in Articles 9 and 11 of Chapter 131E of the General Statutes.
Section 9. Effective July 1, 1998, the Revisor of Statutes is authorized to correct any reference or citation in the General Statutes to any portion of the General Statutes which is amended by this act by deleting incorrect references and substituting correct references.
Subtitle 2. Conforming Changes.
Section 10.  The Department of Insurance shall prepare and present for consideration and action by the General Assembly all changes to Chapter 58 of the General Statutes, other than Article 68A of that Chapter, necessary to make relevant sections of Chapter 58 of the General Statutes conform to and be consistent with the requirements of the North Carolina Family Health Care Act and amendments thereto.  The Department shall present the recommended changes to the General Assembly upon the convening of the next session following the enactment of the North Carolina Family Health Care Act.
Section 11.  The Executive Administrator and the Board of Trustees of the Teachers' and State Employees' Comprehensive Major Medical Plan shall prepare and present for consideration and action by the General Assembly all changes to Chapter 135 of the General Statutes necessary to make relevant sections to that Chapter conform to and be consistent with the requirements of the North Carolina Family Health Care Act and amendments thereto. The Board shall present the recommended changes to the General Assembly upon the convening of the next session following the enactment of the North Carolina Family Health Care Act.
Section 12.  Within 60 days of ratification of this act, the Governor and the General Assembly shall make appointments to the North Carolina Family Health Care Planning Commission.
Section 13. The provisions of this act are severable.  If any provision of this act is held invalid by a court of competent jurisdiction, the invalidity does not affect other provisions of the act that can be given effect without the invalid provision.
Section 14. The headings to the titles and sections of this act are a convenience to the reader and are for reference only.  The headings do not expand, limit, or define the text of this act.
Subtitle 3. Appropriations.
Section 15.  There is appropriated from the General Fund to the Department of Insurance the sum of two million dollars ($2,000,000) for the 1997-98 fiscal year and the sum of two million dollars ($2,000,000) for the 1998-99 fiscal year for allocation to the North Carolina Family Health Care Planning Commission to begin to carry out the purposes authorized under Section 2 of this act.
Subtitle 4. Effective Date.
Section 16.  Section 1 of this act becomes effective, if and only if, specific funds are made available for implementation of the North Carolina Family Health Care Program.  Funds appropriated for the 1997-98 fiscal year or for any fiscal year in the future do not constitute an entitlement to services beyond those provided for that fiscal year.  Nothing in this act creates any right except to the extent funds are made available by the General Assembly to implement its provisions from year to year and nothing in this act obligates the General Assembly to appropriate funds to implement its provisions.  Section 15 of this act becomes effective July 1, 1997. The remainder of this act is effective when it becomes law.