No loan or loan guarantee may be made under this subsection for the operating costs of a health maintenance organization unless the Secretary determines that the organization has made all reasonable attempts to meet such costs.

(b) Limitations.

(1) Except as provided in paragraph (2), the principal amount of any loan made or guaranteed under subsection (a) of this section in any fiscal year for a health maintenance organization may not exceed $1,000,000 and the aggregate amount of principal of loans made or guaranteed, or both, under this section for a health maintenance organization may not exceed $2,500,000.

(2) The cumulative total of the principal of the loans outstanding at any time which have been directly made, or with respect to which guarantees have been issued, under subsection (a) of this section may not exceed such limitations as may be specified in appropriation Acts.

(c) Source of loan funds.

Loans under this section shall be made from the fund established under section 300e-7(e) of this title.

(d) Time limit on loans and loan guarantees.

A loan or loan guarantee may be made under this section through the fiscal year ending June 30, 1978.

(e) Non-metropolitan areas.

Of the sums used for loans under this section in any fiscal year from the loan fund established under section 300e-7(e) of this title, not less than 20 per centum shall be used for loans for projects (1) for the initial operation of health maintenance organizations which the Secretary determines have not less than 66 per centum of their membership drawn from residents of non-metropolitan areas, and (2) the applications for which meet the requirements of this subchapter for approval. (July 1, 1944, ch. 373, title XIII, § 1305, as added Dec. 29, 1973, Pub. L. 93-222, § 2, 87 Stat. 924.)

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 300e-13 of this title.

§ 300e-5. Application requirements.

(a) Submission to and approval by Secretary required for making grants, loans, contracts, and loan guarantees.

No grant, contract, loan, or loan guarantee may be made under this subchapter unless an application therefor has been submitted to, and approved by, the Secretary.

(b) Application contents.

The Secretary may not approve an application for a grant, contract, loan, or loan guarantee under this subchapter unless

(1) in the case of an application for assistance under section 300e-2 or 300e-3 of this title, such application meets the application requirements of such section and in the case of an application for a loan or loan guarantee, such application meets the requirements of section 300e-7 of this title;

(2) he determines that the applicant making the application would not be able to complete the project or undertaking for which the application is submitted without the assistance applied for;

(3) the application contains satisfactory specification of the existing or anticipated (A) population group or groups to be served by the proposed or existing health maintenance organization described in the application, (B) membership of such organization, (C) methods, terms, and periods of the enrollment of members of such organization, (D) estimated costs per member of the health and educational services to be provided by such organization and the nature of such costs, (E) sources of professional services for such organization, and organizational arrangements of such organization for providing health and educational services, (F) organizational arrangements of such organization for an ongoing quality assurance program in conformity with the requirements of section 300e(c) of this title, (G) sources of prepayment and other forms of payment for the services to be provided by such organization, (H) facilities, and additional capital investments and sources of financing therefor, available to such organization to provide the level and scope of services proposed, (I) administrative, managerial, and financial arrangements and capabilities of such organization, (J) role for members in the planning and policymaking for such organization, (K) grievance procedures for members of such organization, and (L) evaluations of the support for and acceptance of such organization by the population to be served, the sources of operating support, and the professional groups to be involved or affected thereby;

(4) contains or is supported by assurances satisfactory to the Secretary that the applicant making the application will, in accordance with such criteria as the Secretary shall by regulation prescribe, enroll, and maintain an enrollment of the maximum number of members that its available and potential resources (as determined under regulations of the Secretary) will enable it to effectively serve;

(5) the section 314(b) areawide health planning agency whose section 314(b) plan covers (in whole or in part) the area to be served by the health maintenance organization for which such application is submitted, or if there is no such agency, the section 314(a) State health planning agency whose section 314(a) plan covers (in whole or in part) such area, has, in accordance with regulations of the Secretary under subsection (c) of this section, been provided an opportunity to review the application and to submit to the Secretary for his consideration its recommendations respecting approval of the application or if under applicable State law such an application may not be submitted without the approval of the section 314(b) area wide health planning agency or the section 314(a) State health planning agency, the required approval has been obtained;

(6) in the case of an application made for a project which previously received a grant, contract, loan, or loan guarantee under this subchapter, such application contains or is supported

by assurances satisfactory to the Secretary that the applicant making the application has the financial capability to adequately carry out the purposes of such project and has developed and operated such project in accordance with the requirements of this subchapter and with the plans contained in previous applications for such assistance; and

(7) the application is submitted in such form and manner, and contains such additional information, as the Secretary shall prescribe in regulations.

An organization making multiple applications for more than one grant, contract, loan, or loan guarantee under this subchapter, simultaneously or over the course of time, shall not be required to submit duplicate or redundant information but shall be required to update the specifications (required by paragraph (3)) respecting the existing or proposed health maintenance organization in such manner and with such frequency as the Secretary may by regulation prescribe.

(c) Regulations.

The Secretary shall by regulation establish standards and procedures for section 314(b) area wide health planning agencies and section 314(a) State health planning agencies to follow in reviewing and commenting on applications for grants, contracts, loans, and loan guarantees under this subchapter. (July 1, 1944, ch. 373, title XIII, § 1306, as added Dec. 29, 1973, Pub. L. 93-222, § 2, 87 Stat. 925.)

REFERENCES IN TEXT

For definitions of "section 314(a) State health planning agency", "section 314(a) plan", "section 314 (b) area wide health planning agency", and "section 314(b) plan", referred to in subsecs. (b) (5) and (c), see section 300e-1(6) of this title. Section 314 is classified to section 246 of this title.

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 300e-6 of this title.

§ 300e-6. Administration of assistance programs. (a) Recordkeeping; audit and examination.

(1) Each recipient of a grant, contract, loan, or loan guarantee under this subchapter shall keep such records as the Secretary shall prescribe, including records which fully disclose the amount and disposition by such recipient of the proceeds of the grant, contract, or loan (directly made or guaranteed), the total cost of the undertaking in connection with which such assistance was given or used, the amount of that portion of the cost of the undertaking supplied by other sources, and such other records as will facilitate an effective audit.

(2) The Secretary, or any of his duly authorized representatives, shall have access for the purpose of audit and examination to any books, documents, papers, and records of the recipients of a grant, contract, loan, or loan gurantee under this subchapter which relate to such assistance.

(b) Report upon expiration of period.

Upon expiration of the period for which a grant, contract, loan, or loan guarantee was provided an entity under this subchapter such entity shall make a full and complete report to the Secretary in such manner as he may by regulation prescribe. Each

such report shall contain, among such other matters as the Secretary may by regulation require, descriptions of plans, developments, and operations relating to the matters referred to in section 300e-5(b) (3) of this title.

(c) Priority applications.

If in any fiscal year the funds appropriated under section 300e-8 of this title are insufficient to fund all applications approved under this subchapter for that fiscal year, the Secretary shall, after applying the applicable priorities under sections 300e-2 and 300e-3 of this title, give priority to the funding of applications for projects which the Secretary determines are the most likely to be economically viable. (d) Other entities considered health maintenance organizations.

An entity which provides health services to a defined population on a prepaid basis and which has members who are entitled to insurance benefits under title XVIII of the Social Security Act or to medical assistance under a State plan approved under title XIX of such Act may be considered as a health maintenance organization for purposes of receiving assistance under this subchapter if

(1) with respect to its members who are entitled to such insurance benefits or to such medical assistance it (A) provides health services in accordance with section 300e (b) of this title, except that (i) it does not furnish to those members the health services (within the basic health services) for which it may not be compensated under such title XVIII or such State plan, and (ii) it does not fix the basic or supplemental health services payment for such members under a community rating system, and (B) is organized and operated in the manner prescribed by section 300e (c) of this title, except that it does not assume full financial risk on a prospective basis for the provision to such members of basic or supplemental health services with respect to which it is not required under such title XVIII or such State plan to assume such financial risk; and

(2) with respect to its other members it provides health services in accordance with section 300e (b) of this title and is organized and operated in the manner prescribed by section 300e (c) of this title.

(e) Cumulative total of loan guarantees in any fiscal year limited by amount of grant and contract funds obligated.

In any fiscal year no loan guarantee may be made under this subchapter if the making of such guarantee would cause the cumulative total of the principal of the loans guaranteed under this subchapter in such fiscal year to exceed the amount of grant and contract funds obligated under this subchapter in such fiscal year; except that this subsection shall not apply if the amount of grant and contract funds obligated under this subchapter in such fiscal year equals the sums appropriated under section 300e-8 of this title for grants and contracts for such fiscal year. (July 1, 1944, ch. 373, title XIII, § 1307, as added Dec. 29, 1973, Pub. L. 93-222, § 2, 87 Stat. 926.)

REFERENCES IN TEXT

Titles XVIII and XIX of the Social Security Act, referred to in subsec. (d), are classified, respectively, to sections 1395 et seq. and 1396 et seq. of this title.

§ 300e-7. General provisions relating to loan guarantees and loans.

(a) Conditions.

(1) The Secretary may not approve an application for a loan guarantee under this subchapter unless he determines that (A) the terms, conditions, security (if any), and schedule and amount of repayments with respect to the loan are sufficient to protect the financial interests of the United States and are otherwise reasonable, including a determination that the rate of interest does not exceed such per centum per annum on the principal obligation outstanding as the Secretary determines to be reasonable, taking into account the range of interest rates prevailing in the private market for similar loans and the risks assumed by the United States, and (B) the loan would not be available on reasonable terms and conditions without the guarantee under this subchapter.

(2) (A) The United States shall be entitled to recover from the applicant for a loan guarantee under this subchapter the amount of any payment made pursuant to such guarantee, unless the Secretary for good cause waives such right of recovery; and, upon making any such payment, the United States shall be subrogated to all of the rights of the recipient of the payments with respect to which the guarantee was made.

(B) To the extent permitted by subparagraph (C), any terms and conditions applicable to a loan guarantee under this subchapter (including terms and conditions imposed under subparagraph (D)) may be modified by the Secretary to the extent he determines it to be consistent with the financial interest of the United States.

(C) Any loan guarantee made by the Secretary under this subchapter shall be incontestable (i) in the hands of an applicant on whose behalf such guarantee is made unless the applicant engaged in fraud or misrepresentation in securing such guarantee, and (ii) as to any person (or his successor in interest) who makes or contracts to make a loan to such applicant in reliance thereon unless such person (or his successor in interest) engaged in fraud or misrepresentation in making or contracting to make such loan.

(D) Guarantees of loans under this subchapter shall be subject to such further terms and conditions as the Secretary determines to be necessary to assure that the purposes of this subchapter will be achieved.

(b) Application requirements.

(1) The Secretary may not approve an application for a loan under this subchapter unless

(A) the Secretary is reasonably satisfied that the applicant therefor will be able to make payments of principal and interest thereon when due, and

(B) the applicant provides the Secretary with reasonable assurances that there will be available to it such additional funds as may be necessary to complete the project or undertaking with respect to which such loan is requested.

(2) Any loan made under this subchapter shall (A) have such security, (B) have such maturity date, (C) be repayable in such installments, (D) bear interest at a rate comparable to the current

rate of interest prevailing, on the date the loan is made, with respect to loans guaranteed under this subchapter, and (E) be subject to such other terms and conditions (including provisions for recovery in case of default) as the Secretary determines to be necessary to carry out the purposes of this subchapter while adequately protecting the financial interests of the United States.

(3) The Secretary may, for good cause but with due regard to the financial interests of the United States, waive any right of recovery which he has by reason of the failure of a borrower to make payments of principal of and interest on a loan made under this subchapter except that if such loan is sold and guaranteed, any such waiver shall have no effect upon the Secretary's guarantee of timely payment of principal and interest.

(c) Sale of loans.

(1) The Secretary may from time to time, but with due regard to the financial interests of the United States, sell loans made by him under this subchapter.

(2) The Secretary may agree, prior to his sale of any such loan, to guarantee to the purchaser (and any successor in interest of the purchaser) compliance by the borrower with the terms and conditions of such loan. Any such agreement shall contain such terms and conditions as the Secretary considers necessary to protect the financial interests of the United States or as otherwise appropriate. Any such agreement may (A) provide that the Secretary shall act as agent of any such purchaser for the purpose of collecting from the borrower to which such loan was made and paying over to such purchaser, any payments of principal and interest payable by such organization under such loan; and (B) provide for the repurchase by the Secretary of any such loan on such terms and conditions as may be specified in the agreement. The full faith and credit of the United States is pledged to the payment of all amounts which may be required to be paid under any guarantee under this paragraph.

(3) After any loan under this subchapter to a public health maintenance organization has been sold and guaranteed under this subsection, interest paid on such loan which is received by the purchaser thereof (or his successor in interest) shall be included in the gross income of the purchaser of the loan (or his successor in interest) for the purpose of chapter 1 of the Internal Revenue Code of 1954.

(4) Amounts received by the Secretary as proceeds from the sale of loans under this subsection shall be deposited in the loan fund established under subsection (e) of this section.

(d) Loan guarantee fund.

(1) There is established in the Treasury a loan guarantee fund (hereinafter in this subsection referred to as the "fund") which shall be available to the Secretary without fiscal year limitation, in such amounts as may be specified from time to time in appropriation Acts, to enable him to discharge his responsibilities under loan guarantees issued by him under this subchapter. There are authorized to be appropriated from time to time such amounts as may be necessary to provide the sums required for

the fund. To the extent authorized in appropriation Acts, there shall also be deposited in the fund amounts received by the Secretary in connection with loan guarantees under this subchapter and other property or assets derived by him from his operations respecting such loan guarantees, including any money derived from the sale of assets.

(2) If at any time the sums in the funds are insufficient to enable the Secretary to discharge his responsibilities under guarantees issued by him under this subchapter, he is authorized to issue to the Secretary of the Treasury notes or other obligations in such forms and denominations, bearing such maturities, and subject to such terms and conditions, as may be prescribed by the Secretary with the approval of the Secretary of the Treasury. Such notes or other obligations shall bear interest at a rate determined by the Secretary of the Treasury, taking into consideration the current average market yield on outstanding marketable obligations of the United States of comparable maturities during the month preceding the issuance of the notes or other obligations. The Secretary of the Treasury shall purchase any notes and other obligations issued under this paragraph and for that purpose he may use as a public debt transaction the proceeds from the sale of any securities issued under the Second Liberty Bond Act, and the purposes for which the securities may be issued under that Act are extended to include any purchase of such notes and obligations. The Secretary of the Treasury may at any time sell any of the notes or other obligations acquired by him under this paragraph. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes or other obligations shall be treated as public transactions of the United States. Sums borrowed under this paragraph shall be deposited in the fund and redemption of such notes and obligations shall be made by the Secretary from the fund.

(e) Loan fund.

There is established in the Treasury a loan fund (hereinafter in this subsection referred to as the "fund") which shall be available to the Secretary without fiscal year limitation, in such amounts as may be specified from time to time in appropriation Acts, to enable him to make loans under this subchapter. There shall also be deposited in the fund amounts received by the Secretary as interest payments and repayment of principal on loans made under this subchapter and other property or assets derived by him from his operations respecting such loans, from the sale of loans under subsection (c) of this section, or from the sale of assets. (July 1, 1944, ch. 373, title XIII, § 1308, as added Dec. 29, 1973, Pub. L. 93-222, § 2, 87 Stat. 927.)

REFERENCES IN TEXT

Chapter 1 of the Internal Revenue Code of 1954, referred to in subsec. (c) (3), is set out in section 1 et seq. of Title 26, Internal Revenue Code.

The Second Liberty Bond Act, referred to in subsec. (d) (2), is Act Sept. 24, 1917, c. 56, 40 Stat. 288, as amended, which was classified to section 745, former section 747, sections 752, 752d, 753, 754, 754a, 754b, 757, 757b, and 757c, former section 757c-1, sections 757c-2, 757c-3, 757c-4, 757d, 757e, 758, 760, and 764, former section 765, and sections 766, 769, 771, 773, 774, and 801 of 31, Money and Finance.

SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 300e-4, 300e-5, 300e-8 of this title.

§ 300e-8. Authorization of appropriations.

(a) For the purpose of making payments under grants and contracts under sections 300e-2, 300e-3 (a), and 300e-3 (b) of this title, there are authorized to be appropriated $25,000,000 for the fiscal year ending June 30, 1974, $55,000,000 for the fiscal year ending June 30, 1975, and $85,000,000 for the fiscal year ending June 30, 1976; and for the purpose of making payments under grants and contracts under section 300e-3(b) of this title for the fiscal year ending June 30, 1977, there is authorized to be appropriated $85,000,000.

(b) There is authorized to be appropriated to the loan fund established under section 300e-7(e) of this title $75,000,000 in the aggregate for the fiscal years ending June 30, 1974, and June 30, 1975. (July 1, 1944, ch. 373, title XIII, § 1309, as added Dec. 29, 1973, Pub. L. 93-222, § 2, 87 Stat. 930.)

SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 300e-2, 300e-3, 300e-6 of this title.

§ 300e-9. Employees' health benefits plans.

(a) Each employer which is required during any calendar quarter to pay its employees the minimum wage specified by section 206 of Title 29 (or would be required to pay his employees such wage but for section 213(a) of Title 29), and which during such calendar quarter employed an average number of employees of not less than twenty-five, shall, in accordance with regulations which the Secretary shall prescribe, include in any health benefits plan offered to its employees in the calendar year beginning after such calendar quarter the option of membership in qualified health maintenance organizations which are engaged in the provision of basic and supplemental health services in the areas in which such employees reside.

(b) If there is more than one qualified health maintenance organization which is engaged in the provision of basic and supplemental health services in the area in which the employees of an employer subject to subsection (a) of this section reside and if

(1) one or more of such organizations provides basic health services through professionals who are members of the staff of the organization or a medical group (or groups), and

(2) one or more of such organizations provides such services through an individual practice association (or associations),

then of the qualified health maintenance organizations included in a health benefits plan of such employer pursuant to subsection (a) of this section at least one shall be an organization which provides basic health services as described in clause (1) and at least one shall be an organization which provides basic health services as described in clause (2).

(c) No employer shall 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 for the provision of

health benefits between the employer and its employees. Failure of any employer to comply with the requirements of subsection (a) of this section shall be considered a willful violation of section 215 of Title 29.

(d) For purposes of this section, the term "qualified health maintenance organization” means (1) a health maintenance organization which has provided assurances satisfactory to the Secretary that it provides basic and supplemental health services to its members in the manner prescribed by section 300e (b) of this title and that it is organized and operated in the manner prescribed by section 300e (c) of this title, and (2) an entity which proposes to become a health maintenance organization and which the Secretary determines will when it becomes operational provide basic and supplemental health services to its members in the manner prescribed by section 300e (b) of this title and will be organized and operated in the manner prescribed by section 300e (c) of this title. (July 1, 1944, ch. 373, title XIII, § 1310, as added Dec. 29, 1973, Pub. L. 93–222 § 2, 87 Stat. 930.) SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 300e-10, 300e-11, 300e-13, 300e-14 of this title.

§ 300e-10. Restrictive State laws and practices. (a) In the case of any entity

(1) which cannot do business as a health maintenance organization in a State in which it proposes to furnish basic and supplemental health services because that State by law, regulation, or otherwise

(A) requires as a condition to doing business in that State that a medical society approve the furnishing of services by the entity,

(B) requires that physicians constitute all or a percentage of its governing body,

(C) requires that all physicians or a percentage of physicians in the locale participate or be permitted to participate in the provision of services for the entity, or

(D) requires that the entity meet requirements for insurers of health care services doing business in that State respecting initial capitalization and establishment of financial reserves against insolvency, and

(2) for which a grant, contract, loan, or loan guarantee was made under this subchapter or which is a qualified health maintenance organization for purposes of section 300e-9 of this title (relating to employees' health benefits plans), such requirements shall not apply to that entity so as to prevent it from operating as a health maintenance organization in accordance with section 300e of this title.

(b) No State may establish or enforce any law which prevents a health maintenance organization for which a grant, contract, loan, or loan guarantee was made under this subchapter or which is a qualified health maintenance organization for purposes of section 300e-9 of this title (relating to employees' health benefits plans), from soliciting members through advertising its services, charges, or other nonprofessional aspects of its operation. This subsection does not authorize any advertising which

identifies, refers to, or makes any qualitative judgment concerning, any health professional who provides services for a health maintenance organization. (July 1, 1944, ch. 373, title XIII, § 1311, as added Dec. 29, 1973, Pub. L. 93-222, § 2, 87 Stat. 931.)

§ 300e-11. Continued regulation of health maintenance organizations.

(a) If the Secretary determines that an entity which received a grant, contract, loan, or loan guarantee under this subchapter as a health maintenance organization or which was included in a health benefits plan offered to employees pursuant to section 300e-9 of this title

(1) fails to provide basic and supplemental services to its members,

(2) fails to provide such services in the manner prescribed by section 300e (b) of this title, or

(3) is not organized or operated in the manner prescribed by section 300e (c) of this title,

the Secretary may, in addition to any other remedies available to him, bring a civil action in the United States district court for the district in which such entity is located to enforce its compliance with any assurances it furnished him respecting the provision of basic and supplemental health services or its organization or operation, as the case may be, which assurances were made under section 300e-9 of this title or when application was made under this subchapter for a grant, contract, loan, or loan guarantee.

(b) The Secretary, through the Assistant Secretary for Health, shall administer subsection (a) of this section in the Office of the Assistant Secretary for Health. (July 1, 1944, ch. 373, title XIII, § 1312, as added Dec. 29, 1973, Pub. L. 93-222, § 2, 87 Stat. 931.)

§ 300e-12. Limitation on source of funding for health maintenance organizations.

No funds appropriated under any provision of this chapter other than this subchapter may be used

(1) for grants or contracts for surveys or other activities to determine the feasibility of developing or expanding health maintenance organizations or other entities which provide, directly or indirectly, health services to a defined population on a prepaid basis;

(2) for grants or contracts, or for payments under loan guarantees, for planning projects for the establishment or expansion of such organizations or entities;

(3) for grants or contracts, or for payments under loan guarantees, for projects for the initial development or expansion of such organizations or entities; or

(4) for loans, or for payments under loan guarantees, to assist in meeting the costs of the initial operation after establishment or expansion of such organizations or entities.

(July 1, 1944, ch. 373, title XIII, § 1313, as added Dec. 29, 1973, Pub. L. 93-222, § 2, 87 Stat. 932.)

§ 300e-13. Program evaluation.

(a) Operation of health maintenance organizations; report to Congress.

The Comptroller General shall evaluate the operations of at least fifty of the health maintenance organizations for which assistance was provided