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D. Federally-Qualified HMOs3
3 HMOs are defined for purposes of Federal law under 42 U.S.C.
sec. 300e(a) (1994) which provides:
(a) “Health maintenance organization” defined
For purposes of this subchapter, the term “health
maintenance organization” means a public or private
entity which is organized under the laws of any State
and which (1) provides basic and supplemental health
services to its members in the manner prescribed by
subsection (b) of this section, and (2) is organized
and operated in the manner prescribed by subsection (c)
of this section.
42 U.S.C. sec. 300e(b)(1) (1994) provides in pertinent part
that an HMO generally will provide basic health services to its
members without limitations as to time or cost for a fixed
payment from each member that is determined under a community
rating system and is paid on a periodic basis without regard to
the dates health services are provided. 42 U.S.C. sec.
300e(b)(2) (1994) provides that HMOs may also provide members
with supplemental health services (defined in 42 U.S.C. sec.
300e-1(2) (1994)) for a separate fee that is fixed under a
community rating system.
42 U.S.C. sec. 300e(b)(3)(A) (1994) provides that at least
90 percent of physician services provided as basic health
services to an HMO enrollee shall be provided through: (1) the
members of the HMO’s physician staff (staff model HMO); (2) a
medical group (medical group model HMO); (3) an individual
practice association (IPA model HMO); (4) physicians who have
contracted with the HMO for the provision of such services
(direct contract model HMO), or (5) any combination of these
models. See Health Care Plan, Inc. v. Aetna Life Ins. Co., 966
F.2d 738, 739 n.3 (2d Cir. 1992); 42 C.F.R. sec. 417.100 (1991)
(definitions); Boisture, Assessing The Impact Of Health Care
Reform On The Formation Of Tax-Exempt Health Care Providers And
HMO’s, 62 Tax Notes 1181, 1184 (Feb. 28, 1994).
42 U.S.C. sec. 300e(c)(1) (1994) provides that HMOs shall
have a fiscally sound operation, adequate provision against the
risk of insolvency, and assume full financial risk on a
prospective basis for the provision of basic health services.
However, 42 U.S.C. sec. 300e(c)(2) (1994) provides that HMOs may
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