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1. IHC Care, Inc.
In January 1985, Health Plans organized petitioner as a
nonprofit affiliate for the purpose of establishing a federally
qualified direct contract model HMO.4 Health Plans was
petitioner’s sole corporate member. Petitioner’s articles of
incorporation stated that petitioner
is organized and shall be operated exclusively for
charitable, educational, or scientific purposes as
described in section 501(c)(3) * * *.
In furtherance of such purposes, the Corporation
may develop and operate alternative health care
delivery plans and financing systems such as a health
maintenance organization to provide cost-effective and
3(...continued)
obtain insurance: (1) For the cost of providing a member with
more than $5,000 in basic health services for any one year; (2)
for the cost of basic health services provided to a member by a
source outside the HMO due to an emergency; and (3) for not more
than 90 percent of the amount by which its costs for any fiscal
year exceeds 115 percent of its income. Additionally, the
section states that HMOs may enter into arrangements under which
physicians and/or health care institutions assume all or part of
the risk on a prospective basis for the provision to enrollees of
basic health services.
4 The Health Maintenance Organization Act of 1973 (the HMO
Act), Pub. L. 93-222, 87 Stat. 914, codified a number of
provisions governing the organization and operation of federally
qualified HMOs. Under the HMO Act, an HMO was required to satisfy
both State licensing requirements and additional federally
mandated conditions pertaining to benefits, availability and
accessibility of services, fiscal soundness, and quality
assurance. The HMO Act provided federally qualified HMOs with
certain marketing advantages. In particular, under 42 U.S.C.
sec. 300e-9 (1976), a provision referred to as the so-called
dual-choice mandate, certain employers (generally those with more
than 25 employees) were obligated to offer their employees the
option of enrolling in a federally qualified HMO.
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Last modified: May 25, 2011