CHAPTER 268

An Act to repeal §§ 82-168 through 82-195, inclusive, and all amendments
thereto, of the Code of Virginia, and to amend the Code of Virginia
by adding sections numbered 82-195.1 through 82-195.20, inclusive,
all of which sections, both old and new, relate to contracts for future
hospitalization, medical and surgical services. tH 49]

Approved March 9, 1956

Be it enacted by the General Assembly of Virginia:

1. That §§ 32-168 through 32-195, inclusive, and all amendments thereto,
of the Code of Virginia are repealed.

2. That the Code of Virginia be amended by adding sections numbered
$2-195.1 through 32-195.20, inclusive, as follows:

§ 32-195.1 Hospital Plans.—A hospital or a group of hospitals may
conduct directly or through an agent, who may be either an individual or
a nonstock corporation, a plan or plans for furnishing prepaid hospital
services.

§ 32-195.2. Medical and Surgical Plans.—A group of physicians
may conduct directly or through an agent, who may be either an indi-
vidual or a nonstock corporation, a plan or plans for furnishing prepaid
medical or surgical services or both.

§ 32-195.3. Combination Plans.—A plan for furnishing hospital
services may be combined with a plan for furnishing medical or surgical
services or both.
§ 32-195.4. Liability of Participants.—All hospitals and physicians
participating in a plan shall be jointly and severally liable on all con-
tracts made for the purposes of the plan by them or by their agent
for them. Each such contract executed by their agent on their behalf
may be signed by the agent alone; and a contract so signed shall be
binding on the principals and not on the agent. Actions for breach of
such contracts may be brought against the principals by naming the
agent as the sole defendant, and a judgment in favor of the plaintiff may
be satisfied out of the assets of the plan in the custody of the agent or
out of the assets of each and all of the principals. Each participant shall
be liable for his own torts and not for the torts of any other participant
or of the agent.

§ 82-195.5. Change of Participants.—Any participating hospital or
physician may resign from a plan at any time and will continue liable
on each subscription contract while effective, but not later than the end
of each such subscriber’s current contract year. Hospitals and physicians
may be admitted to a plan at any time and will then automatically become
liable on all its outstanding contracts.

$2-195.6. Subscription Contracts.—No contract shall be offered
to subscribers under any plan until the form and substance of the contract
have been approved by the State Corporation Commission. The Com-
mission shall have no jurisdiction over the fees of hospitals or physicians,
or contracts between them, or between them and their agent. The Com-
mission shall not approve any contract or plan unless it is of the opinion
that the plan will succeed, that the principals will perform their under-
takings, that the expenses of operating the plan will not be excessive
and that the plan is in the public interest. Subject to cancellation at
times and for causes approved by the Commission and recited in the
contracts, subscription contracts shall run from year to year.

§ 82-195.7. Rates.—A plan subject to the provisions of this chapter
being affected with a public interest, rates payable by subscribers shall be
authorized by the Commission. The Commission may allow experience
rating and shall authorize rates, as near as may be, in such manner that
those paid by a group or class of subscribers will not only pay the cost
of services available to that group or class, but will, when combined with
the rates paid by all subscribers, enable the plan to maintain a reserve
for contingencies equal to an amount between one-sixth and three-sixths
of the total of rates collected by the plan during the preceding year.

§ 82-195.8. Subscription Contracts not Contracts of Insurance.—
The laws relating to insurance shall not apply to contracts issued by a
plan. A plan may make payments to a nonparticipating hospital or
physician for services rendered a person included in a subscription con-
tract; but no payments shall be made by a plan to a person included in a
subscription contract unless it be for breach of contract or unless it be for
services received and paid for by such person and rendered by a nonpar-
ticipating hospital or physician, which services a participating hospital
or physician was unable to render.

§ 82-195.9. Geographical Area.—The geographical area to be served
by each plan as hereinbefore defined shall be fixed by the Commission and
only one hospital plan, one medical plan and one surgical plan shall oper-
ate in one area unless the Commission finds that the operation of more
than one plan in an area will promote the public welfare. Subscription
contracts shall not be sold to persons residing outside the area of the plan
unless they are regularly employed within the area. The subscription con-
tract of a subscriber who neither lives nor is employed within the area
shall be cancelled by notice given in accordance with the terms of the
subscription contract.

§ 32-195.10. Interplan Arrangements.—A plan may enter into con-
CH. 268] ACTS OF ASSEMBLY 327

tracts with similar plans within or without this State for the interchange
of services to those included in subscription contracts, and may provide
in subscription contracts for the substitution of such services in lieu of
those therein recited.

§ 32-195.11. Licensing of Plans.—It shall be unlawful to operate a
plan without a license issued by the Commission. The agent (or the prin-
cipals if there be no agent) shall apply for a license and furnish such
relevant information as the Commission requires. Each license shall expire
at midnight on the following thirtieth day of April. With each application
for a license a filing fee of fifty dollars shall be paid, and if the license
is issued, the filing fee shall serve as a license fee for the remaining portion
of the license year.

§ 32-195.12. Renewals.—Unless a plan notifies the Commission that
it does not wish a renewal license, such plan shall be deemed to have
applied for a renewal license, and shall pay on the first day of May of each
year a renewal fee. If the plan has fewer than five thousand and one sub-
scribers, the renewal fee shall be fifty dollars. If the plan has more than
five thousand but fewer than ten thousand and one subscribers, the renewal
fee shall be one hundred dollars. If the plan has more than ten thousand
but fewer than twenty thousand and one subscribers the renewal fee shall
be one hundred and fifty dollars. If the plan has more than twenty thou-
sand subscribers, the renewal fee shall be two hundred dollars.

A The number of subscribers shall be counted as of the first day of
pril.

§ 32-195.13. Licensing of Salesmen.—Subscription contracts may be
solicited outside the principal office of a plan only through licensed sales-
men. Each salesman’s license shall expire at midnight on the following
thirtieth day of April. A salesman shall apply to the Commission for a
license and furnish such relevant information as the Commission requires.
No salesman’s license shall be issued unless the Commission is satisfied
that the applicant is a person of good character and reputation and com-
petent to perform the obligations of a salesman of subscription contracts.
With each application for a salesman’s license a filing fee of ten dollars
shall be paid, and if the license is issued, the filing fee shall serve as a
license fee for the remaining portion of the license year.

§ 32-195.14. Renewals.—Each salesman who wishes a_ renewal
license shall apply for it in writing and pay a renewal fee of five dollars.

§ 32-195.15. Corporate Agents.—If the agent of a plan is a corpora-
tion, the corporation shall not engage in any other business. Its charter
may provide for ex officio directors and directors elected by persons or
associations who are not directors or members of the corporation. The
license and renewal fees paid by a corporation under this chapter shall
be in lieu of all other State and local license fees or license taxes, and
State income taxes of the corporation.

§ 82-195.16. Advertising Matter.—In the operation of a plan it shall
be unlawful to use any misleading advertising matter, oral or written.

§ 32-195.17. Injunctions.—The Commission shall have the juris-
diction and powers of a court of equity to issue temporary and permanent
injunctions restraining violations or attempted violations of this chapter,
and to enforce such injunctions by fine or imprisonment.

§ 32-195.18. Penalties—The Commission may, by judgment entered
after a hearing on notice duly served on the defendant not less than ten
days before the date of the hearing, if it be proved that the defendant has
violated any provision of this chapter or any lawful order of the Com-
mission issued under this chapter, impose a penalty not exceeding one
thousand dollars, which shall be collectible by the process of the Commis-
sion as provided by law.
In addition to imposing such penalty, or without imposing such pen-
alty, the Commission, in any such case, may revoke any license issued by
it to the defendant. .

§ 32-195.19. Appeals—Any person aggrieved by any final or inter-
locutory judgment, order or decree of the Commission may appeal, as a
matter of right, to the Supreme Court of Appeals.

§ 32-195.20. Controversies Involving Subscription Contracts.—The
Commission shall have no jurisdiction to adjudicate controversies growing
out of subscription contracts; and a breach of contract shall not be deemed
a violation of this chapter.