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However, in any case in which the Governor, or the mayor, considers that no one of those organizations would be satisfactory, he may consult with the Price Commission with respect to selecting another organization. In any case in which a Governor declines to designate a board, the Price Commission may designate a board for that State.

(f) State Advisory Boards-duties. Each State Advisory Board shall review the applications filed with it under paragraph (c)(2) of this section, pursuant to the guidelines established by the Price Commission, and whenever it considers that the granting of an exception is essential to the provision of adequate health services and is consistent with the Economic Stabilization Program, shall recommend to the District Director of Internal Revenue that an exception be granted by the Price Commission. The Board shall consider all of the kinds of cost increases involved in each application, including the following:

(1) Costs ensuing from changes in legislation or regulations requiring substantially increased expenses by providers.

(2) Costs incurred in connection with additional facilities or equipment for which a binding contract was entered into before August 15, 1971.

(3) Costs incurred with respect to wage increases for employees whose wages are substandard or below legal minimum wage rates of general application, or employees who are members of the working poor.

(g) Price schedules. Each institutional provider of health services shall maintain at each of its facilities a schedule showing its base prices for its principal services, and each change in such a price. The schedule shall be made available for public inspection, and a copy shall be furnished to a representative of the Internal Revenue Service or the Price Commission upon his request. Each provider shall post a sign (minimum of 22'' x 28'') in a prominent place in each of its facilities stating the availability and location of the schedule. No price may be increased before the sign is posted and the schedule is made available.

(h) Prohibition. No institutional provider of health services may adopt any change in charging practices, reduction in quality or quantity of services, or any other practice for the purpose of avoid

ing compliance with any provision of this section.

[36 F.R. 23584, Dec. 30, 1971, as amended at 37 F.R. 775, Jan. 19, 1972]

§ 300.19

Noninstitutional providers of health services.

(a) Definition. For the purposes of this section, the term "noninstitutional provider of health services" includes any person covered by paragraph (b) of Appendix 1 to this part.

(b) General. Subject to paragraph (c) of this section, a noninstitutional provider of health services may charge a price in excess of the base price with respect to the furnishing of a service only to reflect increases in allowable costs that it incurred since the last price increase in the furnishing of that service, or that it incurred after January 1, 1971, whichever was later, and that it is continuing to incur, reduced to reflect productivity gains, and only to the extent that the increased price does not—

(1) In the case of a noninstitutional provider that is a nonprofit organization, result in an increase in its net revenues (after deducting operating expenses and depreciation) as a percentage of total revenues, over that prevailing during the base period; and

(2) In the case of any other noninstitutional provider, result in an increase in its profit margin over that which prevailed during the base period.

(c) Limitation. In addition to the limitations set forth in paragraph (b) of this section, the aggregate price increases of a noninstitutional provider of health services may not exceed 2.5 percent a year.

(d) Price schedules. Each non-institutional provider of health services shall maintain at each of its facilities a schedule showing its base prices for its principal services, and each change in such a price. The schedule shall be made available for public inspection, and a copy shall be furnished to a representative of the Internal Revenue Service or the Price Commission upon his request. Each provider shall post a sign in a prominent place in each of its facilities stating the availability and location of the schedule. No price may be increased before the sign is posted and the schedule is made available.

(e) Prohibition. No noninstitutional provider of health services may adopt any change in charging practices, reduction in quality or quantity of services, or

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(i) Is subject to the regulatory jurisdiction of a State or the District of Columbia (including a person engaged in providing nonprofit medical or hospital services under such a regulatory jurisdiction); or

(ii) Is undertaking to provide medical or hospital services for a capitation fee.

"Prenotifier" means an insurer that had revenues of $250 million or more during the calendar year preceding the effective date of a rate increase it is proposing.

"Rate" means any amount paid for insurance, calculated in accordance with a rate-making practice or formula, or developed under a classification system.

"State regulatory agency" means any commission, board, or other legal body that has jurisdiction over rates or practices of insurers in a State or the District of Columbia.

(b) General. An insurer may charge a price for insurance in excess of the base price only in accordance with ratemaking practices, rating plans, or formulas developed by using the following:

(1) Factors that reflect experience incurred on all actual costs, including commissions payable to licensed agents and brokers on other than a percentage of premium basis, to the extent those commissions are not inconsistent with the rulings of the Pay Board and Price Commission, may be used in the customary manner in rate-making process.

(2) Factors that reflect changed conditions of risk may be used in accordance with customary practice in the normal rate-making process.

(3) Factors in rate-making processes or formulas anticipating cost or price increases for any period after November 13, 1971, may not exceed five-eights of the rate of inflation, otherwise justified on the basis of the line of insurance

involved in the proposed increase at the time of determining the rate increase, that would otherwise be used; however, assumptions of any rate of inflation during the period beginning on August 16, 1971 and ending on November 13, 1971, may not be used.

(4) Claim settlement expenses or loss adjustment expenses may continue to be loaded into premiums on a percentage basis related to the loss portion developed under subparagraph (1), (2), or (3) of this paragraph, or on any other customary basis.

(5) Any expense, profit, or retention portion of premiums (other than contingencies, claim settlement expenses or loss adjustment expense, State taxes and fees, and commissions payable to licensed agents and brokers based on a percentage of premium) when loaded on a percentage of premium basis may not be used to produce an actual dollar amount when applied to the average premium per unit of exposure under the proposed rate in excess of 22 percent more than the actual dollar amount represented by those loadings applied to the average premium per unit of exposure under the rates that are to be increased.

(6) Contingencies, taxes and fees payable to a State, and commissions payable to licensed agents and brokers, to the extent otherwise consistent with the rulings of the Pay Board and Price Commission, based upon a percentage of premium, may continue to be loaded on the same percentage of premium basis in accordance with customary practice in the normal rate-making process.

(c) Prohibited changes: Except as otherwise provided by the Price Commission, for the purposes of this section, no insurer may change a rating formula, formula use or application, data base, rate-making procedure or technique, or other element in the rate-making process, or increase a rate as a result of such a prohibited change.

(d) Prenotification: Each pronotifier shall file a written notice with the Price Commission and the appropriate State regulatory agency of each State to which the rate increase is applicable (or the State of domicile or delivery of the master policy for experience rated or group contracts applicable to a multistate risk) of each proposed rate increase which affects $1 million or more in aggregate annualized premiums under the existing rate. Each insurer submitting a notice under this section shall certify to

the Price Commission and the State regulatory authority that the proposed increase conforms to paragraphs (b) and (c) of this section.

(e) Certification by State regulatory agency: A State regulatory agency may agree, in writing, with the Price Commission to certify the rate increases of which it has received prenotification under paragraph (d) of this section are or are not in compliance with paragraphs (b) and (c) of this section, if that agency includes in the agreement a statement that

(1) It has the authority and ability to make those certifications; and

(2) All information obtained by it in the certification procedure will be kept in a confidential status.

Each agency entering into such an agreement with the Price Commission shall furnish its certification to the Commission (with a copy to the insurer) within 20 days after the date it receives the prenotification. A certification by an agency under this paragraph is prima facie evidence that the proposed rate increase is or is not in compliance with paragraphs (b) and (c) of this section.

(f) Self certification: Whenever a prenotifier cannot obtain a certification of a rate increase from a State regulatory agency in accordance with paragraph (e) of this section because

(1) The State concerned has not agreed to furnish certifications under that paragraph; or

(2) The State regulatory agency did not act upon the filing within the period required under that paragraph;

The prenotifier shall immediately notify the Price Commission that he cannot obtain the certification and may request the Commission to act upon the certification filed with it under paragraph (d) of this section.

(g) With respect to any rate increase certified by a State regulatory agency under paragraph (e) of this section or self-certified by a prenotifier under paragraph (f) of this section, the Price Commission may take any of the following actions during the period after receiving the certification or self-certification and before the end of the thirtieth day after the date the prenotifier filed under paragraph (d) of this section.

(1) Require the insurer to furnish additional information regarding the increase;

(2) Delay the effective date of the increase pending further Commission action;

(3) Suspend all or part of the effect of the increase, pending further action by the Price Commission or by the regulatory agency;

(4) Limit, refuse, rescind, reduce, or modify the increase.

If the Price Commission does not act upon a request under this paragraph before the end of the period prescribed in this paragraph, the increase may go into effect without Commission action. However, in any case in which that period would otherwise end on a Saturday, Sunday, or Federal holiday, it will end at the close of the next succeeding workday.

(h) Reporting: Each insurer that had annual revenues of $50 million or more during the calendar year preceding any rate increase proposed by it shall file a quarterly report with the Price Commission, at the time it normally releases its quarterly reports, but in any event not more than 45 days after the end of the quarter, of each rate increase by it during that quarter that affects $250,000 or more in aggregate annualized premiums under the existing rate. In addition, each insurer that had annual revenues of $50 million or more during the calendar year 1971 shall, not more than 90 days after the end of its last fiscal quarter ending before January 1, 1972, file a report with the Price Commission of each rate increase made by it during that quarter. Each report under this section shall be made on a form prescribed by the Commission and shall contain the information required by that form.

(i) Federal Employees Health Benefit Law: The Price Commission designates the U.S. Civil Service Commission to act as certifying agent for contracts of insurers under the Federal Employees Health Benefits Law. Each prenotifier that proposes to increase a rate under such a contract shall file notice thereof with the Price Commission and the Civil Service Commission. Each other insurer that proposes to increase a rate under such a contract shall file notice thereof with the Civil Service Commission. The Civil Service Commission shall, with respect to each proposed increase, certify to the Price Commission that the increase is or is not in compliance with paragraph (b) of this section, and that certification is prima facie evidence of compliance or noncompliance. A rate

certified by the Civil Service Commission as being in compliance may go into effect on any date, specified by that Commission, that is at least 10 days after the date of the certification, and at least 30 days after the date of the prenotification.

(j) Data requirements: Each prenotification filed under paragraph (d) of this section and each report made under paragraph (h) of this section shall include

(1) Specification of the coverages to which the rate increase is applicable and of the person or persons by which the rate is to be used;

(2) The average percentage increase by line of coverage and by State;

(3) The annualized inflationary trend factor or factors used with specification of the applicability of the factors if more than one are involved, including prefreeze, freeze and postfreeze applicability separately; and

(4) The percentage increase in the actual dollar amount produced by application of loadings on a percentage of premium basis for expense, profit, or retention (other than contingencies, loss adjustment expenses or claim settlement expenses, State taxes and fees, and commissions payable to licensed agents and brokers based on a percentage of premium) to the average premium per unit of exposure under the proposed or increased rate as compared with the actual dollar amount so produced under the existing or previous rate.

(k) Rates for replacement or revised insurance coverages: The rate for a form of insurance coverage replacing or revising another form of insurance coverage previously written by the same insurer is subject to the same requirements as an increase in the rate for the previous insurance coverage would have been subject.

(1) Insurance rates subject to State laws: Approval of an insurance rate increase under this section does not authorize the use of an insurance rate in contravention of any applicable State law that is not inconsistent with this section.

(m) Monitoring by health insurers. Each health insurer is authorized and cacouraged to monitor and report to health care providers (both institutional and noninstitutional) any price increases by those providers that involved significant deviation from the provisions of this part that apply to those providers and any increases in use of services or benefits that significantly exceeds its experi

ence with that provider. Upon the receipt of such a report, the provider and the insurer shall make a good faith effort to determine whether any violation of this part has occurred and to take any steps to remedy such violation.

[37 F.R. 426, Jan. 11, 1971, as amended at 37 F.R. 3914, Feb. 24, 1972]

§ 300.21 Securities traded over-the

counter.

No person may charge a brokerage fee for the over-the-counter trading of any security that exceeds the fee which would be charged on a similar transaction on a securities exchange, under a fee schedule which has been certified by the Securities and Exchange Commission as being consistent with the Economic Stabilization Program.

[37 F.R. 3914, Feb. 24, 1972] § 300.51

Prenotification firms.

(a) General-Manufacturers and Service Organizations. A manufacturer or service organization which is a prenotification firm may not charge a price in excess of the base price, or charge an increased price as a result of the calculation of a base price under Subpart F of this part, until the Price Commission has approved that price in excess of the base price or that increased price. If the Price Commission does not act upon a request under this paragraph within 30 days after receiving it, the increase may go into effect without Commission action. However, in any case in which the 30-day period would otherwise end on a Saturday, Sunday, or Federal holiday, it will end at the close of the next succeeding work day. This paragraph does not require prenotification of any price increase to the extent it reflects solely an increase in excise taxes (including sales and use taxes) or in duties on imports (including the import surcharge imposed by the President on August 15, 1971).

(b) General-Retailers and wholesalers. A retailer or wholesaler which is a prenotification firm may not charge a price in excess of the base price before filing notification of his customary initial percentage markups with the Price Commission in the form and containing the information prescribed by it. After filing, and after posting the base prices as required by § 300.13 (b), a retailer or wholesaler may adjust its prices to the extent that the adjustments do not increase the customary initial percentage markup above that authorized by § 300.13 and to

the extent that the aggregate of all of that retailer's or wholesaler's price changes do not increase its profit margin over that which prevailed during the base period. This paragraph does not require prenotification of any price increase to the extent it reflects solely an increase in excise taxes (including sales and use taxes) or in duties on imports (including the import surcharge imposed by the President on August 15, 1971). (c) [Reserved]

(d) Manner of notification. Each prenotification firm shall notify the Price Commission, on a form to be prescribed by the Commission, whenever that firm intends to increase the price of a product or service. The firm shall provide information sufficient to enable the Commission to make a determination with respect to that proposed increase. If the Commission finds that the information submitted is not sufficient to make such a determination it shall notify the person and the 30-day period provided in paragraph (a) of this section or the 72-hour period provided in paragraph (c) of this section does not begin to run until the time the additional information is received.

(e) Reporting requirement. Each prenotification firm shall file a quarterly report with the Price Commission not more than 45 days after the end of each fiscal quarter beginning with its first fiscal quarter ending after November 13, 1971, or, in the case of a report for the quarter ending the firm's fiscal year, not more than 90 days after the end of that fiscal year. Each quarterly report shall be made on a form to be prescribed by the Commission and shall contain the information required by that form.

(f) Volatile prices-Special rule. Subject to paragraphs (g) through (i) of this section, a prenotification firm that has customarily priced an item in a manner immediately responsive to frequent and customary market price fluctuations of the raw materials or partially processed products which it uses in that item, may, when and to the extent authorized by the Price Commission, increase the price of that item to the extent of any significant market price increase of those raw materials or partially processed products, without regard to paragraphs (a) through (d) of this section. However, in the case of a price increase based on an increase in the price of a partially processed product, only that part of the increased cost of the partially processed

product that is due to an increase in the market price of the raw materials in that product may be used in computing any allowable increase under this paragraph. For the purposes of this paragraph and paragraphs (h) and (i) of this section "raw materials" include raw agricultural products, raw seafood, and other raw materials used by the prenotification firm in preparing an item for which an authorization is sought under this section.

(g) Limitation. No firm may increase a price pursuant to an authorization granted under paragraph (f) of this section to the extent that the price as increased would result in an increase of its profit margin over that which prevailed during the base period.

(h) Notice on invoice. A firm which increases a price on any partially processed product pursuant to authorization granted under paragraph (f) of this section, shall indicate on each invoice to its manufacturing and processing customers that part of any cost increase that is due to an increase in the cost of the raw materials used in making the partially processed product.

(i) Reduction of prices. Each firm that increases a price on an item pursuant to an authorization granted under paragraph (f) of this section shall reduce that price to the extent of any later decrease in the cost of the raw material or partially processed product upon which the price increase was based, but is not required to decrease the price of the item concerned below its base price.

(j) Persons to whom section does not apply. This section does not apply to the following:

(1) Public utilities covered by § 300.16. (2) Providers of health services covered by §§ 300.18 and 300.19.

(3) Insurers covered by § 300.20. (k) Public benefit corporations. For the purposes of this part, each public benefit corporation (within the meaning of section 215 of the Economic Stabilization Act Amendments of 1971 (Public Law 92-210)), charged by law or contract with the responsibility to operate a mass transportation facility or facilities, the fares of which are not otherwise regulated, shall be treated as if it were a prenotification firm subject to this section.

[36 F.R. 23975, Dec. 16, 1971, as amended at 36 F.R. 25385, Dec. 30, 1971; 37 F.R. 285, Jan. 5, 1972; 37 F.R. 654, Jan. 14, 1972; 37 F.R. 3914, Feb. 24, 1972]

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