SECTION 1. Chapter 176O of the General Laws is amended by adding the following Section.

Section 28. (a) When establishing alternative payment arrangements, a carrier may take into account patient population characteristics including age, acuity, social determinants of health, and behavioral health service needs. The measures of total medical expense used to establish an alternative payment arrangement should include expenses incurred by all providers in the carrier’s provider network, uniformly applied by provider type. When establishing alternative payment arrangements, a carrier shall not take into account provider prices or historic medical spending attributable only to a subset of its provider network or the historic medical expenses of members based on their attribution to specific providers in the carrier’s network.

(b) In addition to the factors set forth in subsection (a) of this section, an alternative payment arrangement may include adjustments for claims processing and administrative costs and incentive payments based on attainment of quality measures or outcomes, as negotiated between a carrier and providers participating in the alternative payment arrangement.

(c) Each carrier shall file with the center for health information and analysis data on its alternative payment arrangements sufficient for the verification of compliance with subsection (a) of this section, in a form determined by the center for health information and analysis.

(d) A violation of subsection (a) or (c) of this section shall be a violation of Section __ of chapter 93A of the general laws.

SECTION 2. Chapter 176O is amended by adding the following definition after the definition of adverse determination:

“Alternative payment arrangement” means a contract between a carrier and a health care provider or group of providers under which payment is made by capitation, shared savings, reconcilation of fee-for-service payments against a global budget or per-member-per month target, or any other method that bases payments to the provider on a projection of the medical expenses to be incurred by a population of individuals.