SB-0348, As Passed Senate, August 24, 2011
HOUSE SUBSTITUTE FOR
SENATE BILL NO. 348
A bill to impose an assessment on certain health care claims;
to impose certain duties and obligations on certain insurance or
health coverage providers; to impose certain duties on certain
state departments, agencies, and officials; to create certain
funds; to authorize certain expenditures; to impose certain
remedies and penalties; to provide for an appropriation; and to
repeal acts and parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the
"health insurance claims assessment act".
Sec. 2. As used in this act:
(a) "Carrier" means any of the following:
(i) An insurer or health maintenance organization regulated
under the insurance code of 1956, 1956 PA 218, MCL 500.100 to
500.8302.
(ii) A health care corporation regulated under the nonprofit
health care corporation reform act, 1980 PA 350, MCL 550.1101 to
550.1704.
(iii) A nonprofit dental care corporation subject to 1963 PA
125, MCL 550.351 to 550.373.
(iv) A specialty prepaid health plan.
(v) A group health plan sponsor including, but not limited to,
1 or more of the following:
(A) An employer if a group health plan is established or
maintained by a single employer.
(B) An employee organization if a plan is established or
maintained by an employee organization.
(C) If a plan is established or maintained by 2 or more
employers or jointly by 1 or more employers and 1 or more employee
organizations, the association, committee, joint board of trustees,
or other similar group of representatives of the parties that
establish or maintain the plan.
(b) "Claims-related expenses" means all of the following:
(i) Cost containment expenses including, but not limited to,
payments for utilization review, care or case management, disease
management, medication review management, risk assessment, and
similar administrative services intended to reduce the claims paid
for health and medical services rendered to covered individuals by
attempting to ensure that needed services are delivered in the most
efficacious manner possible or by helping those covered individuals
maintain or improve their health.
(ii) Payments that are made to or by an organized group of
health and medical service providers in accordance with managed
care risk arrangements or network access agreements, which payments
are unrelated to the provision of services to specific covered
individuals.
(iii) General administrative expenses.
(c) "Commissioner" means the commissioner of the office of
financial and insurance regulation or his or her designee.
(d) "Department" means the department of treasury.
(e) "Excess loss" or "stop loss" means coverage that provides
insurance protection against the accumulation of total claims
exceeding a stated level for a group as a whole or protection
against a high-dollar claim on any 1 individual.
(f) "Federal employee health benefit program" means the
program of health benefits plans, as defined in 5 USC 8901,
available to federal employees under 5 USC 8901 to 8914.
(g) "Fund" means the health insurance claims assessment fund
created in section 7.
(h) "Group health plan" means an employee welfare benefit plan
as defined in section 3(1) of subtitle A of title I of the employee
retirement income security act of 1974, Public Law 93-406, 29 USC
1002, to the extent that the plan provides medical care, including
items and services paid for as medical care to employees or their
dependents as defined under the terms of the plan directly or
through insurance, reimbursement, or otherwise.
(i) "Group insurance coverage" means a form of voluntary
health and medical services insurance that covers members, with or
without their eligible dependents, and that is written under a
master policy.
(j) "Health and medical services" means 1 or more of the
following:
(i) Services included in furnishing medical care, dental care,
pharmaceutical benefits, or hospitalization, including, but not
limited to, services provided in a hospital or other medical
facility.
(ii) Ancillary services, including, but not limited to,
ambulatory services and emergency and nonemergency transportation.
(iii) Services provided by a physician or other practitioner,
including, but not limited to, health professionals, other than
veterinarians, marriage and family therapists, athletic trainers,
massage therapists, licensed professional counselors, and
sanitarians, as defined by article 15 of the public health code,
1978 PA 368, MCL 333.16101 to 333.18838.
(iv) Behavioral health services, including, but not limited to,
mental health and substance abuse services.
(k) "Managed care risk arrangement" means an arrangement where
participating hospitals and physicians agree to a managed care risk
incentive which shares favorable and unfavorable claims experience.
Under a managed care risk arrangement, payment to a participating
physician is generally subject to a retention requirement and the
distribution of that retained payment is contingent on the result
of the risk incentive arrangement.
(l) "Medicaid contracted health plan" means that term as
defined in section 106 of the social welfare act, 1939 PA 280, MCL
400.106.
(m) "Medicaid managed care organization" means a medicaid
contracted health plan or a specialty prepaid health plan.
(n) "Medical inflation rate" means that rate determined by the
annual national health expenditures accounts report issued by the
federal centers for medicare and medicaid services, office of the
actuary.
(o) "Medicare" means the federal medicare program established
under title XVIII of the social security act, 42 USC 1395 to
1395kkk-1.
(p) "Medicare advantage plan" means a plan of coverage for
health benefits under part C of title XVIII of the social security
act, 42 USC 1395w-21 to 1395w-29.
(q) "Medicare part D" means a plan of coverage for
prescription drug benefits under part D of title XVIII of the
social security act, 42 USC 1395w-101 to 1395w-152.
(r) "Network access agreement" means an agreement that allows
a network access to another provider network for certain services
that are not readily available in the accessing network.
(s) "Paid claims" means actual payments, net of recoveries,
made to a health and medical services provider or reimbursed to an
individual by a carrier, third party administrator, or excess loss
or stop loss carrier. Paid claims include payments, net of
recoveries, made under a service contract for administrative
services only, cost-plus or noninsured benefit plan arrangements
under section 211 of the nonprofit health care corporation reform
act, 1980 PA 350, MCL 550.1211, or section 5208 of the insurance
code of 1956, 1956 PA 218, MCL 500.5208, for health and medical
services provided under group health plans, any claims for service
in this state by a pharmacy benefits manager, and individual,
nongroup, and group insurance coverage to residents of this state
in this state that affect the rights of an insured in this state
and bear a reasonable relation to this state, regardless of whether
the coverage is delivered, renewed, or issued for delivery in this
state. If a carrier or a third party administrator is contractually
entitled to withhold a certain amount from payments due to
providers of health and medical services in order to help ensure
that the providers can fulfill any financial obligations they may
have under a managed care risk arrangement, the full amounts due
the providers before that amount is withheld shall be included in
paid claims. Paid claims include claims or payments made under any
federally approved waiver or initiative to integrate medicare and
medicaid funding for dual eligibles under the patient protection
and affordable care act, Public Law 111-148, and the health care
and education reconciliation act of 2010, Public Law 111-152. Paid
claims do not include any of the following:
(i) Claims-related expenses.
(ii) Payments made to a qualifying provider under an incentive
compensation arrangement if the payments are not reflected in the
processing of claims submitted for services rendered to specific
covered individuals.
(iii) Claims paid by carriers or third party administrators for
specified accident, accident-only coverage, credit, disability
income, long-term care, health-related claims under automobile
insurance, homeowners insurance, farm owners, commercial multi-
peril, and worker's compensation, or coverage issued as a
supplement to liability insurance.
(iv) Claims paid for services rendered to a nonresident of this
state.
(v) The proportionate share of claims paid for services
rendered to a person covered under a health benefit plan for
federal employees.
(vi) Claims paid for services rendered outside of this state to
a person who is a resident of this state.
(vii) Claims paid under a federal employee health benefit
program, medicare, medicare advantage, medicare part D, tricare, by
the United States veterans administration, and for high-risk pools
established pursuant to the patient protection and affordable care
act, Public Law 111-148, and the health care and education
reconciliation act of 2010, Public Law 111-152.
(viii) Reimbursements to individuals under a flexible spending
arrangement as that term is defined in section 106(c)(2) of the
internal revenue code, 26 USC 106, a health savings account as that
term is defined in section 223 of the internal revenue code, 26 USC
223, an Archer medical savings account as defined in section 220 of
the internal revenue code, 26 USC 220, a medicare advantage medical
savings account as that term is defined in section 138 of the
internal revenue code, 26 USC 138, or other health reimbursement
arrangement authorized under federal law.
(ix) Health and medical services costs paid by an individual
for cost-sharing requirements, including deductibles, coinsurance,
or copays.
(t) "Qualifying provider" means a provider that is paid based
on an incentive compensation arrangement.
(u) "Specialty prepaid health plan" means that term as
described in section 109f of the social welfare act, 1939 PA 280,
MCL 400.109f.
(v) "Third party administrator" means an entity that processes
claims under a service contract and that may also provide 1 or more
other administrative services under a service contract.
Sec. 3. (1) For dates of service beginning on or after January
1, 2012, subject to subsections (2), (3), and (4), there is levied
upon and there shall be collected from every carrier and third
party administrator an assessment of 1% on that carrier's or third
party administrator's paid claims.
(2) A carrier with a suspension or exemption under section
3717 of the insurance code of 1956, 1956 PA 218, MCL 500.3717, on
the effective date of this act is subject to an assessment of 0.1%.
(3) All of the following apply to a group health plan that
uses the services of a third party administrator or excess loss or
stop loss insurer:
(a) A group health plan sponsor shall not be responsible for
an assessment under this subsection for a paid claim where the
assessment on that claim has been paid by a third party
administrator or excess loss or stop loss insurer, except as
otherwise provided in section 3a(2).
(b) Except as otherwise provided in subdivision (d), the third
party administrator shall be responsible for all assessments on
paid claims paid by the third party administrator.
(c) Except as otherwise provided in subdivision (d), the
excess loss or stop loss insurer shall be responsible for all
assessments on paid claims paid by the excess loss or stop loss
insurer.
(d) If there is both a third party administrator and an excess
loss or stop loss insurer servicing the group health plan, the
third party administrator shall be responsible for all assessments
for paid claims that are not reimbursed by the excess loss or stop
loss insurer and the excess loss or stop loss insurer shall be
responsible for all assessments for paid claims that are
reimbursable to the excess loss or stop loss insurer.
(4) The assessment under this section shall not exceed
$10,000.00 per insured individual or covered life annually.
(5) To the extent an assessment paid under this section for
paid claims for a group plan or individual subscriber is inaccurate
due to subsequent claim adjustments or recoveries, subsequent
filings shall be adjusted to accurately reflect the correct
assessment based on actual claims paid.
(6) If the assessment under this section collects revenue in
an amount greater than $400,000,000.00, adjusted annually by the
medical inflation rate, each carrier and third party administrator
that paid the assessment shall receive a proportional credit
against the carrier's or third party administrator's assessment in
the immediately succeeding year. The department shall send a notice
of credit to each carrier or third party administrator entitled to
a credit under this subsection not later than July 1. A carrier or
third party administrator entitled to a credit under this
subsection shall apply that credit to the July 30 payment. Any
unused credit shall be carried forward and applied to subsequent
payments. If a carrier or third party administrator entitled to a
credit under this subsection has no liability under this act in the
immediately succeeding year or if this act is no longer in effect,
the department shall issue that carrier or third party
administrator a refund in the amount of any unused credit. If a
third party administrator receives a credit or refund under this
subsection, the third party administrator shall apply that credit
or refund to the benefit of the entity for which it processed the
claims under a service contract.
Sec. 3a. (1) A carrier that is required to file rates or file
for approval rates with the commissioner is not required to file
rates in order to collect the assessment levied under this act from
an individual or group. The collected amount shall not be
considered an element or factor of a rate.
(2) A carrier or third party administrator shall develop and
implement a methodology by which it will collect the assessment
levied under this act from an individual, employer, or group health
plan, subject to all of the following:
(a) Any methodology shall be applied uniformly within a line
of business.
(b) Except as provided in subdivision (d), health status or
claims experience of an individual or group shall not be an element
or factor of any methodology to collect the assessment from that
individual or group.
(c) The amount collected from individuals and groups with
insured coverage shall be determined as a percentage of premium.
(d) The amount collected from groups with uninsured or self-
funded coverage shall be determined as a percentage of actual paid
claims.
(e) The amount collected shall reflect only the assessment
levied under this act, and shall not include any additional amounts
such as related administrative expenses.
(f) A carrier shall notify the commissioner of the methodology
used for the collection of the assessment levied under this act.
Sec. 4. (1) Every carrier and third party administrator with
paid claims subject to the assessment under this act shall file
with the department on April 30, July 30, October 30, and January
30 of each year a return for the preceding calendar quarter, in a
form prescribed by the department, showing all information that the
department considers necessary for the proper administration of
this act. At the same time, each carrier and third party
administrator shall pay to the department the amount of the
assessment imposed under this act with respect to the paid claims
included in the return. The department may require each carrier and
third party administrator to file with the department an annual
reconciliation return.
(2) If a due date falls on a Saturday, Sunday, state holiday,
or legal banking holiday, the returns and assessments are due on
the next succeeding business day.
(3) The department may require that payment of the assessment
be made by an electronic funds transfer method approved by the
department.
Sec. 5. (1) A carrier or third party administrator liable for
an assessment under this act shall keep accurate and complete
records and pertinent documents as required by the department.
Records required by the department shall be retained for a period
of 4 years after the assessment imposed under this act to which the
records apply is due or as otherwise provided by law.
(2) If the department considers it necessary, the department
may require a person, by notice served upon that person, to make a
return, render under oath certain statements, or keep certain
records the department considers sufficient to show whether that
person is liable for the assessment under this act.
(3) If a carrier or third party administrator fails to file a
return or keep proper records as required under this section, or if
the department has reason to believe that any records kept or
returns filed are inaccurate or incomplete and that additional
assessments are due, the department may assess the amount of the
assessment due from the carrier or third party administrator based
on information that is available or that may become available to
the department. An assessment under this subsection is considered
prima facie correct under this act, and a carrier or third party
administrator has the burden of proof for refuting the assessment.
Sec. 6. (1) The department shall administer the assessment
imposed under this act under 1941 PA 122, MCL 205.1 to 205.31, and
this act. If 1941 PA 122, MCL 205.1 to 205.31, and this act
conflict, the provisions of this act apply. The assessment imposed
under this act shall be considered a tax for the purpose of 1941 PA
122, MCL 205.1 to 205.31.
(2) The department is authorized to promulgate rules to
implement this act under the administrative procedures act of 1969,
1969 PA 306, MCL 24.201 to 24.328.
(3) The assessment imposed under this act shall not be
considered an assessment or burden for purposes of the tax, or as a
credit toward or payment in lieu of the tax under section 476a of
the insurance code of 1956, 1956 PA 218, MCL 500.476a.
(4) The department shall submit an annual report to the state
budget director and the senate and house of representatives
standing committees on appropriations not later than 120 days after
the January thirtieth quarterly filing that states the amount of
revenue received under this act for the immediately preceding
calendar year.
Sec. 7. (1) All money received and collected under this act
shall be deposited by the department in the health insurance claims
assessment fund established in this section.
(2) The health insurance claims assessment fund is created
within the department.
(3) The state treasurer may receive money or other assets from
any of the following sources for deposit into the fund:
(a) Money received by the department under this act.
(b) Interest and earnings from fund investments. The state
treasurer shall direct the investment of the fund. The state
treasurer shall credit to the fund interest and earnings from fund
investments.
(c) Donations of money made to the fund from any source.
(4) Money in the fund at the close of the fiscal year shall
remain in the fund and shall not lapse to the general fund and
shall remain available after this act is repealed January 1, 2014
to pay any remaining credits or refunds due under section 3(6)
until all pending appeals and claims are resolved.
(5) Except as otherwise provided in this act, the department
shall transfer money from the fund, upon appropriation in the
respective departments, only for the following:
(a) To finance the expenditures of medicaid managed care
organizations that include medicaid contracted health plans and
specialty prepaid health plans.
(b) To pay any credits or refunds due under section 3(6).
Sec. 8. There is appropriated to the department for the 2010-
2011 state fiscal year $1,000,000.00 to begin implementing the
requirements of this act. Any portion of the amount appropriated
under this section that is not expended in the 2010-2011 state
fiscal year shall not lapse to the general fund but shall be
carried forward in a work project account that is in compliance
with section 451a of the management and budget act, 1984 PA 431,
MCL 18.1451a, for the following state fiscal year.
Sec. 9. (1) For administration and compliance requirements
created by this act, in the 2011-2012 state fiscal year and each
fiscal year thereafter, the department shall receive from the
health insurance claims assessment fund created in section 7 an
amount not to exceed 1% of the annual remittances under this act in
the 2011-2012 state fiscal year, subject to annual appropriation by
the legislature.
(2) Not later than March 1 of each year, the department shall
report to the appropriations committees of the house of
representatives and the senate and to the house and senate fiscal
agencies the costs incurred for administration and compliance
requirements as of the end of the immediately preceding state
fiscal year.
Sec. 10. The department shall provide the commissioner with
written notice of any final determination that a carrier or a third
party administrator has failed to pay an assessment, interest, or
penalty when due. The commissioner may suspend or revoke, after
notice and hearing, the certificate of authority to transact
insurance in this state, or the license to operate in this state,
of any carrier or third party administrator that fails to pay an
assessment, interest, or penalty due under this act. A certificate
of authority to transact insurance in this state or a license to
operate in this state that is suspended or revoked under this
section shall not be reinstated unless any delinquent assessment,
interest, or penalty has been paid.
Sec. 11. The department shall develop and implement a
dashboard to provide information to the citizens of this state,
which dashboard shall include, but is not limited to, the amount of
revenue collected from carriers and third party administrators
subject to the assessment levied under this act.
Enacting section 1. This act does not take effect unless
Senate Bill No. 347 of the 96th Legislature is enacted into law.
Enacting section 2. This act is repealed effective January 1,
2014.