SB-0348, As Passed House, 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.

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.

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.

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.

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.

(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.