SB-0348, As Passed Senate, June 30, 2011

 

 

 

 

 

 

 

 

 

 

 

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 as described in section

 

109f of the social welfare act, 1939 PA 280, MCL 400.109f.

 

     (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) "Medicare" means the federal medicare program established


 

under title XVIII of the social security act, 42 USC 1395 to

 

1395kkk-1.

 

     (m) "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.

 

     (n) "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.

 

     (o) "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.

 

     (p) "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, 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 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, and a health reimbursement

 

account.

 

     (ix) Health and medical services costs paid by an individual

 

for cost-sharing requirements, including deductibles, coinsurance,

 

or copays.

 

     (q) "Qualifying provider" means a provider that is paid based

 

on an incentive compensation arrangement.

 

     (r) "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) and (3), there is levied upon

 

and there shall be collected from every carrier and third party


 

administrator an assessment on that carrier's or third party

 

administrator's paid claims at the following rate:

 

     (a) In 2012, 1%.

 

     (b) In 2013 and each year thereafter, except as otherwise

 

provided in this subdivision, the rate levied in the immediately

 

preceding year. However, if the department of treasury determines

 

that the rate levied in the immediately preceding year collected

 

revenue in an amount greater than 110% of $400,000,000.00, as

 

annually adjusted for the medical inflation rate, the department of

 

treasury shall reduce the rate to a rate that would have generated

 

for the immediately preceding year revenue equal to 103% of

 

$400,000,000.00, as annually adjusted for the medical inflation

 

rate, which assessment rate shall not be greater than 1%. In 2013

 

only, the rate levied in the immediately preceding year shall be

 

adjusted downward to reflect any amount collected in excess of

 

$400,000,000.00.

 

     (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.

 

     (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) 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.

 

     (5) As used in this section, "medical inflation rate" means

 

that rate determined by the annual national health expenditures

 

accounts report issued by the federal center for medicare and

 

medicaid, office of the actuary.

 

     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 15, July 15, October 15, and January

 

15 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.

 

     (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 fifteenth 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.

 

     (5) Except as otherwise provided in this act, the department

 

of treasury shall transfer money from the fund, upon appropriation

 

in the respective departments, only for 1 or more of the following

 

purposes:

 

     (a) To finance medicaid program expenditures, including

 

actuarial soundness for carriers with contracts under sections

 

106(2)(a) and 109f(2) of the social welfare act, 1939 PA 280, MCL

 

400.106 and 400.109f, consistent with federal requirements under 42

 

CFR 438.6.

 

     (b) To finance a shortfall in the medicaid program resulting

 

from disallowance of medicaid payments from the federal government.

 

     (c) To offset any decline in revenue or increase in

 

expenditures caused by federal medicaid policy change.

 

     (d) To finance graduate medical education programs.

 

     (e) To reimburse for uncompensated health and medical care.

 

     (f) To finance activities to identify and eliminate fraud,

 

waste, and abuse in the medicaid system.


 

     (g) To finance department of community health or office of

 

financial and insurance regulation expenditures incurred to

 

implement, enforce, or otherwise carry out the responsibilities of

 

this act.

 

     Sec. 8. There is appropriated to the department of treasury

 

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. For administration and compliance requirements created

 

by this act, in the 2011-2012 state fiscal year and each fiscal

 

year thereafter, the department of treasury 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.

 

     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


Senate Bill No. 348 as amended June 30, 2011

 

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 of treasury 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 level of compliance, effectiveness, and efficiency of carriers 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,

 

2016.