SB-1294, As Passed Senate, October 17, 2012

SUBSTITUTE FOR

SENATE BILL NO. 1294

A bill to amend 1980 PA 350, entitled

"The nonprofit health care corporation reform act,"

by amending the title and sections 218, 401e, and 414b (MCL

550.1218, 550.1401e, and 550.1414b), the title as amended by 1994

PA 169, section 218 as added by 2002 PA 559, section 401e as added

by 1996 PA 516, and section 414b as added by 2006 PA 413, and by

adding sections 201a, 220, 400, 401m, 410b, 501c, and 620 and part

6A.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

TITLE

An act to provide for the incorporation of nonprofit health

care corporations; to provide their rights, powers, and immunities;

to prescribe the powers and duties of certain state officers

relative to the exercise of those rights, powers, and immunities;

to prescribe certain conditions for the transaction of business by

those corporations in this state; to define the relationship of

health care providers to nonprofit health care corporations and to

specify their rights, powers, and immunities with respect thereto;

to provide for a Michigan caring program; to provide for the

regulation and supervision of nonprofit health care corporations by

the commissioner of insurance; to prescribe powers and duties of

certain other state officers with respect to the regulation and

supervision of nonprofit health care corporations; to provide for

the imposition of a regulatory fee; to regulate the merger or

consolidation of certain corporations; to prescribe an expeditious

and effective procedure for the maintenance and conduct of certain

administrative appeals relative to provider class plans; to provide

for certain administrative hearings relative to rates for health

care benefits; to provide for the creation of and the powers and

duties of a nonprofit corporation for the purpose of receiving and

administering funds for the public welfare; to provide for certain

causes of action; to prescribe penalties and to provide civil fines

for violations of this act; and to repeal ~~certain~~ acts and parts of

acts.

Sec. 201a. Notwithstanding section 201, a health care

corporation shall not be formed in this state on or after the

effective date of this section.

Sec. 218. A health care corporation shall not do any of the

following:

(a) Take any action to change its nonprofit status.

(b) ~~Dissolve,~~ Except as otherwise provided in section 220,

dissolve, merge, consolidate, mutualize, or take any other action

Senate Bill No. 1294 as amended October 17, 2012

that results in a change in direct or indirect control of the

health care corporation or sell, transfer, lease, exchange, option,

or convey assets that results in a change in direct or indirect

control of the health care corporation.

Sec. 220. (1) Notwithstanding any provision of this act to the

contrary, a health care corporation may establish, own, operate,

and merge with a nonprofit mutual disability insurer formed under

chapter 58 of the insurance code of 1956, 1956 PA 218, MCL 500.5800

to 500.5840. The surviving entity of a merger described in this

subsection is the nonprofit mutual disability insurer. A merger

described in this subsection is exempt from the application of

sections 1311 to 1319 of the insurance code of 1956, 1956 PA 218,

MCL 500.1311 to 500.1319.

(2) The merger of a health care corporation with a nonprofit

mutual disability insurer is effective upon completion of both of

the following:

(a) The adoption of a plan of merger by the majority of the

boards of directors of both the health care corporation and the

nonprofit mutual disability insurer. The health care corporation

shall include in the plan of merger that beginning in April 2014

the surviving entity of a merger described in subsection (1) shall

use its best efforts to make annual social mission contributions in

an aggregate amount of <<up to $1,500,000,000.00 over a period of up to

18 years beginning in april 2014 to the michigan health and wellness

foundation created under part 6a of this act.>> If

adopted, the boards of directors shall submit the plan of merger to

the commissioner for his or her consideration as provided in

subdivision (b).

(b) The approval of the plan of merger by the commissioner.

The commissioner shall make a determination to approve or

disapprove a plan of merger within 90 days of receipt of the plan,

and the commissioner shall not unreasonably withhold approval of a

plan of merger submitted under subdivision (a).

(3) Notwithstanding any other provision of this act to the

contrary, the directors of a health care corporation may serve as

incorporators of the corporate body of, directors of, or officers

of the nonprofit mutual disability insurer formed through a merger

described in subsection (1).

(4) A merger described in subsection (1) is the dissolution of

the health care corporation, and the surviving nonprofit mutual

disability insurer assumes the performance of all contracts and

policies of the merged health care corporation that exist on the

date of the merger. However, the officers of a health care

corporation may perform any act or acts necessary to close the

affairs of the merged health care corporation after the date of the

merger.

Sec. 400. (1) Notwithstanding any provision of this act to the

contrary, this section applies to the use of a most favored nation

clause in a provider contract on and after February 1, 2013.

(2) Beginning February 1, 2013, a health care corporation

shall not use a most favored nation clause in any provider

contract, including a provider contract in effect on February 1,

2013, unless the most favored nation clause has been filed with and

approved by the commissioner. Beginning February 1, 2013, a health

care corporation shall not enforce a most favored nation clause in

any provider contract without the prior approval of the

commissioner.

(3) As used in this section, "most favored nation clause"

means a clause that does any of the following:

(a) Prohibits, or grants a contracting health care corporation

an option to prohibit, a provider from contracting with another

party to provide health care services at a lower rate than the

payment or reimbursement rate specified in the contract with the

health care corporation.

(b) Requires, or grants a contracting health care corporation

an option to require, a provider to accept a lower payment or

reimbursement rate if the provider agrees to provide health care

services to any other party at a lower rate than the payment or

reimbursement rate specified in the contract with the health care

corporation.

an option to require, termination or renegotiation of an existing

provider contract if a provider agrees to provide health care

services to any other party at a lower rate than the payment or

reimbursement rate specified in the contract with the health care

corporation.

(d) Requires a provider to disclose, to the health care

corporation or its designee, the provider's contractual payment or

reimbursement rates with other parties.

Sec. 401e. (1) Except as otherwise provided in this section, a

health care corporation that has issued a nongroup certificate

shall renew or continue in force the certificate at the option of

the individual.

(2) Except as otherwise provided in this section, a health

care corporation that has issued a group certificate shall renew or

continue in force the certificate at the option of the sponsor of

the plan.

(3) Guaranteed renewal is not required in cases of fraud,

intentional misrepresentation of material fact, lack of payment, if

the health care corporation no longer offers that particular type

of coverage in the market, or if the individual or group moves

outside the service area.

(4) A health care corporation shall not discontinue offering a

particular plan or product in the nongroup or group market unless

the health care corporation does all of the following:

(a) Provides notice to the commissioner and to each covered

individual provided coverage under the plan or product of the

discontinuation at least 90 days before the date of the

discontinuation.

(b) Offers to each covered individual provided coverage under

the plan or product the option to purchase any other plan or

product currently being offered in the nongroup market by that

health care corporation without excluding or limiting coverage for

a preexisting condition or providing a waiting period.

of enrolled individuals or individuals who may become eligible for

coverage in making the determination to discontinue coverage and in

offering other plans or products.

(5) A health care corporation shall not discontinue offering

all coverage in the nongroup or group market unless the health care

corporation does all of the following:

(a) Provides notice to the commissioner and to each covered

individual of the discontinuation at least 180 days before the date

of the expiration of coverage.

(b) Discontinues all health benefit plans issued in the

nongroup or group market from which the health care corporation

withdrew and does not renew coverage under those plans.

(6) If a health care corporation discontinues coverage under

subsection (5), the health care corporation shall not provide for

the issuance of any health benefit plans in the nongroup or group

market from which the health care corporation withdrew during the

5-year period beginning on the date of the discontinuation of the

last plan not renewed under that subsection.

Sec. 401m. Until January 1, 2014, a health care corporation

established, maintained, or operating in this state shall offer

health care benefits to all residents of this state regardless of

health status.

Sec. 410b. Notwithstanding section 410a(8), for a certificate

delivered, issued for delivery, or renewed in this state on or

after January 1, 2014, the premium for a group conversion

certificate under section 410a shall be determined only by using

the rating factors set forth in section 3474a of the insurance code

of 1956, 1956 PA 218, MCL 500.3474a.

Sec. 414b. (1) A health care corporation may offer group

wellness coverage. Wellness coverage may provide for an appropriate

rebate or reduction in premiums or for reduced copayments,

coinsurance, or deductibles, or a combination of these incentives,

for participation in any health behavior wellness, maintenance, or

improvement program offered by the employer. The employer shall

provide evidence of demonstrative maintenance or improvement of the

members' health behaviors as determined by assessments of agreed-

upon health status indicators between the employer and the health

care corporation. Any rebate or premium provided by the health care

corporation is presumed to be appropriate unless credible data

demonstrate otherwise, but shall not exceed ~~10%~~ 30% of paid

premiums. A health care corporation shall make available to

employers all wellness coverage plans that it markets to employers

in this state.

(2) A health care corporation may offer nongroup wellness

coverage. Wellness coverage may provide for an appropriate rebate

or reduction in premiums or for reduced copayments, coinsurance, or

deductibles, or a combination of these incentives, for

participation in any health behavior wellness, maintenance, or

improvement program approved by the health care corporation. The

member shall provide evidence of demonstrative maintenance or

improvement of the individual's or family's health behaviors as

determined by assessments of agreed-upon health status indicators

between the member and the health care corporation. Any rebate of

premium provided by the health care corporation is presumed to be

appropriate unless credible data demonstrate otherwise, but shall

not exceed ~~10%~~ 30% of paid premiums. A health care corporation

shall make available to individuals all wellness coverage plans

that it markets to individuals in this state.

(3) A health care corporation is not required to continue any

health behavior wellness, maintenance, or improvement program or to

continue any incentive associated with a health behavior wellness,

maintenance, or improvement program.

Sec. 501c. (1) Beginning January 1, 2014, a health care

corporation shall establish and maintain a provider network in a

manner that is sufficient in numbers and types of providers and

facilities to ensure that all covered health care services to

members will be accessible without unreasonable delay. Members

shall have access to emergency services 24 hours per day, 7 days

per week. The health care corporation's service area shall not be

created in a manner that is designed to discriminate against

individuals because of age, sex, family structure, ethnicity, race,

health condition, employment status, or socioeconomic status. A

health care corporation shall ensure that its networks meet these

requirements by the end of the first year of initial operation of

the network and at all times after the first year of initial

operation.

(2) Beginning January 1, 2014, a health care corporation shall

maintain contracts with the number and types of affiliated

providers that are sufficient to ensure that covered services are

available to its members without unreasonable delay. The

commissioner shall determine what is sufficient under this

subsection and as may be established by reference to reasonable

criteria used by the health care corporation, including, but not

limited to, provider-member ratios by specialty, primary care

provider-member ratios, geographic accessibility, waiting times for

appointments with participating providers, hours of operation, and

the volume of technological and specialty services available to

serve the needs of members requiring technologically advanced or

specialty care.

(3) On or after January 1, 2014, if a health care corporation

has an insufficient number or type of participating providers to

provide a covered benefit, the health care corporation shall ensure

that the member obtains the covered health care service at no

greater cost to the member than if the covered health care service

were obtained from a participating provider or shall make other

arrangements acceptable to the commissioner.

(4) Beginning January 1, 2014, a health care corporation shall

establish and maintain adequate arrangements to ensure reasonable

proximity of participating providers to the business or personal

residence of a member. In determining whether a health care

corporation has complied with this subsection, the commissioner

shall give due consideration to the relative availability of health

care providers in the service area.

Sec. 620. (1) Notwithstanding any provision of this act to the

contrary, a certificate delivered, issued for delivery, or renewed

in this state on or after January 1, 2014 by a health care

corporation is subject to the policy and certificate issuance and

rate filing requirements of the insurance code of 1956, 1956 PA

218, MCL 500.100 to 500.8302, including the rating factor

requirements of section 3474a of the insurance code of 1956, 1956

PA 218, MCL 500.3474a.

(2) For a certificate delivered, issued for delivery, or

renewed in this state on or after January 1, 2014, subject to the

prior approval of the commissioner, a health care corporation may

establish reasonable open enrollment periods.

(3) The commissioner shall establish minimum standards for the

frequency and duration of open enrollment periods established under

subsection (2). The commissioner shall uniformly apply the minimum

standards for the frequency and duration of open enrollment periods

established under this subsection to all health care corporations.

(4) A health care corporation offering coverage during an open

enrollment period established under subsection (2) shall not deny

or condition the issuance or effectiveness of a certificate and

shall not discriminate in the pricing of the certificate on the

basis of health status, claims experience, receipt of health care,

or medical condition.

PART 6A

MICHIGAN HEALTH AND WELLNESS FOUNDATION

Sec. 651. As used in this part:

(a) "Board" means the Michigan health and wellness foundation

board created in section 652.

(b) "Executive director" means the executive director of the

foundation appointed by the board under section 654.

foundation organized as a nonprofit corporation under section 653.

Sec. 652. (1) The Michigan health and wellness foundation

board is created to organize and govern the foundation. The board

is the incorporator of the foundation for the purposes of the

nonprofit corporation act, 1982 PA 162, MCL 450.2101 to 450.3192.

Senate Bill No. 1294 as amended October 17, 2012

(2) The board appointed under subsection (3) shall not

currently be or within the immediately preceding 12 months have

been employed by<<, under contract employment with, or received

employment compensation from>> a carrier, producer, health care

provider, or

third party administrator or by an affiliate or subsidiary of a

carrier, producer, health care provider, or third party

administrator.

(3) Subject to this subsection, the governor shall appoint the

members of the board with the advice and consent of the senate. On

or before the expiration of 60 days after the effective date of

this section, the governor shall appoint the following initial

members of the board with the advice and consent of the senate:

(a) Two members from a list of 5 or more individuals

recommended by the senate majority leader.

(b) Two members from a list of 5 or more individuals

recommended by the speaker of the house of representatives.

(d) One member representing the interests of senior citizens.

(e) Two members of the general public.

(f) One member representing the business community.

(g) One member representing organized labor.

(h) One member representing small businesses.

(i) One member from a list of 3 or more individuals

recommended by the house minority leader.

(j) One member from a list of 3 or more individuals

recommended by the senate minority leader.

(4) A vacancy in the board shall be filled in the same manner

as the initial appointment of that member under subsection (3).

Senate Bill No. 1294 as amended October 17, 2012

Except as otherwise provided in this subsection, a board member

shall serve for a term of 4 years or until a successor is

appointed, whichever is later. For an initial member appointed to

the board under subsection (3), 4 members shall serve for 2-year

terms, 4 members shall serve for 3-year terms, and <<5>> members shall

serve for 4-year terms.

(5) Seven members of the board constitute a quorum for the

transaction of business at a meeting of the board. An affirmative

vote of 7 board members is necessary for official action of the

board.

(6) The business that the board may perform shall be conducted

at a meeting of the board that is held in this state, is open to

the public, and is held in a place that is available to the general

public. However, the board may establish reasonable rules and

regulations to minimize disruption of a meeting of the board. At

least 10 days and not more than 60 days before a meeting, the board

shall provide public notice of its meeting at its principal office

and on its internet website. The board shall include in the public

notice of its meeting the address where board minutes required

under subsection (7) may be inspected by the public. The board may

meet in a closed session for any of the following purposes:

(a) To consider the hiring, dismissal, suspension, or

disciplining of board members or its employees or agents.

(b) To consult with its attorney.

regarding privacy or confidentiality.

(7) The board shall keep minutes of each meeting. Board

minutes shall be open to public inspection, and the board shall

make the minutes available at the address designated on the public

notice of its meeting under subsection (6). The board shall make

copies of the minutes available to the public at the reasonable

estimated cost for printing and copying. The board shall include

all of the following in its board minutes:

(a) The date, time, and place of the meeting.

(b) Board members who are present and absent.

(d) All roll call votes taken at the meeting.

(8) Board members shall serve without compensation. However,

board members may be reimbursed for their actual and necessary

expenses incurred in the performance of their official duties as

board members.

Sec. 653. (1) The board shall organize a nonprofit

corporation, on a nonstock, directorship basis, under the nonprofit

corporation act, 1982 PA 162, MCL 450.2101 to 450.3192. The

nonprofit corporation shall be known as the Michigan health and

wellness foundation and is organized to receive and administer

funds for the public welfare.

(2) The foundation shall do all of the following:

(a) Plan, promote, coordinate, and fund programs that will

benefit the health and wellness of the residents of this state.

(b) Promote, through grants to programs or entities, the

progress of the science and art of health care in this state.

services in this state.

Senate Bill No. 1294 as amended October 17, 2012

(d) Promote wellness and improve the physical, mental, and

emotional health of residents of this state through development and

support of programs that promote a healthier lifestyle and

encourage proper nutrition and physical activity.

(e) Support programs that assist senior citizens and

individuals with disabilities to live healthy and independent

lifestyles and that protect vulnerable individuals from abuse and

neglect.

(f) Solicit and accept any gift, grant, legacy, or endowment

of money or in-kind donations of goods and services from the

federal government, this state, other state government, local

government, or any private source to further its purposes under

this section.

(g) Plan, promote, coordinate, and fund programs that are

designed to prevent illness, disability, or death due to foodborne

disease.

(h) Support programs to reduce inefficiencies in the health

care delivery system of this state through the use of technology,

collaboration or coordination of entities providing health care

services, or education of health care consumers.

<<(i) Support programs that assist minor children to live healthy lifestyles and protect minor children from abuse and neglect.>>

(3) In addition to the powers and duties under subsection (2),

the foundation has the power and duties of a nonprofit corporation

under the nonprofit corporation act, 1982 PA 162, MCL 450.2101 to

450.3192. If a conflict between a power or duty of the foundation

under this section conflicts with a power or duty under other state

law, this section controls.

(4)<<

Senate Bill No. 1294 as amended October 17, 2012

>> The board <<shall>> implement a program that disburses

foundation

money to subsidize the cost of individual medigap coverage to

senior citizens in this state who demonstrate a financial need in

order to be able to purchase individual medigap coverage. To

implement the program, the board shall develop a means test to

determine if a senior citizen applicant is eligible for the medigap

coverage subsidy allowed in this subsection.

(5) Except as otherwise provided in this subsection, <<beginning

january 1, 2016>> the board

shall disburse <<60%>> of the total amount of foundation money eligible

for disbursement under section 655(3) to subsidize the cost of

individual medigap coverage purchased by senior citizens in this

state, subject to the means test required in subsection (4). This

subsection does not apply after December 31, 2021 or after a

nonprofit mutual disability insurer discontinues offering

supplemental coverage to medicare enrollees as provided in section

5805(3) of the insurance code of 1956, 1956 PA 218, MCL 500.5805,

whichever first occurs.

Sec. 654. (1) The board shall appoint an executive director of

the foundation. The executive director is the chief executive

officer of the foundation and serves at the pleasure of the board.

The executive director may employ staff as necessary with the

approval of the board. The board shall determine compensation for

the executive director and staff employed under this subsection.

(2) To ensure efficient operation of the foundation, the

executive director may seek assistance and support as may be

required in the performance of his or her duties from appropriate

state departments, agencies, and offices. Upon request of the

executive director, the state department, agency, or office may

provide assistance and support to the executive director.

(3) The executive director shall display on the foundation

internet website information relevant to the public, as defined by

the board, concerning the foundation's operations and efficiencies,

as well as the board's assessments of those activities.

Sec. 655. (1) The board shall provide for a system of

financial accounting, controls, audits, and reports. The books,

records, and accounts of the foundation are subject to audit.

(2) The board shall provide for the investment policy of the

foundation in its bylaws. Subject to the investment policy of the

foundation, all money received by the foundation may be invested in

bonds or other obligations of, or guaranteed as to principal and

interest by, the United States, this state, or a political

subdivision of this state.

(3) No more than 1/2 of the money contributed to the

foundation each year, including any interest and earnings but not

including any unrealized gains or losses on those contributions, is

available for disbursement by the foundation upon board approval.

(4) Money from the foundation may be used as matching funds

for a federal grant.

Enacting section 1. This amendatory act does not take effect

unless Senate Bill No. 1293 of the 96th Legislature is enacted into

law.