1.1                          A bill for an act
  1.2             relating to insurance; providing technical changes; 
  1.3             regulating motor vehicle service contracts; regulating 
  1.4             underwriting practices; regulating workers' 
  1.5             compensation self-insurance; using part of the excess 
  1.6             surplus in the assigned risk plan surplus fund for the 
  1.7             benefit of the Minnesota comprehensive health 
  1.8             association; appropriating money; amending Minnesota 
  1.9             Statutes 1998, sections 60A.129, subdivision 5; 
  1.10            60K.14, subdivision 1; 61A.092, subdivision 6; 
  1.11            62A.136; 62C.11, subdivision 1; 62C.142, subdivision 
  1.12            2a; 62E.04, subdivision 4; 62S.02, subdivision 1; 
  1.13            64B.30, subdivision 1; 65B.29, subdivisions 2 and 3; 
  1.14            72A.20, subdivision 17; 72A.499, subdivision 1; and 
  1.15            79A.22, subdivisions 3 and 11; Minnesota Statutes 1999 
  1.16            Supplement, sections 72A.20, subdivision 23; 79A.22, 
  1.17            subdivision 2; 79A.23, subdivisions 1, 2, and 3; 
  1.18            79A.24, subdivision 2; repealing Minnesota Statutes 
  1.19            1998, sections 62A.285, subdivision 4; 62A.651; 
  1.20            62H.10, subdivision 4; and 65B.13. 
  1.21  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.22     Section 1.  Minnesota Statutes 1998, section 60A.129, 
  1.23  subdivision 5, is amended to read: 
  1.24     Subd. 5.  [CONSOLIDATED FILING.] (a) The commissioner may 
  1.25  allow an insurer to file a consolidated loss reserve 
  1.26  certification required by subdivision 2, in lieu of separate 
  1.27  loss certifications and may allow an insurer to file 
  1.28  consolidated or combined audited financial statements required 
  1.29  by subdivision 3, paragraph (a), in lieu of separate annual 
  1.30  audited financial statements, where it can be demonstrated that 
  1.31  an insurer is part of a group of insurance companies that has a 
  1.32  pooling or 100 percent reinsurance agreement which substantially 
  1.33  affects the solvency and integrity of the reserves of the 
  2.1   insurer and the insurer cedes all of its direct and assumed 
  2.2   business to the pool.  An affiliated insurance company not 
  2.3   meeting these requirements may be included in the consolidated 
  2.4   or combined audited financial statements, if the company's total 
  2.5   admitted assets are less than five percent of the consolidated 
  2.6   group's total admitted assets.  If these circumstances exist, 
  2.7   then the company may file a written application to file a 
  2.8   consolidated loss reserve certification and/or consolidated or 
  2.9   combined audited financial statements.  This application shall 
  2.10  be for a specified period. 
  2.11     (b) A consolidated annual audit filing shall include a 
  2.12  columnar consolidated or combining worksheet.  Amounts shown on 
  2.13  the audited consolidated or combined financial statement shall 
  2.14  be shown on the worksheet.  Amounts for each insurer shall be 
  2.15  stated separately.  Noninsurance operations may be shown on the 
  2.16  worksheet on a combined or individual basis.  Explanations of 
  2.17  consolidating or eliminating entries shall be shown on the 
  2.18  worksheet.  A reconciliation of any differences between the 
  2.19  amounts shown in the individual insurer columns of the worksheet 
  2.20  and comparable amounts shown on the annual statement of the 
  2.21  insurers shall be included on the worksheet. 
  2.22     Sec. 2.  Minnesota Statutes 1998, section 60K.14, 
  2.23  subdivision 1, is amended to read: 
  2.24     Subdivision 1.  [PERSONAL SOLICITATION OF INSURANCE SALES.] 
  2.25  (a)  [DEFINITIONS.] For the purposes of this section, the 
  2.26  following terms have the meanings given them:  
  2.27     (1) "agent" means a person, copartnership, or corporation 
  2.28  required to be licensed pursuant to section 60K.02; and 
  2.29     (2) "personal solicitation" means any contact by an agent, 
  2.30  or any person acting on behalf of an agent, made for the purpose 
  2.31  of selling or attempting to sell insurance, when either the 
  2.32  agent or a person acting for the agent contacts the buyer by 
  2.33  telephone or in person, except:  (i) an attempted sale in which 
  2.34  the buyer personally knows the identity of the agent, the name 
  2.35  of the general agency, if any, which the agent represents, and 
  2.36  the fact that the agent is an insurance agent; (ii) an attempted 
  3.1   sale in which the prospective purchaser of insurance initiated 
  3.2   the contact; or (iii) a personal contact which takes place at 
  3.3   the agent's place of business.  
  3.4      (b)  [DISCLOSURE REQUIREMENT.] Before a personal 
  3.5   solicitation, the agent or person acting for an agent shall, at 
  3.6   the time of initial personal contact with the potential buyer, 
  3.7   clearly and expressly disclose in writing:  
  3.8      (1) the name and state insurance agent license number of 
  3.9   the person making the contact; 
  3.10     (2) the name of the agent, general agency, or insurer that 
  3.11  person represents; and 
  3.12     (3) the fact that the agent, agency, or insurer is in the 
  3.13  business of selling insurance.  
  3.14     If the initial personal contact is made by telephone, the 
  3.15  disclosures required by this subdivision need not be made in 
  3.16  writing. 
  3.17     (c)  [FALSE REPRESENTATION OF GOVERNMENT AFFILIATION.] No 
  3.18  agent or person acting for an agent shall make any communication 
  3.19  to a potential buyer that indicates or gives the impression that 
  3.20  the agent is acting on behalf of a government agency. 
  3.21     Sec. 3.  Minnesota Statutes 1998, section 61A.092, 
  3.22  subdivision 6, is amended to read: 
  3.23     Subd. 6.  [APPLICATION.] This section applies to a policy, 
  3.24  certificate of insurance, or similar evidence of coverage issued 
  3.25  to a Minnesota resident or issued to provide coverage to a 
  3.26  Minnesota resident.  This section does not apply to:  (1) a 
  3.27  certificate of insurance or similar evidence of coverage that 
  3.28  meets the conditions of section 61A.093, subdivision 2; or (2) a 
  3.29  group life insurance policy that contains a provision permitting 
  3.30  the certificate holder, upon termination or layoff from 
  3.31  employment, to retain the coverage provided under the group 
  3.32  policy by paying premiums directly to the insurer, provided that 
  3.33  the employer shall give the employee notice of the employee's 
  3.34  and each related certificate holder's right to continue the 
  3.35  insurance by paying premiums directly to the insurer.  A related 
  3.36  certificate holder is an insured spouse or dependent child of 
  4.1   the employee.  Upon termination of this group policy, each 
  4.2   covered employee, spouse, and dependent child is entitled to 
  4.3   have issued to them a life conversion policy as prescribed in 
  4.4   section 61A.09, subdivision 1, paragraph (h). 
  4.5      Sec. 4.  Minnesota Statutes 1998, section 62A.136, is 
  4.6   amended to read: 
  4.7      62A.136 [DENTAL AND VISION PLAN COVERAGE.] 
  4.8      The following provisions do not apply to health plans 
  4.9   providing dental or vision coverage only:  sections 62A.041; 
  4.10  62A.0411; 62A.047; 62A.149; 62A.151; 62A.152; 62A.154; 62A.155; 
  4.11  62A.17, subdivision 6; 62A.21, subdivision 2b; 62A.26; 
  4.12  62A.28; and 62A.285; 62A.30; 62A.304; 62A.3093; and 62E.16. 
  4.13     Sec. 5.  Minnesota Statutes 1998, section 62C.11, 
  4.14  subdivision 1, is amended to read: 
  4.15     Subdivision 1.  A service plan corporation shall annually 
  4.16  on or before the last day of March, file with the commissioner a 
  4.17  financial statement, in such form as the commissioner shall 
  4.18  prescribe, verified by not less than two of its principal 
  4.19  officers, showing the financial condition of the corporation as 
  4.20  of December 31 of the preceding year.  The statement shall 
  4.21  include an audit report certified by an independent certified 
  4.22  public accountant and reconciled and adjusted to conform to the 
  4.23  financial statement.  
  4.24     Sec. 6.  Minnesota Statutes 1998, section 62C.142, 
  4.25  subdivision 2a, is amended to read: 
  4.26     Subd. 2a.  [CONTINUATION PRIVILEGE.] Every subscriber 
  4.27  contract, other than a contract whose continuance is contingent 
  4.28  upon continued employment or membership, shall contain a 
  4.29  provision which permits continuation of coverage under the 
  4.30  contract for the subscriber's former spouse and children upon 
  4.31  entry of a valid decree of dissolution of marriage, if the 
  4.32  decree requires the subscriber to provide continued coverage for 
  4.33  those persons.  The coverage may be continued until the earlier 
  4.34  of the following dates:  
  4.35     (a) the date of remarriage of either the subscriber or the 
  4.36  subscriber's former spouse becomes covered under any other group 
  5.1   health plan; or 
  5.2      (b) the date coverage would otherwise terminate under the 
  5.3   subscriber contract.  
  5.4      The contract must require the group contract holder to, 
  5.5   upon request, provide the insured with written verification from 
  5.6   the insurer of the cost of this coverage promptly at the time of 
  5.7   eligibility for this coverage and at any time during the 
  5.8   continuation period.  In no event shall the amount of premium 
  5.9   charged exceed 102 percent of the cost to the plan for such 
  5.10  period of coverage for other similarly situated spouses and 
  5.11  dependent children with respect to whom the marital relationship 
  5.12  has not dissolved, without regard to whether such cost is paid 
  5.13  by the employer or employee. 
  5.14     Sec. 7.  Minnesota Statutes 1998, section 62E.04, 
  5.15  subdivision 4, is amended to read: 
  5.16     Subd. 4.  [MAJOR MEDICAL COVERAGE.] Each insurer and 
  5.17  fraternal shall affirmatively offer coverage of major medical 
  5.18  expenses to every applicant who applies to the insurer or 
  5.19  fraternal for a new unqualified policy, which has a lifetime 
  5.20  benefit limit of less than $1,000,000, at the time of 
  5.21  application and annually to every holder of such an unqualified 
  5.22  policy of accident and health insurance renewed by the insurer 
  5.23  or fraternal.  The coverage shall provide that when a covered 
  5.24  individual incurs out-of-pocket expenses of $5,000 or more 
  5.25  within a calendar year for services covered in section 62E.06, 
  5.26  subdivision 1, benefits shall be payable, subject to any 
  5.27  copayment authorized by the commissioner, up to a maximum 
  5.28  lifetime limit of $500,000.  The offer of coverage of major 
  5.29  medical expenses may consist of the offer of a rider on an 
  5.30  existing unqualified policy or a new policy which is a qualified 
  5.31  plan. 
  5.32     Sec. 8.  Minnesota Statutes 1998, section 62S.02, 
  5.33  subdivision 1, is amended to read: 
  5.34     Subdivision 1.  [REQUIREMENTS.] A qualified long-term care 
  5.35  insurance policy may not be offered, issued, delivered, or 
  5.36  renewed in this state unless the policy satisfies the 
  6.1   requirements of this chapter and the filing provisions of 
  6.2   section 62A.02.  A qualified long-term care insurance policy 
  6.3   must cover qualified long-term care services. 
  6.4      Sec. 9.  Minnesota Statutes 1998, section 64B.30, 
  6.5   subdivision 1, is amended to read: 
  6.6      Subdivision 1.  [VISITATION AND EXAMINATION.] The 
  6.7   commissioner, or any person the commissioner may appoint, shall 
  6.8   have the power of visitation and examination into the affairs of 
  6.9   any domestic society.  The commissioner shall conduct an 
  6.10  examination at least once in every three years as often as is 
  6.11  required in section 60A.031, subdivision 1.  The commissioner 
  6.12  may: 
  6.13     (1) employ assistance for the purposes of examination and 
  6.14  the commissioner, or any person the commissioner may appoint, 
  6.15  shall have free access to any books, papers, and documents that 
  6.16  relate to the business of the association; and 
  6.17     (2) summon and qualify as witnesses, under oath, and 
  6.18  examine its officers, agents, and employees, or other persons, 
  6.19  in relation to the affairs, transactions, and condition of the 
  6.20  association. 
  6.21     Sec. 10.  Minnesota Statutes 1998, section 65B.29, 
  6.22  subdivision 2, is amended to read: 
  6.23     Subd. 2.  [INSURANCE REQUIRED.] No motor vehicle service 
  6.24  contract may be issued, sold, or offered for sale in this state 
  6.25  unless the provider of the service contract is insured under a 
  6.26  motor vehicle service contract reimbursement insurance policy 
  6.27  issued by an insurer authorized to do business in this 
  6.28  state.  Insurers issuing such a policy are required to have 
  6.29  capital and surplus equal to at least $5,000,000 at the end of 
  6.30  the preceding year.  Capital and surplus must be calculated 
  6.31  using the accounting standards required by section 60A.13. 
  6.32     Sec. 11.  Minnesota Statutes 1998, section 65B.29, 
  6.33  subdivision 3, is amended to read: 
  6.34     Subd. 3.  [FILING REQUIREMENTS.] No motor vehicle service 
  6.35  contract may be issued, sold, or offered for sale in this state 
  6.36  unless a true and correct copy of the service contract and the 
  7.1   provider's reimbursement insurance policy have been filed with 
  7.2   the commissioner and either (1) the commissioner has approved it 
  7.3   or (2) 60 days have elapsed and the commissioner has not 
  7.4   disapproved it as misleading or violative of public policy.  The 
  7.5   commissioner may, by written notice to the provider, extend the 
  7.6   review for an additional period not to exceed 60 days. 
  7.7      Sec. 12.  Minnesota Statutes 1998, section 72A.20, 
  7.8   subdivision 17, is amended to read: 
  7.9      Subd. 17.  [RETURN OF PREMIUMS.] (a) Refusing, upon 
  7.10  surrender of an individual policy of life insurance in the case 
  7.11  of the insured's death, or in the case of a surrender prior to 
  7.12  death, of an individual insurance policy not covered by the 
  7.13  standard nonforfeiture laws under section 61A.24, to refund to 
  7.14  the owner all unearned premiums paid on the policy covering the 
  7.15  insured as of the time of the insured's death or surrender if 
  7.16  the unearned premium is for a period of more than one 
  7.17  month.  The return of unearned premium must be delivered to the 
  7.18  insured within 30 days following receipt by the insurer of the 
  7.19  insured's request for cancellation.  
  7.20     (b) Refusing, upon termination or cancellation of a policy 
  7.21  of automobile insurance under section 65B.14, subdivision 2, or 
  7.22  a policy of homeowner's insurance under section 65A.27, 
  7.23  subdivision 4, or a policy of accident and sickness insurance 
  7.24  under section 62A.01, or a policy of comprehensive health 
  7.25  insurance under chapter 62E, to refund to the insured all 
  7.26  unearned premiums paid on the policy covering the insured as of 
  7.27  the time of the termination or cancellation if the unearned 
  7.28  premium is for a period of more than one month.  The return of 
  7.29  unearned premium must be delivered to the insured within 30 days 
  7.30  following receipt by the insurer of the insured's request for 
  7.31  cancellation. 
  7.32     (c) This subdivision does not apply to policies of 
  7.33  insurance providing coverage only for motorcycles or other 
  7.34  seasonally rated or limited use vehicles where the rate is 
  7.35  reduced to reflect seasonal or limited use. 
  7.36     (d) For purposes of this section, a premium is unearned 
  8.1   during the period of time the insurer has not been exposed to 
  8.2   any risk of loss.  Except for premiums for motorcycle coverage 
  8.3   or other seasonally rated or limited use vehicles where the rate 
  8.4   is reduced to reflect seasonal or limited use, the unearned 
  8.5   premium is determined by multiplying the premium by the fraction 
  8.6   that results from dividing the period of time from the date of 
  8.7   termination to the date the next scheduled premium is due by the 
  8.8   period of time for which the premium was paid. 
  8.9      (e) The owner may cancel a policy referred to in this 
  8.10  section at any time during the policy period.  This provision 
  8.11  supersedes any inconsistent provision of law or any inconsistent 
  8.12  policy provision. 
  8.13     Sec. 13.  Minnesota Statutes 1999 Supplement, section 
  8.14  72A.20, subdivision 23, is amended to read: 
  8.15     Subd. 23.  [DISCRIMINATION IN AUTOMOBILE INSURANCE 
  8.16  POLICIES.] (a) No insurer that offers an automobile insurance 
  8.17  policy in this state shall: 
  8.18     (1) use the employment status of the applicant as an 
  8.19  underwriting standard or guideline; or 
  8.20     (2) deny coverage to a policyholder for the same reason. 
  8.21     (b) No insurer that offers an automobile insurance policy 
  8.22  in this state shall: 
  8.23     (1) use the applicant's status as a residential tenant, as 
  8.24  the term is defined in section 504B.001, subdivision 12, as an 
  8.25  underwriting standard or guideline; or 
  8.26     (2) deny coverage to a policyholder for the same reason; or 
  8.27     (3) make any discrimination in offering or establishing 
  8.28  rates, premiums, dividends, or benefits of any kind, or by way 
  8.29  of rebate, for the same reason.  
  8.30     (c) No insurer that offers an automobile insurance policy 
  8.31  in this state shall: 
  8.32     (1) use the failure of the applicant to have an automobile 
  8.33  policy in force during any period of time before the application 
  8.34  is made as an underwriting standard or guideline; or 
  8.35     (2) deny coverage to a policyholder for the same reason. 
  8.36     This provision Paragraph (c) does not apply if the 
  9.1   applicant was required by law to maintain automobile insurance 
  9.2   coverage and failed to do so. 
  9.3      An insurer may require reasonable proof that the applicant 
  9.4   did not fail to maintain this coverage.  The insurer is not 
  9.5   required to accept the mere lack of a conviction or citation for 
  9.6   failure to maintain this coverage as proof of failure to 
  9.7   maintain coverage.  The insurer must provide the applicant with 
  9.8   information identifying the documentation that is required to 
  9.9   establish reasonable proof that the applicant did not fail to 
  9.10  maintain the coverage. 
  9.11     (d) No insurer that offers an automobile insurance policy 
  9.12  in this state shall use an applicant's prior claims for benefits 
  9.13  paid under section 65B.44 as an underwriting standard or 
  9.14  guideline if the applicant was 50 percent or less negligent in 
  9.15  the accident or accidents causing the claims. 
  9.16     (e) No insurer shall refuse to issue any standard or 
  9.17  preferred policy of motor vehicle insurance or make any 
  9.18  discrimination in the acceptance of risks, in rates, premiums, 
  9.19  dividends, or benefits of any kind, or by way of rebate:  
  9.20     (1) between persons of the same class, or 
  9.21     (2) on account of race, or 
  9.22     (3) on account of physical handicap if the handicap is 
  9.23  compensated for by special training, equipment, prosthetic 
  9.24  device, corrective lenses, or medication and if the physically 
  9.25  handicapped person: 
  9.26     (i) is licensed by the department of public safety to 
  9.27  operate a motor vehicle in this state, and 
  9.28     (ii) operates only vehicles that are equipped with 
  9.29  auxiliary devices and equipment necessary for safe and effective 
  9.30  operation by the handicapped person, or 
  9.31     (4) on account of marital dissolution.  
  9.32     Sec. 14.  Minnesota Statutes 1998, section 72A.499, 
  9.33  subdivision 1, is amended to read: 
  9.34     Subdivision 1.  [NOTICE AND INFORMATION.] In the event of 
  9.35  an adverse underwriting decision, the insurer or insurance agent 
  9.36  responsible for the decision shall provide in writing to the 
 10.1   applicant, policyholder, or individual proposed for coverage: 
 10.2      (1) the specific reason or reasons for the adverse 
 10.3   underwriting decision, a summary of the person's rights under 
 10.4   sections 72A.497 and 72A.498, and that upon request the person 
 10.5   may receive the specific items of personal information that 
 10.6   support those reasons and the specific sources of the 
 10.7   information; or 
 10.8      (2) the specific reason or reasons for the adverse 
 10.9   underwriting decision, the specific items of personal and 
 10.10  privileged information that support those reasons, the names and 
 10.11  addresses of the sources that supplied the specific items of 
 10.12  information specified, and a summary of the rights established 
 10.13  under sections 72A.497 and 72A.498; or 
 10.14     (3) if the adverse underwriting decision is either solely 
 10.15  or partially based upon a report of credit worthiness, credit 
 10.16  standing, or credit capacity that an insurer receives from a 
 10.17  consumer reporting agency, the primary reason or reasons for the 
 10.18  credit score or codes or other credit based information used by 
 10.19  the insurer in the insurer's underwriting. 
 10.20     Sec. 15.  Minnesota Statutes 1999 Supplement, section 
 10.21  79A.22, subdivision 2, is amended to read: 
 10.22     Subd. 2.  [FINANCIAL STANDARDS.] Commercial self-insurance 
 10.23  groups shall have and maintain: 
 10.24     (1) combined net worth of all of the members in an amount 
 10.25  at least equal to 12 ten times the group's selected retention 
 10.26  level of the workers' compensation reinsurance association.  For 
 10.27  purposes of this clause, the amount of any retained surplus by 
 10.28  the group is considered part of the combined net worth of all 
 10.29  the members; 
 10.30     (2) sufficient assets and liquidity in the group's common 
 10.31  claims fund to promptly and completely meet all obligations of 
 10.32  its members under this chapter and chapter 176. 
 10.33     Sec. 16.  Minnesota Statutes 1998, section 79A.22, 
 10.34  subdivision 3, is amended to read: 
 10.35     Subd. 3.  [NEW MEMBERSHIP.] The commercial self-insurance 
 10.36  group shall file with the commissioner the name of any new 
 11.1   employer that has been accepted in the group prior to the 
 11.2   initiation date of membership along with the member's signed 
 11.3   indemnity agreement and evidence the member has deposited 
 11.4   sufficient premiums with the group as required by the commercial 
 11.5   self-insurance group's bylaws or plan of operation.  The 
 11.6   security deposit of the group will shall be increased quarterly 
 11.7   to an amount equal to 50 percent of the new member's premium 
 11.8   members' premiums for that quarter.  If the total increase of 
 11.9   new members' premiums for the first quarter is less than five 
 11.10  percent of the total annual premium of the group, no quarterly 
 11.11  increase is necessary until the cumulative quarterly increases 
 11.12  for that calendar year exceed five percent of the total premium 
 11.13  of the group.  The department of commerce commissioner may, at 
 11.14  its the commissioner's option, review the financial statement of 
 11.15  any applicant whose premium equals 25 percent or more of the 
 11.16  group's total premium. 
 11.17     Sec. 17.  Minnesota Statutes 1998, section 79A.22, 
 11.18  subdivision 11, is amended to read: 
 11.19     Subd. 11.  [DISBURSEMENT OF FUND SURPLUS.] (a) One hundred 
 11.20  percent of any surplus money for a fund year in excess of 125 
 11.21  percent of the amount necessary to fulfill all obligations under 
 11.22  the Workers' Compensation Act, chapter 176, for that fund year 
 11.23  may be declared refundable to a member at any time.  The date 
 11.24  shall be no earlier than 18 months following the end of such 
 11.25  fund year.  The first disbursement of fund surplus may not be 
 11.26  made prior to the completion of an operational audit by the 
 11.27  commissioner written approval of the commissioner.  There can be 
 11.28  no more than one refund made in any 12-month period.  When all 
 11.29  the claims of any one fund year have been fully paid, as 
 11.30  certified by an actuary, all surplus money from that fund year 
 11.31  may be declared refundable. 
 11.32     (b) The commercial self-insurance group shall give notice 
 11.33  to the commissioner of any refund.  Said notice shall be 
 11.34  accompanied by a statement from the commercial self-insurer 
 11.35  group's certified public accountant certifying that the proposed 
 11.36  refund is in compliance with paragraph (a). 
 12.1      Sec. 18.  Minnesota Statutes 1999 Supplement, section 
 12.2   79A.23, subdivision 1, is amended to read: 
 12.3      Subdivision 1.  [REQUIRED REPORTS TO COMMISSIONER.] Each 
 12.4   commercial self-insurance group shall submit the following 
 12.5   documents to the commissioner.  
 12.6      (a) An annual report shall be submitted by April 1 showing 
 12.7   the incurred losses, paid and unpaid, specifying indemnity and 
 12.8   medical losses by classification, payroll by classification, and 
 12.9   current estimated outstanding liability for workers' 
 12.10  compensation on a calendar year basis, in a manner and on forms 
 12.11  available from the commissioner.  In addition each group will 
 12.12  submit a quarterly interim loss report showing incurred losses 
 12.13  for all its membership. 
 12.14     (b) Each commercial self-insurance group shall submit 
 12.15  within 45 days of the end of each quarter:  
 12.16     (1) a schedule showing all the members who participate in 
 12.17  the group, their date of inception, and date of withdrawal, if 
 12.18  applicable; 
 12.19     (2) a separate section identifying which members were added 
 12.20  or withdrawn during that quarter; and 
 12.21     (3) an internal financial statement and copies of the 
 12.22  fiscal agent's statements supporting the balances in the common 
 12.23  claims fund. 
 12.24     (c) The commercial self-insurance group shall submit an 
 12.25  annual certified financial audit report of the commercial 
 12.26  self-insurance group fund by April 1 of the following year.  The 
 12.27  report must be accompanied by an expense schedule showing the 
 12.28  commercial self-insurance group's operational costs for the same 
 12.29  year including service company charges, accounting and actuarial 
 12.30  fees, fund administration charges, reinsurance premiums, 
 12.31  commissions, and any other costs associated with the 
 12.32  administration of the group program. 
 12.33     (d) An officer of the commercial self-insurance group 
 12.34  shall, under oath, attest to the accuracy of each report 
 12.35  submitted under paragraphs (a), (b), and (c).  Upon sufficient 
 12.36  cause, the commissioner shall require the commercial 
 13.1   self-insurance group to submit a certified audit of payroll and 
 13.2   claim records conducted by an independent auditor approved by 
 13.3   the commissioner, based on generally accepted accounting 
 13.4   principles and generally accepted auditing standards, and 
 13.5   supported by an actuarial review and opinion of the future 
 13.6   contingent liabilities.  The basis for sufficient cause shall 
 13.7   include the following factors: 
 13.8      (1) where the losses reported appear significantly 
 13.9   different from similar types of groups; 
 13.10     (2) where major changes in the reports exist from year to 
 13.11  year, which are not solely attributable to economic factors; or 
 13.12     (3) where the commissioner has reason to believe that the 
 13.13  losses and payroll in the report do not accurately reflect the 
 13.14  losses and payroll of the commercial self-insurance group.  
 13.15  If any discrepancy is found, the commissioner shall require 
 13.16  changes in the commercial self-insurance group's business plan 
 13.17  or service company recordkeeping practices. 
 13.18     (e) Each commercial self-insurance group shall submit by 
 13.19  September 15 a copy of the group's annual federal and state 
 13.20  income tax returns or provide proof that it has received an 
 13.21  exemption from these filings. 
 13.22     (f) With the annual loss report each commercial 
 13.23  self-insurance group shall report to the commissioner any 
 13.24  worker's compensation claim where the full, undiscounted value 
 13.25  is estimated to exceed $50,000, in a manner and on forms 
 13.26  prescribed by the commissioner. 
 13.27     (g) Each commercial self-insurance group shall submit by 
 13.28  May 1 a list of all members and the percentage of premium each 
 13.29  represents to the total group's premium for the previous 
 13.30  calendar year.  
 13.31     (h) Each commercial self-insurance group shall submit by 
 13.32  October 15 the following documents prepared by the group's 
 13.33  certified public accountant:  
 13.34     (1) a compiled combined financial statement of group 
 13.35  members and a list of members included in this statement.  An 
 13.36  "Agreed Upon Procedures" report, as determined by the 
 14.1   commissioner, indicating combined net worth, total assets, cash 
 14.2   flow, and net income of the group members may be filed in lieu 
 14.3   of the compiled combined financial statement; and 
 14.4      (2) a report that the statements which were combined have 
 14.5   met the requirements of subdivision 2.  
 14.6      (i) If any group member comprises over 25 percent of total 
 14.7   group premium, that member's financial statement must be 
 14.8   reviewed or audited, and, at the commissioner's option, must be 
 14.9   filed with the department of commerce commissioner by October 15 
 14.10  of the following year. 
 14.11     (j) Each commercial self-insurance group shall submit a 
 14.12  copy of each member's accountant's report letter from the 
 14.13  reports used in compiling the combined financial 
 14.14  statements.  This requirement does not apply to any group that 
 14.15  has been in existence for at least three years. 
 14.16     Sec. 19.  Minnesota Statutes 1999 Supplement, section 
 14.17  79A.23, subdivision 2, is amended to read: 
 14.18     Subd. 2.  [REQUIRED REPORTS FROM MEMBERS TO GROUP.] (a) 
 14.19  Each member of the commercial self-insurance group shall, by 
 14.20  September 15, submit to the group its most recent annual 
 14.21  financial statement, together with other financial information 
 14.22  the group may require.  These financial statements submitted 
 14.23  must not have a fiscal year end date older than January 15 of 
 14.24  the group's calendar year end.  Individual group members 
 14.25  constituting at least 25 percent of the group's annual premium 
 14.26  shall submit to the group reviewed or audited financial 
 14.27  statements.  The remaining members must submit compilation level 
 14.28  statements.  
 14.29     (b) For groups that have been in existence for at least 
 14.30  three years, individual group members may satisfy the 
 14.31  requirements of paragraph (a) by submitting compiled, reviewed, 
 14.32  or audited statements or the most recent federal income tax 
 14.33  return filed by the member. 
 14.34     Sec. 20.  Minnesota Statutes 1999 Supplement, section 
 14.35  79A.23, subdivision 3, is amended to read: 
 14.36     Subd. 3.  [OPERATIONAL AUDIT.] (a) The commissioner, prior 
 15.1   to authorizing surplus distribution of a commercial 
 15.2   self-insurance group's first fund year or no later than after 
 15.3   the third anniversary of the group's authority to self-insure, 
 15.4   shall may conduct an operational audit of the commercial 
 15.5   self-insurance group's claim handling and reserve practices as 
 15.6   well as its underwriting procedures to determine if they adhere 
 15.7   to the group's business plan.  The commissioner may select 
 15.8   outside consultants to assist in conducting the audit.  After 
 15.9   completion of the audit, the commissioner shall either renew or 
 15.10  revoke the commercial self-insurance group's authority to 
 15.11  self-insure.  The commissioner may also order any changes deemed 
 15.12  necessary in the claims handling, reserving practices, or 
 15.13  underwriting procedures of the group. 
 15.14     (b) The cost of the operational audit shall be borne by the 
 15.15  commercial self-insurance group. 
 15.16     Sec. 21.  Minnesota Statutes 1999 Supplement, section 
 15.17  79A.24, subdivision 2, is amended to read: 
 15.18     Subd. 2.  [MINIMUM DEPOSIT.] The minimum deposit is 125 
 15.19  percent of the commercial self-insurance group's estimated 
 15.20  future liability for the payment of compensation as determined 
 15.21  by an actuary.  If all the members of the commercial 
 15.22  self-insurance group have submitted reviewed or audited 
 15.23  financial statements to the group's accountant has been in 
 15.24  existence for three years, this minimum deposit shall be 110 
 15.25  percent of the commercial self-insurance group's estimated 
 15.26  future liability for the payment of workers' compensation as 
 15.27  determined by an actuary.  The group must file a letter with the 
 15.28  commissioner from the group's accountant which confirms that the 
 15.29  compiled combined financial statements were prepared from 
 15.30  members reviewed or audited financial statements only before the 
 15.31  lower security deposit is allowed.  Each actuarial study shall 
 15.32  include a projection of future losses during a one-year period 
 15.33  until the next scheduled actuarial study, less payments 
 15.34  anticipated to be made during that time.  Deduction should be 
 15.35  made for the total amount which is estimated to be returned to 
 15.36  the commercial self-insurance group from any specific excess 
 16.1   insurance coverage, aggregate excess insurance coverage, and any 
 16.2   supplementary benefits which are estimated to be reimbursed by 
 16.3   the special compensation fund.  Supplementary benefits will not 
 16.4   be reimbursed by the special compensation fund unless the 
 16.5   special compensation fund assessment pursuant to section 176.129 
 16.6   is paid and the required reports are filed with the special 
 16.7   compensation fund.  In the case of surety bonds, bonds shall 
 16.8   secure administrative and legal costs in addition to the 
 16.9   liability for payment of compensation reflected on the face of 
 16.10  the bond.  In no event shall the security be less than the 
 16.11  group's selected retention limit of the workers' compensation 
 16.12  reinsurance association.  The posting or depositing of security 
 16.13  under this section shall release all previously posted or 
 16.14  deposited security from any obligations under the posting or 
 16.15  depositing and any surety bond so released shall be returned to 
 16.16  the surety.  Any other security shall be returned to the 
 16.17  depositor or the person posting the bond. 
 16.18     Sec. 22.  [MINNESOTA WORKERS' COMPENSATION ASSIGNED RISK 
 16.19  PLAN SURPLUS UTILIZATION.] 
 16.20     Subdivision 1.  [EXCESS SURPLUS.] (a) For purposes of this 
 16.21  section, "excess surplus" means the amount of the assigned risk 
 16.22  plan surplus fund that exceeds the amount necessary to pay all 
 16.23  current and future liabilities of the assigned risk plan, 
 16.24  including, but not limited to: 
 16.25     (1) administrative expenses; 
 16.26     (2) benefit claims; and 
 16.27     (3) in the event the assigned risk plan is dissolved under 
 16.28  Minnesota Statutes, section 79.251, subdivision 8, the amounts 
 16.29  that would be due insurers who have paid assessments to the 
 16.30  assigned risk plan. 
 16.31     (b) On July 1, 2000, and July 1, 2001, the commissioner of 
 16.32  commerce shall certify to the commissioner of finance the amount 
 16.33  of the assigned risk plan excess surplus and shall direct the 
 16.34  transfer of the excess surplus funds as provided in subdivision 
 16.35  2.  The transfers are not subject to review under Minnesota 
 16.36  Statutes, chapter 14. 
 17.1      Subd. 2.  [TRANSFER OF EXCESS SURPLUS FUNDS FOR THE BENEFIT 
 17.2   OF THE MINNESOTA COMPREHENSIVE HEALTH ASSOCIATION.] (a) The 
 17.3   commissioner of commerce shall direct the transfer of excess 
 17.4   surplus money for the benefit of the Minnesota comprehensive 
 17.5   health association according to paragraphs (b) to (d).  The 
 17.6   excess surplus available for transfer to the general fund under 
 17.7   2000 H.F. No. 4127, if enacted, is reduced by the amount of 
 17.8   these transfers, notwithstanding anything in H.F. No. 4127 to 
 17.9   the contrary.  
 17.10     (b) On July 1, 2000, $65,000,000 must be paid into the 
 17.11  state treasury and credited to a separate account within the 
 17.12  special revenue fund called the Minnesota comprehensive health 
 17.13  association endowment account.  Interest attributable to money 
 17.14  in the account must be credited to the Minnesota comprehensive 
 17.15  health association endowment account of the special revenue 
 17.16  fund.  Money, including interest earned, in the Minnesota 
 17.17  comprehensive health association endowment account must be used 
 17.18  to fund current and future deficits of the Minnesota 
 17.19  comprehensive health association.  Except as otherwise provided 
 17.20  in subdivision 3, $5,200,000 is appropriated from the endowment 
 17.21  account to the commissioner of commerce on January 15, 2001, and 
 17.22  on January 15 annually thereafter, and disbursed to the 
 17.23  association for the purpose of reducing its operating deficit.  
 17.24  The payments made under this paragraph must be made first from 
 17.25  the interest earned by the endowment, and if the interest is not 
 17.26  sufficient, then from the endowment principal, until the 
 17.27  endowment is exhausted. 
 17.28     (c) On January 15, 2001, $15,000,000 must be paid to the 
 17.29  state treasury and credited to the general fund and $15,000,000 
 17.30  is appropriated from the general fund to the commissioner of 
 17.31  commerce for disbursement to the association for the exclusive 
 17.32  purpose of reducing its operating deficit assessment for 
 17.33  calendar year 2001. 
 17.34     (d) On January 15, 2002: 
 17.35     (1) $15,000,000 must be paid to the state treasury and 
 17.36  credited to the general fund; and 
 18.1      (2) $15,000,000 is appropriated from the general fund to 
 18.2   the commissioner of commerce for disbursement to the association 
 18.3   for the exclusive purpose of reducing its operating deficit 
 18.4   assessment for calendar year 2002.  
 18.5      Subd. 3.  [RESTRICTIONS ON TRANSFER OF MINNESOTA WORKERS' 
 18.6   COMPENSATION PLAN ASSIGNED RISK PROGRAM EXCESS SURPLUS.] Thirty 
 18.7   days before each annual scheduled appropriation of $5,200,000 
 18.8   from the Minnesota comprehensive health association endowment 
 18.9   account to the association as set forth in subdivision 2, 
 18.10  paragraph (b), the commissioner of commerce, in consultation 
 18.11  with the commissioner of health, must determine whether the 
 18.12  association has made satisfactory progress in attaining and 
 18.13  maintaining the cost containment goals of the association.  If 
 18.14  the commissioner of commerce determines that satisfactory 
 18.15  progress has not been achieved, the scheduled appropriation for 
 18.16  the Minnesota comprehensive health association endowment account 
 18.17  to the association must not be made.  The determination of the 
 18.18  commissioner of commerce is not subject to review under 
 18.19  Minnesota Statutes, chapter 14. 
 18.20     Sec. 23.  [REPEALER.] 
 18.21     Minnesota Statutes 1998, sections 62A.285, subdivision 4; 
 18.22  62A.651; 62H.10, subdivision 4; and 65B.13, are repealed. 
 18.23     Sec. 24.  [EFFECTIVE DATES.] 
 18.24     Sections 4 to 6, 8, 13, and 15 to 23 are effective the day 
 18.25  following enactment.