HF 2832

as introduced - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

A bill for an act
relating to insurance; creating an employee health coverage reinsurance pool for
businesses and political subdivisions; appropriating money; amending Minnesota
Statutes 2004, sections 123A.21, subdivision 7; 471.61, by adding a subdivision;
471.617, by adding a subdivision; proposing coding for new law as Minnesota
Statutes, chapter 62U.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [62U.01] MINNESOTA STATEWIDE HEALTH REINSURANCE
ASSOCIATION.
new text end

new text begin Subdivision 1. new text end

new text begin Creation. new text end

new text begin The Minnesota Statewide Health Reinsurance Association
may operate as a nonprofit unincorporated association, but is authorized to incorporate
under chapter 317A.
new text end

new text begin Subd. 2. new text end

new text begin Purpose. new text end

new text begin The association is established to provide a voluntary private
reinsurance and stop-loss pool for health coverage provided to employees and dependents
by Minnesota employers. Public sector and private sector employers are eligible to apply
for reinsurance through the pool, regardless of whether the underlying health coverage is
insured or self-insured.
new text end

new text begin Subd. 3. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the terms defined in this
subdivision have the meanings given.
new text end

new text begin (b) "Eligible entity" means an insured or self-insured public or private sector
employer, a self-insured group of public or private sector employers, the public employees
insurance program, the Minnesota employees insurance program, a service cooperative,
or a multiple employer welfare arrangement.
new text end

new text begin (c) "Reinsurance" means reinsurance or stop-loss coverage.
new text end

new text begin (d) "Insured" means an eligible entity that obtains reinsurance through the
association.
new text end

new text begin Subd. 4. new text end

new text begin Exemptions. new text end

new text begin The association, its transactions, and all property owned by it
are exempt from taxation under the laws of this state or any of its subdivisions, including,
but not limited to, premiums taxes imposed under chapter 297I, income tax, sales tax, use
tax, and property tax. The association may seek exemption from payment of all fees and
taxes levied by the federal government. Except as otherwise provided in this chapter, the
association is not subject to the provisions of chapters 13, 13D, 60A, and 62A to 62H.
Reinsurance or stop-loss insurance premiums received by the board are subject to the
assessment of the Minnesota Comprehensive Health Association under chapter 62E to the
same extent as other reinsurance or stop-loss coverage. The association is not a public
employer and is not subject to the provisions of chapters 179A and 353. Members of the
board of directors and entities that obtain coverage through the association are exempt
from sections 325D.49 to 325D.66 in the performance of their duties as directors and as
insureds of the association.
new text end

new text begin Subd. 5. new text end

new text begin Powers of association. new text end

new text begin The association may exercise all of the powers of a
corporation formed under chapter 317A, including, but not limited to, the authority to:
new text end

new text begin (1) establish operating rules, conditions, and procedures relating to the reinsurance
of members' risks;
new text end

new text begin (2) assess insureds in accordance with the provisions of this section and to make
advance interim assessments as may be reasonable and necessary for organizational and
interim operating expenses;
new text end

new text begin (3) sue and be sued, including taking any legal action necessary to recover any
assessments;
new text end

new text begin (4) enter into contracts necessary to carry out the provisions of this chapter;
new text end

new text begin (5) establish operating, administrative, and accounting procedures for the operation
of the association; and
new text end

new text begin (6) borrow money against the future receipt of premiums and assessments up to the
amount of the previous year's assessment, with the prior approval of the commissioner
of commerce.
new text end

new text begin The provisions of this chapter govern if the provisions of chapter 317A conflict with
this chapter. The association may operate under the plan of operation approved by the
board and shall be governed in accordance with this chapter and may operate in accordance
with chapter 317A. If the association incorporates as a nonprofit corporation under chapter
317A, the filing of the plan of operation meets the requirements of filing articles.
new text end

new text begin Subd. 6. new text end

new text begin Role of commissioner. new text end

new text begin The commissioner of commerce shall supervise
the association in accordance with this chapter. The commissioner of commerce may
examine the association. The association's reinsurance policy forms, contracts, premium
rates, and assessments are subject to the approval of the commissioner of commerce. The
association's policy forms, contracts, and premium rates are deemed approved if not
disapproved by the commissioner of commerce within 60 days after the date of filing them
with the commissioner of commerce. The association's assessments are deemed approved
if not disapproved by the commissioner of commerce within 15 business days after filing
them with the commissioner of commerce. The association shall notify the commissioner
of all board meetings, and the commissioner or the commissioner's designee may attend
all board meetings. The association shall file an annual report with the commissioner on
or before July 1 of each year, beginning July 1, 2008, describing its activities during the
preceding calendar year. The report must include a financial report, a summary of claims
paid by the association, and full information regarding compensation and reimbursements
paid by the association to the directors. The annual report must be available for public
inspection.
new text end

Sec. 2.

new text begin [62U.02] BOARD OF DIRECTORS.
new text end

new text begin Subdivision 1. new text end

new text begin Composition of board. new text end

new text begin The association shall exercise its powers
through a board of nine directors appointed by the governor. Four directors must be
public members who are deeply committed to the success of the association. Four of the
nonpublic directors must be representatives of employers or other organizations that are
eligible to obtain reinsurance or stop-loss through the association, including at least one
governmental employer. The ninth board member must represent employees.
new text end

new text begin Subd. 2. new text end

new text begin Appointment of board. new text end

new text begin On or before July 1, 2006, the governor shall
appoint an interim board of directors of the association who shall serve until December 31,
2007. Thereafter the governor shall appoint board members to serve staggered three-year
terms, so that one-third of the terms expire each year.
new text end

new text begin Subd. 3. new text end

new text begin Term of office. new text end

new text begin Each director shall hold office until expiration of the
director's term or until the director's successor is duly appointed and qualified, or until the
director's death, resignation, or removal.
new text end

new text begin Subd. 4. new text end

new text begin Resignation and removal. new text end

new text begin A director may resign at any time by giving
written notice to the governor. The resignation takes effect at the time the resignation is
received unless the resignation specifies a later date. If a vacancy occurs for a director, the
governor shall appoint a new director for the duration of the unexpired term.
new text end

new text begin Subd. 5. new text end

new text begin Quorum. new text end

new text begin A majority of the directors constitutes a quorum for the
transaction of business. If a vacancy exists by reason of death, resignation, or otherwise, a
majority of the remaining directors constitutes a quorum.
new text end

new text begin Subd. 6. new text end

new text begin Duties of directors. new text end

new text begin On or before January 1, 2007, the board or the interim
board shall develop a plan of operation and reasonable operating rules to ensure the fair,
reasonable, and equitable administration of the association. The plan of operation must
include the development of procedures for selecting an administering entity, establishment
of the powers and duties of the administering entity, and establishment of procedures for
collecting assessments from insureds, including the imposition of interest penalties for late
payments of assessments. The plan of operation must be submitted to the commissioner
for review and a determination that the plan is consistent with the requirements of this
section. The board of directors may subsequently amend, change, or revise the plan of
operation with the same review and determination by the commissioner. The original plan
and proposed amendments to it are deemed to be consistent with the requirements of this
section unless objected to by the commissioner within 60 days.
new text end

new text begin Subd. 7. new text end

new text begin Compensation. new text end

new text begin Directors may be reimbursed by the association for
reasonable and necessary expenses incurred by them in performing their duties as directors
and may be compensated by the association at a rate determined by the board per day
spent on authorized association activities.
new text end

new text begin Subd. 8. new text end

new text begin Officers. new text end

new text begin The board may elect officers and establish committees as
provided in the bylaws of the association. Officers have the authority and duties in the
management of the association as prescribed by the bylaws and determined by the board
of directors.
new text end

new text begin Subd. 9. new text end

new text begin Majority vote. new text end

new text begin Approval by a majority of the directors present is required
for any action of the board.
new text end

Sec. 3.

new text begin [62U.03] COMPLIANCE BY INSUREDS.
new text end

new text begin All insureds shall comply with the provisions of this chapter, the association's
bylaws, the plan of operation developed by the board of directors, and any other operating,
administrative, or other procedures established by the board of directors for the operation
of the association. The board may terminate the coverage of an insured that violates
this section.
new text end

Sec. 4.

new text begin [62U.04] ADMINISTRATION OF ASSOCIATION.
new text end

new text begin Subdivision 1. new text end

new text begin Administrator. new text end

new text begin The association shall contract with a qualified entity
to operate and administer the association. If there is no available qualified entity, or in
the event of a termination under subdivision 2, the association may directly operate and
administer the reinsurance program. The administrator shall perform all administrative
functions required by sections 62U.01 to 62U.10. The board of directors shall develop
administrative functions required by those sections and written criteria for the selection of
an administrator. The administrator must be selected by the board of directors.
new text end

new text begin Subd. 2. new text end

new text begin Term. new text end

new text begin The administrator shall serve for a period of three years, unless the
administrator requests the termination of its contract and the termination is approved by
the board of directors. The board of directors shall approve or deny a request to terminate
within 90 days of its receipt. A failure to make a final decision on a request to terminate
within 90 days is considered an approval.
new text end

new text begin Subd. 3. new text end

new text begin Duties of administrator. new text end

new text begin The association shall enter into a written contract
with the administrator to carry out its duties and responsibilities. The administrator shall
perform all administrative functions required by sections 62U.01 to 62U.10, including the:
new text end

new text begin (1) preparation and submission of an annual report to the commissioner;
new text end

new text begin (2) preparation and submission of monthly reports to the board of directors;
new text end

new text begin (3) calculation of all assessments and the notification thereof of insureds;
new text end

new text begin (4) payment of claims to insureds following the submission by insureds of acceptable
claim documentation;
new text end

new text begin (5) provision of claim reports to insureds as determined by the board of directors;
new text end

new text begin (6) recommendation to the board of reinsurance coverages, premiums, and
underwriting standards;
new text end

new text begin (7) marketing of the reinsurance program; and
new text end

new text begin (8) other duties as determined by the board.
new text end

new text begin Subd. 4. new text end

new text begin Bid process. new text end

new text begin The association shall issue a request for proposal for
administration of the reinsurance association and shall solicit responses from qualified
entities. Methods of compensation of the administrator must be a part of the bid process.
The administrator shall substantiate its cost reports consistent with generally accepted
accounting principles. The contract for administration must be rebid every three years.
new text end

new text begin Subd. 5. new text end

new text begin Audits. new text end

new text begin The board of directors may conduct periodic audits to verify the
accuracy of financial data and reports submitted by the administrator. The board may
establish in the plan of operation a uniform audit program.
new text end

new text begin Subd. 6. new text end

new text begin Records of association. new text end

new text begin The association shall maintain appropriate
records and documentation relating to the activities of the association. All individual
patient-identifying claims data and information are confidential and not subject to
disclosure of any kind, except as necessary to resolve claims, provided that an employer
must not be given access to such data regarding a person covered by that employer. All
records, documents, and work product prepared by the association or by the administrator
for the association are the property of the association. The commissioner shall have access
to the data for the purposes of carrying out the supervisory functions provided for in
sections 62U.01 to 62U.10.
new text end

new text begin Subd. 7. new text end

new text begin Indemnification. new text end

new text begin The association shall indemnify directors, officers,
employees, and agents to the same extent that persons may be indemnified by corporations
under section .
new text end

Sec. 5.

new text begin [62U.05] PARTICIPATION IN REINSURANCE ASSOCIATION.
new text end

new text begin Subdivision 1. new text end

new text begin Minimum standards. new text end

new text begin The board of directors or the interim board
shall establish minimum claim processing and managed care standards which must be met
by the underlying health coverage in order to have its risk reinsured by the association.
Adherence to these standards must be subject to audit by the association.
new text end

new text begin Subd. 2. new text end

new text begin Underwriting standards. new text end

new text begin The board shall develop and use underwriting
standards for determining whether to reinsure an eligible entity, and on what terms. The
standards must be similar to those customarily used in the health reinsurance and stop-loss
markets and must avoid subjecting the association to undue risk, in the opinion of the
board.
new text end

new text begin Subd. 3. new text end

new text begin Length of participation. new text end

new text begin An insured's initial participation in the
reinsurance pool is for a period of two years. Subsequent elections of participation are
also for two-year periods.
new text end

Sec. 6.

new text begin [62U.06] CEDING OF RISK.
new text end

new text begin Subdivision 1. new text end

new text begin Prospective ceding. new text end

new text begin An employer or other eligible entity may
prospectively reinsure its entire employer group and may exclude certain employees only
with the approval of the administrator, subject to the association's operating rules.
new text end

new text begin Subd. 2. new text end

new text begin Reinsurance termination. new text end

new text begin An insured may terminate reinsurance through
the association for an entire group on the anniversary date of coverage for that group,
with a 60-day written notice, subject to the two-year participation requirement of section
62U.05, subdivision 3.
new text end

new text begin Subd. 3. new text end

new text begin Continuing insureds responsibility. new text end

new text begin An eligible entity transferring risk
to the association is completely responsible for administering its health benefit plans.
An eligible entity shall apply its case management and claim processing techniques
consistently between reinsured and nonreinsured business.
new text end

Sec. 7.

new text begin [62U.07] ALLOWED REINSURANCE BENEFITS.
new text end

new text begin An eligible entity may reinsure through the association only those benefits permitted
to be reinsured by the board. The board may establish guidelines to clarify what coverage
is included.
new text end

Sec. 8.

new text begin [62U.08] TRANSFER OF RISK.
new text end

new text begin Subdivision 1. new text end

new text begin Reinsurance threshold. new text end

new text begin An eligible entity participating in the
association may transfer up to a percentage of the risk above a reinsurance threshold. The
board shall determine the percentage and the threshold.
new text end

new text begin Satisfaction of the reinsurance threshold must be determined by the board of
directors based on discounted eligible charges. The board may establish an audit process
to assure consistency in the submission of charge calculations by eligible entities to the
association. The association shall determine the amount to be paid to the eligible entity
for claims submitted based on discounted eligible charges. The board may also establish
upper limits on the amount paid by the association based on a usual and customary
determination. The board shall establish in the plan of operation a procedure for
determining the discounted eligible charge.
new text end

new text begin Subd. 2. new text end

new text begin Conversion factors. new text end

new text begin The board shall establish a standardized conversion
table for determining equivalent charges for eligible entities that use alternative provider
reimbursement methods. If an eligible entity establishes to the board that the health
carrier's conversion factor is equivalent to the association's standardized conversion table,
the association shall accept the health carrier's conversion factor.
new text end

new text begin Subd. 3. new text end

new text begin Board authority. new text end

new text begin The board shall establish criteria for changing the
threshold amount or retention percentage. The board shall review the criteria on an annual
basis. The board shall provide the insureds with an opportunity to comment on the criteria
at the time of the annual review.
new text end

new text begin Subd. 4. new text end

new text begin Notification of transfer of risk. new text end

new text begin An insured must notify the association,
within 90 days of receipt of proof of loss, of satisfaction of a reinsurance threshold. After
satisfaction of the reinsurance threshold, an eligible entity continues to be liable to its
providers, eligible employees, and dependents for payment of claims in accordance with
the underlying benefit plan. Eligible entities shall not pend or delay payment of otherwise
valid claims due to the transfer of risk to the association.
new text end

new text begin Subd. 5. new text end

new text begin Periodic studies. new text end

new text begin The board shall, on a biennial basis, prepare and submit
a report to the commissioner of commerce on the effect of the reinsurance association on
the insurance market. The first study must be presented to the commissioner no later than
January 1, 2009. After two years of operation, the board shall study the composition of the
board and determine whether the initial appointments reflect the types of interests and
backgrounds appropriate to the reinsurance association and recommend any desirable
changes.
new text end

Sec. 9.

new text begin [62U.09] REINSURANCE PREMIUMS.
new text end

new text begin Subdivision 1. new text end

new text begin Monthly premium. new text end

new text begin An eligible entity ceding a group to the
reinsurance association shall be assessed a monthly reinsurance coverage premium
determined by the board. The board may consider benefit levels in establishing the
reinsurance coverage premium.
new text end

new text begin Subd. 2. new text end

new text begin Adjustment of premium rates. new text end

new text begin The board of directors shall establish
operating rules to allocate adjustments to the reinsurance premium charge of no more
than minus 25 percent of the monthly reinsurance premium for eligible entities that can
demonstrate administrative efficiencies and cost-effective handling of equivalent risks.
The adjustment must be made monthly, unless the board provides for a different interval in
its operating rules. The operating rules must establish objective and measurable criteria
which must be met by an eligible entity in order to be eligible for an adjustment. These
criteria must include consideration of efficiency attributable to case management, but not
consideration of such factors as provider discounts.
new text end

new text begin Subd. 3. new text end

new text begin Liability for premium. new text end

new text begin An eligible entity is liable to the board for the
cost of the reinsurance premium and may not transfer or purport to transfer this liability to
the persons covered by the reinsurance.
new text end

Sec. 10.

new text begin [62U.10] FINANCIAL MANAGEMENT AND ASSESSMENTS.
new text end

new text begin Subdivision 1. new text end

new text begin Assessment by board. new text end

new text begin For the purpose of providing the funds
necessary to carry out the purposes of the association, the board of directors shall assess
insureds as provided in subdivisions 2, 3, and 4 at the times and for the amounts the
board of directors finds necessary. Assessments are due and payable on the date specified
by the board of directors, but not less than 30 days after written notice to the insured.
Assessments accrue interest at the rate of six percent per year on or after the due date.
new text end

new text begin Subd. 2. new text end

new text begin Initial capitalization. new text end

new text begin The board of directors shall determine the initial
and ongoing capital operating and reserve requirements for the association. If the board
determines that it needs funds in addition to those otherwise available to the board, to meet
the board's obligations, the board may access additional funds as needed in the form of
loans from the health care access fund, not to exceed a total indebtedness of $10,000,000
at any one time. Such loans accrue interest at three percent per annum simple interest and
must be repaid in installments beginning no later than two years after the board first
provides coverage and must be fully repaid no later than ten years after that date. The
monthly repayment installments must be reamortized as needed to reflect repayments and
additional loan amounts accessed, so that equal monthly installments will be sufficient to
repay the existing balance, including accrued interest, at the end of that ten-year period.
The $10,000,000 amount is available until the end of that ten-year period. Amounts of
principal repaid are available to be accessed for new loans within that period.
new text end

new text begin Subd. 3. new text end

new text begin Retrospective assessment. new text end

new text begin On or before July 1 of each year, the
administering carrier shall determine the association's net loss, if any, for the previous
calendar year, the program expenses of administration, and other appropriate gains and
losses. If reinsurance premium charges are not sufficient to satisfy the operating and
administrative expenses incurred or estimated to be incurred by the association, the board
of directors shall assess each insured in proportion to each insured's respective share of the
total reinsurance premiums. The board of directors may provide for interim assessments
as it considers necessary to appropriately carry out the association's responsibilities. The
board of directors may establish operating rules to provide for changes in the assessment
calculation.
new text end

new text begin Subd. 4. new text end

new text begin Refund. new text end

new text begin The board of directors may refund to insureds, in proportion to
their contributions, the amount by which the assets of the association exceed the amount
the board of directors finds necessary to carry out its responsibilities during the next
calendar year. A reasonable amount may be retained to provide funds for the continuing
expenses of the association and for future losses.
new text end

new text begin Subd. 5. new text end

new text begin Appeals. new text end

new text begin An insured may appeal to the commissioner of commerce within
30 days of notice of an assessment by the board of directors. A final action or order of the
commissioner is subject to judicial review in the manner provided in chapter 14.
new text end

Sec. 11.

Minnesota Statutes 2004, section 123A.21, subdivision 7, is amended to read:

Subd. 7.

Educational programs and services.

The board of directors of each SC
shall submit annually a plan to the members. The plan shall identify the programs and
services which are suggested for implementation by the SC during the following year and
shall contain components of long-range planning determined by the SC. These programs
and services may include, but are not limited to, the following areas:

(1) administrative services;

(2) curriculum development;

(3) data processing;

(4) distance learning and other telecommunication services;

(5) evaluation and research;

(6) staff development;

(7) media and technology centers;

(8) publication and dissemination of materials;

(9) pupil personnel services;

(10) planning;

(11) secondary, postsecondary, community, adult, and adult vocational education;

(12) teaching and learning services, including services for students with special
talents and special needs;

(13) employee personnel services;

(14) vocational rehabilitation;

(15) health, diagnostic, and child development services and centers;

(16) leadership or direction in early childhood and family education;

(17) community services;

(18) shared time programs;

(19) fiscal services and risk management programs new text begin . A risk management program
may involve participation in a reinsurance arrangement offered by the Minnesota
Statewide Health Reinsurance Association new text end ;

(20) technology planning, training, and support services;

(21) health and safety services;

(22) student academic challenges; and

(23) cooperative purchasing services.

Sec. 12.

Minnesota Statutes 2004, section 471.61, is amended by adding a subdivision
to read:

new text begin Subd. 6. new text end

new text begin Participation in reinsurance pool permitted. new text end

new text begin A political subdivision
providing insured health coverage to its employees and their dependents may obtain
reinsurance coverage from the Minnesota Statewide Health Reinsurance Association
created in chapter 62U to coordinate with the underlying health coverage.
new text end

Sec. 13.

Minnesota Statutes 2004, section 471.617, is amended by adding a subdivision
to read:

new text begin Subd. 7. new text end

new text begin Participation in reinsurance pool permitted. new text end

new text begin A political subdivision
self-insuring health coverage it provides to its employees and dependents, whether
self-insuring on its own or as part of a group self-insurance arrangement, may obtain
excess or stop-loss coverage through the Minnesota Statewide Health Reinsurance
Association created under chapter 62U.
new text end

Sec. 14. new text begin APPROPRIATION.
new text end

new text begin $10,000,000 is appropriated from the health care access fund to the commissioner
of commerce for disbursement as as-needed loans to the Minnesota Statewide Health
Reinsurance Association, as provided in Minnesota Statutes, section 62U.10.
new text end