HF 4853

as introduced - 93rd Legislature (2023 - 2024) Posted on 03/14/2024 04:14pm

A bill for an act
relating to health carriers; providing for oversight of health maintenance
organization transactions by the commissioner of health; establishing requirements
for nonprofit health coverage entity conversion transactions; prohibiting certain
conversion transactions; authorizing enforcement; classifying data; amending
Minnesota Statutes 2022, sections 62D.02, by adding subdivisions; 62D.22, by
adding a subdivision; 317A.811, subdivision 1; Minnesota Statutes 2023
Supplement, section 145D.01, subdivision 1; proposing coding for new law in
Minnesota Statutes, chapters 62C; 62D; 145D.

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

ARTICLE 1

OVERSIGHT OF HEALTH MAINTENANCE ORGANIZATION TRANSACTIONS

Section 1.

Minnesota Statutes 2022, section 62D.02, is amended by adding a subdivision
to read:

new text begin Subd. 18. new text end

new text begin Control. new text end

new text begin "Control," including the terms "controlling," "controlled by," and
"under common control with," means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a person, whether through
the ownership of voting securities, by contract other than a commercial contract for goods
or nonmanagement services, or otherwise, unless the power is the result of an official position
with, corporate office held by, or court appointment of the person. Control is presumed to
exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or
holds proxies representing ten percent or more of the voting securities of any other person.
This presumption may be rebutted by a showing made in the manner provided by section
60D.19, subdivision 11, that control does not exist in fact. The commissioner may determine,
after furnishing all persons in interest notice and opportunity to be heard and making specific
findings of fact to support the determination, that control exists in fact, notwithstanding the
absence of a presumption to that effect.
new text end

Sec. 2.

Minnesota Statutes 2022, section 62D.02, is amended by adding a subdivision to
read:

new text begin Subd. 19. new text end

new text begin Enterprise risk. new text end

new text begin "Enterprise risk" means an activity, circumstance, event, or
series of events involving one or more affiliates of a health maintenance organization that,
if not remedied promptly, is likely to have a material adverse effect upon the financial
condition or liquidity of the health maintenance organization or its holding company system
as a whole. Material adverse effects include but are not limited to anything that would cause
the health maintenance organization's risk-based capital to fall into company action level
event in sections 60A.50 to 60A.696 or would cause the health maintenance organization
to be in hazardous financial condition in accordance with the standards of section 60G.20.
new text end

Sec. 3.

Minnesota Statutes 2022, section 62D.02, is amended by adding a subdivision to
read:

new text begin Subd. 20. new text end

new text begin Health maintenance organization holding company system. new text end

new text begin "Health
maintenance organization holding company system" means two or more affiliated persons,
one or more of which is a health maintenance organization.
new text end

Sec. 4.

Minnesota Statutes 2022, section 62D.02, is amended by adding a subdivision to
read:

new text begin Subd. 21. new text end

new text begin Person. new text end

new text begin "Person" means an individual, a corporation, a partnership, an
association, a joint stock company, a trust, an unincorporated organization, any similar
entity, or any combination of the foregoing acting in concert, but does not include any joint
venture partnership exclusively engaged in owning, managing, leasing, or developing real
or tangible personal property.
new text end

Sec. 5.

new text begin [62D.31] DISCLOSURE OF MATERIAL TRANSACTIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Requirement. new text end

new text begin Every health maintenance organization domiciled in this
state must file a report with the commissioner disclosing material acquisitions and
dispositions of assets or material nonrenewals, cancellations, or revisions of ceded reinsurance
agreements unless the acquisitions and dispositions of assets or material nonrenewals,
cancellations, or revisions of ceded reinsurance agreements have been submitted to the
commissioner for review, approval, or informational purposes pursuant to other provisions
of law, rule, or other requirements.
new text end

new text begin Subd. 2. new text end

new text begin Materiality. new text end

new text begin No acquisitions or dispositions of assets need be reported pursuant
to this section if the acquisitions or dispositions are not material. A material acquisition, or
the aggregate of any series of related acquisitions during any 30-day period, or disposition
or the aggregate of any series of related dispositions during any 30-day period is one that
is nonrecurring and not in the ordinary course of business and involves more than five
percent of the reporting health maintenance organization's total admitted assets as reported
in the organization's most recent statutory statement filed with the commissioner of
commerce.
new text end

new text begin Subd. 3. new text end

new text begin Scope. new text end

new text begin (a) Asset acquisitions subject to this section include every purchase,
lease, exchange, merger, consolidation, succession, or other acquisition other than the
construction or development of real property by or for the reporting health maintenance
organization or the acquisition of materials for this purpose.
new text end

new text begin (b) Asset dispositions subject to this section include every sale, lease, exchange, merger,
consolidation, mortgage, hypothecation, assignment, whether for the benefit of creditors or
otherwise, abandonment, destruction, or other disposition.
new text end

new text begin Subd. 4. new text end

new text begin Information to be reported. new text end

new text begin The following information is required to be
disclosed in a report of a material acquisition or disposition of assets:
new text end

new text begin (1) date of the transaction;
new text end

new text begin (2) manner of acquisition or disposition;
new text end

new text begin (3) description of the assets involved;
new text end

new text begin (4) nature and amount of the consideration given or received;
new text end

new text begin (5) purpose of, or reason for, the transaction;
new text end

new text begin (6) manner by which the amount of consideration was determined;
new text end

new text begin (7) gain or loss recognized or realized by the health maintenance organization as a result
of the transaction;
new text end

new text begin (8) name of each person from whom the assets were acquired or to whom the assets
were disposed; and
new text end

new text begin (9) any additional information requested by the commissioner.
new text end

new text begin Subd. 5. new text end

new text begin Date due. new text end

new text begin The report required in subdivision 1 is due within 15 days after the
end of the calendar month in which the transactions occur.
new text end

new text begin Subd. 6. new text end

new text begin Filing. new text end

new text begin One complete copy of the report, including exhibits or other attachments
filed as part of the report, must be filed with the National Association of Insurance
Commissioners.
new text end

new text begin Subd. 7. new text end

new text begin Confidentiality. new text end

new text begin Notwithstanding section 62D.23, reports filed with the
commissioner pursuant to this section must be held as nonpublic data as defined in section
13.02, are not subject to subpoena, and may not be made public by the commissioner, the
National Association of Insurance Commissioners, or any other person, except to insurance
departments of other states, without the prior written consent of the health maintenance
organization to which the report pertains. The commissioner may publish all or part of a
report in the manner the commissioner considers appropriate if, after giving the affected
health maintenance organization notice and an opportunity to be heard, the commissioner
determines that the interest of policyholders, shareholders, or the public will be served by
the publication.
new text end

Sec. 6.

new text begin [62D.32] ACQUISITION OF CONTROL OF OR MERGER WITH
DOMESTIC HEALTH MAINTENANCE ORGANIZATION.
new text end

new text begin Subdivision 1. new text end

new text begin Filing requirements. new text end

new text begin (a) No person other than the issuer shall:
new text end

new text begin (1) make a tender offer for or a request or invitation for tenders of, or enter into any
agreement to exchange securities, or seek to acquire, or acquire, in the open market or
otherwise, any voting security of a domestic health maintenance organization if, after the
consummation thereof, the person would, directly or indirectly or by conversion or by
exercise of any right to acquire, be in control of the health maintenance organization;
new text end

new text begin (2) enter into an agreement to merge with or otherwise acquire control of a domestic
health maintenance organization, or any person controlling a domestic health maintenance
organization; or
new text end

new text begin (3) acquire all or substantially all of the assets of a domestic nonprofit health maintenance
organization through any means unless, at the time the offer, request, or invitation is made
or the agreement is entered into or before the acquisition of the securities if no offer or
agreement is involved the person has filed with the commissioner and has sent to the health
maintenance organization a statement containing the information required by this section
and the offer, request, invitation, agreement, or acquisition has been approved by the
commissioner in the manner prescribed in this section.
new text end

new text begin (b) For purposes of this section, a controlling person of a domestic health maintenance
organization seeking to divest the controlling person's controlling interest in the domestic
health maintenance organization in any manner shall file with the commissioner, with a
copy to the health maintenance organization, a confidential notice of the controlling person's
proposed divestiture at least 30 days before the cessation of control. The commissioner shall
determine those instances in which the party or parties seeking to divest or to acquire a
controlling interest in a health maintenance organization is required to file for and obtain
approval of the transaction.
new text end

new text begin (c) With respect to a transaction subject to this section, the acquiring person must also
file a preacquisition notification with the commissioner, which must contain the information
in section 62D.33, subdivision 3, paragraph (b). A failure to file the notification may be
subject to penalties specified in section 62D.33, subdivision 5.
new text end

new text begin (d) For purposes of this section, a domestic health maintenance organization includes a
person controlling a domestic health maintenance organization unless the person as
determined by the commissioner is either directly or through the controlling person's affiliates
primarily engaged in business other than the business of insurance. For purposes of this
section, person does not include any securities broker holding, in the usual and customary
broker's function, less than 20 percent of the voting securities of a health maintenance
organization or of any person that controls a health maintenance organization.
new text end

new text begin (e) The statement filed with the commissioner pursuant to subdivisions 1 and 2 must
remain confidential until the transaction is approved by the commissioner, except that all
attachments filed with the statement remain confidential after the approval unless the
commissioner, in the commissioner's discretion, determines that confidential treatment of
any of this information will interfere with enforcement of this section.
new text end

new text begin Subd. 2. new text end

new text begin Content of statement. new text end

new text begin (a) The statement to be filed with the commissioner
shall be made under oath or affirmation and shall contain:
new text end

new text begin (1) the name and address of each person by whom or on whose behalf the merger or
other acquisition of control referred to in subdivision 1 is to be effected, hereinafter called
"acquiring party"; and
new text end

new text begin (i) if the person is an individual, the principal occupation and all offices and positions
held during the past five years, and any conviction of crimes other than minor traffic
violations during the past ten years; or
new text end

new text begin (ii) if the person is not an individual, a report of the nature of its business operations
during the past five years or for a lesser period as the person and any predecessors have
been in existence; an informative description of the business intended to be done by the
person and the person's subsidiaries; and a list of all individuals who are or who have been
selected to become directors or executive officers of the person, or who perform or will
perform functions appropriate to the positions. The list must include for each individual the
information required by clause (1);
new text end

new text begin (2) the source, nature, and amount of the consideration used or to be used in effecting
the merger or other acquisition of control, a description of any transaction in which funds
were or are to be obtained for this purpose, including any pledge of the health maintenance
organization's stock or the stock of any of its subsidiaries or controlling affiliates and the
identity of persons furnishing the consideration, provided that where a source of the
consideration is a loan made in the lender's ordinary course of business, the identity of the
lender shall remain confidential if the person filing the statement requests;
new text end

new text begin (3) fully audited financial information on the earnings and financial condition of each
acquiring party for the preceding five fiscal years of each acquiring party, or for a lesser
period as the acquiring party and any predecessors have been in existence, and similar
unaudited information as of a date not earlier than 90 days before the filing of the statement;
new text end

new text begin (4) any plans or proposals that each acquiring party may have to liquidate the health
maintenance organization, to sell its assets or merge or consolidate it with any person, or
to make any other material change in its business or corporate structure or management;
new text end

new text begin (5) the number of shares of any security referred to in subdivision 1 that each acquiring
party proposes to acquire; the terms of the offer, request, invitation, agreement, or acquisition
referred to in subdivision 1; and a statement of the method by which the fairness of the
proposal was arrived at;
new text end

new text begin (6) the amount of each class of any security referred to in subdivision 1 that is beneficially
owned or concerning which there is a right to acquire beneficial ownership by each acquiring
party;
new text end

new text begin (7) a full description of any contracts, arrangements, or understandings with respect to
any security referred to in subdivision 1 in which any acquiring party is involved, including
but not limited to transfer of any of the securities, joint ventures, loan or option arrangements,
puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division
of losses or profits, or the giving or withholding of proxies. The description must identify
all persons who have entered into contracts, arrangements, or understandings;
new text end

new text begin (8) a description of the purchase of any security referred to in subdivision 1 during the
12 calendar months preceding the filing of the statement by any acquiring party including
the dates of purchase, names of the purchasers, and consideration paid or agreed to be paid
for the security;
new text end

new text begin (9) a description of any recommendations to purchase any security referred to in
subdivision 1 made during the 12 calendar months preceding the filing of the statement by
any acquiring party or by anyone based upon interviews or at the suggestion of the acquiring
party;
new text end

new text begin (10) copies of all tender offers for, requests for, or invitations for tenders of, exchange
offers for, and agreements to acquire or exchange any securities referred to in subdivision
1 and, if distributed, of additional soliciting material relating to them;
new text end

new text begin (11) the term of any agreement, contract, or understanding made with or proposed to be
made with any broker-dealer as to solicitation of securities referred to in subdivision 1 for
tender, and the amount of any fees, commissions, or other compensation to be paid to
broker-dealers with regard to it;
new text end

new text begin (12) an agreement by the person required to file the statement referred to in subdivision
1 that the person will provide the annual report specified in section 60D.19, subdivision
11a, for so long as control exists;
new text end

new text begin (13) a consent by the person required to file the statement referred to in subdivision 1
that the person and all subsidiaries within the person's control in the health maintenance
organization holding company system shall provide information to the commissioner upon
request as necessary to evaluate enterprise risk to the health maintenance organization;
new text end

new text begin (14) information regarding the proposed conversion benefit entity if required under
section 145D.33; and
new text end

new text begin (15) additional information the commissioner may prescribe as necessary or appropriate
for the protection of policyholders of the health maintenance organization or in the public
interest.
new text end

new text begin (b) If the person required to file the statement referred to in subdivision 1 is a partnership,
limited partnership, syndicate, or other group, the commissioner may require that the
information in clauses (1) to (15) must be given with respect to each partner of the partnership
or limited partnership, each member of the syndicate or group, and each person who controls
the partner or member. If a partner, member, or person is a corporation, or the person required
to file the statement referred to in subdivision 1 is a corporation, the commissioner may
require that the information in clauses (1) to (15) must be given with respect to the
corporation, each officer and director of the corporation, and each person who is directly
or indirectly the beneficial owner of more than ten percent of the outstanding voting securities
of the corporation.
new text end

new text begin (c) If any material change occurs in the facts in the statement filed with the commissioner
and sent to the health maintenance organization pursuant to this section, an amendment
specifying the change, together with copies of all documents and other material relevant to
the change, must be filed with the commissioner and sent to the health maintenance
organization within two business days after the person learns of the change.
new text end

new text begin Subd. 3. new text end

new text begin Alternative filing materials. new text end

new text begin If any offer, request, invitation, agreement, or
acquisition referred to in subdivision 1 is proposed to be made by means of a registration
statement under the Securities Act of 1933, or in circumstances requiring the disclosure of
similar information under the Securities Exchange Act of 1934, or under a state law requiring
similar registration or disclosure, the person required to file the statement under subdivision
1 may utilize these documents in furnishing the information called for by that statement.
new text end

new text begin Subd. 4. new text end

new text begin Approval by commissioner; hearings. new text end

new text begin (a) The commissioner shall approve
any merger or other acquisition of control under subdivision 1 unless, after a public hearing,
the commissioner finds that:
new text end

new text begin (1) after the change of control, the domestic health maintenance organization in
subdivision 1 is not able to satisfy the requirements for the issuance of a license to write
the line or lines of insurance for which it is presently licensed, unless the domestic health
maintenance organization is in rehabilitation or other court-ordered supervision and the
acquiring party commits to a plan that would enable the domestic health maintenance
organization to satisfy the requirements for the issuance of a license within a reasonable
amount of time;
new text end

new text begin (2) the effect of the merger or other acquisition of control would substantially lessen
competition in insurance in this state or tend to create a monopoly therein in applying the
competitive standard in this subdivision in which case:
new text end

new text begin (i) the informational requirements of section 62D.33, subdivision 3, paragraph (b), and
the standards of section 62D.33, subdivision 4, paragraph (c), shall apply;
new text end

new text begin (ii) the merger or other acquisition shall not be disapproved if the commissioner finds
that any of the situations meeting the criteria provided by section 62D.33, subdivision 4,
paragraph (c), exist; and
new text end

new text begin (iii) the commissioner may condition the approval of the merger or other acquisition on
the removal of the basis of disapproval within a specified period of time;
new text end

new text begin (3) the financial condition of any acquiring party may jeopardize the financial stability
of the health maintenance organization or prejudice the interest of its policyholders;
new text end

new text begin (4) the plans or proposals that the acquiring party has to liquidate the health maintenance
organization, sell its assets, or consolidate or merge it with any person, or to make any other
material change in its business or corporate structure or management, are unfair and
unreasonable to policyholders of the health maintenance organization and not in the public
interest;
new text end

new text begin (5) the competence, experience, and integrity of those persons who would control the
operation of the health maintenance organization are such that it would not be in the interest
of policyholders of the health maintenance organization and of the public to permit the
merger or other acquisition of control;
new text end

new text begin (6) the acquisition is likely to be hazardous or prejudicial to the insurance buying public;
or
new text end

new text begin (7) if applicable, information regarding the plan to transfer assets to a conversion benefit
entity under sections 145D.30 to 145D.37 and data related to the conversion transaction
pursuant to section 145D.36.
new text end

new text begin (b) The following apply to the public hearing referred to in paragraph (a).
new text end

new text begin (1) The hearing must be held within 30 days after the statement required by subdivision
1 is filed or within 60 days after the statement is filed in the case of a conversion transaction
under section 145D.32.
new text end

new text begin (2) The commissioner must give at least 20 days' notice of the hearing to the person
filing the statement.
new text end

new text begin (3) If the commissioner determines the information provided is insufficient to review
the proposed transaction, the commissioner shall inform the filing party within 30 days.
The hearing timeline shall begin when the commissioner sends the person filing the statement
a notice of complete submission.
new text end

new text begin (4) Not less than seven days' notice of the public hearing shall be given by the person
filing the statement to the health maintenance organization and to other persons designated
by the commissioner.
new text end

new text begin (5) At the hearing, the person filing the statement, the health maintenance organization,
any person to whom notice of hearing was sent, and any other person whose interest may
be affected by the statement may present evidence, examine and cross-examine witnesses,
and offer oral and written arguments, and may conduct discovery proceedings in the same
manner as is presently allowed in district courts of this state. All discovery proceedings
must be concluded not later than three days before the start of the public hearing.
new text end

new text begin (6) The commissioner shall make a determination within 30 days after the conclusion
of the hearing.
new text end

new text begin (c) If the proposed acquisition of control requires the approval of more than one
commissioner, the public hearing in paragraph (b) may be held on a consolidated basis upon
request of the person filing the statement under subdivision 1. The person shall file the
statement under subdivision 1 with the National Association of Insurance Commissioners
(NAIC) within five days of making the request for a public hearing. A commissioner may
opt out of a consolidated hearing, and shall provide notice to the applicant of the opt-out
within ten days of the receipt of the statement under subdivision 1. A hearing conducted on
a consolidated basis must be public and must be held within the United States before the
commissioners of the states in which the health maintenance organizations are domiciled.
The commissioners shall hear and receive evidence. A commissioner may attend the hearing
in person or virtually. For purposes of this paragraph, the term "commissioner" when used
in reference to an official from a state other than Minnesota means the state official charged
with the responsibility of supervising the business associated with the transaction in that
state.
new text end

new text begin (d) In connection with a change of control of a domestic health maintenance organization,
any determination by the commissioner that the person acquiring control of the health
maintenance organization shall be required to maintain or restore the capital of the health
maintenance organization to the level required by the laws and regulations of this state shall
be made not later than 60 days after the date of notification of the change in control submitted
pursuant to subdivision 1.
new text end

new text begin (e) The commissioner may retain at the acquiring person's expense any attorneys,
actuaries, accountants, and other experts not otherwise a part of the commissioner's staff as
may be reasonably necessary to assist the commissioner in reviewing the proposed acquisition
of control.
new text end

new text begin Subd. 5. new text end

new text begin Exemptions. new text end

new text begin This section does not apply to any offer, request, invitation,
agreement, or acquisition that the commissioner by order exempts from this section as (1)
not having been made or entered into for the purpose of changing or influencing control,
and not having the effect of changing or influencing the control, of a domestic health
maintenance organization, or (2) otherwise not comprehended within the purposes of this
section.
new text end

new text begin Subd. 6. new text end

new text begin Violations. new text end

new text begin The following are violations of this section:
new text end

new text begin (1) the failure to file any statement, amendment, or other material required to be filed
pursuant to subdivision 1 or 2; or
new text end

new text begin (2) the effectuation or any attempt to effectuate an acquisition of control of, divestiture
of, or merger with a domestic health maintenance organization unless the commissioner
has approved it.
new text end

new text begin Subd. 7. new text end

new text begin Jurisdiction; consent to service of process. new text end

new text begin The courts of this state have
jurisdiction over every person not resident, domiciled, or authorized to do business in this
state who files a statement with the commissioner under this section, and jurisdiction over
all actions involving the person arising out of violations of this section, and the person is
deemed to have performed acts equivalent to and constituting an appointment by the person
of the commissioner to be the person's true and lawful attorney upon whom may be served
all lawful process in any action, suit, or proceeding arising out of violations of this section.
Copies of all lawful process shall be served on the commissioner.
new text end

Sec. 7.

new text begin [62D.33] ACQUISITION INVOLVING HEALTH MAINTENANCE
ORGANIZATIONS NOT OTHERWISE COVERED.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

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

new text begin (b) "Acquisition" means an agreement, arrangement, or activity the consummation of
which results in a person acquiring directly or indirectly the control of another person, and
includes but is not limited to the acquisition of voting securities, the acquisition of assets,
bulk reinsurance, and mergers.
new text end

new text begin (c) "Involved health maintenance organization" includes a health maintenance
organization that either acquires or is acquired, is affiliated with an acquirer or acquired, or
is the result of a merger.
new text end

new text begin Subd. 2. new text end

new text begin Scope. new text end

new text begin (a) Except as exempted in paragraph (b), this section applies to any
acquisition in which there is a change in control of a health maintenance organization
authorized to do business in this state.
new text end

new text begin (b) This section does not apply to:
new text end

new text begin (1) a purchase of securities solely for investment purposes so long as the securities are
not used by voting or otherwise to cause or attempt to cause the substantial lessening of
competition in any insurance market in this state. If a purchase of securities results in a
presumption of control under section 62D.02, subdivision 18, it is not solely for investment
purposes unless the commissioner of the health maintenance organization's state of domicile
accepts a disclaimer of control or affirmatively finds that control does not exist and the
disclaimer action or affirmative finding is communicated by the domiciliary commissioner
to the commissioner of this state;
new text end

new text begin (2) the acquisition of a person by another person when both persons are neither directly
nor through affiliates primarily engaged in the business of insurance, if preacquisition
notification is filed with the commissioner in accordance with subdivision 3, paragraph (a),
30 days before the proposed effective date of the acquisition. The preacquisition notification
is not required for exclusion from this section if the acquisition would otherwise be excluded
from this section by any other clause of this paragraph;
new text end

new text begin (3) the acquisition of already affiliated persons;
new text end

new text begin (4) an acquisition if, as an immediate result of the acquisition:
new text end

new text begin (i) in no market would the combined market share of the involved health maintenance
organizations exceed five percent of the total market;
new text end

new text begin (ii) there would be no increase in any market share; or
new text end

new text begin (iii) in no market would the combined market share of the involved health maintenance
organizations exceed 12 percent of the total market and the market share increases by more
than two percent of the total market.
new text end

new text begin For the purpose of this clause, "market" means a direct written insurance premium in this
state for a line of business as contained in the annual statement required to be filed by health
maintenance organizations licensed to do business in this state; and
new text end

new text begin (5) an acquisition of a health maintenance organization whose domiciliary commissioner
affirmatively finds that the health maintenance organization is in failing condition; there is
a lack of feasible alternative to improving the condition; the public benefits of improving
the health maintenance organization's condition through the acquisition exceed the public
benefits that would arise from not lessening competition; and the findings are communicated
by the domiciliary commissioner to the commissioner of this state.
new text end

new text begin Subd. 3. new text end

new text begin Preacquisition notification; waiting period. new text end

new text begin (a) An acquisition covered by
subdivision 2 may be subject to an order pursuant to subdivision 4 unless the acquiring
person files a preacquisition notification and the waiting period has expired. The acquired
person may file a preacquisition notification. The commissioner shall give confidential
treatment to information submitted under this section in the same manner as provided in
section 60D.22.
new text end

new text begin (b) The preacquisition notification must be in the form and contain the information as
prescribed by the National Association of Insurance Commissioners relating to those markets
that, under subdivision 2, paragraph (b), clause (5), cause the acquisition not to be exempted
from this section. The commissioner may require the additional material and information
as the commissioner deems necessary to determine whether the proposed acquisition, if
consummated, would violate the competitive standard of subdivision 4. The required
information may include an opinion of an economist on the competitive impact of the
acquisition in this state accompanied by a summary of the education and experience of the
person indicating the person's ability to render an informed opinion.
new text end

new text begin (c) The waiting period required begins on the date of the commissioner's receipt of a
preacquisition notification and ends on the earlier of the 30th day after the date of its receipt,
or termination of the waiting period by the commissioner. Before the end of the waiting
period, the commissioner on a onetime basis may require the submission of additional
needed information relevant to the proposed acquisition, in which event the waiting period
shall end on the earlier of the 30th day after receipt of the additional information by the
commissioner or termination of the waiting period by the commissioner.
new text end

new text begin Subd. 4. new text end

new text begin Competitive standard. new text end

new text begin (a) The commissioner may enter an order under
subdivision 5 with respect to an acquisition if there is substantial evidence that the effect
of the acquisition may be substantially to lessen competition in any line of insurance in this
state or tend to create a monopoly therein or if the health maintenance organization fails to
file adequate information in compliance with subdivision 3.
new text end

new text begin (b) In determining whether a proposed acquisition would violate the competitive standard
of paragraph (a), the commissioner shall consider the following:
new text end

new text begin (1) any acquisition covered under subdivision 2 involving two or more health maintenance
organizations competing in the same market is prima facie evidence of violation of the
competitive standards:
new text end

new text begin (i) if the market is highly concentrated and the involved health maintenance organizations
possess the following shares of the market:
new text end

	new text begin HEALTH MAINTENANCE ORGANIZATION A new text end	new text begin HEALTH MAINTENANCE ORGANIZATION B new text end
	new text begin 4 percent new text end	new text begin 4 percent or more new text end
	new text begin 10 percent new text end	new text begin 2 percent or more new text end
	new text begin 15 percent new text end	new text begin 1 percent or more; or new text end

new text begin (ii) if the market is not highly concentrated and the involved health maintenance
organizations possess the following shares of the market:
new text end

	new text begin HEALTH MAINTENANCE ORGANIZATION A new text end	new text begin HEALTH MAINTENANCE ORGANIZATION B new text end
	new text begin 5 percent new text end	new text begin 5 percent or more new text end
	new text begin 10 percent new text end	new text begin 4 percent or more new text end
	new text begin 15 percent new text end	new text begin 3 percent or more new text end
	new text begin 19 percent new text end	new text begin 1 percent or more new text end

new text begin A highly concentrated market is one in which the share of the four largest health
maintenance organizations is 75 percent or more of the market. Percentages not shown in
the tables are interpolated proportionately to the percentages that are shown. If more than
two health maintenance organizations are involved, exceeding the total of the two columns
in the table is prima facie evidence of violation of the competitive standard in paragraph
(a). For the purpose of this clause, the health maintenance organization with the largest
share of the market shall be deemed to be health maintenance organization A.
new text end

new text begin (2) There is a significant trend toward increased concentration when the aggregate market
share of any grouping of the largest health maintenance organizations in the market, from
the two largest to the eight largest, has increased by seven percent or more of the market
over a period of time extending from any base year five to ten years prior to the acquisition
up to the time of the acquisition. Any acquisition or merger covered under subdivision 2
involving two or more health maintenance organizations competing in the same market is
prima facie evidence of a violation of the competitive standard in clause (1) if:
new text end

new text begin (i) there is a significant trend toward increased concentration in the market;
new text end

new text begin (ii) one of the health maintenance organizations involved is one of the health maintenance
organizations in a grouping of large health maintenance organizations showing the requisite
increase in the market share; and
new text end

new text begin (iii) another involved health maintenance organization's market is two percent or more.
new text end

new text begin (3) For purposes of this paragraph:
new text end

new text begin (i) "Health maintenance organization" includes any company or group of companies
under common management, ownership, or control.
new text end

new text begin (ii) "Market" means the relevant product and geographical markets. In determining the
relevant product and geographical markets, the commissioner shall give due consideration
to, among other things, the definitions or guidelines, if any, promulgated by the National
Association of Insurance Commissioners and to information, if any, submitted by parties
to the acquisition. In the absence of sufficient information to the contrary, the relevant
product market is assumed to be the direct written insurance premium for a line of business,
the line being that used in the annual statement required to be filed by health maintenance
organizations doing business in this state, and the relevant geographical market is assumed
to be this state.
new text end

new text begin (iii) The burden of showing prima facie evidence of violation of the competitive standard
rests upon the commissioner.
new text end

new text begin (iv) Even though an acquisition is not prima facie violative of the competitive standard
under paragraph (b), clauses (1) and (2), the commissioner may establish the requisite
anticompetitive effect based upon other substantial evidence. Even though an acquisition
is prima facie violative of the competitive standard under paragraph (b), clauses (1) and (2),
a party may establish the absence of the requisite anticompetitive effect based upon other
substantial evidence. Relevant factors in making a determination under this paragraph
include but are not limited to: market shares; volatility of ranking of market leaders; number
of competitors; concentration; trend of concentration in the industry; and ease of entry and
exit into the market.
new text end

new text begin (c) An order may not be entered under subdivision 5 if:
new text end

new text begin (1) the acquisition will yield substantial economies of scale or economies in resource
utilization that cannot feasibly be achieved in any other way, and the public benefits that
would arise from the economies exceed the public benefits which would arise from not
lessening competition; or
new text end

new text begin (2) the acquisition will substantially increase the availability of health care coverage and
the public benefits of the increase exceed the public benefits which would arise from not
lessening competition.
new text end

new text begin Subd. 5. new text end

new text begin Orders and penalties. new text end

new text begin (a) If an acquisition violates the standards of this section,
the commissioner may enter an order:
new text end

new text begin (1) requiring an involved health maintenance organization to cease and desist from doing
business in this state with respect to the line or lines of insurance involved in the violation;
or
new text end

new text begin (2) denying the application of an acquired or acquiring health maintenance organization
for a certificate of authority in this state.
new text end

new text begin (b) The order must not be entered unless there is a hearing, the notice of the hearing is
issued before the end of the waiting period and not less than 15 days before the hearing,
and the hearing is concluded and the order is issued no later than 60 days after the end of
the waiting period. Every order must be accompanied by a written decision of the
commissioner's findings of fact and conclusions of law.
new text end

new text begin (c) An order entered under this subdivision shall not become final earlier than 30 days
after the order is issued, during which time the involved health maintenance organization
may submit a plan to remedy the anticompetitive impact of the acquisition within a reasonable
time. Based upon the plan or other information, the commissioner shall specify the conditions,
if any, under the time period during which the aspects of the acquisition causing a violation
of the standards of this section would be remedied and the order vacated or modified.
new text end

new text begin (d) An order under this subdivision does not apply if the acquisition is not consummated.
new text end

new text begin (e) Any person who violates a cease and desist order of the commissioner and while the
order is in effect may, after notice and hearing and upon order of the commissioner, be
subject at the discretion of the commissioner to any one or more of:
new text end

new text begin (1) a monetary penalty of not more than $10,000 for every day of violation; and
new text end

new text begin (2) suspension or revocation of the person's license.
new text end

new text begin (f) Any health maintenance organization or other person who fails to make any filing
required by this section and who also fails to demonstrate a good faith effort to comply with
the filing requirement is subject to a fine of not more than $50,000.
new text end

Sec. 8.

new text begin [62D.34] STANDARDS AND MANAGEMENT OF A HEALTH
MAINTENANCE ORGANIZATION HOLDING COMPANY SYSTEM.
new text end

new text begin Subdivision 1. new text end

new text begin Transactions within a health maintenance organization holding
company system. new text end

new text begin (a) Transactions within a health maintenance organization holding
company system to which a health maintenance organization subject to regulation by the
commissioner is a party are subject to the following standards:
new text end

new text begin (1) the terms shall be fair and reasonable;
new text end

new text begin (2) agreements for cost-sharing services and management shall include the provisions
required by rule issued by the commissioner;
new text end

new text begin (3) charges or fees for services performed shall be reasonable;
new text end

new text begin (4) expenses incurred and payment received shall be allocated to the health maintenance
organization in conformity with customary insurance accounting practices consistently
applied;
new text end

new text begin (5) the books, accounts, and records of each party to all such transactions shall be so
maintained as to clearly and accurately disclose the nature and details of the transactions,
including this accounting information as is necessary to support the reasonableness of the
charges or fees to the respective parties; and
new text end

new text begin (6) the health maintenance organization's surplus as regards policyholders following
any dividends or distributions to shareholder affiliates shall be reasonable in relation to the
health maintenance organization's outstanding liabilities and adequate to its financial needs.
new text end

new text begin (b) The following transactions involving a domestic health maintenance organization
and any person in its health maintenance organization holding company system, including
amendments or modifications of affiliate agreements previously filed pursuant to this section,
which are subject to any materiality standards contained in clauses (1) to (7), may not be
entered into unless the health maintenance organization has notified the commissioner in
writing of its intention to enter into the transaction at least 30 days prior thereto, or a shorter
period the commissioner permits, and the commissioner has not disapproved the transaction
within this period. The notice for amendments or modifications must include the reasons
for the change and the financial impact on the domestic health maintenance organization.
Informal notice must be reported, within 30 days after a termination of a previously filed
agreement, to the commissioner for determination of the type of filing required, if any:
new text end

new text begin (1) sales, purchases, exchanges, loans or extensions of credit, guarantees, or investments
provided the transactions are equal to or exceed the lesser of three percent of the health
maintenance organization's admitted assets, or 25 percent of surplus as regards policyholders;
each as of the 31st day of December next preceding;
new text end

new text begin (2) loans or extensions of credit to any person who is not an affiliate, where the health
maintenance organization makes the loans or extensions of credit with the agreement or
understanding that the proceeds of the transactions, in whole or in substantial part, are to
be used to make loans or extensions of credit to, to purchase assets of, or to make investments
in, any affiliate of the health maintenance organization making such loans or extensions of
credit provided the transactions are equal to or exceed the lesser of three percent of the
health maintenance organization's admitted assets or 25 percent of surplus as regards
policyholders; each as of the 31st day of December next preceding;
new text end

new text begin (3) reinsurance agreements or modifications to those agreements, including agreements
in which the reinsurance premium or a change in the health maintenance organization's
liabilities, or the projected reinsurance premium or a change in the health maintenance
organization's liabilities in any of the next three years, equals or exceeds five percent of the
health maintenance organization's surplus as regards policyholders, as of the 31st day of
December next preceding, including those agreements which may require as consideration
the transfer of assets from a health maintenance organization to a nonaffiliate, if an agreement
or understanding exists between the health maintenance organization and nonaffiliate that
any portion of the assets will be transferred to one or more affiliates of the health maintenance
organization;
new text end

new text begin (4) all management agreements, service contracts, tax allocation agreements, guarantees,
and all cost-sharing arrangements;
new text end

new text begin (5) guarantees when made by a domestic health maintenance organization; provided
that a guarantee that is quantifiable as to amount is not subject to the notice requirements
of this paragraph unless it exceeds the lesser of one-half of one percent of the health
maintenance organization's admitted assets or ten percent of surplus as regards policyholders
as of the 31st day of December next preceding. All guarantees which are not quantifiable
as to amount are subject to the notice requirements of this paragraph;
new text end

new text begin (6) direct or indirect acquisitions or investments in a person that controls the health
maintenance organization or in an affiliate of the health maintenance organization in an
amount which, together with its present holdings in the investments, exceeds 2-1/2 percent
of the health maintenance organization's surplus to policyholders. Direct or indirect
acquisitions or investments in subsidiaries acquired pursuant to section 60D.16, or in
nonsubsidiary insurance affiliates that are subject to the provisions of sections 60D.15 to
60D.29, are exempt from this requirement; and
new text end

new text begin (7) any material transactions, specified by regulation, which the commissioner determines
may adversely affect the interests of the health maintenance organization's policyholders.
new text end

new text begin Nothing contained in this section authorizes or permits any transactions that, in the case of
a health maintenance organization not a member of the same health maintenance organization
holding company system, would be otherwise contrary to law.
new text end

new text begin (c) A domestic health maintenance organization may not enter into transactions which
are part of a plan or series of like transactions with persons within the health maintenance
holding company system if the purpose of those separate transactions is to avoid the statutory
threshold amount and thus avoid the review that would occur otherwise. If the commissioner
determines that the separate transactions were entered into over any 12-month period for
the purpose, the commissioner may exercise the authority under section 62D.17.
new text end

new text begin (d) The commissioner, in reviewing transactions pursuant to paragraph (b), shall consider
whether the transactions comply with the standards in paragraph (a) and whether they
adversely affect the interests of policyholders.
new text end

new text begin (e) The commissioner shall be notified within 30 days of any investment of the domestic
health maintenance organization in any one corporation if the total investment in the
corporation by the insurance holding company system exceeds ten percent of the corporation's
voting securities.
new text end

new text begin Subd. 2. new text end

new text begin Dividends and other distributions. new text end

new text begin (a) Subject to the limitations and
requirements of this subdivision, the board of directors of any domestic health maintenance
organization within a health maintenance organization holding company system may
authorize and cause the health maintenance organization to declare and pay any dividend
or distribution to its shareholders as the directors deem prudent from the earned surplus of
the health maintenance organization. A health maintenance organization's earned surplus,
also known as unassigned funds, shall be determined in accordance with the accounting
procedures and practices governing preparation of its annual statement. Dividends that are
paid from sources other than a health maintenance organization's earned surplus as of the
end of the immediately preceding quarter for which the health maintenance organization
has filed a quarterly or annual statement as appropriate, or are extraordinary dividends or
distributions may be paid only as provided in paragraphs (d) to (f).
new text end

new text begin (b) The health maintenance organization shall notify the commissioner within five
business days following declaration of a dividend declared pursuant to paragraph (a) and
at least ten days prior to its payment. The commissioner shall promptly consider the
notification filed pursuant to this paragraph, taking into consideration the factors described
in subdivision 4.
new text end

new text begin (c) The commissioner shall review at least annually the dividends paid by a health
maintenance organization pursuant to paragraph (a) for the purpose of determining if the
dividends are reasonable based upon: (1) the adequacy of the level of surplus as regards
policyholders remaining after the dividend payments; and (2) the quality of the health
maintenance organization's earnings and extent to which the reported earnings include
extraordinary items, such as surplus relief reinsurance transactions and reserve
destrengthening.
new text end

new text begin (d) No domestic health maintenance organization shall pay any extraordinary dividend
or make any other extraordinary distribution to its shareholders until: (1) 30 days after the
commissioner has received notice of the declaration of it and has not within the period
disapproved the payment; or (2) the commissioner has approved the payment within the
30-day period.
new text end

new text begin (e) For purposes of this section, an extraordinary dividend or distribution includes any
dividend or distribution of cash or other property, whose fair market value together with
that of other dividends or distributions made within the preceding 12 months exceeds the
greater of: (1) ten percent of the health maintenance organization's surplus as regards
policyholders on December 31 of the preceding year; or (2) the net income, not including
realized capital gains, for the 12-month period ending on December 31 of the preceding
year, but does not include pro rata distributions of any class of the health maintenance
organization's own securities.
new text end

new text begin (f) Notwithstanding any other provision of law, a health maintenance organization may
declare an extraordinary dividend or distribution that is conditional upon the commissioner's
approval, and the declaration shall confer no rights upon shareholders until: (1) the
commissioner has approved the payment of the dividend or distribution; or (2) the
commissioner has not disapproved the payment within the 30-day period under this section.
new text end

new text begin (g) For purposes of state law, dividends paid to a health maintenance organization's
parent company from a health maintenance organization, which is a member of a health
maintenance organization holding company system, are not considered income to the parent
company.
new text end

Sec. 9. new text begin REVISOR INSTRUCTION.
new text end

new text begin In Minnesota Statutes, chapter 62D, the revisor of statutes shall change "sections 62D.01
to 62D.30" to "this chapter." In Minnesota Statutes, section 145B.02, subdivision 7, the
revisor of statutes shall change "sections 62D.01 to 62D.30" to "chapter 62D."
new text end

ARTICLE 2

NONPROFIT HEALTH COVERAGE ENTITY CONVERSION TRANSACTIONS

Section 1.

new text begin [145D.30] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Application. new text end

new text begin For purposes of sections 145D.30 to 145D.37, the following
terms have the meanings given unless the context clearly indicates otherwise.
new text end

new text begin Subd. 2. new text end

new text begin Commissioner new text end

new text begin "Commissioner" means the commissioner of commerce for a
nonprofit health coverage entity that is a nonprofit health service plan corporation operating
under chapter 62C or the commissioner of health for a nonprofit health coverage entity that
is a nonprofit health maintenance organization operating under chapter 62D.
new text end

new text begin Subd. 3. new text end

new text begin Control. new text end

new text begin "Control," including the terms "controlling," "controlled by," and
"under common control with," means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a nonprofit health coverage
entity, whether through the ownership of voting securities, through membership in an entity
formed under chapter 317A, by contract other than a commercial contract for goods or
nonmanagement services, or otherwise, unless the power is the result of an official position
with, corporate office held by, or court appointment of the person. Control is presumed to
exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or
holds proxies representing 40 percent or more of the voting securities of any other person
or if any person, directly or indirectly, constitutes 40 percent or more of the membership
of an entity formed under chapter 317A. The attorney general may determine that control
exists in fact, notwithstanding the absence of a presumption to that effect.
new text end

new text begin Subd. 4. new text end

new text begin Conversion benefit entity. new text end

new text begin "Conversion benefit entity" means a foundation,
corporation, limited liability company, trust, partnership, or other entity that receives, in
connection with a conversion transaction, the value of any public benefit asset in accordance
with section 145D.32, subdivision 5.
new text end

new text begin Subd. 5. new text end

new text begin Conversion transaction. new text end

new text begin "Conversion transaction" means a transaction otherwise
permitted under applicable law in which a nonprofit health coverage entity:
new text end

new text begin (1) merges, consolidates, converts, or transfers all or substantially all of its assets to any
entity except a corporation that is exempt under United States Code, title 26, section
501(c)(3);
new text end

new text begin (2) makes a series of separate transfers within a 60-month period that in the aggregate
constitute a transfer of all or substantially all of the nonprofit health coverage entity's assets
to any entity except a corporation that is exempt under United States Code, title 26, section
501(c)(3); or
new text end

new text begin (3) adds or substitutes one or more directors or officers that effectively transfer the
control of, responsibility for, or governance of the nonprofit health coverage entity to any
entity except a corporation that is exempt under United States Code, title 26, section
501(c)(3).
new text end

new text begin Subd. 6. new text end

new text begin Corporation. new text end

new text begin "Corporation" has the meaning given in section 317A.011,
subdivision 6, and also includes a nonprofit limited liability company organized under
section 322C.1101.
new text end

new text begin Subd. 7. new text end

new text begin Director. new text end

new text begin "Director" has the meaning given in section 317A.011, subdivision
7.
new text end

new text begin Subd. 8. new text end

new text begin Family member. new text end

new text begin "Family member" means a spouse, parent, child, spouse of
a child, brother, sister, or spouse of a brother or sister.
new text end

new text begin Subd. 9. new text end

new text begin Full and fair value. new text end

new text begin "Full and fair value" means at least the amount that the
public benefit assets of the nonprofit health coverage entity would be worth if the assets
were equal to stock in the nonprofit health coverage entity, if the nonprofit health coverage
entity was a for-profit corporation and if the nonprofit health coverage entity had 100 percent
of its stock authorized by the corporation and available for purchase without transfer
restrictions. The valuation shall consider market value, investment or earning value, net
asset value, goodwill, amount of donations received, and control premium, if any.
new text end

new text begin Subd. 10. new text end

new text begin Key employee. new text end

new text begin "Key employee" means an individual, regardless of title, who:
new text end

new text begin (1) has responsibilities, power, or influence over an organization similar to those of an
officer or director;
new text end

new text begin (2) manages a discrete segment or activity of the organization that represents ten percent
or more of the activities, assets, income, or expenses of the organization, as compared to
the organization as a whole; or
new text end

new text begin (3) has or shares authority to control or determine ten percent or more of the organization's
capital expenditures, operating budget, or compensation for employees.
new text end

new text begin Subd. 11. new text end

new text begin Nonprofit health coverage entity. new text end

new text begin "Nonprofit health coverage entity" means
a nonprofit health service plan corporation operating under chapter 62C or a nonprofit health
maintenance organization operating under chapter 62D.
new text end

new text begin Subd. 12. new text end

new text begin Officer. new text end

new text begin "Officer" has the meaning given in section 317A.011, subdivision
15.
new text end

new text begin Subd. 13. new text end

new text begin Public benefit assets. new text end

new text begin "Public benefit assets" means the entirety of a nonprofit
health coverage entity's assets, whether tangible or intangible, including but not limited to
its goodwill and anticipated future revenue.
new text end

new text begin Subd. 14. new text end

new text begin Related organization. new text end

new text begin "Related organization" has the meaning given in section
317A.011, subdivision 18.
new text end

Sec. 2.

new text begin [145D.31] CERTAIN CONVERSION TRANSACTIONS PROHIBITED.
new text end

new text begin A nonprofit health coverage entity must not enter into a conversion transaction if:
new text end

new text begin (1) doing so would result in less than the full and fair market value of all public benefit
assets remaining dedicated to the public benefit; or
new text end

new text begin (2) an individual who has been an officer, director, or other executive of the nonprofit
health coverage entity or of a related organization, or a family member of such an individual:
new text end

new text begin (i) has held or will hold, whether guaranteed or contingent, an ownership stake, stock,
securities, investment, or other financial interest in an entity to which the nonprofit health
coverage entity transfers public benefit assets in connection with the conversion transaction;
new text end

new text begin (ii) has received or will receive any type of compensation or other financial benefit from
an entity to which the nonprofit health coverage entity transfers public benefit assets in
connection with the conversion transaction;
new text end

new text begin (iii) has held or will hold, whether guaranteed or contingent, an ownership stake, stock,
securities, investment, or other financial interest in an entity that has or will have a business
relationship with an entity to which the nonprofit health coverage entity transfers public
benefit assets in connection with the conversion transaction; or
new text end

new text begin (iv) has received or will receive any type of compensation or other financial benefit from
an entity that has or will have a business relationship with an entity to which the nonprofit
health coverage entity transfers public benefit assets in connection with the conversion
transaction.
new text end

Sec. 3.

new text begin [145D.32] REQUIREMENTS FOR NONPROFIT HEALTH COVERAGE
ENTITY CONVERSION TRANSACTIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Notice. new text end

new text begin (a) Before entering into a conversion transaction, a nonprofit
health coverage entity must notify the attorney general according to section 317A.811. In
addition to the elements listed in section 317A.811, subdivision 1, the notice required by
this subdivision must also include: (1) an itemization of the nonprofit health coverage entity's
public benefit assets and an independent third-party valuation of the nonprofit health coverage
entity's public benefit assets; (2) a proposed plan to distribute the value of those public
benefit assets to a conversion benefit entity that meets the requirements of section 145D.33;
and (3) other information contained in forms provided by the attorney general.
new text end

new text begin (b) When the nonprofit health coverage entity provides the attorney general with the
notice and other information required under paragraph (a), the nonprofit health coverage
entity must also provide a copy of this notice and other information to the applicable
commissioner.
new text end

new text begin Subd. 2. new text end

new text begin Nonprofit health coverage entity requirements. new text end

new text begin Before entering into a
conversion transaction, a nonprofit health coverage entity must ensure that:
new text end

new text begin (1) the proposed conversion transaction complies with chapters 317A and 501B and
other applicable laws;
new text end

new text begin (2) the proposed conversion transaction does not involve or constitute a breach of
charitable trust;
new text end

new text begin (3) the nonprofit health coverage entity shall receive full and fair value for its public
benefit assets;
new text end

new text begin (4) the value of the public benefit assets to be transferred has not been manipulated in
a manner that causes or caused the value of the assets to decrease;
new text end

new text begin (5) the proceeds of the proposed conversion transaction shall be used in a manner
consistent with the public benefit for which the assets are held by the nonprofit health
coverage entity;
new text end

new text begin (6) the proposed conversion transaction shall not result in a breach of fiduciary duty;
and
new text end

new text begin (7) the conversion benefit entity that receives the value of the nonprofit health coverage
entity's public benefit assets meets the requirements in section 145D.33.
new text end

new text begin Subd. 3. new text end

new text begin Listening sessions and public comment. new text end

new text begin The attorney general or the
commissioner may hold public listening sessions or forums and may solicit public comments
regarding the proposed conversion transaction, including on the formation of a conversion
benefit entity under section 145D.33.
new text end

new text begin Subd. 4. new text end

new text begin Waiting period. new text end

new text begin (a) Subject to paragraphs (b) and (c), a nonprofit health
coverage entity must not enter into a conversion transaction until 90 days after the nonprofit
health coverage entity has given written notice as required in subdivision 1.
new text end

new text begin (b) The attorney general may waive all or part of the waiting period or may extend the
waiting period for an additional 90 days by notifying the nonprofit health coverage entity
of the extension in writing.
new text end

new text begin (c) The time periods specified in this subdivision shall be suspended while an
investigation into the conversion transaction is pending or while a request from the attorney
general for additional information is outstanding.
new text end

new text begin Subd. 5. new text end

new text begin Transfer of value of assets required. new text end

new text begin As part of a conversion transaction for
which notice is provided under subdivision 1, the nonprofit health coverage entity must
transfer the entirety of the full and fair value of its public benefit assets to one or more
conversion benefit entities that meet the requirements in section 145D.33.
new text end

new text begin Subd. 6. new text end

new text begin Funds restricted for a particular purpose. new text end

new text begin Nothing in this section relieves a
nonprofit health coverage entity from complying with requirements for funds that are
restricted for a particular purpose. Funds restricted for a particular purpose must continue
to be used in accordance with the purpose for which they were restricted under sections
317A.671 and 501B.31. A nonprofit health coverage entity may not convert assets that
would conflict with their restricted purpose.
new text end

Sec. 4.

new text begin [145D.33] CONVERSION BENEFIT ENTITY REQUIREMENTS.
new text end

new text begin Subdivision 1. new text end

new text begin Requirements. new text end

new text begin In order to receive the value of a nonprofit health coverage
entity's public benefit assets as part of a conversion transaction, a conversion benefit entity
must:
new text end

new text begin (1) be: (i) an existing or new domestic, nonprofit corporation operating under chapter
317A, a nonprofit limited liability company operating under chapter 322C, or a wholly
owned subsidiary thereof; and (ii) exempt under United States Code, title 26, section
501(c)(3);
new text end

new text begin (2) have in place procedures and policies to prohibit conflicts of interest, including but
not limited to conflicts of interest relating to any grant-making activities that may benefit:
new text end

new text begin (i) the officers, directors, or key employees of the conversion benefit entity;
new text end

new text begin (ii) any entity to which the nonprofit health coverage entity transfers public benefit assets
in connection with a conversion transaction; or
new text end

new text begin (iii) any officers, directors, or key employees of an entity to which the nonprofit health
coverage entity transfers public benefit assets in connection with a conversion transaction;
new text end

new text begin (3) operate to benefit the health of the people in this state;
new text end

new text begin (4) have in place procedures and policies that prohibit:
new text end

new text begin (i) an officer, director, or key employee of the nonprofit health coverage entity from
serving as an officer, director, or key employee of the conversion benefit entity for the
five-year period following the conversion transaction;
new text end

new text begin (ii) an officer, director, or key employee of the nonprofit health coverage entity or of
the conversion benefit entity from directly or indirectly benefitting from the conversion
transaction; and
new text end

new text begin (iii) elected or appointed public officials from serving as an officer, director, or key
employee of the conversion benefit entity;
new text end

new text begin (5) not make grants or payments or otherwise provide financial benefit to an entity to
which a nonprofit health coverage entity transfers public benefit assets as part of a conversion
transaction or to a related organization of the entity to which the nonprofit health coverage
entity transfers public benefit assets as part of a conversion transaction; and
new text end

new text begin (6) not have as an officer director, or key employee any individual who has been an
officer, director, or key employee of an entity that receives public benefit assets as part of
a conversion transaction.
new text end

new text begin Subd. 2. new text end

new text begin Review and approval. new text end

new text begin The commissioner must review and approve a conversion
benefit entity before the conversion benefit entity receives the value of public benefit assets
from a nonprofit health coverage entity. In order to be approved under this subdivision, the
conversion benefit entity's governance must be broadly based in the community served by
the nonprofit health coverage entity and must be independent of the entity to which the
nonprofit health coverage entity transfers public benefit assets as part of the conversion
transaction. As part of the review of the conversion benefit entity's governance, the
commissioner may hold a public hearing. The public hearing, if held by the commissioner
of health, may be held concurrently with the hearing authorized under section 62D.31. If
the commissioner finds it necessary, a portion of the value of the public benefit assets must
be used to develop a community-based plan for use by the conversion benefit entity.
new text end

new text begin Subd. 3. new text end

new text begin Community advisory committee. new text end

new text begin The commissioner must establish a
community advisory committee for a conversion benefit entity receiving the value of public
benefit assets. The members of the community advisory committee must be selected to
represent the diversity of the community previously served by the nonprofit health coverage
entity. The community advisory committee must:
new text end

new text begin (1) provide a slate of three nominees for each vacancy on the governing board of the
conversion benefit entity, from which the remaining board members must select new
members to the board;
new text end

new text begin (2) provide the conversion benefit entity's governing board with guidance on the health
needs of the community previously served by the nonprofit health coverage entity; and
new text end

new text begin (3) promote dialogue and information sharing between the conversion benefit entity and
the community previously served by the nonprofit health coverage entity.
new text end

Sec. 5.

new text begin [145D.34] ENFORCEMENT AND REMEDIES.
new text end

new text begin Subdivision 1. new text end

new text begin Investigation. new text end

new text begin The attorney general has the powers in section 8.31.
Nothing in this subdivision limits the powers, remedies, or responsibilities of the attorney
general under this chapter; chapter 8, 309, 317A, or 501B; or any other chapter. For purposes
of this section, an approval by the commissioner for regulatory purposes does not impair
or inform the attorney general's authority.
new text end

new text begin Subd. 2. new text end

new text begin Enforcement and penalties. new text end

new text begin (a) The attorney general may bring an action in
district court to enjoin or unwind a conversion transaction or seek other equitable relief
necessary to protect the public interest if:
new text end

new text begin (1) a nonprofit health coverage entity or conversion transaction violates sections 145D.30
to 145D.33; or
new text end

new text begin (2) the conversion transaction is contrary to the public interest.
new text end

new text begin In seeking injunctive relief, the attorney general must not be required to establish irreparable
harm but must instead establish that a violation of sections 145D.30 to 145D.33 occurred
or that the requested order promotes the public interest.
new text end

new text begin (b) Factors informing whether a conversion transaction is contrary to the public interest
include but are not limited to whether:
new text end

new text begin (1) the conversion transaction shall result in increased health care costs for patients; and
new text end

new text begin (2) the conversion transaction shall adversely impact provider cost trends and containment
of total health care spending.
new text end

new text begin (c) The attorney general may enforce sections 145D.30 to 145D.33 under section 8.31.
new text end

new text begin (d) Failure of the entities involved in a conversion transaction to provide timely
information as required by the attorney general or the commissioner shall be an independent
and sufficient ground for a court to enjoin or unwind the transaction or provide other equitable
relief, provided the attorney general notifies the entities of the inadequacy of the information
provided and provides the entities with a reasonable opportunity to remedy the inadequacy.
new text end

new text begin (e) An officer, director, or other executive found to have violated sections 145D.30 to
145D.33 shall be subject to a civil penalty of up to $100,000 for each violation. A corporation
or other entity which is a party to or materially participated in a conversion transaction
found to have violated sections 145D.30 to 145D.33 shall be subject to a civil penalty of
up to $1,000,000. A court may also award reasonable attorney fees and costs of investigation
and litigation.
new text end

new text begin Subd. 3. new text end

new text begin Commissioner of health; data and research. new text end

new text begin The commissioner of health
must provide the attorney general, upon request, with data and research on broader market
trends, impacts on prices and outcomes, public health and population health considerations,
and health care access, for the attorney general to use when evaluating whether a conversion
transaction is contrary to public interest. The commissioner may share with the attorney
general, according to section 13.05, subdivision 9, any not public data, as defined in section
13.02, subdivision 8a, held by the commissioner to aid in the investigation and review of
the conversion transaction, and the attorney general must maintain this data with the same
classification according to section 13.03, subdivision 4, paragraph (c).
new text end

new text begin Subd. 4. new text end

new text begin Failure to take action. new text end

new text begin Failure by the attorney general to take action with
respect to a conversion transaction under this section does not constitute approval of the
conversion transaction or waiver, nor shall failure prevent the attorney general from taking
action in the same, similar, or subsequent circumstances.
new text end

Sec. 6.

new text begin [145D.36] DATA PRACTICES.
new text end

new text begin Section 13.65 applies to data provided by a nonprofit health coverage entity or the
commissioner to the attorney general under sections 145D.30 to 145D.33 and to data provided
by a nonprofit health coverage entity to the commissioner under sections 145D.30 to 145D.33.
The attorney general or the commissioner may make any data classified as confidential or
protected nonpublic under this section accessible to any civil or criminal law enforcement
agency if the attorney general or commissioner determines that the access aids the law
enforcement process.
new text end

Sec. 7.

new text begin [145D.36] COMMISSIONER OF HEALTH; REPORTS AND ANALYSIS.
new text end

new text begin Notwithstanding any law to the contrary, the commissioner may use data or information
submitted under sections 60A.135 to 60A.137, 60A.17, 60D.18, 60D.20, 62D.31 to 62D.35,
and 145D.32 to conduct analyses of the aggregate impact of transactions within nonprofit
health coverage entities and organizations which include nonprofit health coverage entities
or their affiliates on access to or the cost of health care services, health care market
consolidation, and health care quality. The commissioner must issue periodic public reports
on the number and types of conversion transactions subject to sections 145D.30 to 145D.35
and on the aggregate impact of conversion transactions on health care costs, quality, and
competition in Minnesota.
new text end

Sec. 8.

new text begin [145D.37] RELATION TO OTHER LAW.
new text end

new text begin (a) Sections 145D.30 to 145D.36 are in addition to and do not affect or limit any power,
remedy, or responsibility of a health maintenance organization, a service plan corporation,
a conversion benefit entity, the attorney general, the commissioner of health, or the
commissioner of commerce under this chapter; chapter 8, 62C, 62D, 309, 317A, or 501B;
or other law.
new text end

new text begin (b) Nothing in sections 145D.03 to 145D.36 authorizes a nonprofit health coverage entity
to enter into a conversion transaction not otherwise permitted under chapter 317A or 501B
or other law.
new text end

ARTICLE 3

OTHER PROVISIONS

Section 1.

new text begin [62C.045] APPLICATION OF OTHER LAW.
new text end

new text begin Sections 145D.30 to 145D.37 apply to service plan corporations operating under this
chapter.
new text end

Sec. 2.

Minnesota Statutes 2022, section 62D.22, is amended by adding a subdivision to
read:

new text begin Subd. 5a. new text end

new text begin Application of other law. new text end

new text begin Sections 145D.30 to 145D.37 apply to nonprofit
health maintenance organizations operating under this chapter.
new text end

Sec. 3.

Minnesota Statutes 2023 Supplement, section 145D.01, subdivision 1, is amended
to read:

Subdivision 1.

Definitions.

(a) For purposes of this deleted text begin chapter deleted text end new text begin section and section 145D.02 new text end ,
the following terms have the meanings given.

(b) "Captive professional entity" means a professional corporation, limited liability
company, or other entity formed to render professional services in which a beneficial owner
is a health care provider employed by, controlled by, or subject to the direction of a hospital
or hospital system.

(c) "Commissioner" means the commissioner of health.

(d) "Control," including the terms "controlling," "controlled by," and "under common
control with," means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a health care entity, whether through the
ownership of voting securities, membership in an entity formed under chapter 317A, by
contract other than a commercial contract for goods or nonmanagement services, or otherwise,
unless the power is the result of an official position with, corporate office held by, or court
appointment of, the person. Control is presumed to exist if any person, directly or indirectly,
owns, controls, holds with the power to vote, or holds proxies representing 40 percent or
more of the voting securities of any other person, or if any person, directly or indirectly,
constitutes 40 percent or more of the membership of an entity formed under chapter 317A.
The attorney general may determine that control exists in fact, notwithstanding the absence
of a presumption to that effect.

(e) "Health care entity" means:

(1) a hospital;

(2) a hospital system;

(3) a captive professional entity;

(4) a medical foundation;

(5) a health care provider group practice;

(6) an entity organized or controlled by an entity listed in clauses (1) to (5); or

(7) an entity that owns or exercises control over an entity listed in clauses (1) to (5).

(f) "Health care provider" means a physician licensed under chapter 147, a physician
assistant licensed under chapter 147A, or an advanced practice registered nurse as defined
in section 148.171, subdivision 3, who provides health care services, including but not
limited to medical care, consultation, diagnosis, or treatment.

(g) "Health care provider group practice" means two or more health care providers legally
organized in a partnership, professional corporation, limited liability company, medical
foundation, nonprofit corporation, faculty practice plan, or other similar entity:

(1) in which each health care provider who is a member of the group provides services
that a health care provider routinely provides, including but not limited to medical care,
consultation, diagnosis, and treatment, through the joint use of shared office space, facilities,
equipment, or personnel;

(2) for which substantially all services of the health care providers who are group
members are provided through the group and are billed in the name of the group practice
and amounts so received are treated as receipts of the group; or

(3) in which the overhead expenses of, and the income from, the group are distributed
in accordance with methods previously determined by members of the group.

An entity that otherwise meets the definition of health care provider group practice in this
paragraph shall be considered a health care provider group practice even if its shareholders,
partners, members, or owners include a professional corporation, limited liability company,
or other entity in which any beneficial owner is a health care provider and that is formed to
render professional services.

(h) "Hospital" means a health care facility licensed as a hospital under sections 144.50
to 144.56.

(i) "Medical foundation" means a nonprofit legal entity through which health care
providers perform research or provide medical services.

(j) "Transaction" means a single action, or a series of actions within a five-year period,
which occurs in part within the state of Minnesota or involves a health care entity formed
or licensed in Minnesota, that constitutes:

(1) a merger or exchange of a health care entity with another entity;

(2) the sale, lease, or transfer of 40 percent or more of the assets of a health care entity
to another entity;

(3) the granting of a security interest of 40 percent or more of the property and assets
of a health care entity to another entity;

(4) the transfer of 40 percent or more of the shares or other ownership of a health care
entity to another entity;

(5) an addition, removal, withdrawal, substitution, or other modification of one or more
members of the health care entity's governing body that transfers control, responsibility for,
or governance of the health care entity to another entity;

(6) the creation of a new health care entity;

(7) an agreement or series of agreements that results in the sharing of 40 percent or more
of the health care entity's revenues with another entity, including affiliates of such other
entity;

(8) an addition, removal, withdrawal, substitution, or other modification of the members
of a health care entity formed under chapter 317A that results in a change of 40 percent or
more of the membership of the health care entity; or

(9) any other transfer of control of a health care entity to, or acquisition of control of a
health care entity by, another entity.

(k) A transaction as defined in paragraph (j) does not include:

(1) an action or series of actions that meets one or more of the criteria set forth in
paragraph (j), clauses (1) to (9), if, immediately prior to all such actions, the health care
entity directly, or indirectly through one or more intermediaries, controls, is controlled by,
or is under common control with, all other parties to the action or series of actions;

(2) a mortgage or other secured loan for business improvement purposes entered into
by a health care entity that does not directly affect delivery of health care or governance of
the health care entity;

(3) a clinical affiliation of health care entities formed solely for the purpose of
collaborating on clinical trials or providing graduate medical education;

(4) the mere offer of employment to, or hiring of, a health care provider by a health care
entity;

(5) contracts between a health care entity and a health care provider primarily for clinical
services; or

(6) a single action or series of actions within a five-year period involving only entities
that operate solely as a nursing home licensed under chapter 144A; a boarding care home
licensed under sections 144.50 to 144.56; a supervised living facility licensed under sections
144.50 to 144.56; an assisted living facility licensed under chapter 144G; a foster care setting
licensed under Minnesota Rules, parts 9555.5105 to 9555.6265, for a physical location that
is not the primary residence of the license holder; a community residential setting as defined
in section 245D.02, subdivision 4a; or a home care provider licensed under sections 144A.471
to 144A.483.

Sec. 4.

Minnesota Statutes 2022, section 317A.811, subdivision 1, is amended to read:

Subdivision 1.

When required.

(a) Except as provided in subdivision 6, the following
corporations shall notify the attorney general of their intent to dissolve, merge, consolidate,
or convert, or to transfer all or substantially all of their assets:

(1) a corporation that holds assets for a charitable purpose as defined in section 501B.35,
subdivision 2; deleted text begin or
deleted text end

(2) a corporation that is exempt under section 501(c)(3) of the Internal Revenue Code
of 1986, or any successor section deleted text begin . deleted text end new text begin ; or
new text end

new text begin (3) a nonprofit health coverage entity defined in section 145D.30.
new text end

(b) The notice must include:

(1) the purpose of the corporation that is giving the notice;

(2) a list of assets owned or held by the corporation for charitable purposes;

(3) a description of restricted assets and purposes for which the assets were received;

(4) a description of debts, obligations, and liabilities of the corporation;

(5) a description of tangible assets being converted to cash and the manner in which
they will be sold;

(6) anticipated expenses of the transaction, including attorney fees;

(7) a list of persons to whom assets will be transferred, if known, or the name of the
converted organization;

(8) the purposes of persons receiving the assets or of the converted organization; and

(9) the terms, conditions, or restrictions, if any, to be imposed on the transferred or
converted assets.

The notice must be signed on behalf of the corporation by an authorized person.