Minnesota Legislature
SF 359
as introduced - 91st Legislature (2019 - 2020) Posted on 02/21/2019 02:33pm
Current Version - as introduced
1.8 1.9 1.10 1.11 1.12 1.13 1.14
1.15 1.16 1.17 1.18 1.19 1.20 1.21 1.22 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 2.14 2.15 2.16 2.17 2.18 2.19 2.20 2.21 2.22 2.23 2.24 2.25 2.26 2.27 2.28 2.29 2.30 2.31 2.32 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 3.13 3.14 3.15 3.16 3.17 3.18 3.19 3.20 3.21 3.22 3.23 3.24 3.25 3.26 3.27 3.28 3.29 3.30 3.31 3.32 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13 4.14 4.15 4.16 4.17 4.18 4.19 4.20 4.21 4.22 4.23 4.24 4.25 4.26 4.27 4.28 4.29 4.30 4.31 4.32 4.33 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 5.11 5.12 5.13 5.14 5.15 5.16 5.17 5.18 5.19 5.20 5.21 5.22 5.23 5.24 5.25 5.26 5.27 5.28 5.29 5.30 5.31 5.32 5.33 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 6.12 6.13 6.14 6.15 6.16 6.17 6.18 6.19 6.20 6.21 6.22 6.23 6.24 6.25 6.26 6.27 6.28 6.29 6.30 6.31 6.32 6.33 7.1 7.2
7.3 7.4 7.5 7.6 7.7 7.8 7.9 7.10 7.11 7.12 7.13 7.14 7.15 7.16 7.17 7.18 7.19 7.20 7.21 7.22 7.23 7.24 7.25 7.26 7.27 7.28 7.29
8.1 8.2
A bill for an act
relating to health; providing for attorney general review and approval of conversions
by nonprofit health maintenance organizations; specifying notice and review
requirements; establishing standards for distribution of certain assets; amending
Minnesota Statutes 2018, sections 62C.04, by adding a subdivision; 317A.811,
subdivision 1; proposing coding for new law in Minnesota Statutes, chapter 62D.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2018, section 62C.04, is amended by adding a subdivision
to read:
new text begin Subd. 5. new text end
new text begin Service plan corporation conversions. new text end
new text begin
A service plan corporation that intends
to dissolve, merge, or consolidate, or to transfer all or a substantial portion of its assets to
an entity that is not a corporation organized under chapter 317A, or that is not exempt under
United States Code, title 26, section 501(c)(3), must notify the attorney general in accordance
with section 317A.811 and comply with section 62D.31.
new text end
Sec. 2.
new text begin
[62D.31] NONPROFIT HEALTH CARE ENTITY CONVERSIONS.
new text end
new text begin Subdivision 1. new text end
new text begin Definitions. new text end
new text begin
(a) The definitions in this subdivision apply to this section.
new text end
new text begin
(b) "Commissioner" means the commissioner of commerce if the nonprofit health care
entity is operating under chapter 62C or the commissioner of health if the nonprofit health
care entity is operating under this chapter.
new text end
new text begin
(c) "Conversion benefit entity" means an entity that meets the requirements of subdivision
7 and that directly or indirectly receives public benefit assets, or the value of such assets,
in connection with a conversion transaction.
new text end
new text begin
(d) "Conversion transaction" or "transaction" means a transaction in which a nonprofit
health care entity merges, consolidates, converts, or transfers all or a substantial portion of
its assets to an entity that is not a corporation organized under chapter 317A, or that is not
exempt under United States Code, title 26, section 501(c)(3). The substitution of a new
corporate member that transfers the control, responsibility for, or governance of a nonprofit
health care entity is also considered a transaction for purposes of this section.
new text end
new text begin
(e) "Family member" means a spouse, parent, or child or other legal dependent.
new text end
new text begin
(f) "Key employee" means a person, regardless of title, who:
new text end
new text begin
(1) has responsibilities, powers, or influence over the nonprofit health care entity similar
to those of an officer or director;
new text end
new text begin
(2) manages a discrete segment or activity of the entity that represents ten percent or
more of the activities, assets, income, or expenses of the entity, as compared to the entity
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 entity's
capital expenditures, operating budget, or compensation for employees.
new text end
new text begin
(g) "Nonprofit health care entity" means a nonprofit health service plan corporation
operating under chapter 62C or a nonprofit health maintenance organization operating under
this chapter.
new text end
new text begin
(h) "Public benefit assets" means the entirety of a nonprofit health care entity's assets,
whether tangible or intangible.
new text end
new text begin
(i) "Related organization" has the meaning given in section 317A.011.
new text end
new text begin Subd. 2. new text end
new text begin Attorney general notice required. new text end
new text begin
(a) Before entering into a conversion
transaction, a nonprofit health care entity must notify the attorney general as specified under
section 317A.811, subdivision 1. The notice required under this subdivision must also
include an itemization of the nonprofit health care entity's public benefit assets and the
valuation that the entity attributes to those assets, a proposed plan for distribution of the
value of those assets to a conversion benefit entity that meets the requirements of subdivision
7, and other information from the nonprofit health care entity or the proposed conversion
benefit entity that the attorney general reasonably considers necessary for review of the
proposed transaction.
new text end
new text begin
(b) A copy of the notice and other information required under this subdivision must be
given to the commissioner.
new text end
new text begin Subd. 3. new text end
new text begin Review elements. new text end
new text begin
(a) The attorney general may approve, conditionally approve,
or not approve a conversion transaction under this section. In making a decision whether
to approve, conditionally approve, or not approve a transaction, the attorney general, in
consultation with the commissioner, shall consider any factors the attorney general considers
relevant, including whether:
new text end
new text begin
(1) the proposed transaction complies with this section, chapters 317A and 501B, and
other applicable law;
new text end
new text begin
(2) the proposed transaction involves or constitutes a breach of charitable trust;
new text end
new text begin
(3) the nonprofit health care entity receives full and fair value for its public benefit assets;
new text end
new text begin
(4) the full and fair value of the public benefit assets to be transferred has been
manipulated in a manner that causes or has caused the value of the assets to decrease;
new text end
new text begin
(5) the proceeds of the proposed transaction are used consistent with the public benefit
for which the assets are held by the nonprofit health care entity;
new text end
new text begin
(6) the proposed transaction results in a breach of fiduciary duty, as determined by the
attorney general, including whether:
new text end
new text begin
(i) conflicts of interest exist related to payments to or benefits conferred upon officers,
directors, board members, or key employees of the nonprofit health care entity or a related
organization;
new text end
new text begin
(ii) the nonprofit health care entity's board of directors exercised reasonable care and
due diligence in deciding to pursue the transaction, in selecting the entity with which to
pursue the transaction, and in negotiating the terms and conditions of the transaction; and
new text end
new text begin
(iii) the nonprofit health care entity's board of directors considered all reasonably viable
alternatives, including any competing offers for its public benefit assets, or alternative
transactions;
new text end
new text begin
(7) the transaction results in private financial benefit to any person prohibited under
subdivision 6 or any financial benefit to any person prohibited under any other applicable
law, including owners, stakeholders, directors, officers, or key employees of the nonprofit
health care entity or entity to which the nonprofit health care entity proposes to transfer
public benefit assets;
new text end
new text begin
(8) the conversion benefit entity meets the requirements of subdivision 7; and
new text end
new text begin
(9) the attorney general and commissioner have been provided with sufficient information
by the nonprofit health care entity to adequately evaluate the proposed transaction and the
effects on the public, provided the attorney general has notified the nonprofit health care
entity or the proposed conversion benefit entity of any inadequacy of the information and
has provided a reasonable opportunity to remedy that inadequacy.
new text end
new text begin
(b) In addition, the attorney general shall consider any public comments received
regarding the proposed conversion transaction and the proposed transaction's likely effect
on the availability, accessibility, and affordability of health care services to the public.
new text end
new text begin
(c) The attorney general must consult with the commissioner in making a decision
whether to approve or disapprove a transaction.
new text end
new text begin Subd. 4. new text end
new text begin Period for approval or disapproval; extension. new text end
new text begin
(a) Within 150 days of
receiving notice of a proposed transaction, the attorney general shall notify the nonprofit
health care entity in writing of its decision to approve, conditionally approve, or disapprove
the transaction. If the transaction is not approved, the notice must include the reason for the
decision. If the transaction is conditionally approved, the notice must specify the conditions
that must be met. The attorney general may extend this period for an additional 90 days if
necessary to obtain additional information.
new text end
new text begin
(b) The time periods under this subdivision are suspended during the time when 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 assets. new text end
new text begin
If a proposed conversion transaction is approved or
conditionally approved by the attorney general, the nonprofit health care entity shall transfer
the entirety of the full and fair value of its public benefit assets to one or more conversion
benefit entities as part of the transaction.
new text end
new text begin Subd. 6. new text end
new text begin Private financial benefit. new text end
new text begin
(a) A nonprofit health care entity must not enter into
a conversion transaction if a person who has been an officer, director, or key employee of
the nonprofit health care entity or conversion benefit entity, or of a related organization, or
a family member of such a person:
new text end
new text begin
(1) has received or will receive any compensation or other financial benefit, directly or
indirectly, in connection with the conversion transaction;
new text end
new text begin
(2) has held or will hold, regardless of whether guaranteed or contingent, an ownership
stake, stock, securities, investment, or other financial interest in, or receive any type of
compensation or other financial benefit from, any entity to which the nonprofit health care
entity transfers assets in connection with a conversion transaction; or
new text end
new text begin
(3) has held or will hold, regardless of whether guaranteed or contingent, an ownership
stake, stock, securities, investment, or other financial interest in, or receive any type of
compensation or other financial benefit from, any entity that has or will have a business
relationship with any entity to which the nonprofit health care entity transfers assets in
connection with a conversion transaction.
new text end
new text begin
(b) This subdivision does not prohibit routine increases in compensation or other financial
benefit that is not made in connection with a conversion transaction and is undertaken as
part of the ordinary course of business of the nonprofit health care entity or conversion
benefit entity.
new text end
new text begin Subd. 7. new text end
new text begin Conversion benefit entity requirements. new text end
new text begin
(a) A conversion benefit entity must
be an existing or new domestic nonprofit corporation organized under chapter 317A, and
must be exempt under United States Code, title 26, section 501(c)(3).
new text end
new text begin
(b) The conversion benefit entity must be completely independent of any influence or
control by the nonprofit health care entity and related organizations, all entities to which
the nonprofit health care entity transfers any public benefit assets in connection with a
conversion transaction, and the directors, officers, and key employees of those organizations
or entities.
new text end
new text begin
(c) The conversion benefit entity must have in place procedures and policies to prohibit
conflicts of interest, including prohibiting conflicts of interests relating to grant-making
activities that may benefit:
new text end
new text begin
(1) the directors, officers, or key employees of the conversion benefit entity;
new text end
new text begin
(2) an entity to which the nonprofit health care entity transfers public benefit assets in
connection with a conversion transaction; or
new text end
new text begin
(3) the directors, officers, or key employees of an entity to which the nonprofit health
care entity transfers public benefit assets in connection with a conversion transaction.
new text end
new text begin
(d) The charitable purpose and grant-making functions of the conversion benefit entity
must be dedicated to meeting the health care needs of residents of this state.
new text end
new text begin Subd. 8. new text end
new text begin Public comment. new text end
new text begin
Before issuing a decision under subdivision 3, the attorney
general may solicit public comment regarding the proposed conversion transaction. The
attorney general may hold one or more public meetings or solicit written or electronic
correspondence. If a meeting is held, notice of the meeting must be published in a qualified
newspaper of general circulation in this state at least seven days before the meeting.
new text end
new text begin Subd. 9. new text end
new text begin Assessment of costs. new text end
new text begin
(a) The nonprofit health care entity or the conversion
benefit entity must reimburse the attorney general or a state agency for all reasonable and
actual costs incurred by the attorney general or a state agency in reviewing a proposed
conversion transaction and exercising enforcement remedies under subdivision 11, including
attorney fees at the billing rate used by the attorney general for state agencies and the costs
for retention of actuarial, valuation, or other experts or consultants, and administrative costs.
new text end
new text begin
(b) The attorney general or state agency must provide the nonprofit health care entity
or the conversion benefit entity with a statement of costs incurred. The nonprofit health care
entity or the conversion benefit entity must remit the statement total to the attorney general
or state agency within 30 days of the statement date. The nonprofit health care entity
conversion account is created in the special revenue fund of the state treasury. The attorney
general or state agency receiving an amount from the nonprofit health care entity or the
conversion benefit entity shall deposit the amounts in the nonprofit health care entity
conversion account in the special revenue fund. Amounts deposited in the nonprofit health
care entity conversion account by the attorney general are appropriated to the attorney
general for costs paid or incurred under this section. Amounts deposited in the nonprofit
health care entity conversion account by a state agency are appropriated to the commissioner
of the state agency for costs paid or incurred by the agency under this section.
new text end
new text begin Subd. 10. new text end
new text begin Annual report by conversion benefit entity. new text end
new text begin
A conversion benefit entity
must submit an annual report to the attorney general that contains a detailed description of
its charitable activities related to the use of the public benefit assets received under a
transaction that is approved under this section.
new text end
new text begin Subd. 11. new text end
new text begin Penalties; remedies. new text end
new text begin
(a) A conversion transaction entered into in violation
of this section is null and void. The attorney general is authorized to bring an action to
unwind a conversion transaction entered into in violation of this section and to recover the
amount of any private financial benefit received or held in violation of subdivision 6. In
addition to this recovery, the officers, directors, and key employees of each entity that is a
party to and materially participated in a conversion transaction entered into in violation of
this section may be subject to a civil penalty of up to the greater of either the entirety of any
financial benefit each one derived from the transaction, or $1,000,000, as determined by
the court.
new text end
new text begin
(b) The attorney general is authorized to enforce this section pursuant to section 8.31.
new text end
new text begin Subd. 12. new text end
new text begin Relation to other law. new text end
new text begin
(a) This section is in addition to, and does not affect
or limit any power, remedy, or responsibility of a health maintenance organization, nonprofit
health service plan corporation, a conversion benefit entity, the attorney general, or the
commissioner under this chapter, chapter 62C, 317A, 501B, or other law.
new text end
new text begin
(b) Nothing in this section authorizes a nonprofit health care entity to enter into a
conversion transaction not otherwise permitted under this section or chapter 317A.
new text end
Sec. 3.
Minnesota Statutes 2018, 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
new text begin
(2) a nonprofit health maintenance organization operating under chapter 62D;
new text end
new text begin
(3) a nonprofit health service plan corporation operating under chapter 62C; or
new text end
deleted text begin (2)deleted text end new text begin (4)new text end a corporation that is exempt under section 501(c)(3) of the Internal Revenue Code
of 1986, or any successor section.
(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.
new text begin
(c) A corporation that is a nonprofit health maintenance organization or a nonprofit
health service plan corporation is subject to additional notice requirements governing
nonprofit health care entity conversions under section 62D.31.
new text end
new text begin (d) new text end The notice must be signed on behalf of the corporation by an authorized person.
Sec. 4. new text begin EFFECTIVE DATE.
new text end
new text begin
Sections 1 to 3 are effective July 1, 2019.
new text end