SF 1472

as introduced - 90th Legislature (2017 - 2018) Posted on 03/14/2017 11:23am

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 2016, section 317A.811, subdivision 1, by adding a subdivision;
proposing coding for new law in Minnesota Statutes, chapter 62D.

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

Section 1.

new text begin [62D.046] NONPROFIT HEALTH MAINTENANCE ORGANIZATION
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) "Conversion benefit entity" means a foundation, nonprofit corporation, trust, or other
entity that receives public benefit assets pursuant to a public benefit assets distribution plan
under this section.
new text end

new text begin (c) "Nonprofit health maintenance organization conversion transaction" or "transaction"
means a transaction in which a health maintenance organization merges, consolidates,
converts, or transfers all or substantially all of its assets to an entity that is not a nonprofit
corporation under chapter 317A or an organization operating according to United States
Code, title 26, section 501(c)(3).
new text end

new text begin (d) "Public benefit assets" means:
new text end

new text begin (1) assets that represent net earnings that were required to be devoted to the nonprofit
purposes of the health maintenance organization according to Minnesota Statutes 2016,
section 62D.12;
new text end

new text begin (2) excess reserves and other assets that represent the benefits to the health maintenance
organization of its tax status and other benefits associated with its organization as a nonprofit
corporation; and
new text end

new text begin (3) other assets that are identified as dedicated for a charitable or public purpose.
new text end

new text begin Subd. 2. new text end

new text begin Attorney general notice and approval required. new text end

new text begin (a) Before entering into a
nonprofit health maintenance organization conversion transaction, the health maintenance
organization must notify the attorney general as specified under section 317A.811,
subdivision 1, and the transaction must be approved by the attorney general under this
section. In addition, the notice must include an itemization of assets the corporation has
identified as public benefit assets, a proposed plan for distribution of those assets to a
conversion benefit entity that meets the requirements of subdivision 4, and other information
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) In making a decision whether to approve or disapprove
a proposed transaction, the attorney general, in consultation with the commissioner, shall
consider whether:
new text end

new text begin (1) the health maintenance organization will receive full and fair market value for its
public benefit assets;
new text end

new text begin (2) the fair market value of the public benefit assets to be transferred has been manipulated
by the actions of the parties in a manner that causes the fair market value of the assets to
decrease;
new text end

new text begin (3) the proceeds of the proposed transaction will be used consistent with the public
benefit for which the assets are held by the health maintenance organization;
new text end

new text begin (4) the proposed transaction will result in a breach of fiduciary duty, as determined by
the attorney general, including conflicts of interest related to payments or benefits to officers,
directors, board members, and executives;
new text end

new text begin (5) the transaction will result in private inurement to any person;
new text end

new text begin (6) the conversion benefit entity meets the requirements of subdivision 4; and
new text end

new text begin (7) the attorney general and the commissioner have been provided with sufficient
information by the health maintenance organization to adequately evaluate the proposed
transaction and the effects on the public, provided the attorney general or the commissioner
has notified the health maintenance organization or the acquiring entity of any inadequacy
of the information and has provided a reasonable opportunity to remedy that inadequacy.
new text end

new text begin (b) 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 Conversion entity requirements. new text end

new text begin (a) A conversion benefit entity must be an
existing or new charitable organization operating according to United States Code, title 26,
section 501(c)(3).
new text end

new text begin (b) The conversion entity must be independent of any influence or control by the health
maintenance organization or its directors, officers, subsidiaries, or affiliates and must have
in place procedures and policies to prohibit conflicts of interest, including grant-making
activities that may benefit the organization or those persons.
new text end

new text begin (c) The charitable purpose and grant-making functions of the conversion benefit entity
must be dedicated to meeting the health care needs of the people of this state.
new text end

new text begin Subd. 5. new text end

new text begin Period for approval or disapproval; extension. new text end

new text begin Within 90 days of receiving
notice of a proposed transaction, the attorney general shall notify the health maintenance
organization in writing of its decision to approve or disapprove the transaction. If the
transaction is not approved, the notice must include the reason for the decision. The attorney
general may extend this period for an additional 60 days if necessary to obtain additional
information.
new text end

new text begin Subd. 6. 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. 7. new text end

new text begin Relation to other law. new text end

new text begin This section does not affect any power or responsibility
of a health maintenance organization, a conversion benefit entity, the attorney general, or
the commissioner under this chapter, chapter 317A, 501B, or other law.
new text end

Sec. 2.

Minnesota Statutes 2016, 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, or consolidate,
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 new text begin , which includes a health maintenance organization operating under chapter
62D new text end ; or

(2) 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;

(8) the purposes of persons receiving the assets; and

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

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

Sec. 3.

Minnesota Statutes 2016, section 317A.811, is amended by adding a subdivision
to read:

new text begin Subd. 1a. new text end

new text begin Health maintenance organizations; notice and approval required. new text end

new text begin A
corporation that is a health maintenance organization is subject to notice and approval
requirements for certain transactions under section 62D.046.
new text end