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Minnesota Legislature

Office of the Revisor of Statutes

SF 722

as introduced - 91st Legislature (2019 - 2020) Posted on 01/31/2019 03:39pm

KEY: stricken = removed, old language.
underscored = added, new language.

Current Version - as introduced

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A bill for an act
relating to taxation; insurance; clarifying that for-profit health maintenance
organizations must pay the two percent premium revenue tax; making clarifying
changes; amending Minnesota Statutes 2018, sections 256B.69, subdivision 5i;
295.58; 297I.05, subdivisions 1, 2, 5.

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

Section 1.

Minnesota Statutes 2018, section 256B.69, subdivision 5i, is amended to read:


Subd. 5i.

Administrative expenses.

(a) Administrative costs paid to managed care plans
and county-based purchasing plans under this section, section 256B.692, and section 256L.12
must not exceed 6.6 percent of total payments made to all managed care plans and
county-based purchasing plans in aggregate across all state public health care programs,
based on payments expected to be made at the beginning of each calendar year. The
commissioner may reduce or eliminate administrative requirements to meet the administrative
cost limit. For purposes of this paragraph, administrative costs do not include premium
taxes paid under section 297I.05, deleted text beginsubdivision 5deleted text enddeleted text begin,deleted text end provider surcharges paid under section
256.9657, subdivision 3, and health insurance fees under section 9010 of the Affordable
Care Act.

(b) The following expenses are not allowable administrative expenses for rate-setting
purposes under this section:

(1) charitable contributions made by the managed care plan or the county-based
purchasing plan;

(2) compensation of individuals within the organization in excess of $200,000 such that
the allocation of compensation for an individual across all state public health care programs
in total cannot exceed $200,000;

(3) any penalties or fines assessed against the managed care plan or county-based
purchasing plan;

(4) any indirect marketing or advertising expenses of the managed care plan or
county-based purchasing plan, including but not limited to costs to promote the managed
care or county-based purchasing plan, costs of facilities used for special events, and costs
of displays, demonstrations, donations, and promotional items such as memorabilia, models,
gifts, and souvenirs. The commissioner may classify an item listed in this clause as an
allowable administrative expense for rate-setting purposes, if the commissioner determines
that the expense is incidental to an activity related to state public health care programs that
is an allowable cost for purposes of rate setting;

(5) any lobbying and political activities, events, or contributions;

(6) administrative expenses related to the provision of services not covered under the
state plan or waiver;

(7) alcoholic beverages and related costs;

(8) membership in any social, dining, or country club or organization; and

(9) entertainment, including amusement, diversion, and social activities, and any costs
directly associated with these costs, including but not limited to tickets to shows or sporting
events, meals, lodging, rentals, transportation, and gratuities.

For the purposes of this subdivision, compensation includes salaries, bonuses and incentives,
other reportable compensation on an IRS 990 form, retirement and other deferred
compensation, and nontaxable benefits. Charitable contributions under clause (1) include
payments for or to any organization or entity selected by the managed care plan or
county-based purchasing plan that is operated for charitable, educational, political, religious,
or scientific purposes, that are not related to medical and administrative services covered
under state public health care programs.

(c) Payments to a quality improvement organization are an allowable administrative
expense for rate-setting purposes under this section, to the extent they are allocated to a
state public health care program and approved by the commissioner.

(d) Where reasonably possible, expenses for an administrative item shall be directly
allocated so as to assign costs for an item to an individual state public health care program
when the cost can be specifically identified with and benefits the individual state public
health care program. For administrative services expensed to the state's public health care
programs, managed care plans and county-based purchasing plans must clearly identify and
separately record expense items listed under paragraph (b) in their accounting systems in a
manner that allows for independent verification of unallowable expenses for purposes of
determining payment rates for state public health care programs.

(e) Notwithstanding paragraph (a), the commissioner shall reduce administrative expenses
paid to managed care plans and county-based purchasing plans by .50 of a percentage point
for contracts beginning January 1, 2016, and ending December 31, 2017. To meet the
administrative reductions under this paragraph, the commissioner may reduce or eliminate
administrative requirements, exclude additional unallowable administrative expenses
identified under this section and resulting from the financial audits conducted under
subdivision 9d, and utilize competitive bidding to gain efficiencies through economies of
scale from increased enrollment. If the total reduction cannot be achieved through
administrative reduction, the commissioner may limit total rate increases on payments to
managed care plans and county-based purchasing plans.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 2.

Minnesota Statutes 2018, section 295.58, is amended to read:


295.58 DEPOSIT OF REVENUES AND PAYMENT OF REFUNDS.

The commissioner shall deposit all revenues, including penalties and interest, derived
from the taxes imposed by sections 295.50 to 295.57 deleted text beginand from the insurance premiums tax
imposed by section 297I.05, subdivision 5,
deleted text end on health maintenance organizations, community
integrated service networks, and nonprofit health service plan corporations in the health
care access fund. There is annually appropriated from the health care access fund to the
commissioner of revenue the amount necessary to make refunds under this chapter.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2018, section 297I.05, subdivision 1, is amended to read:


Subdivision 1.

Domestic and foreign companiesnew text begin and for-profit health maintenance
organizations; deposit of revenues
new text end.

new text begin(a) new text endExcept as otherwise provided in this section, a tax
is imposed on every domestic and foreign insurance companynew text begin and for-profit health
maintenance organization
new text end. The rate of tax is equal to two percent of all gross premiums less
return premiums on all direct business received by the insurer or agents of the insurer in
Minnesota, in cash or otherwise, during the year.

new text begin (b) The commissioner shall deposit all revenues, including penalties and interest, collected
under this chapter from for-profit health maintenance organizations in the health care access
fund. Refunds of overpayments of tax imposed by this subdivision must be paid from the
health care access fund. There is annually appropriated from the health care access fund to
the commissioner the amount necessary to make any refunds of the tax imposed under this
subdivision.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment and
applies to premium tax returns originally due on or after December 31, 2019.
new text end

Sec. 4.

Minnesota Statutes 2018, section 297I.05, subdivision 2, is amended to read:


Subd. 2.

Township mutual insurance.

A tax is imposed on township mutual insurance
companies. The rate of tax is equal to one percent of gross premiums less return premiums
on all direct business received by the insurer or agents of the insurer in Minnesota, in cash
or otherwise, deleted text beginduringdeleted text end new text beginin new text endthe new text begincalendar new text endyear.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 5.

Minnesota Statutes 2018, section 297I.05, subdivision 5, is amended to read:


Subd. 5.

new text beginNonprofit new text endhealth maintenance organizations, nonprofit health service plan
corporations, and community integrated service networksnew text begin; deposit of revenuesnew text end.

(a) A
tax is imposed on new text beginnonprofit new text endhealth maintenance organizations, community integrated service
networks, and nonprofit health care service plan corporations. The rate of tax is equal to
one percent of gross premiums less return premiums on all direct business received by the
organization, network, or corporation or its agents in Minnesota, in cash or otherwise, in
the calendar year.

(b) The commissioner shall deposit all revenues, including penalties and interest, collected
under this chapter from new text beginnonprofit new text endhealth maintenance organizations, community integrated
service networks, and nonprofit health service plan corporations in the health care access
fund. Refunds of overpayments of tax imposed by this subdivision must be paid from the
health care access fund. There is annually appropriated from the health care access fund to
the commissioner the amount necessary to make any refunds of the tax imposed under this
subdivision.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment and
applies to premium tax returns originally due on or after December 31, 2019.
new text end