1.1 	A bill for an act
1.2 	relating to health; limiting a health maintenance organization's net worth;
1.3 	proposing coding for new law in Minnesota Statutes, chapter 62D.
1.4 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.5 	Section 1. [62D.0425] NET WORTH LIMIT.
1.6 	(a) Between July 1, 2013, and June 30, 2018, no health maintenance organization 
1.7 	shall have a net worth of more than 25 percent of the sum of all expenses incurred during 
1.8 	the most recent calendar year, except as provided in paragraph (b).
1.9 	(b) A health maintenance organization may have a net worth of more than 25 percent 
1.10 	of the sum of all expenses incurred during the most recent calendar year if necessary to 
1.11 	maintain capital reserves at the level of the product of 2.0 and its authorized control 
1.12 	level risk-based capital, as required pursuant to sections 60A.50 to 60A.592 and 62D.04. 
1.13 	Paragraphs (c) and (d) do not apply to health maintenance organizations permitted, under 
1.14 	this paragraph, to have a net worth greater than 25 percent of the sum of all expenses 
1.15 	incurred during the most recent calendar year.
1.16 	(c) By June 15, 2013, and annually thereafter until June 15, 2017, for a health 
1.17 	maintenance organization that has a net worth of more than 25 percent of the sum of all 
1.18 	expenses incurred during the most recent calendar year, the commissioner of health, in 
1.19 	consultation with the commissioners of commerce and human services, shall determine:
1.20 	(1) capital reserves using the National Association of Insurance Commissioners 
1.21 	definitions of admitted assets, which shall be used in clauses (2) to (5);
1.22 	(2) the proportion of capital reserves that are reasonably attributable to net 
1.23 	underwriting gains in Minnesota public health care programs based on annual financial 
1.24 	filings for calendar years 2003 to 2012;
2.1 	(3) the proportion of capital reserves that are reasonably attributable to investment 
2.2 	gains associated with net underwriting gains in Minnesota public health care programs 
2.3 	based on annual financial filings for calendar years 2003 to 2012;
2.4 	(4) any adjustments needed to clauses (1) or (2) based on corporate reorganizations, 
2.5 	since 2003; and
2.6 	(5) any adjustments needed to account for the impact of annual financial filings 
2.7 	for calendar years 2013 to 2016.
2.8 	(d) A health maintenance organization that has a net worth of more than 25 percent 
2.9 	of the sum of all expenses incurred during the most recent calendar year shall reduce its 
2.10 	capital reserves as follows:
2.11 	(1) as determined by paragraph (c), the proportion of capital reserves that are greater 
2.12 	than 25 percent of the sum of all expenses incurred during the most recent calendar 
2.13 	year and that are reasonably attributable to net underwriting gains and investment gains 
2.14 	associated with net underwriting gains in Minnesota public health care programs shall be 
2.15 	spent down. The health maintenance organization shall place excess capital reserves in a 
2.16 	special restricted account under the control of the health maintenance organization. The 
2.17 	special restricted account may only be used to pay for a portion of the health maintenance 
2.18 	organization's current public program enrollee premiums. The health maintenance 
2.19 	organization shall spend no less than 50 percent of this special restricted account in any 
2.20 	state fiscal year beginning on or after July 1, 2013; and
2.21 	(2) the proportion of capital reserves that are greater than 25 percent of the 
2.22 	sum of all expenses incurred during the most recent calendar year and that are not 
2.23 	reasonably attributable to net underwriting gains and investment gains associated with net 
2.24 	underwriting gains in Minnesota public health care programs shall be spent down. The 
2.25 	health maintenance organization shall place these excess capital reserves in a second 
2.26 	special restricted account under the control of the health maintenance organization. The 
2.27 	health maintenance organization may use this special restricted account to benefit current 
2.28 	enrollees by moderating variation in premium increases, assisting enrollees in accessing 
2.29 	new benefits, reducing health disparities, promoting health, wellness and preventive 
2.30 	services, and improving care coordination. Prior to spending down excess reserves from 
2.31 	this special revenue account, the health maintenance organization's spenddown plan must 
2.32 	be approved by the commissioner of health. The health maintenance organization shall 
2.33 	spend no less than 33 percent of this special restricted account in any state fiscal year 
2.34 	beginning July 1, 2013.
2.35 	(e) The health maintenance organization must spend down all of the reserves placed 
2.36 	in its special restricted accounts by July 1, 2018. All reserves placed in a special restricted 
3.1 	account must be spent according to paragraph (d), unless the reserves are necessary for the 
3.2 	health maintenance organization to maintain capital reserves at the level of the product 
3.3 	of 2.0 and its authorized control level risk-based capital, as required pursuant to sections 
3.4 	60A.50 to 60A.592 and 62D.04, in which case the health maintenance organization 
3.5 	may transfer funds out of its special restricted accounts in a manner approved by the 
3.6 	commissioner of health.
3.7 	(f) The commissioner of health must approve all health maintenance organization 
3.8 	expenditures for the acquisition of any asset, which is a not an admitted asset under 
3.9 	National Association of Insurance Commissioners definitions. The commissioner shall 
3.10 	disapprove any acquisition unless the health maintenance organization demonstrates that 
3.11 	the acquisition is: (1) consistent with its long-standing business practices; or (2) more 
3.12 	beneficial to enrollees than benefits to enrollees under paragraph (d).