1.1                          A bill for an act 
  1.2             relating to health; changing provisions in health plan 
  1.3             company regulations; changing provisions for Minnesota 
  1.4             provider tax and tobacco tax; amending Minnesota 
  1.5             Statutes 2000, sections 62C.01; 62C.02, subdivision 6; 
  1.6             62D.02, subdivision 4; 62D.03, subdivision 1; 62D.04, 
  1.7             subdivision 1; 295.52, subdivisions 1, 1a, 2, 3; 
  1.8             297F.05, subdivisions 1, 3; 297F.08, subdivision 7; 
  1.9             297F.10; repealing Minnesota Statutes 2000, section 
  1.10            62A.309; Minnesota Statutes 2001 Supplement, section 
  1.11            295.52, subdivision 7. 
  1.12  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.13                             ARTICLE 1 
  1.14                   HEALTH PLAN COMPANY REGULATION 
  1.15     Section 1.  Minnesota Statutes 2000, section 62C.01, is 
  1.16  amended to read: 
  1.17     62C.01 [~~NONPROFIT~~ HEALTH SERVICE PLAN CORPORATIONS ACT.] 
  1.18     Subdivision 1.  [CITATION.] Sections 62C.01 to 62C.23 may 
  1.19  be cited as the "~~Nonprofit~~ Health Service Plan Corporations Act."
  1.20     Subd. 2.  [PURPOSE.] It is the purpose and intent of Laws 
  1.21  1971, chapter 568 to promote a wider, more economical and timely 
  1.22  availability of hospital, medical-surgical, dental, and other 
  1.23  health services for the people of Minnesota, through ~~nonprofit,~~ 
  1.24  prepaid health service plans, and thereby advance public health 
  1.25  and the art and science of medical and health care within the 
  1.26  state, while reasonably regulating the formation, continuation, 
  1.27  operation, and termination of such service plans by 
  1.28  establishment and enforcement of reasonable and practical 
  2.1   standards of administration, investments, surplus and reserves.  
  2.2      Subd. 3.  [SCOPE.] Every foreign or domestic ~~nonprofit~~ 
  2.3   corporation organized for the purpose of establishing or 
  2.4   operating a health service plan in Minnesota whereby health 
  2.5   services are provided to subscribers to the plan under a 
  2.6   contract with the corporation shall be subject to and governed 
  2.7   by Laws 1971, chapter 568, and shall not be subject to the laws 
  2.8   of this state relating to insurance, except the gross premiums 
  2.9   tax provisions contained in chapter 297I and as otherwise 
  2.10  specifically provided.  Laws 1971, chapter 568 shall apply to 
  2.11  all health service plan corporations incorporated after August 
  2.12  1, 1971, and to all existing health service plan corporations, 
  2.13  except as otherwise provided.  Nothing in sections 62C.01 to 
  2.14  62C.23 shall apply to prepaid group practice plans.  A prepaid 
  2.15  group practice plan is any plan or arrangement other than a 
  2.16  service plan, whereby health services are rendered to certain 
  2.17  patients by providers who devote their professional effort 
  2.18  primarily to members or patients of the plan, and whereby the 
  2.19  recipients of health services pay for the services on a regular, 
  2.20  periodic basis, not on a fee for service basis.  
  2.21     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  2.22  following final enactment.  
  2.23     Sec. 2.  Minnesota Statutes 2000, section 62C.02, 
  2.24  subdivision 6, is amended to read: 
  2.25     Subd. 6.  [SERVICE PLAN CORPORATION.] "Service plan 
  2.26  corporation" means a foreign or domestic ~~nonprofit~~ corporation 
  2.27  which contracts for health service or payment therefor for 
  2.28  subscribers pursuant to a service plan, in exchange for periodic 
  2.29  prepayments by or on behalf of subscribers.  An "existing 
  2.30  corporation" means a service plan association or corporation 
  2.31  legally in existence on August 1, 1971, and authorized to do 
  2.32  business in this state on that date.  
  2.33     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  2.34  following final enactment.  
  2.35     Sec. 3.  Minnesota Statutes 2000, section 62D.02, 
  2.36  subdivision 4, is amended to read: 
  3.1      Subd. 4.  [HEALTH MAINTENANCE ORGANIZATION.] (a) "Health 
  3.2   maintenance organization" means a ~~nonprofit~~ domestic or foreign 
  3.3   corporation ~~organized under chapter 317A~~, or a local 
  3.4   governmental unit as defined in subdivision 11, controlled and 
  3.5   operated as provided in sections 62D.01 to 62D.30, which 
  3.6   provides, either directly or through arrangements with providers 
  3.7   or other persons, comprehensive health maintenance services, or 
  3.8   arranges for the provision of these services, to enrollees on 
  3.9   the basis of a fixed prepaid sum without regard to the frequency 
  3.10  or extent of services furnished to any particular enrollee.  
  3.11     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  3.12  following final enactment.  
  3.13     Sec. 4.  Minnesota Statutes 2000, section 62D.03, 
  3.14  subdivision 1, is amended to read: 
  3.15     Subdivision 1.  [CERTIFICATE OF AUTHORITY REQUIRED.] 
  3.16  Notwithstanding any law of this state to the contrary, any 
  3.17  ~~nonprofit~~ domestic or foreign corporation organized to do so or 
  3.18  a local governmental unit may apply to the commissioner of 
  3.19  health for a certificate of authority to establish and operate a 
  3.20  health maintenance organization in compliance with sections 
  3.21  62D.01 to 62D.30.  No person shall establish or operate a health 
  3.22  maintenance organization in this state, nor sell or offer to 
  3.23  sell, or solicit offers to purchase or receive advance or 
  3.24  periodic consideration in conjunction with a health maintenance 
  3.25  organization or health maintenance contract unless the 
  3.26  organization has a certificate of authority under sections 
  3.27  62D.01 to 62D.30. 
  3.28     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  3.29  following final enactment.  
  3.30     Sec. 5.  Minnesota Statutes 2000, section 62D.04, 
  3.31  subdivision 1, is amended to read: 
  3.32     Subdivision 1.  [APPLICATION REVIEW.] Upon receipt of an 
  3.33  application for a certificate of authority, the commissioner of 
  3.34  health shall determine whether the applicant for a certificate 
  3.35  of authority has: 
  3.36     (a) demonstrated the willingness and potential ability to 
  4.1   assure that health care services will be provided in such a 
  4.2   manner as to enhance and assure both the availability and 
  4.3   accessibility of adequate personnel and facilities; 
  4.4      (b) arrangements for an ongoing evaluation of the quality 
  4.5   of health care; 
  4.6      (c) a procedure to develop, compile, evaluate, and report 
  4.7   statistics relating to the cost of its operations, the pattern 
  4.8   of utilization of its services, the quality, availability and 
  4.9   accessibility of its services, and such other matters as may be 
  4.10  reasonably required by regulation of the commissioner of health; 
  4.11     (d) reasonable provisions for emergency and out of area 
  4.12  health care services; 
  4.13     (e) demonstrated that it is financially responsible and may 
  4.14  reasonably be expected to meet its obligations to enrollees and 
  4.15  prospective enrollees.  In making this determination, the 
  4.16  commissioner of health shall require the amounts of net worth 
  4.17  and working capital required in section 62D.042, the deposit 
  4.18  required in section 62D.041, and in addition shall consider: 
  4.19     (1) the financial soundness of its arrangements for health 
  4.20  care services and the proposed schedule of charges used in 
  4.21  connection therewith; 
  4.22     (2) arrangements which will guarantee for a reasonable 
  4.23  period of time the continued availability or payment of the cost 
  4.24  of health care services in the event of discontinuance of the 
  4.25  health maintenance organization; and 
  4.26     (3) agreements with providers for the provision of health 
  4.27  care services; 
  4.28     (f) demonstrated that it will assume full financial risk on 
  4.29  a prospective basis for the provision of comprehensive health 
  4.30  maintenance services, including hospital care; provided, 
  4.31  however, that the requirement in this paragraph shall not 
  4.32  prohibit the following: 
  4.33     (1) a health maintenance organization from obtaining 
  4.34  insurance or making other arrangements (i) for the cost of 
  4.35  providing to any enrollee comprehensive health maintenance 
  4.36  services, the aggregate value of which exceeds $5,000 in any 
  5.1   year, (ii) for the cost of providing comprehensive health care 
  5.2   services to its members on a nonelective emergency basis, or 
  5.3   while they are outside the area served by the organization, or 
  5.4   (iii) for not more than 95 percent of the amount by which the 
  5.5   health maintenance organization's costs for any of its fiscal 
  5.6   years exceed 105 percent of its income for such fiscal years; 
  5.7   and 
  5.8      (2) a health maintenance organization from having a 
  5.9   provision in a group health maintenance contract allowing an 
  5.10  adjustment of premiums paid based upon the actual health 
  5.11  services utilization of the enrollees covered under the 
  5.12  contract, except that at no time during the life of the contract 
  5.13  shall the contract holder fully self-insure the financial risk 
  5.14  of health care services delivered under the contract.  Risk 
  5.15  sharing arrangements shall be subject to the requirements of 
  5.16  sections 62D.01 to 62D.30; 
  5.17     (g) demonstrated that it has made provisions for and 
  5.18  adopted a conflict of interest policy applicable to all members 
  5.19  of the board of directors and the principal officers of the 
  5.20  health maintenance organization.  The conflict of interest 
  5.21  policy shall include the procedures described in section 
  5.22  302A.255, subdivisions 1 and 2, or 317A.255, subdivisions 1 and 
  5.23  2.  However, the commissioner is not precluded from finding that 
  5.24  a particular transaction is an unreasonable expense as described 
  5.25  in section 62D.19 even if the directors follow the required 
  5.26  procedures; and 
  5.27     (h) otherwise met the requirements of sections 62D.01 to 
  5.28  62D.30. 
  5.29     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  5.30  following final enactment.  
  5.31     Sec. 6.  [CONSUMER COST AWARENESS.] 
  5.32     The commissioner of health, in consultation with 
  5.33  representatives of consumers, health plan companies, and 
  5.34  employers, shall develop and promote policies to increase 
  5.35  consumer awareness of health care costs.  These policies shall 
  5.36  include, but are not limited to, nonsmoking and other healthy 
  6.1   lifestyle premium discounts or financial incentives, provision 
  6.2   of employer health care premium contribution information on 
  6.3   employee pay stubs, and financial incentives for enrollees to 
  6.4   report health care provider billing errors. 
  6.5      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  6.6   following final enactment.  
  6.7      Sec. 7.  [COST AND QUALITY DISCLOSURE.] 
  6.8      (a) The commissioner of health shall assess options and 
  6.9   develop recommendations for the legislature on methods of making 
  6.10  available to patients information on the expected costs of 
  6.11  receiving a course of treatment from a particular health care 
  6.12  provider or system of providers, the current allowable payment 
  6.13  for health care services, and information on the provider's 
  6.14  quality of care.  The commissioner shall submit a report to the 
  6.15  legislature by December 1, 2002. 
  6.16     (b) The commissioner's recommendations must ensure that the 
  6.17  cost information to be made available to consumers is based on: 
  6.18     (1) the expected course of treatment as determined by the 
  6.19  patient's health care provider; 
  6.20     (2) the provider's charges and current allowable payment 
  6.21  for each service and how many times each service is expected to 
  6.22  be provided; and 
  6.23     (3) the methodology used to make any adjustments or 
  6.24  discounts to the provider's charges under the patient's health 
  6.25  coverage plan. 
  6.26     (c) The commissioner's recommendations shall ensure that 
  6.27  patients will have access to reliable and useful information on 
  6.28  health care provider quality.  The commissioner shall consider, 
  6.29  among other possible measures of quality, information on 
  6.30  consumer satisfaction and complaint rates; patient outcomes 
  6.31  measures; mortality and morbidity rates; rates of infections, 
  6.32  complications, and medical errors; chart reviews to determine 
  6.33  whether best practice guidelines were followed; preventive care 
  6.34  rates; reputation among peers; frequency and experience with a 
  6.35  particular procedure; research assessments of the effectiveness 
  6.36  of a procedure, drug, device, or technology; and accreditation 
  7.1   status. 
  7.2      (d) The report must include an analysis of the impact of 
  7.3   various options and recommendations on the cost of health care 
  7.4   services and health coverage, antitrust implications, and the 
  7.5   expected impact on the health care marketplace.  In developing 
  7.6   the report and recommendations, the commissioner shall solicit 
  7.7   input from interested organizations. 
  7.8      (e) For purposes of this section, "allowable payment" means 
  7.9   the total financial compensation, including details of any 
  7.10  withhold or settle-up payments, to be paid to a health care 
  7.11  provider for providing a health care service, as determined by 
  7.12  the contract between the health plan company and the provider. 
  7.13     Sec. 8.  [INSTRUCTION TO REVISOR.] 
  7.14     The revisor of statutes shall change the term "nonprofit 
  7.15  health service plan corporation" or similar terms to "health 
  7.16  service plan corporation" or similar terms wherever they appear 
  7.17  in Minnesota Statutes and Minnesota Rules in connection with 
  7.18  those entities regulated under Minnesota Statutes, chapter 62C. 
  7.19     Sec. 9.  [REPEALER.] 
  7.20     Minnesota Statutes 2000, section 62A.309, is repealed 
  7.21  effective the day following final enactment, and applies to 
  7.22  health plan contracts and policies issued or renewed on or after 
  7.23  that date. 
  7.24                             ARTICLE 2 
  7.25              MINNESOTACARE PROVIDER TAX; TOBACCO TAX 
  7.26     Section 1.  Minnesota Statutes 2000, section 295.52, 
  7.27  subdivision 1, is amended to read: 
  7.28     Subdivision 1.  [HOSPITAL TAX.] A tax is imposed on each 
  7.29  hospital equal to ~~two~~ one percent of its gross revenues. 
  7.30     <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 
  7.31  2003, and applies to tax periods beginning on or after that date.
  7.32     Sec. 2.  Minnesota Statutes 2000, section 295.52, 
  7.33  subdivision 1a, is amended to read: 
  7.34     Subd. 1a.  [SURGICAL CENTER TAX.] A tax is imposed on each 
  7.35  surgical center equal to ~~two~~ one percent of its gross revenues. 
  7.36     <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 
  8.1   2003, and applies to tax periods beginning on or after that date.
  8.2      Sec. 3.  Minnesota Statutes 2000, section 295.52, 
  8.3   subdivision 2, is amended to read: 
  8.4      Subd. 2.  [PROVIDER TAX.] A tax is imposed on each health 
  8.5   care provider equal to ~~two~~ one percent of its gross revenues. 
  8.6      <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 
  8.7   2003, and applies to tax periods beginning on or after that date.
  8.8      Sec. 4.  Minnesota Statutes 2000, section 295.52, 
  8.9   subdivision 3, is amended to read: 
  8.10     Subd. 3.  [WHOLESALE DRUG DISTRIBUTOR TAX.] A tax is 
  8.11  imposed on each wholesale drug distributor equal to ~~two~~ one 
  8.12  percent of its gross revenues.  
  8.13     <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 
  8.14  2003, and applies to tax periods beginning on or after that date.
  8.15     Sec. 5.  Minnesota Statutes 2000, section 297F.05, 
  8.16  subdivision 1, is amended to read: 
  8.17     Subdivision 1.  [RATES; CIGARETTES.] A tax is imposed upon 
  8.18  the sale of cigarettes in this state, upon having cigarettes in 
  8.19  possession in this state with intent to sell, upon any person 
  8.20  engaged in business as a distributor, and upon the use or 
  8.21  storage by consumers, at the following rates, subject to the 
  8.22  discount provided in this chapter: 
  8.23     (1) on cigarettes weighing not more than three pounds per 
  8.24  thousand, ~~24~~ 43 mills on each such cigarette; and 
  8.25     (2) on cigarettes weighing more than three pounds per 
  8.26  thousand, ~~48~~ 86 mills on each such cigarette. 
  8.27     <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 2003.
  8.28     Sec. 6.  Minnesota Statutes 2000, section 297F.05, 
  8.29  subdivision 3, is amended to read: 
  8.30     Subd. 3.  [RATES; TOBACCO PRODUCTS.] A tax is imposed upon 
  8.31  all tobacco products in this state and upon any person engaged 
  8.32  in business as a distributor, at the rate of ~~35~~ 63 percent of 
  8.33  the wholesale sales price of the tobacco products.  The tax is 
  8.34  imposed at the time the distributor: 
  8.35     (1) brings, or causes to be brought, into this state from 
  8.36  outside the state tobacco products for sale; 
  9.1      (2) makes, manufactures, or fabricates tobacco products in 
  9.2   this state for sale in this state; or 
  9.3      (3) ships or transports tobacco products to retailers in 
  9.4   this state, to be sold by those retailers. 
  9.5      <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 2003.
  9.6      Sec. 7.  Minnesota Statutes 2000, section 297F.08, 
  9.7   subdivision 7, is amended to read: 
  9.8      Subd. 7.  [PRICE OF STAMPS.] The commissioner shall sell 
  9.9   stamps to any person licensed as a distributor at a discount of 
  9.10  ~~1.0~~ 0.8 percent from the face amount of the stamps for the first 
  9.11  ~~$1,500,000~~ $1,800,000 of such stamps purchased in any fiscal 
  9.12  year; and at a discount of ~~0.6~~ 0.33 percent on the remainder of 
  9.13  such stamps purchased in any fiscal year.  The commissioner 
  9.14  shall not sell stamps to any other person.  The commissioner may 
  9.15  prescribe the method of shipment of the stamps to the 
  9.16  distributor as well as the quantities of stamps purchased. 
  9.17     <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 2003.
  9.18     Sec. 8.  Minnesota Statutes 2000, section 297F.10, is 
  9.19  amended to read: 
  9.20     297F.10 [DEPOSIT OF PROCEEDS.] 
  9.21     Subdivision 1.  [TAX AND USE TAX ON CIGARETTES.] Revenue 
  9.22  received from cigarette taxes, as well as related penalties, 
  9.23  interest, license fees, and miscellaneous sources of revenue 
  9.24  shall be deposited by the commissioner in the state treasury and 
  9.25  credited as follows: 
  9.26     (a) first to the general obligation special tax bond debt 
  9.27  service account in each fiscal year the amount required to 
  9.28  increase the balance on hand in the account on each December 1 
  9.29  to an amount equal to the full amount of principal and interest 
  9.30  to come due on all outstanding bonds whose debt service is 
  9.31  payable primarily from the proceeds of the tax to and including 
  9.32  the second following July 1; and 
  9.33     (b) after the requirements of paragraph (a) have been met: 
  9.34     (1) the revenue produced by one mill of the tax on 
  9.35  cigarettes weighing not more than three pounds a thousand and 
  9.36  two mills of the tax on cigarettes weighing more than three 
 10.1   pounds a thousand must be credited to the Minnesota future 
 10.2   resources fund; and 
 10.3      (2) the balance of the revenues derived from taxes, 
 10.4   penalties, and interest (under this chapter) and from license 
 10.5   fees and miscellaneous sources of revenue shall be credited to 
 10.6   the general fund, except that the portion of tax revenue 
 10.7   resulting from the increase in the tax on cigarettes weighing 
 10.8   not more than three pounds per thousand from 24 to 43 mills and 
 10.9   the increase in the tax on cigarettes weighing more than three 
 10.10  pounds per thousand from 48 to 86 mills shall be deposited in 
 10.11  the health care access fund. 
 10.12     Subd. 2.  [TAX AND USE TAX ON TOBACCO PRODUCTS.] Revenue 
 10.13  received from taxes on tobacco products, as well as related 
 10.14  penalties, interest, and license fees shall be deposited by the 
 10.15  commissioner in the state treasury and credited to the general 
 10.16  fund, except that the portion of tax revenue resulting from the 
 10.17  increase in the tax on the wholesale sales price of tobacco 
 10.18  products from 35 to 63 percent shall be deposited in the health 
 10.19  care access fund. 
 10.20     <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 2003.
 10.21     Sec. 9.  [FLOOR STOCKS TAX.] 
 10.22     Subdivision 1.  [CIGARETTES.] (a) A floor stocks tax is 
 10.23  imposed on every person engaged in business in this state as a 
 10.24  distributor, retailer, subjobber, vendor, manufacturer, or 
 10.25  manufacturer's representative of cigarettes, on the stamped 
 10.26  cigarettes and unaffixed stamps in the person's possession or 
 10.27  under the person's control at 12:01 a.m. on January 1, 2003.  
 10.28  The tax is imposed at the following rates, subject to the 
 10.29  discounts in Minnesota Statutes, section 297F.08, subdivision 7: 
 10.30     (1) on cigarettes weighing not more than three pounds per 
 10.31  thousand, 19 mills on each cigarette; and 
 10.32     (2) on cigarettes weighing more than three pounds per 
 10.33  thousand, 38 mills on each cigarette. 
 10.34     (b) Each distributor, by January 1, 2003, shall file a 
 10.35  report with the commissioner of revenue, in the form the 
 10.36  commissioner prescribes, showing the stamped cigarettes and 
 11.1   unaffixed stamps on hand at 12:01 a.m. on January 1, 2003, and 
 11.2   the amount of tax due on the cigarettes and unaffixed stamps.  
 11.3   The tax imposed by this section is due and payable by February 
 11.4   1, 2003, and after that date bears interest as provided in 
 11.5   Minnesota Statutes, section 270.75.  Each retailer, subjobber, 
 11.6   vendor, manufacturer, or manufacturer's representative shall 
 11.7   file a return with the commissioner, in the form the 
 11.8   commissioner prescribes, showing the cigarettes on hand at 12:01 
 11.9   a.m. on January 1, 2003, and pay the tax due on them by February 
 11.10  1, 2003.  Tax not paid by the due date bears interest as 
 11.11  provided in Minnesota Statutes, section 270.75. 
 11.12     Subd. 2.  [TOBACCO PRODUCTS.] A floor stocks tax is imposed 
 11.13  on every person engaged in business in this state as a 
 11.14  distributor of tobacco products, at the rate of 28 percent of 
 11.15  the wholesale sales price of each tobacco product in the 
 11.16  person's possession or under the person's control at 12:01 a.m. 
 11.17  on January 1, 2003, and the amount of tax due on them.  The tax 
 11.18  imposed by this section, less the discount provided in Minnesota 
 11.19  Statutes, section 297F.09, subdivision 2, is due and payable by 
 11.20  February 1, 2003, and thereafter bears interest as provided in 
 11.21  Minnesota Statutes, section 270.75. 
 11.22     Subd. 3.  [AUDIT AND ENFORCEMENT.] The tax imposed by this 
 11.23  section is subject to the audit, assessment, and collection 
 11.24  provisions applicable to the taxes imposed under Minnesota 
 11.25  Statutes, chapter 297F.  The commissioner of revenue shall 
 11.26  deposit the revenue from the tax imposed under this section in 
 11.27  the health care access fund in the state treasury. 
 11.28     <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 2003.
 11.29     Sec. 10.  [REPEALER; TEMPORARY RATE FOR PROVIDER TAX.] 
 11.30     Minnesota Statutes 2001 Supplement, section 295.52, 
 11.31  subdivision 7, is repealed effective January 1, 2003.