1.1 	A bill for an act
1.2 	relating to insurance; creating an employee health coverage reinsurance pool for 
1.3 	businesses and political subdivisions; appropriating money;amending Minnesota 
1.4 	Statutes 2004, sections 123A.21, subdivision 7; 471.61, by adding a subdivision; 
1.5 	471.617, by adding a subdivision; proposing coding for new law as Minnesota 
1.6 	Statutes, chapter 62U.
1.7 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.8 	Section 1. [62U.01] MINNESOTA STATEWIDE HEALTH REINSURANCE 
1.9 	ASSOCIATION.
1.10 		Subdivision 1.Creation. The Minnesota Statewide Health Reinsurance Association 
1.11 	may operate as a nonprofit unincorporated association, but is authorized to incorporate 
1.12 	under chapter 317A. 
1.13 		Subd. 2.Purpose. The association is established to provide a voluntary private 
1.14 	reinsurance and stop-loss pool for health coverage provided to employees and dependents 
1.15 	by Minnesota employers. Public sector and private sector employers are eligible to apply 
1.16 	for reinsurance through the pool, regardless of whether the underlying health coverage is 
1.17 	insured or self-insured. 
1.18 		Subd. 3.Definitions. (a) For purposes of this section, the terms defined in this 
1.19 	subdivision have the meanings given.
1.20 	(b) "Eligible entity" means an insured or self-insured public or private sector 
1.21 	employer, a self-insured group of public or private sector employers, the public employees 
1.22 	insurance program, the Minnesota employees insurance program, a service cooperative, 
1.23 	or a multiple employer welfare arrangement.
1.24 	(c) "Reinsurance" means reinsurance or stop-loss coverage.
2.1 	(d) "Insured" means an eligible entity that obtains reinsurance through the 
2.2 	association.
2.3 		Subd. 4.Exemptions. The association, its transactions, and all property owned by it 
2.4 	are exempt from taxation under the laws of this state or any of its subdivisions, including, 
2.5 	but not limited to, premiums taxes imposed under chapter 297I, income tax, sales tax, use 
2.6 	tax, and property tax. The association may seek exemption from payment of all fees and 
2.7 	taxes levied by the federal government. Except as otherwise provided in this chapter, the 
2.8 	association is not subject to the provisions of chapters 13, 13D, 60A, and 62A to 62H. 
2.9 	Reinsurance or stop-loss insurance premiums received by the board are subject to the 
2.10 	assessment of the Minnesota Comprehensive Health Association under chapter 62E to the 
2.11 	same extent as other reinsurance or stop-loss coverage. The association is not a public 
2.12 	employer and is not subject to the provisions of chapters 179A and 353. Members of the 
2.13 	board of directors and entities that obtain coverage through the association are exempt 
2.14 	from sections  325D.49 to  325D.66 in the performance of their duties as directors and as 
2.15 	insureds of the association. 
2.16 		Subd. 5.Powers of association. The association may exercise all of the powers of a 
2.17 	corporation formed under chapter 317A, including, but not limited to, the authority to:
2.18 	(1) establish operating rules, conditions, and procedures relating to the reinsurance 
2.19 	of members' risks;
2.20 	(2) assess insureds in accordance with the provisions of this section and to make 
2.21 	advance interim assessments as may be reasonable and necessary for organizational and 
2.22 	interim operating expenses;
2.23 	(3) sue and be sued, including taking any legal action necessary to recover any 
2.24 	assessments;
2.25 	(4) enter into contracts necessary to carry out the provisions of this chapter;
2.26 	(5) establish operating, administrative, and accounting procedures for the operation 
2.27 	of the association; and
2.28 	(6) borrow money against the future receipt of premiums and assessments up to the 
2.29 	amount of the previous year's assessment, with the prior approval of the commissioner 
2.30 	of commerce.
2.31 	The provisions of this chapter govern if the provisions of chapter 317A conflict with 
2.32 	this chapter. The association may operate under the plan of operation approved by the 
2.33 	board and shall be governed in accordance with this chapter and may operate in accordance 
2.34 	with chapter 317A. If the association incorporates as a nonprofit corporation under chapter 
2.35 	317A, the filing of the plan of operation meets the requirements of filing articles.
3.1 		Subd. 6.Role of commissioner. The commissioner of commerce shall supervise 
3.2 	the association in accordance with this chapter. The commissioner of commerce may 
3.3 	examine the association. The association's reinsurance policy forms, contracts, premium 
3.4 	rates, and assessments are subject to the approval of the commissioner of commerce. The 
3.5 	association's policy forms, contracts, and premium rates are deemed approved if not 
3.6 	disapproved by the commissioner of commerce within 60 days after the date of filing them 
3.7 	with the commissioner of commerce. The association's assessments are deemed approved 
3.8 	if not disapproved by the commissioner of commerce within 15 business days after filing 
3.9 	them with the commissioner of commerce. The association shall notify the commissioner 
3.10 	of all board meetings, and the commissioner or the commissioner's designee may attend 
3.11 	all board meetings. The association shall file an annual report with the commissioner on 
3.12 	or before July 1 of each year, beginning July 1, 2008, describing its activities during the 
3.13 	preceding calendar year. The report must include a financial report, a summary of claims 
3.14 	paid by the association, and full information regarding compensation and reimbursements 
3.15 	paid by the association to the directors. The annual report must be available for public 
3.16 	inspection.

3.17 	Sec. 2. [62U.02] BOARD OF DIRECTORS.
3.18 		Subdivision 1.Composition of board. The association shall exercise its powers 
3.19 	through a board of nine directors appointed by the governor. Four directors must be 
3.20 	public members who are deeply committed to the success of the association. Four of the 
3.21 	nonpublic directors must be representatives of employers or other organizations that are 
3.22 	eligible to obtain reinsurance or stop-loss through the association, including at least one 
3.23 	governmental employer. The ninth board member must represent employees.
3.24 		Subd. 2.Appointment of board. On or before July 1, 2006, the governor shall 
3.25 	appoint an interim board of directors of the association who shall serve until December 31, 
3.26 	2007. Thereafter the governor shall appoint board members to serve staggered three-year 
3.27 	terms, so that one-third of the terms expire each year.
3.28 		Subd. 3.Term of office. Each director shall hold office until expiration of the 
3.29 	director's term or until the director's successor is duly appointed and qualified, or until the 
3.30 	director's death, resignation, or removal.
3.31 		Subd. 4.Resignation and removal. A director may resign at any time by giving 
3.32 	written notice to the governor. The resignation takes effect at the time the resignation is 
3.33 	received unless the resignation specifies a later date. If a vacancy occurs for a director, the 
3.34 	governor shall appoint a new director for the duration of the unexpired term.
4.1 		Subd. 5.Quorum. A majority of the directors constitutes a quorum for the 
4.2 	transaction of business. If a vacancy exists by reason of death, resignation, or otherwise, a 
4.3 	majority of the remaining directors constitutes a quorum.
4.4 		Subd. 6.Duties of directors. On or before January 1, 2007, the board or the interim 
4.5 	board shall develop a plan of operation and reasonable operating rules to ensure the fair, 
4.6 	reasonable, and equitable administration of the association. The plan of operation must 
4.7 	include the development of procedures for selecting an administering entity, establishment 
4.8 	of the powers and duties of the administering entity, and establishment of procedures for 
4.9 	collecting assessments from insureds, including the imposition of interest penalties for late 
4.10 	payments of assessments. The plan of operation must be submitted to the commissioner 
4.11 	for review and a determination that the plan is consistent with the requirements of this 
4.12 	section. The board of directors may subsequently amend, change, or revise the plan of 
4.13 	operation with the same review and determination by the commissioner. The original plan 
4.14 	and proposed amendments to it are deemed to be consistent with the requirements of this 
4.15 	section unless objected to by the commissioner within 60 days.
4.16 		Subd. 7.Compensation. Directors may be reimbursed by the association for 
4.17 	reasonable and necessary expenses incurred by them in performing their duties as directors 
4.18 	and may be compensated by the association at a rate determined by the board per day 
4.19 	spent on authorized association activities.
4.20 		Subd. 8.Officers. The board may elect officers and establish committees as 
4.21 	provided in the bylaws of the association. Officers have the authority and duties in the 
4.22 	management of the association as prescribed by the bylaws and determined by the board 
4.23 	of directors.
4.24 		Subd. 9.Majority vote. Approval by a majority of the directors present is required 
4.25 	for any action of the board. 

4.26 	Sec. 3. [62U.03] COMPLIANCE BY INSUREDS.
4.27 	All insureds shall comply with the provisions of this chapter, the association's 
4.28 	bylaws, the plan of operation developed by the board of directors, and any other operating, 
4.29 	administrative, or other procedures established by the board of directors for the operation 
4.30 	of the association. The board may terminate the coverage of an insured that violates 
4.31 	this section. 

4.32 	Sec. 4. [62U.04] ADMINISTRATION OF ASSOCIATION.
4.33 		Subdivision 1.Administrator. The association shall contract with a qualified entity 
4.34 	to operate and administer the association. If there is no available qualified entity, or in 
5.1 	the event of a termination under subdivision 2, the association may directly operate and 
5.2 	administer the reinsurance program. The administrator shall perform all administrative 
5.3 	functions required by sections 62U.01 to 62U.10. The board of directors shall develop 
5.4 	administrative functions required by those sections and written criteria for the selection of 
5.5 	an administrator. The administrator must be selected by the board of directors.
5.6 		Subd. 2.Term. The administrator shall serve for a period of three years, unless the 
5.7 	administrator requests the termination of its contract and the termination is approved by 
5.8 	the board of directors. The board of directors shall approve or deny a request to terminate 
5.9 	within 90 days of its receipt. A failure to make a final decision on a request to terminate 
5.10 	within 90 days is considered an approval.
5.11 		Subd. 3.Duties of administrator. The association shall enter into a written contract 
5.12 	with the administrator to carry out its duties and responsibilities. The administrator shall 
5.13 	perform all administrative functions required by sections 62U.01 to 62U.10, including the:
5.14 	(1) preparation and submission of an annual report to the commissioner;
5.15 	(2) preparation and submission of monthly reports to the board of directors;
5.16 	(3) calculation of all assessments and the notification thereof of insureds;
5.17 	(4) payment of claims to insureds following the submission by insureds of acceptable 
5.18 	claim documentation;
5.19 	(5) provision of claim reports to insureds as determined by the board of directors;
5.20 	(6) recommendation to the board of reinsurance coverages, premiums, and 
5.21 	underwriting standards; 
5.22 	(7) marketing of the reinsurance program; and
5.23 	(8) other duties as determined by the board.
5.24 		Subd. 4.Bid process. The association shall issue a request for proposal for 
5.25 	administration of the reinsurance association and shall solicit responses from qualified 
5.26 	entities. Methods of compensation of the administrator must be a part of the bid process. 
5.27 	The administrator shall substantiate its cost reports consistent with generally accepted 
5.28 	accounting principles. The contract for administration must be rebid every three years. 
5.29 		Subd. 5.Audits. The board of directors may conduct periodic audits to verify the 
5.30 	accuracy of financial data and reports submitted by the administrator. The board may 
5.31 	establish in the plan of operation a uniform audit program.
5.32 		Subd. 6.Records of association. The association shall maintain appropriate 
5.33 	records and documentation relating to the activities of the association. All individual 
5.34 	patient-identifying claims data and information are confidential and not subject to 
5.35 	disclosure of any kind, except as necessary to resolve claims, provided that an employer 
5.36 	must not be given access to such data regarding a person covered by that employer. All 
6.1 	records, documents, and work product prepared by the association or by the administrator 
6.2 	for the association are the property of the association. The commissioner shall have access 
6.3 	to the data for the purposes of carrying out the supervisory functions provided for in 
6.4 	sections 62U.01 to 62U.10.
6.5 		Subd. 7.Indemnification. The association shall indemnify directors, officers, 
6.6 	employees, and agents to the same extent that persons may be indemnified by corporations 
6.7 	under section  317A.521. 

6.8 	Sec. 5. [62U.05] PARTICIPATION IN REINSURANCE ASSOCIATION.
6.9 		Subdivision 1.Minimum standards. The board of directors or the interim board 
6.10 	shall establish minimum claim processing and managed care standards which must be met 
6.11 	by the underlying health coverage in order to have its risk reinsured by the association. 
6.12 	Adherence to these standards must be subject to audit by the association.
6.13 		Subd. 2.Underwriting standards. The board shall develop and use underwriting 
6.14 	standards for determining whether to reinsure an eligible entity, and on what terms. The 
6.15 	standards must be similar to those customarily used in the health reinsurance and stop-loss 
6.16 	markets and must avoid subjecting the association to undue risk, in the opinion of the 
6.17 	board.
6.18 		Subd. 3.Length of participation. An insured's initial participation in the 
6.19 	reinsurance pool is for a period of two years. Subsequent elections of participation are 
6.20 	also for two-year periods.

6.21 	Sec. 6. [62U.06] CEDING OF RISK.
6.22 		Subdivision 1.Prospective ceding. An employer or other eligible entity may 
6.23 	prospectively reinsure its entire employer group and may exclude certain employees only 
6.24 	with the approval of the administrator, subject to the association's operating rules.
6.25 		Subd. 2.Reinsurance termination. An insured may terminate reinsurance through 
6.26 	the association for an entire group on the anniversary date of coverage for that group, 
6.27 	with a 60-day written notice, subject to the two-year participation requirement of section 
6.28 	62U.05, subdivision 3.
6.29 		Subd. 3.Continuing insureds responsibility. An eligible entity transferring risk 
6.30 	to the association is completely responsible for administering its health benefit plans. 
6.31 	An eligible entity shall apply its case management and claim processing techniques 
6.32 	consistently between reinsured and nonreinsured business. 

6.33 	Sec. 7. [62U.07] ALLOWED REINSURANCE BENEFITS.
7.1 	An eligible entity may reinsure through the association only those benefits permitted 
7.2 	to be reinsured by the board. The board may establish guidelines to clarify what coverage 
7.3 	is included. 

7.4 	Sec. 8. [62U.08] TRANSFER OF RISK.
7.5 		Subdivision 1.Reinsurance threshold. An eligible entity participating in the 
7.6 	association may transfer up to a percentage of the risk above a reinsurance threshold. The 
7.7 	board shall determine the percentage and the threshold. 
7.8 	Satisfaction of the reinsurance threshold must be determined by the board of 
7.9 	directors based on discounted eligible charges. The board may establish an audit process 
7.10 	to assure consistency in the submission of charge calculations by eligible entities to the 
7.11 	association. The association shall determine the amount to be paid to the eligible entity 
7.12 	for claims submitted based on discounted eligible charges. The board may also establish 
7.13 	upper limits on the amount paid by the association based on a usual and customary 
7.14 	determination. The board shall establish in the plan of operation a procedure for 
7.15 	determining the discounted eligible charge.
7.16 		Subd. 2.Conversion factors. The board shall establish a standardized conversion 
7.17 	table for determining equivalent charges for eligible entities that use alternative provider 
7.18 	reimbursement methods. If an eligible entity establishes to the board that the health 
7.19 	carrier's conversion factor is equivalent to the association's standardized conversion table, 
7.20 	the association shall accept the health carrier's conversion factor.
7.21 		Subd. 3.Board authority. The board shall establish criteria for changing the 
7.22 	threshold amount or retention percentage. The board shall review the criteria on an annual 
7.23 	basis. The board shall provide the insureds with an opportunity to comment on the criteria 
7.24 	at the time of the annual review.
7.25 		Subd. 4.Notification of transfer of risk. An insured must notify the association, 
7.26 	within 90 days of receipt of proof of loss, of satisfaction of a reinsurance threshold. After 
7.27 	satisfaction of the reinsurance threshold, an eligible entity continues to be liable to its 
7.28 	providers, eligible employees, and dependents for payment of claims in accordance with 
7.29 	the underlying benefit plan. Eligible entities shall not pend or delay payment of otherwise 
7.30 	valid claims due to the transfer of risk to the association.
7.31 		Subd. 5.Periodic studies. The board shall, on a biennial basis, prepare and submit 
7.32 	a report to the commissioner of commerce on the effect of the reinsurance association on 
7.33 	the insurance market. The first study must be presented to the commissioner no later than 
7.34 	January 1, 2009. After two years of operation, the board shall study the composition of the 
7.35 	board and determine whether the initial appointments reflect the types of interests and 
8.1 	backgrounds appropriate to the reinsurance association and recommend any desirable 
8.2 	changes.

8.3 	Sec. 9. [62U.09] REINSURANCE PREMIUMS.
8.4 		Subdivision 1.Monthly premium. An eligible entity ceding a group to the 
8.5 	reinsurance association shall be assessed a monthly reinsurance coverage premium 
8.6 	determined by the board. The board may consider benefit levels in establishing the 
8.7 	reinsurance coverage premium.
8.8 		Subd. 2.Adjustment of premium rates. The board of directors shall establish 
8.9 	operating rules to allocate adjustments to the reinsurance premium charge of no more 
8.10 	than minus 25 percent of the monthly reinsurance premium for eligible entities that can 
8.11 	demonstrate administrative efficiencies and cost-effective handling of equivalent risks. 
8.12 	The adjustment must be made monthly, unless the board provides for a different interval in 
8.13 	its operating rules. The operating rules must establish objective and measurable criteria 
8.14 	which must be met by an eligible entity in order to be eligible for an adjustment. These 
8.15 	criteria must include consideration of efficiency attributable to case management, but not 
8.16 	consideration of such factors as provider discounts.
8.17 		Subd. 3.Liability for premium. An eligible entity is liable to the board for the 
8.18 	cost of the reinsurance premium and may not transfer or purport to transfer this liability to 
8.19 	the persons covered by the reinsurance. 

8.20 	Sec. 10. [62U.10] FINANCIAL MANAGEMENT AND ASSESSMENTS.
8.21 		Subdivision 1.Assessment by board. For the purpose of providing the funds 
8.22 	necessary to carry out the purposes of the association, the board of directors shall assess 
8.23 	insureds as provided in subdivisions 2, 3, and 4 at the times and for the amounts the 
8.24 	board of directors finds necessary. Assessments are due and payable on the date specified 
8.25 	by the board of directors, but not less than 30 days after written notice to the insured. 
8.26 	Assessments accrue interest at the rate of six percent per year on or after the due date.
8.27 		Subd. 2.Initial capitalization. The board of directors shall determine the initial 
8.28 	and ongoing capital operating and reserve requirements for the association. If the board 
8.29 	determines that it needs funds in addition to those otherwise available to the board, to meet 
8.30 	the board's obligations, the board may access additional funds as needed in the form of 
8.31 	loans from the health care access fund, not to exceed a total indebtedness of $10,000,000 
8.32 	at any one time. Such loans accrue interest at three percent per annum simple interest and 
8.33 	must be repaid in installments beginning no later than two years after the board first 
8.34 	provides coverage and must be fully repaid no later than ten years after that date. The 
9.1 	monthly repayment installments must be reamortized as needed to reflect repayments and 
9.2 	additional loan amounts accessed, so that equal monthly installments will be sufficient to 
9.3 	repay the existing balance, including accrued interest, at the end of that ten-year period. 
9.4 	The $10,000,000 amount is available until the end of that ten-year period. Amounts of 
9.5 	principal repaid are available to be accessed for new loans within that period.
9.6 		Subd. 3.Retrospective assessment. On or before July 1 of each year, the 
9.7 	administering carrier shall determine the association's net loss, if any, for the previous 
9.8 	calendar year, the program expenses of administration, and other appropriate gains and 
9.9 	losses. If reinsurance premium charges are not sufficient to satisfy the operating and 
9.10 	administrative expenses incurred or estimated to be incurred by the association, the board 
9.11 	of directors shall assess each insured in proportion to each insured's respective share of the 
9.12 	total reinsurance premiums. The board of directors may provide for interim assessments 
9.13 	as it considers necessary to appropriately carry out the association's responsibilities. The 
9.14 	board of directors may establish operating rules to provide for changes in the assessment 
9.15 	calculation.
9.16 		Subd. 4.Refund. The board of directors may refund to insureds, in proportion to 
9.17 	their contributions, the amount by which the assets of the association exceed the amount 
9.18 	the board of directors finds necessary to carry out its responsibilities during the next 
9.19 	calendar year. A reasonable amount may be retained to provide funds for the continuing 
9.20 	expenses of the association and for future losses.
9.21 		Subd. 5.Appeals. An insured may appeal to the commissioner of commerce within 
9.22 	30 days of notice of an assessment by the board of directors. A final action or order of the 
9.23 	commissioner is subject to judicial review in the manner provided in chapter 14.

9.24 	Sec. 11. Minnesota Statutes 2004, section 123A.21, subdivision 7, is amended to read:
9.25 		Subd. 7.Educational programs and services. The board of directors of each SC 
9.26 	shall submit annually a plan to the members. The plan shall identify the programs and 
9.27 	services which are suggested for implementation by the SC during the following year and 
9.28 	shall contain components of long-range planning determined by the SC. These programs 
9.29 	and services may include, but are not limited to, the following areas:
9.30 	(1) administrative services;
9.31 	(2) curriculum development;
9.32 	(3) data processing;
9.33 	(4) distance learning and other telecommunication services;
9.34 	(5) evaluation and research;
9.35 	(6) staff development;
10.1 	(7) media and technology centers;
10.2 	(8) publication and dissemination of materials;
10.3 	(9) pupil personnel services;
10.4 	(10) planning;
10.5 	(11) secondary, postsecondary, community, adult, and adult vocational education;
10.6 	(12) teaching and learning services, including services for students with special 
10.7 	talents and special needs;
10.8 	(13) employee personnel services;
10.9 	(14) vocational rehabilitation;
10.10 	(15) health, diagnostic, and child development services and centers;
10.11 	(16) leadership or direction in early childhood and family education;
10.12 	(17) community services;
10.13 	(18) shared time programs;
10.14 	(19) fiscal services and risk management programs. A risk management program 
10.15 	may involve participation in a reinsurance arrangement offered by the Minnesota 
10.16 	Statewide Health Reinsurance Association;
10.17 	(20) technology planning, training, and support services;
10.18 	(21) health and safety services;
10.19 	(22) student academic challenges; and
10.20 	(23) cooperative purchasing services.

10.21 	Sec. 12. Minnesota Statutes 2004, section 471.61, is amended by adding a subdivision 
10.22 	to read:
10.23 		Subd. 6.Participation in reinsurance pool permitted. A political subdivision 
10.24 	providing insured health coverage to its employees and their dependents may obtain 
10.25 	reinsurance coverage from the Minnesota Statewide Health Reinsurance Association 
10.26 	created in chapter 62U to coordinate with the underlying health coverage.

10.27 	Sec. 13. Minnesota Statutes 2004, section 471.617, is amended by adding a subdivision 
10.28 	to read:
10.29 		Subd. 7.Participation in reinsurance pool permitted. A political subdivision 
10.30 	self-insuring health coverage it provides to its employees and dependents, whether 
10.31 	self-insuring on its own or as part of a group self-insurance arrangement, may obtain 
10.32 	excess or stop-loss coverage through the Minnesota Statewide Health Reinsurance 
10.33 	Association created under chapter 62U.

11.1 	Sec. 14. APPROPRIATION.
 11.2 	$10,000,000 is appropriated from the health care access fund to the commissioner 
11.3 	of commerce for disbursement as as-needed loans to the Minnesota Statewide Health 
11.4 	Reinsurance Association, as provided in Minnesota Statutes, section 62U.10.