May 1, 2003, Introduced by Senator GEORGE and referred to the Committee on Health Policy.
A bill to amend 1980 PA 350, entitled
"The nonprofit health care corporation reform act,"
by amending sections 204, 206, 211, 301, 303, 304, 306, 307, 602,
607, 608, and 609 (MCL 550.1204, 550.1206, 550.1211, 550.1301,
550.1303, 550.1304, 550.1306, 550.1307, 550.1602, 550.1607,
550.1608, and 550.1609), section 211 as amended by 1993 PA 127,
section 301 as amended by 1988 PA 45, section 608 as amended by
1991 PA 73, and section 609 as amended by 1991 PA 61, and by
adding sections 204a, 205a, 206a, 301a, 306a, 403c, 502b, and
502c; and to repeal acts and parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
1 Sec. 204. (1) Before entering into contracts or securing
2 applications of subscribers, the persons incorporating a health
3 care corporation shall file all of the following in the office of
4 the commissioner:
1 (a) Three copies of the articles of incorporation, with the
2 certificate of the attorney general required under section 202(3)
3 attached.
4 (b) A statement showing in full detail the plan upon which
5 the corporation proposes to transact business.
6 (c) A copy of all certificates to be issued to subscribers.
7 (d) A copy of the financial statements of the corporation.
8 (e) Proposed advertising to be used in the solicitation of
9 certificates for subscribers.
10 (f) A copy of the bylaws.
11 (g) A copy of all proposed contracts and reimbursement
12 methods.
13 (2) The commissioner shall examine the statements and
14 documents filed under subsection (1), may conduct any
15 investigation which that
he or she considers necessary, may
16 request additional oral and written information from the
17 incorporators, and may examine under oath any persons interested
18 in or connected with the proposed health care corporation. The
19 commissioner shall ascertain whether all of the following
20 conditions are met:
21 (a) The solicitation of certificates will not work a fraud
22 upon the persons solicited by the corporation.
23 (b) The rates to be charged and the benefits to be provided
24 are adequate, equitable, and not excessive, as defined in section
25 609.
26 (c) The amount of money actually available for working
27 capital is sufficient to carry all acquisition costs and
1 operating expenses for a reasonable period of time from the date
2 of issuance of the certificate of authority, and is not less than
3 $500,000.00 or a greater amount, if the commissioner considers it
4 necessary.
5 (d) The amounts contributed as the working capital of the
6 corporation are payable only out of amounts in excess of minimum
7 required reserves of the corporation.
8 (e) Adequate and reasonable
reserves are provided, as
9 defined in section 205
unimpaired surplus is provided,
as
10 determined under section 204a.
11 (3) If the commissioner finds that the conditions prescribed
12 in subsection (2) are met, the commissioner shall do all of the
13 following:
14 (a) Return to the incorporators 1 copy of the articles of
15 incorporation, certified
for filing with the chief officer
16 director of the
department of commerce consumer and industry
17 services or of any other agency or department authorized by law
18 to administer Act No.
284 of the Public Acts of 1972, as
19 amended, being
sections 450.1101 to 450.2099 of the Michigan
20 Compiled Laws the business corporation act, 1972 PA 284, MCL
21 450.1101 to 450.2098, or his or her designated representative,
22 and 1 copy of the articles of incorporation certified for the
23 records of the corporation itself.
24 (b) Retain 1 copy of the articles of incorporation for the
25 commissioner's office files.
26 (c) Deliver to the corporation a certificate of authority to
27 commence business and to
issue certificates which that have
1 been approved by the
commissioner, or which that are exempted
2 from prior approval pursuant to section 607(2) or (7), entitling
3 subscribers to certain health care benefits.
4 Sec. 204a. (1) A health care corporation shall possess and
5 maintain unimpaired surplus in an amount determined adequate by
6 the commissioner to comply with section 403 of the insurance code
7 of 1956, 1956 PA 218, MCL 500.403. The commissioner shall take
8 into account the risk-based capital requirements as developed by
9 the national association of insurance commissioners in order to
10 determine adequate compliance with section 403 of the insurance
11 code of 1956, 1956 PA 218, MCL 500.403.
12 (2) If a health care corporation files a risk-based capital
13 report that indicates that its surplus is less than the amount
14 determined adequate by the commissioner under subsection (1), the
15 health care corporation shall prepare and submit a plan for
16 remedying the deficiency in accordance with risk-based capital
17 requirements adopted by the commissioner. Among the remedies
18 that a health care corporation may employ are planwide viability
19 contributions to surplus by subscribers.
20 (3) If contributions for planwide viability under subsection
21 (2) are employed, those contributions shall be made in accordance
22 with the following:
23 (a) If the health care corporation's surplus is less than
24 200% but more than 150% of the authorized control level under
25 risk-based capital requirements, the maximum contribution rate
26 shall be 0.5% of the rate charged to subscribers for the benefits
27 provided.
1 (b) If the health care corporation's surplus is 150% or less
2 than the authorized control level under risk-based capital
3 requirements, the maximum contribution rate shall be 1% of the
4 rate charged to subscribers for the benefits provided.
5 (c) The actual contribution rate charged is subject to the
6 commissioner's approval.
7 (4) As used in subsection (3), "authorized control level"
8 means the number determined under the risk-based capital formula
9 in accordance with the instructions developed by the national
10 association of insurance commissioners and adopted by the
11 commissioner.
12 Sec. 205a. A health care corporation shall report financial
13 information in conformity with sound actuarial practices and
14 statutory accounting principles, including approved permitted
15 practices, in the same manner as designated by the commissioner
16 for other carriers pursuant to section 438(2) of the insurance
17 code of 1956, 1956 PA 218, MCL 500.438.
18 Sec. 206. (1) The funds and property of a health care
19 corporation shall be acquired, held, and disposed of only for the
20 lawful purposes of the corporation and for the benefit of the
21 subscribers of the corporation as a whole. A health care
22 corporation shall only
transact such business, receive,
23 collect, and disburse such
money, and acquire, hold, protect,
24 and convey such property,
as are that is properly within the
25 scope of the purposes of the corporation as specifically set
26 forth in section 202(1)(d), for the benefit of the subscribers of
27 the corporation as a whole, and consistent with this act.
1 (2) The funds of a health care corporation shall be invested
2 only in securities permitted by the laws of this state for the
3 investments of assets of life insurance companies, as described
4 in chapter 9 of Act
No. 218 of the Public Acts of 1956, as
5 amended, being
sections 500.901 to 500.947 of the Michigan
6 Compiled Laws the insurance code of 1956, 1956 PA 218, MCL
7 500.901 to 500.947.
8 (3) Without regard to the limitation in subsection (2), up to
9 2% of the assets of the health care corporation may be invested
10 in venture-type
investments. For purposes of calculating the
11 contingency reserve
pursuant to section 205 adequate
and
12 unimpaired surplus under section 204a, a venture-type investment
13 shall be carried on the books of a health care corporation at the
14 original acquisition cost, and losses may only be realized as an
15 offset against gains from venture-type investments. All
16 venture-type investments under this subsection shall provide
17 employment or capital investment primarily within this state.
18 Each investment under
this subsection shall be is subject to
19 prior approval by the board of directors. As used in this
20 subsection, "venture-type investments" include:
21 (a) Common stock, preferred stock, limited partnerships, or
22 similar equity interests acquired from the issuer subject to a
23 provision barring resale without consent of the issuer for 5
24 years from the date of acquisition by the corporation.
25 (b) Unsecured debt
instruments which that are either
26 convertible into equity or have equity acquisition rights. These
27 debt instruments shall be subordinated by their terms to all
1 borrowings of the issuer from other institutional lenders and
2 shall have no part amortized during the first 5 years.
3 (4) A health care corporation shall not market or transact,
4 as defined in sections
402a and 402b of Act No. 218 of the
5 Public Acts of 1956,
being sections 500.402a and 500.402b of the
6 Michigan Compiled Laws
the insurance code of 1956, 1956
PA 218,
7 MCL 500.402a and 500.402b, any type of insurance described in
8 chapter 6 of Act No.
218 of the Public Acts of 1956, as amended,
9 being sections 500.600
to 500.644 of the Michigan Compiled Laws
10 the insurance code of 1956, 1956 PA 218, MCL 500.600 to 500.644.
11 This subsection shall not be construed to prohibit the provision
12 of prepaid health care benefits.
13 Sec. 206a. Notwithstanding any other provision of this act,
14 a health care corporation shall not establish, invest in,
15 purchase, own, hold, or otherwise acquire, either directly or
16 indirectly, any network of, or legal entity that has established
17 a network of, health care facilities or providers. If, prior to
18 the effective date of this section, a health care facility has
19 established, has invested in, has purchased, owns, holds, or has
20 otherwise acquired, either directly or indirectly, any network
21 of, or legal entity that has established a network of, health
22 care facilities or providers, the health care corporation shall
23 divest itself of any interest in the network or legal entity by
24 not later than 2 years after the effective date of this section.
25 Sec. 211. (1) Pursuant to section 207(1)(g), a health care
26 corporation may enter into service contracts containing an
27 administrative services only or cost-plus arrangement. Except as
1 otherwise provided in this section, a corporation shall not enter
2 into a service contract containing an administrative services
3 only or cost-plus arrangement for a noninsured benefit plan
4 covering a group of less than 500 individuals, except that a
5 health care corporation may continue an administrative services
6 only or cost-plus arrangement with a group of less than 500,
7 which arrangement is in existence in September of 1980. A
8 corporation may enter into contracts containing an administrative
9 services only or cost-plus arrangement for a noninsured benefit
10 plan covering a group of less than 500 individuals if either the
11 corporation makes arrangements for excess loss coverage or the
12 sponsor of the plan that covers the individuals is liable for the
13 plan's liabilities and is a sponsor of 1 or more plans covering a
14 group of 500 or more individuals in the aggregate. The
15 commissioner, upon obtaining the advice of the corporations
16 subject to this act, shall establish the standards for the manner
17 and amount of the excess loss coverage required by this
18 subsection. It is the intent of the legislature that the excess
19 loss coverage requirements be uniform as between corporations
20 subject to this act and other persons authorized to provide
21 similar services. The corporation shall offer in connection with
22 a noninsured benefit plan a program of specific or aggregate
23 excess loss coverage.
24 (2) Relative to actual administrative costs, fees for
25 administrative services only and cost-plus arrangements shall be
26 set in a manner that precludes cost transfers between subscribers
27 subject to either of these arrangements and other subscribers of
1 the health care corporation. Administrative costs for these
2 arrangements shall be determined in accordance with the
3 administrative costs allocation methodology and definitions filed
4 and approved under part 6, and shall be expressed clearly and
5 accurately in the contracts establishing the arrangements, as a
6 percentage of costs rather than charges. This subsection shall
7 not be construed to prohibit the inclusion, in fees charged, of
8 contributions to the
contingency reserve of the corporation,
9 consistent with
section 205 adequate and
unimpaired surplus as
10 provided in section 204a.
11 (3) Before a health care corporation may enter into contracts
12 containing administrative services only or cost-plus arrangements
13 pursuant to section 207(1)(g), the board of directors of the
14 corporation shall approve
a marketing policy with respect to
15 such for these arrangements that is consistent with
the
16 provisions of this section. The marketing policy may contain
17 other provisions as the board considers necessary. The marketing
18 policy shall be carried out by the corporation consistent with
19 this act.
20 (4) A corporation providing services under a contract
21 containing an administrative services only or cost-plus
22 arrangement in connection with a noninsured benefit plan shall
23 provide in its service contract a provision that the person
24 contracting for the services in connection with a noninsured
25 benefit plan shall notify each covered individual of what
26 services are being provided; the fact that individuals are not
27 insured or are not covered by a certificate from the corporation,
1 or are only partially insured or are only partially covered by a
2 certificate from the corporation, as the case may be; which party
3 is liable for payment of benefits; and of future changes in
4 benefits.
5 (5) A service contract containing an administrative services
6 only arrangement between a corporation and a governmental entity
7 not subject to the employee retirement income security act of
8 1974, Public Law 93-406, 88 Stat. 829, whose plan provides
9 coverage under a collective bargaining agreement utilizing a
10 policy or certificate issued by a carrier before the signing of
11 the service contract, is void unless the governmental entity has
12 provided the notice described in subsection (4) to the collective
13 bargaining agent and to the members of the collective bargaining
14 unit not less than 30 days before signing the service contract.
15 The voiding of a service contract under this subsection shall not
16 relieve the governmental entity of any obligations to the
17 corporation under the service contract.
18 (6) Nothing in this section shall be construed to permit an
19 actionable interference by a corporation with the rights and
20 obligations of the parties under a collective bargaining
21 agreement.
22 (7) An individual covered under a noninsured benefit plan for
23 which services are provided under a service contract authorized
24 under subsection (1) shall
is not be liable for that portion
25 of claims incurred and subject to payment under the plan if the
26 service contract is entered into between an employer and a
27 corporation, unless that portion of the claim has been paid
1 directly to the covered individual.
2 (8) A corporation shall report with its annual statement the
3 amount of business it has conducted as services provided under
4 subsection (1) that are performed in connection with a noninsured
5 benefit plan, and the commissioner shall transmit annually this
6 information to the state commissioner
of revenue treasurer.
7 The commissioner shall submit to the legislature on April 1,
8 1994, a report detailing the impact of this section on employers
9 and covered individuals, and similar activities under other
10 provisions of law, and in
consultation with the revenue
11 commissioner state treasurer the total financial impact on
the
12 state for the preceding legislative biennium.
13 (9) As used in this section, "noninsured benefit plan" or
14 "plan" means a health benefit plan without coverage by a health
15 care corporation, health maintenance organization, or insurer or
16 the portion of a health benefit plan without coverage by a health
17 care corporation, health maintenance organization, or insurer
18 that has a specific or aggregate excess loss coverage.
19 Sec. 301. (1) The
Except as otherwise provided in section
20 301a, the property and lawful business of a health care
21 corporation existing and authorized to do business under this act
22 shall be held and managed by a board of directors to consist of
23 not more than 35 members. The board shall exercise the powers
24 and authority necessary to carry out the lawful purposes of the
25 corporation, as limited by this act and the articles of
26 incorporation and the bylaws of the corporation.
27 (2) Four Except
as otherwise provided in section 301a, 4
1 voting members of the board shall be representatives of the
2 public appointed by the governor by and with the advice and
3 consent of the senate. Two of those members shall be retired
4 individuals 62 years of age or older. The term of office of each
5 representative of the public shall be 2 years, and until a
6 successor is appointed and qualified. If a vacancy occurs before
7 the conclusion of a 2-year term, the appointment of a
8 representative to complete the term shall be made in the same
9 manner as the original appointment.
10 (3) The board of
directors shall consist of not more than
11 25% provider
directors. In addition to physician and hospital
12 provider directors,
not less than 1 provider director shall be a
13 registered professional
nurse who shall be representative of
14 licensees under part
172 of the public health code, Act No. 368
15 of the Public Acts of
1978, as amended, being sections 333.17201
16 to 333.17242 of the
Michigan Compiled Laws, and not less than 1
17 provider director
shall be representative of the provider whose
18 services, in the 1984
calendar year in the case of an existing
19 health care
corporation, or, in the calendar year immediately
20 following incorporation
in the case of a newly-formed health care
21 corporation, generated
the largest number of benefit claims
22 received by the
corporation from its subscribers. Other provider
23 directors shall be as
broadly representative of provider classes
24 as possible. The terms of all provider board of director
members
25 shall end on the effective date of section 301a.
26 (4) The bylaws of a health care corporation may authorize not
27 more than 1 officer or employee of the corporation to serve as a
1 voting or nonvoting director.
2 (5) The Except
as otherwise provided in section 301a, the
3 remaining members of the board of directors shall include
4 representatives of large subscriber groups, medium subscriber
5 groups, small subscriber groups, and nongroup subscribers, in
6 proportions which that
fairly represent the total subscriber
7 population of the health care corporation. However, at least 3
8 directors shall represent nongroup subscribers, at least 1 of
9 whom shall be a retired individual 62 years of age or older, and
10 at least 3 directors shall represent small subscriber groups.
11 Large and medium subscriber groups shall be represented, to the
12 greatest extent possible, by an equal number of labor and
13 management representatives and shall be categorized as labor
14 subscriber representatives or management subscriber
15 representatives.
16 (6) The method of selection of the directors, other than the
17 directors who are
representatives of the public, and additional
18 provisions and
requirements for further refinement or
19 specification
regarding the number of directors comprising each
20 component shall be specified in the bylaws. The terms of
21 office of directors method for filling vacancies in the offices
22 of directors, other than the directors who are representatives of
23 the public, and the
method for filling vacancies in those
24 offices shall be provided in the bylaws. However, if a
term of
25 office of more than 1
year is prescribed by the bylaws, at least
26 1/3 of the members of
the board shall be selected each year. The
27 term of office of any director except the term of office of the
1 director under section 301a(3)(f) shall not exceed 3 years, and
2 at least 1/3 of the members of the board, excluding the director
3 under section 301a(3)(f), shall be selected each year. The
4 bylaws shall provide that all members of the board shall be
5 reimbursed only for all reasonable and necessary expenses
6 incurred in carrying out their duties under this act and shall
7 not receive any compensation for services to the health care
8 corporation as director.
9 (7) The method of selection of each category of subscribers
10 entitled to
representation on the board under subsection (5)
11 this act shall maximize subscriber participation to the extent
12 reasonably practicable.
This subsection shall permit permits,
13 but does not
require, the statewide election of a director. or
14 member of the
corporate body. The method of
selection shall
15 neither permit permits
nor require requires nomination,
16 endorsement, approval, or confirmation of a candidate or director
17 by the corporate
body, the board of directors, or the
18 management of the health care corporation, or any member or
19 members of any of these.
This subsection shall does not apply
20 to the selection of an officer or employee as a director pursuant
21 to subsection (4). This
subsection shall does not limit the
22 rights of any director ,
member of the corporate body, or
23 employee or officer of the health care corporation to participate
24 in the selection process in his or her capacity as a subscriber,
25 to the same extent as any other subscriber may participate.
26 (8) For the
purposes of this section:
27 (a) "Health
care provider" or "provider" includes:
1 (i) A person defined as a health care provider or
provider in
2 section 105(4); a
person employed by a health care facility, as
3 defined in section
105(3); or a director, officer, or trustee of
4 a health care
provider, as defined in section 105(4), unless the
5 person serves in that
capacity as a representative selected by
6 the same subscriber
group or collective bargaining representative
7 which the person
represents on the board of a health care
8 corporation.
9 (ii) Except as provided in subdivision (b), a spouse,
child,
10 or parent of a health
care provider who resides in the same
11 household.
12 (iii) A person who receives more than 25% of his or her
13 annual income through
the provision of goods or services to
14 health care providers,
or who is an employee, officer, trustee,
15 or director of a firm
or organization which receives more than
16 25% of its annual
income through the provision of goods or
17 services to health
care providers.
18 (b) For purposes
of determining whether a director is a
19 provider director,
"health care provider" or "provider" does not
20 include a spouse,
child, or parent of a health care provider who
21 resides in the same household
if all of the following criteria
22 are met:
23 (i) Not more than 1/3 of the total annual household
income is
24 earned by that health
care provider.
25 (ii) The term of office of the director commences in the
1988
26 calendar year.
27 (iii) Not more than 2 directors qualify for the exemption
1 under this
subdivision.
2 (8) (9) A
director shall not be an employee, agent,
3 officer, or director of an insurance company writing disability
4 insurance inside or outside this state.
5 Sec. 301a. (1) All board of director members whose terms
6 expire in April of 2004 shall not be reappointed or replaced.
7 (2) By June 30, 2004, the board of directors shall submit a
8 plan to the commissioner detailing how it will reduce the size of
9 the board by December 31, 2004 to 13 members including the chief
10 executive officer. The plan shall be consistent with the
11 requirements of this act and shall provide that an individual
12 shall not serve more than 2 consecutive terms on the board. If a
13 plan is not submitted by June 30, 2004, then the commissioner,
14 after consultation with the board of directors, shall formulate
15 and place into effect a plan consistent with this act. The plan
16 submitted by the board of directors shall be considered to meet
17 the requirements of this act if it is not disapproved by written
18 order of the commissioner on or before October 1, 2004. As part
19 of a disapproval order, the commissioner shall notify the board
20 of directors in what respect all or any part of the plan
21 submitted by the board of directors fails to meet the
22 requirements of this act. Not later than 30 days after the date
23 of the disapproval order, the board of directors shall submit a
24 revised plan that meets the requirements of this act. If the
25 board of directors fails to submit a revised plan or if the
26 submitted revised plan does not meet the requirements of this
27 act, as determined by the commissioner, then the commissioner
1 shall immediately formulate and place into effect a plan
2 consistent with this act.
3 (3) Effective January 1, 2005, the board of directors shall
4 consist of 13 members as follows:
5 (a) Three public members appointed by the governor with the
6 advice and consent of the senate, at least 1 of whom shall be 62
7 years of age or older, and who shall represent the public
8 interest in the charitable and benevolent mission of the
9 nonprofit health insurer.
10 (b) One member representing nongroup subscribers.
11 (c) Two members representing self-insured groups.
12 (d) Three members representing small subscriber groups.
13 (e) Three members representing medium/large subscriber
14 groups.
15 (f) The chief executive officer of the nonprofit health
16 insurer.
17 Sec. 303. (1) Regular or special meetings of the board or a
18 board committee of
the board shall be held within this state.
19 With respect to regular or special meetings of the board or a
20 board committee, of
the board, the bylaws shall include
21 provisions regarding all of the following:
22 (a) The minimum number of regular meetings to be held each
23 year.
24 (b) The publication and advance distribution of an agenda,
25 including provisions respecting the time and place of the meeting
26 and the business to be conducted. Notice of meetings and the
27 meeting agenda shall be posted on the health core corporation's
1 website as soon as practical after publication or dissemination
2 under this subdivision.
3 (c) Voting procedures. The use of proxies and round robins
4 shall not be allowed.
5 (2) Notice of a regular meeting shall be given at least 15
6 days before the meeting and notice of a special meeting shall be
7 given at least 24 hours
before the meeting. Attendance of a
8 director at a meeting
constitutes a waiver of notice of the
9 meeting, except in cases
in which a director attends a meeting
10 for the express
purpose of objecting to the transaction of any
11 business because the
meeting is not lawfully called or convened.
12 All meetings shall be open to the public except as otherwise
13 provided in section 304(2).
14 (3) Unless otherwise restricted by the articles of
15 incorporation or bylaws, a member of the board or of a committee
16 designated by the board may participate in a meeting by means of
17 conference telephone or similar communications equipment by means
18 of which all individuals participating in the meeting can hear
19 each other. Participation in a meeting pursuant to this
20 subsection constitutes presence in person at the meeting.
21 (4) A majority of the
board members of the board then in
22 office, or of the members
of a board committee, thereof,
23 constitutes a quorum for the transaction of business, unless the
24 articles or bylaws provide for a larger number. The vote of the
25 majority of members present at a meeting at which a quorum is
26 present constitutes the action of the board or of the committee,
27 unless the vote of a larger number is required by this act, the
1 articles, or the bylaws. The following actions shall require the
2 vote of not less than a majority of the members of the board then
3 in office:
4 (a) Adoption of bylaws, amendments to bylaws, or repealers
5 of bylaws.
6 (b) Adoption of articles of incorporation, amendments to
7 articles, or repealers of articles.
8 (c) The proposal or establishment of rates or rating
9 systems; the adoption of provider class plans or provider
10 contracts; or the adoption of compensation for officers of the
11 corporation.
12 (5) The bylaws shall provide that a record roll call vote
13 shall be taken at the request of any 5 board members. The vote
14 of each member shall be recorded in the minutes.
15 Sec. 304. (1) A health care corporation shall keep accurate
16 books and records of account and complete and detailed minutes of
17 the proceedings of the
board of directors of the health care
18 corporation, and board committees. of the board,
and the
19 corporate body. The books, records, and minutes may be in
20 written form or in any other form capable of being converted into
21 written form within a reasonable time and shall be made available
22 electronically to the commissioner. One copy of the minutes or
23 draft minutes from each meeting of the board of directors shall
24 be transmitted to the commissioner within 15 days after the
25 meeting was held. Upon the request of a member of the board of
26 directors, consistent with the board member's fiduciary duty
27 under section 310, a subscriber shall receive, within 15 days
1 after receipt of the request, a copy of the minutes or draft
2 minutes of 1 or more
meetings of the board , its or board
3 committee , or the
corporate body, and may be charged not more
4 than the reasonable cost of copying and postage.
5 (2) Minutes shall be kept and need not be disclosed, except
6 to the commissioner as provided in section 603, for those
7 portions of meetings which
that are held for the following
8 purposes:
9 (a) To consider the hiring, promotion, dismissal, suspension,
10 or discipline of an employee.
11 (b) To consider the purchase, lease, or sale of real
12 property.
13 (c) For strategy and negotiation sessions connected with the
14 negotiations of a collective bargaining agreement when either
15 party requests a closed meeting.
16 (d) For trial or settlement strategy sessions in connection
17 with specific contemplated or pending litigation. If these
18 sessions are with respect to litigation to which the commissioner
19 or the attorney general is a party, minutes regarding these
20 sessions shall are
not be subject to examination and free
21 access under section 603.
22 (e) To consider medical records of an individual.
23 (f) To consider the acquisition or disposal of certificates
24 of stock, bonds, certificates of indebtedness, and other
25 intangibles in which the corporation may invest funds under
26 section 206, if the information regarding proposed acquisition or
27 disposal may affect the price paid or received.
1 (g) To consider provider appeals when the provider has
2 requested a closed hearing.
3 (h) To discuss marketing strategy with regard to a particular
4 customer or limited group of customers, or to discuss a new or
5 changed benefit, the premature disclosure of which would have an
6 adverse impact on the health care corporation.
7 (i) To consider the removal of a director from the board when
8 the director requests a closed hearing.
9 (3) The date and time of preparation and existence of the
10 minutes described in subsection (2), the contents of which shall
11 not be disclosable except to the commissioner as provided in
12 section 603, shall be noted in the minutes required to be kept
13 under subsection (1). Once action is taken by the board to
14 implement a consideration or discussion described in subsection
15 (2)(b), (f), (g), or (h), once a collective bargaining agreement
16 is reached as described in subsection (2)(c), once litigation is
17 no longer pending as described in subsection (2)(d), or once a
18 closed hearing is concluded as described in subsection (2)(i),
19 and upon the request of the director to whom the hearing
20 pertained, the minutes relating to the consideration, discussion,
21 or strategy session shall be published and disseminated with the
22 next succeeding set of minutes published and disseminated under
23 subsection (1), and may be disclosed by the commissioner to other
24 persons under section 603(3).
25 (4) The circuit court, upon proof of a proper purpose, may
26 compel the production of books and records for examination by a
27 subscriber or the attorney general.
1 Sec. 306. (1) A contract or other transaction between a
2 health care corporation and 1 or more of its directors or
3 officers, or between a health care corporation and any other
4 corporation, firm, or association of any type or kind in which 1
5 or more of its directors or officers are directors or officers,
6 or are otherwise interested, is not void or voidable solely
7 because of such common directorship, officership, or interest, or
8 solely because the directors are present at the meeting of the
9 board or committee thereof
which that authorizes or approves
10 the contract or transaction, if all of the following conditions
11 are satisfied:
12 (a) The contract or other transaction is fair and reasonable
13 to the corporation when it is authorized, approved, or ratified.
14 (b) The material facts as to the officer's or director's
15 relationship or interest and as to the contract or transaction
16 are disclosed or known to the board or committee, and the board
17 or committee authorizes, approves, or ratifies the contract or
18 transaction by a vote sufficient for the purpose. The conditions
19 of this subdivision shall be considered satisfied only if the
20 officer or director has announced the potential conflict prior to
21 the vote, the minutes of the meeting reflect that announcement,
22 and the officer or director abstained from the vote.
23 (2) When the validity of a contract described in subsection
24 (1) is questioned, the burden of establishing its validity on the
25 grounds prescribed is upon the director, officer, corporation,
26 firm, or association asserting its validity.
27 (3) Common or interested directors shall not be counted in
1 determining the presence of a quorum at a board or committee
2 meeting at the time a contract or transaction described in
3 subsection (1) is authorized, approved, or ratified.
4 (4) The board, by
affirmative vote of a majority of
5 directors in office
and irrespective of any personal interest of
6 any of them, may
establish reasonable compensation of directors
7 for services to the
health care corporation as directors or
8 officers of the health
care corporation.
9 (4) (5) The
bylaws of a health care corporation may
10 include provisions regarding conflict of interest which are more
11 stringent than this section.
12 Sec. 306a. The board shall establish a compensation plan
13 for executive and senior level management of the health care
14 corporation, including any bonus plan tied to performance of the
15 health care corporation. The plan is not effective until it is
16 filed with and approved by the commissioner. The board shall
17 notify the commissioner of any bonus issued to an executive or
18 senior level member of management of the health care corporation
19 within 10 days of issuance of the bonus. The board shall
20 identify in the compensation plan, subject to the commissioner's
21 approval, those executive and senior level management positions
22 covered under the compensation plan.
23 Sec. 307. (1) The board of directors may establish those
24 advisory councils and, unless otherwise provided in the articles
25 of incorporation or bylaws, those committees it considers
26 necessary to perform its
duties. Members of the corporate body
27 may serve on
committees of the board of directors. With
respect
1 to committees of the board
committees, the bylaws shall include
2 provisions regarding all of the following:
3 (a) Provisions which
that assure that the membership of
4 each committee provides for representation of all of the
5 components of directors, as defined in the bylaws, to the
6 greatest extent practicable.
7 (b) Provisions regarding emergency meetings of the executive
8 committee of the health care corporation, and action by that
9 committee on behalf of the board in cases of emergency, as
10 defined in and authorized by the bylaws.
11 (2) The board of directors shall establish a provider
12 advisory council within 90 days after the effective date of this
13 subsection. The provider advisory council shall consist of not
14 more than 12 members who shall fairly represent the classes of
15 health care providers with whom the health care corporation
16 contracts for services.
17 (3) The provider advisory council established under
18 subsection (2) shall provide advice to the board of directors on
19 matters concerning the impact of board policies on health care
20 providers, including, but not limited to, participating
21 contracts, coverage for medical services, billing and payment
22 procedures and practices, and subscriber access to an appropriate
23 number and mix of health care providers in this state.
24 (4) Except as otherwise provided in subsection (1)(b), a
25 council or committee established under this section shall act in
26 an advisory capacity to the board of directors. Except as
27 otherwise provided in subsection (1)(b), the board of directors
1 shall meet and approve a council or committee recommendation
2 before it is implemented. The minutes of all meetings of
3 councils and committees established under this section shall be
4 given to the members of the board of directors and shall be
5 included in the minutes of the board of directors' meetings.
6 Sec. 403c. (1) A health care corporation delivering,
7 issuing for delivery, or renewing in this state a medium
8 subscriber group or large subscriber group certificate shall
9 furnish to a payor, within 30 days after receiving a written
10 request therefore and upon payment of a reasonable charge, all of
11 the following information by coverage component for the
12 certificate incurred during the immediately preceding 24-month
13 period:
14 (a) Total number of individuals covered.
15 (b) Total number of claims.
16 (c) Total dollar amount of claims.
17 (d) Amount paid or allocated to providers on a per individual
18 basis not included in subdivisions (a) to (c).
19 (e) All pertinent information used by the health care
20 corporation to make its rates for that group. This subdivision
21 does not require the release of any information otherwise exempt
22 from disclosure under this chapter. The commissioner shall
23 determine not less often than annually what is pertinent
24 information under this subdivision.
25 (2) Information furnished under subsection (1) shall not
26 disclose personal data that may reveal the identity of a covered
27 individual. Information furnished under subsection (1) shall be
1 collected and provided to a payor based on the group the payor
2 sponsors.
3 (3) As used in this section:
4 (a) "Coverage component" includes, but is not limited to,
5 in-patient and out-patient facility coverage, professional
6 provider coverage, and pharmacy coverage.
7 (b) "Payor" means the purchaser of group coverage whether the
8 purchase is made directly from the health care corporation or is
9 made through a third party administrator, an agency, or another
10 entity.
11 Sec. 502b. A health care corporation shall submit to the
12 commissioner for approval standard participating contract formats
13 and any substantive changes to those participating contract
14 formats. The contract format or change is considered approved 30
15 days after filing with the commissioner unless approved or
16 disapproved within the 30 days. As used in this section,
17 "substantive changes to those participating contract formats"
18 means any change to a participating contract that alters the
19 method of payment to a health care provider, alters the risk, if
20 any, assumed by each party to the contract, or affects a
21 provision required by law.
22 Sec. 502c. (1) A health care corporation shall provide
23 evidence to the commissioner that it has executed participating
24 contracts with a sufficient number of health care providers to
25 enable the health care corporation to deliver health care
26 services covered under a certificate.
27 (2) A health care corporation shall establish and maintain
1 adequate participating contracts to ensure reasonable proximity
2 between participating providers and members for the delivery of
3 covered health care services. In determining whether a health
4 care corporation has complied with this subsection, the
5 commissioner shall give due consideration to the relative
6 availability of health care providers in a geographic area.
7 Sec. 602. (1) Not later than March 1 each year, subject to
8 a 30-day extension which
that may be granted by the
9 commissioner, a health care corporation shall file in the office
10 of the commissioner a sworn statement verified by at least 2 of
11 the principal officers of the corporation showing its condition
12 as of the preceding December 31. The statement shall be in a
13 form , and contain
those matters , which that the
14 commissioner prescribes for a health care corporation, including
15 those matters contained
in section 205 204a. The statement
16 shall include the number of members and the number of
17 subscribers' certificates issued by the corporation and
18 outstanding.
19 (2) The commissioner, by order, may require a health care
20 corporation to submit statistical, financial, and other reports
21 for the purpose of monitoring compliance with this act.
22 Sec. 607. (1) A
health care corporation shall submit a
23 copy of any new or
revised certificate to the commissioner along
24 with applicable
proposed rates and rate rationale. The
25 certificates, and
applicable proposed rates, shall be deemed
26 approved and effective
30 days after filing with the
27 commissioner, except
as otherwise provided in this section.
1 Except as otherwise provided in subsection (2), if a health care
2 corporation wants to offer a new certificate, change an existing
3 certificate, or change a rate charge, a copy of the proposed
4 revised certificate or proposed rate shall be filed with the
5 commissioner and shall not take effect until 60 days after the
6 filing unless the commissioner approves the change in writing
7 before the expiration of the 60 days. The commissioner may
8 subsequently disapprove
any certificate deemed approved or rate
9 change.
10 (2) The commissioner shall exempt from prior approval
11 certificates resulting from a collective bargaining agreement.
12 (3) The commissioner may disapprove, or approve with
13 modifications, a
certificate and applicable rates under 1 or
14 more either or both of the following circumstances:
15 (a) If the rate charged for the benefits provided is not
16 equitable, not adequate, or excessive, as defined in section
17 609.
18 (b) If the
certificate contains 1 or more provisions which
19 that are unjust, unfair, inequitable, misleading, deceptive, or
20 which that encourage misrepresentation of the
coverage.
21 (c) If a
certificate reduces the scope, amount, or duration
22 of benefits so as to
have the effect of reducing the
23 comprehensiveness of
existing health care benefits available to
24 groups or to
individuals. The commissioner may approve a
25 certificate which
reduces the scope, amount, or duration of
26 health care benefits
if the commissioner determines that the
27 certificate will be
offered as an alternative in addition to an
1 existing certificate
which provides comprehensive health care
2 benefits and if the
commissioner determines that approval of the
3 alternative
certificate will not adversely affect the opportunity
4 for groups or
individuals to obtain comprehensive health care
5 benefits.
6 (4) The commissioner shall approve a certificate and
7 applicable proposed rates if all of the following conditions are
8 met:
9 (a) If the rate charged for the benefits provided is
10 equitable, adequate, and not excessive, as defined in section
11 609.
12 (b) If the
certificate does not contain any provision which
13 that is unjust, unfair, inequitable, misleading, deceptive, or
14 which that encourages misrepresentation of the
coverage.
15 (5) If the commissioner disapproves a certificate and any
16 applicable proposed rates under this section, he or she shall
17 issue a notice of
disapproval which specifies in what respects
18 specifying how a filing fails to meet the requirements of this
19 act. The notice shall state that the filing shall not become
20 effective.
21 (6) If the commissioner approves, or approves with
22 modifications, a certificate and any applicable proposed rates
23 under this section, he or she shall issue a notice of approval or
24 approval with modifications. If the notice is of approval with
25 modifications, the notice shall specify what modifications in the
26 filing are required for approval under this act, and the reasons
27 for the modifications. The notice shall also state that the
1 filing shall become effective after the modifications are made
2 and approved by the commissioner.
3 (7) Upon request by a health care corporation, the
4 commissioner may allow certificates and rates to be implemented
5 prior to filing to allow implementation of a new certificate on
6 the date requested.
7 Sec. 608. (1) The rates charged to nongroup subscribers for
8 each certificate shall be
filed in accordance with section 610
9 and shall be subject
to the prior approval of the commissioner
10 607. Annually, the commissioner shall approve, disapprove, or
11 modify and approve the proposed or existing rates for each
12 certificate subject to the standard that the rates must be
13 determined to be equitable, adequate, and not excessive, as
14 defined in section 609. The burden of proof that rates to be
15 charged meet these standards shall be upon the health care
16 corporation proposing to use the rates.
17 (2) The A
health care corporation shall file the
18 methodology and definitions of each rating system, formula,
19 component, and factor used to calculate rates for group
20 subscribers for each certificate, including the methodology and
21 definitions used to calculate administrative costs for
22 administrative services
only and cost-plus arrangements , shall
23 be filed in accordance with section 610 and shall be
subject to
24 the prior approval of
the commissioner 607. The
definition of a
25 group, including any clustering principles applied to nongroup
26 subscribers or small group subscribers for the purpose of group
27 formation, shall be is
subject to the prior approval of the
1 commissioner. However,
if a Michigan caring program is created
2 under section 436,
that program shall be defined as a group
3 program for the
purpose of establishing rates. The
commissioner
4 shall approve, disapprove, or modify and approve the methodology
5 and definitions of each rating system, formula, component, and
6 factor for each certificate subject to the standard that the
7 resulting rates for group subscribers must be determined to be
8 equitable, adequate, and not excessive, as defined in section
9 609. In addition, the commissioner may from time to time review
10 the records of the corporation to determine proper application of
11 a rating system, formula,
component, or factor with respect to
12 for any group. The corporation shall refile every 3 years for
13 approval under this
subsection , every 3 years, of the
14 methodology and definitions of each rating system, formula,
15 component, and factor used to calculate rates for group
16 subscribers, including the methodology and definitions used to
17 calculate administrative costs for administrative services only
18 and cost-plus arrangements. The burden of proof that the
19 resulting rates to be charged meet these standards shall be upon
20 the health care corporation proposing to use the rating system,
21 formula, component, or factor.
22 (3) A proposed rate shall not take effect until a filing has
23 been made with the commissioner and approved under section 607 or
24 this section, as applicable, except as provided in subsections
25 (4) and (5).
26 (4) Upon request by a health care corporation, the
27 commissioner may allow rate adjustments to become effective prior
1 to approval, for federal or state mandated benefit changes.
2 However, the health care corporation shall submit a filing for
3 these adjustments shall
be submitted before the effective date
4 of the mandated benefit changes. If the commissioner disapproves
5 or modifies and approves
the rates, an adjustment shall be made
6 is retroactive to the effective date of the mandated benefit
7 changes or additions.
8 (5) Implementation
The commissioner may allow
9 implementation prior to
approval may be allowed if the health
10 care corporation is participating with 1 or more health care
11 corporations to underwrite a group whose employees are located in
12 several states. Upon request from the commissioner, the
13 corporation shall file with the commissioner, and the
14 commissioner shall examine, the financial arrangement, formulae,
15 and factors. If any are determined to be unacceptable, the
16 commissioner shall take appropriate action.
17 Sec. 609. (1) A rate is not excessive if the rate is not
18 unreasonably high relative to the following elements,
19 individually or collectively; provision for anticipated benefit
20 costs; provision for administrative expense; provision for cost
21 transfers, if any;
provision for a contribution to or from the
22 corporate contingency
reserve that is consistent with the
23 attainment or
maintenance of the target contingency reserve level
24 prescribed in section
205 surplus that is consistent
with the
25 attainment or maintenance of adequate and unimpaired surplus as
26 provided in section 204a; and provision for adjustments due to
27 prior experience of groups, as defined in the group rating
1 system. A determination as to whether a rate is excessive
2 relative to the these
elements, listed above, individually or
3 collectively, shall be based on the following: reasonable
4 evaluations of recent claim experience; projected trends in claim
5 costs; the allocation of administrative expense budgets; and the
6 present and anticipated contingency
reserve positions
7 unimpaired surplus of the health care corporation. To the extent
8 that any of these elements are considered excessive, the
9 provision in the rates for these elements shall be modified
10 accordingly.
11 (2) The administrative expense budget must be reasonable, as
12 determined by the commissioner after examination of material and
13 substantial administrative and acquisition expense items.
14 (3) A rate is equitable if the rate can be compared to any
15 other rate offered by the health care corporation to its
16 subscribers, and the observed rate differences can be supported
17 by differences in anticipated benefit costs, administrative
18 expense cost, differences in risk, or any identified cost
19 transfer provisions.
20 (4) A rate is adequate if the rate is not unreasonably low
21 relative to the elements prescribed in subsection (1),
22 individually or collectively, based on reasonable evaluations of
23 recent claim experience, projected trends in claim costs, the
24 allocation of administrative expense budgets, and the present and
25 anticipated contingency
reserve positions unimpaired surplus of
26 the health care corporation.
27 (5) Except for identified cost transfers, each line of
1 business, over time, shall be self-sustaining. However, there
2 may be cost transfers for the benefit of senior citizens and
3 group conversion subscribers. Cost transfers for the benefit of
4 senior citizens, in the aggregate, annually shall not exceed 1%
5 of the earned subscription income of the health care corporation
6 as reported in the most recent annual statement of the
7 corporation. Group conversion subscribers are those who have
8 maintained coverage with the health care corporation on an
9 individual basis after
leaving a subscriber group. The Michigan
10 caring program created
in section 436 is not subject to any
11 assessment or
surcharge for cost transfer under this subsection.
12 Enacting section 1. Sections 205, 305, 610, 612, 613, and
13 614 of the nonprofit health care corporation reform act, 1980 PA
14 350, MCL 550.1205, 550.1305, 550.1610, 550.1612, 550.1613, and
15 550.1614, are repealed.