SB 896, As Passed Senate

SB-0896, As Passed Senate, December 1, 2005

SUBSTITUTE FOR

SENATE BILL NO. 896

A bill to provide for a catastrophic stop loss fund and

catastrophic stop loss benefit plans; to create a board of

directors of the catastrophic stop loss fund; to prescribe the

conditions upon which school employers may provide certain

benefits; to require the compilation and release of certain

information and data; and to provide certain powers and duties to

certain state officials, departments, agencies, and authorities.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 1. This act shall be known and may be cited as the

"school employees health benefit act".

Sec. 3. As used in this act:

(a) "Board" means the board of directors created under section

(b) "Carrier" means a health or vision insurance company

authorized to do business in this state under, and a health

maintenance organization operating under, the insurance code of

1956, 1956 PA 218, MCL 500.100 to 500.8302; a system of health care

delivery and financing as defined in section 3573 of the insurance

code of 1956, 1956 PA 218, MCL 500.3573; a dental care corporation

operating under 1963 PA 125, MCL 550.351 to 550.373; and a

nonprofit health care corporation operating under the nonprofit

health care corporation reform act, 1980 PA 350, MCL 550.1101 to

550.1704.

financial and insurance services.

(d) "Consumer price index" means the percentage of change in

the consumer price index for all urban consumers in the United

States city average for all items for the calendar year ending

prior to the June 1 effective date of the adjustment under section

7 as reported by the United States department of labor, bureau of

labor statistics, and as certified by the commissioner.

(e) "Public university" means a public university described in

section 4, 5, or 6 of article VIII of the state constitution of

1963.

(f) "School employee" means an employee of a school employer.

(g) "School employer" means a school district, a public school

academy, or an intermediate school district, as those terms are

defined in the revised school code, 1976 PA 451, MCL 380.1 to

380.1852, and a community college or junior college described in

section 7 of article VIII of the state constitution of 1963.

Senate Bill No. 896 as amended December 1, 2005

(h) "School medical benefit plan" means a plan established and

maintained by 1 or more school employers that provides for the

payment of medical benefits, including, but not limited to,

hospital and physician services, prescription drugs, and related

benefits, to school employees.

Sec. 5. (1) There is created a board of directors to

administer the catastrophic stop loss fund. The board shall consist

of <<10>> directors as follows:

(a) The following 8 directors appointed by the governor with

the advice and consent of the senate:

(i) Until July 1, 2007, 2 directors with some background in

insurance issues representing school employers, and, effective July

1, 2007, 2 directors with some background in insurance issues

representing school employers that have selected a catastrophic

stop loss benefit plan and participate in the catastrophic stop

loss fund.

(ii) Until July 1, 2007, 2 directors with some background in

insurance issues representing collective bargaining organizations

that represent school employees, at least 1 of whom is recommended

by the Michigan state AFL-CIO, and, effective July 1, 2007, 2

directors representing collective bargaining organizations that

represent school employees of school employers that have selected a

catastrophic stop loss benefit plan and participate in the

catastrophic stop loss fund, at least 1 of whom is recommended by

the Michigan state AFL-CIO.

(iii) One director representing the general public.

<<(iv) One director representing the general public with expertise in health promotion and chronic care management programs that include, at a minimum, promoting nutrition and physical exercise and compliance with disease management programs and preventive service guidelines that are supported by evidence-based medical practice.>>

<<(v)>> One director representing the house of representatives

Senate Bill No. 896 as amended December 1, 2005

with some background in insurance issues as recommended by the

speaker of the house of representatives.

<<(vi)>> One director with some background in insurance issues

representing the senate as recommended by the senate majority

leader.

<<(vii)>> One director who is an actuary in good standing with the

American academy of actuaries or the society of actuaries, who

shall serve ex officio and without vote.

(b) The commissioner or his or her designee, who shall serve

ex officio and without vote.

(2) The directors first appointed to the board shall be

appointed within 60 days after the effective date of this act.

(3) The board shall adopt rules providing for the composition

and term of successor boards to the initial board, consistent with

subsection (1). Terms of the board directors shall be staggered so

that the terms of all directors do not expire at the same time. The

appointment of a successor director or to fill a vacancy shall be

made in the same manner as the original appointment.

(4) Except as otherwise provided, each board director shall

have 1 vote on any matter coming before the board.

(5) The first meeting of the board shall be called by the

commissioner. At the first meeting, the board shall elect from

among the directors a chairperson and other officers as it

considers necessary or appropriate. After the first meeting, the

board shall meet at least quarterly, or more frequently at the call

of the chairperson or if requested by 3 or more directors.

(6) A majority of the directors of the board constitute a

quorum for the transaction of business at a meeting of the board. A

majority of the directors present and serving are required for

official action of the board.

(7) Directors of the board shall serve without compensation.

However, board directors may be reimbursed for their actual and

necessary expenses incurred in the performance of their official

duties as board directors.

(8) The board is not a state board or agency and the

catastrophic stop loss fund administered by the board is not a

state fund.

Sec. 7. (1) Beginning July 1, 2006, the board shall implement

and administer a catastrophic stop loss fund that provides 1 or

more catastrophic stop loss benefit plans. The catastrophic stop

loss fund shall reimburse a participating school medical benefit

plan for a claim that exceeds the dollar threshold of the

catastrophic stop loss benefit plan chosen by the participating

school medical benefit plan. The board shall adopt a plan of

operation for the catastrophic stop loss fund that shall provide

for the management and nonprofit operation of the catastrophic stop

loss fund and each catastrophic stop loss benefit plan consistent

with this act.

(2) The board shall establish the catastrophic stop loss fund

and 1 or more catastrophic stop loss benefit plans. The board shall

do all of the following:

(a) Provide for reimbursement to a participating school

medical benefit plan for the portion of a covered medical benefit

claim that exceeds a dollar threshold established by the board in

the catastrophic stop loss benefit plan selected by the school

medical benefit plan. The minimum dollar threshold to be provided

under a catastrophic stop loss benefit plan shall not be less than

$50,000.00 per individual claim. The board may provide for

additional catastrophic stop loss benefit plans that provide dollar

threshold levels above $50,000.00 per individual claim. A dollar

threshold level established under this subdivision in a

catastrophic stop loss benefit plan shall be adjusted to reflect

changes in the consumer price index by June 1 of each year.

(b) Provide that each catastrophic stop loss benefit plan is

subject to the following:

(i) Does not require any changes in the participating school

medical benefit plan for payment from the catastrophic stop loss

fund.

(ii) Provides for continuity of health care treatment and

providers for individuals covered under the participating school

medical benefit plan.

relative to all liabilities of each catastrophic stop loss benefit

plan.

(d) Require each school medical benefit plan to furnish claims

data at the times and in the form and detail as may be required by

the catastrophic stop loss fund.

(e) Determine a premium for each catastrophic stop loss

benefit plan that is sufficient to cover expected losses and

expenses that the catastrophic stop loss fund will likely incur

during the period for which the premium is applicable. The premium

Senate Bill No 896 as amended December 1, 2005

shall include an amount to cover incurred but not reported losses

for the period and may be adjusted for any excess or deficient

premiums from previous periods. Excesses or deficiencies from

previous periods may be fully adjusted in a single period or may be

adjusted over several periods.

(f) Receive and distribute all sums required for the operation

of the catastrophic stop loss fund.

(g) Adopt an investment policy for investing and reinvesting

the assets of the catastrophic stop loss fund that complies with

investment limitations governing the investment of assets of public

employee retirement systems under the public employee retirement

system investment act, 1965 PA 314, MCL 38.1132 to 38.1140m.

(h) Provide a comprehensive program of case management

services that shall be offered to a participating school medical

benefit plan for a covered individual whose claim is covered under,

or is likely to become covered under, the catastrophic stop loss

fund.

(i) Provide 1 or more incentives to participating school

medical benefit plans, <<

>> to provide health promotion and chronic care management

programs to covered individuals of a participating school medical

benefit plan for the purpose of improving or maintaining the health

of covered individuals and reducing unnecessary or excessive

medical expenses. <<Incentives may include an appropriate rebate of

premiums paid for a demonstrated maintenance or improvement of members' health status as determined by assessments of agreed upon health status indicators.>> Health promotion and chronic care management

programs shall meet, if applicable, nationally recognized

accreditation standards. If nationally recognized accreditation

standards are not applicable, health promotion and chronic care

management programs shall meet standards established by the board

which shall include, at a minimum, complete health risk

assessments.

(3) All school medical benefit plans in this state shall be

offered the opportunity to select a catastrophic stop loss benefit

plan and participate in the catastrophic stop loss fund. A public

university shall be offered the opportunity to select a

catastrophic stop loss benefit plan and participate in the

catastrophic stop loss fund.

(4) The catastrophic stop loss fund shall do all of the

following:

(a) Assume 100% of all liability for any covered claim

exceeding the dollar threshold under the applicable catastrophic

stop loss benefit plan.

(b) Maintain relevant and accurate loss and expense data

relative to all liabilities of the catastrophic stop loss fund.

being necessary in the exercise of sound and prudent actuarial

judgment for the preservation, maintenance, and operation of the

catastrophic stop loss fund.

Sec. 9. (1) The board may do any of the following:

(a) Sue and be sued in the name of the catastrophic stop loss

fund. A judgment against the board shall not create any direct

liability against the participating school medical benefit plans or

school employers.

(b) Purchase coverage to cede all or any portion of its

potential liability with an insurer licensed to transact insurance

in this state or otherwise approved by the commissioner.

as may be necessary to assure the efficient operation of the

catastrophic stop loss fund.

(d) Adopt reasonable rules for the administration of the

catastrophic stop loss fund, enforce those rules, and delegate

authority, as the board considers necessary to assure proper

administration and operation.

(e) Contract for goods and services, including independent

claims management and actuarial, investment, and legal services to

assure the efficient operation of the catastrophic stop loss fund.

(f) Perform other acts that are necessary or proper to

accomplish the purposes of the catastrophic stop loss fund.

(2) The board shall hear and determine complaints concerning

the operation of the catastrophic stop loss fund.

Sec. 11. (1) Subject to collective bargaining requirements

under 1947 PA 336, MCL 15.201 to 15.217, a school employer may

provide medical, optical, or dental benefits to school employees

and their dependents by any of the following methods:

(a) By establishing and maintaining a plan on a self-insured

basis as provided in this act. A plan under this subdivision does

not constitute doing the business of insurance in this state and is

not subject to the insurance laws of this state.

(b) By joining with other school employers and establishing

and maintaining a plan on a self-insured basis as provided in this

act. A plan under this subdivision does not constitute doing the

business of insurance in this state and is not subject to the

insurance laws of this state. A plan under this subdivision may

enter into contracts and sue or be sued in its own name.

are made to a trust fund for the purpose of providing medical,

dental, or optical benefits to school employees and their

dependents under a plan agreed to by the school employer. A trust

fund under this subdivision may receive contributions from 1 or

more school employers and may provide medical, dental, and optical

benefits to school employees of 1 or more school employers. A plan

under this subdivision does not constitute doing the business of

insurance in this state and is not subject to the insurance laws of

this state.

(d) By procuring coverage from 1 or more carriers, either on

an individual basis or with 1 or more other school employers.

School employers may pool risks with other school employers under

this subdivision to the extent permitted under a written agreement.

(e) By forming a multiple employer welfare arrangement under

chapter 70 of the insurance code of 1956, 1956 PA 218, MCL 500.7001

to 500.7090.

(2) This act does not prohibit a school employer from

participating, for the payment of medical benefits and claims, in a

purchasing pool or coalition to procure insurance or coverage,

health care plan services, or administrative services.

(3) A school medical benefit plan participating in a

catastrophic stop loss benefit plan that elects not to participate

in a program of case management under section 7(2)(h) shall provide

to covered individuals case management services that meet the case

management accreditation standards established by the national

committee on quality assurance, the joint commission on health care

organizations, or the utilization review accreditation commission.

Sec. 13. (1) In addition to other requirements as provided in

this act, a self-insured school medical benefit plan established on

or after the effective date of this act shall do all of the

following:

(a) Maintain such reserves as are necessary, in the exercise

of sound and prudent actuarial judgment, to cover the projected

cost of medical benefits for covered school employees and

dependents. A report of amounts so reserved and disbursements made

from such funds, together with a written report of a member of the

American academy of actuaries or the society of actuaries

certifying whether the amounts reserved conform to the requirements

of this subsection, are computed in accordance with accepted loss

reserving standards, and are fairly stated in accordance with sound

loss reserving principles, shall be prepared and filed with the

commissioner, within 90 days after the last day of the fiscal year

of the school employer. This report shall be made available for

inspection by any person at all reasonable times during regular

business hours, and, upon request, copies of the report shall be

provided at cost within a reasonable period of time of the request.

(b) Provide for administration of the plan using personnel of

the school employer or employers, personnel of an organization

representing employees of the school employer, or by awarding a

contract, without the necessity of competitive bidding, to any

person, political subdivision, or corporation. No such contract

shall be entered into without full, prior, and public disclosure of

all terms and conditions. The disclosure shall include, at a

minimum, a statement listing all representations made in connection

with any possible savings and losses resulting from the contract,

and potential liability of the school employer or school employee.

academy of actuaries or the society of actuaries for the

preparation of the written actuarial evaluation of a plan as

required under subdivision (a). The actuarial evaluation shall be

based on all of the following information:

(i) Access fees to a facility and provider discount network or

other contracted provider network.

(ii) Paid claims for the immediately preceding 3 years,

including pharmacy.

(iii) Estimated incurred claims for the immediately preceding 3

years.

(iv) Plan administrative costs.

(v) Chronic case management fees.

(vi) Disease case management fees.

(vii) Preventive and wellness plan fees.

(d) Enter into agreements with providers of services to the

school medical benefit plan, subject to the requirements of this

act and as established by the commissioner.

(2) If the commissioner finds that a self-insured school

medical benefit plan's reserves are not sufficient to meet the

requirements of subsection (1)(a), the commissioner shall order the

self-insured school medical benefit plan to immediately collect

Senate Bill No. 896 as amended December 1, 2005

from any school employer that is or has been a member of the self-

insured school medical benefit plan appropriately proportionate

contributions sufficient to restore reserves to the required level.

The commissioner may take such action as he or she considers

necessary, including, but not limited to, ordering the suspension

or dissolution of a self-insured school medical benefit plan, if

the self-insured school medical benefit plan is consistently

failing to maintain adequate reserves, is using methods and

practices that render further transaction of business hazardous or

injurious to its members, employees, beneficiaries, or to the

public, has failed, after written request by the commissioner, to

remove or discharge an officer, director, trustee, or employee who

has been convicted of any crime involving fraud, dishonesty, or

moral turpitude, has failed or refused to furnish any report or

statement required under this act, or if the commissioner, upon

investigation, determines that it is conducting business

fraudulently or is not meeting its contractual obligations in good

faith. Any proceedings by the commissioner under this subsection

shall be governed by the requirements and procedures of sections

7074 to 7078 of the insurance code of 1956, 1956 PA 218, MCL

500.7074 to 500.7078.

Sec. 15. (1) Beginning on the effective date of this act, a

school employer shall not enter into or renew a school medical

benefit plan or an administrative services agreement for a school

medical benefit plan unless the school employer will be furnished

with complete and accurate claims utilization and cost information

as provided in subsection (2)(a) to <<(k)>> with respect to the school

employer's claims and benefits under the school medical benefit

plan.

(2) Beginning on the effective date of this act, all school

medical benefit plans in this state shall compile and make

available upon request to the school employer complete and accurate

claims utilization and cost information for the school medical

benefit plan in the aggregate and for each school employer as

follows:

(a) The number of persons covered under the school medical

benefit plan.

(b) If applicable, the number of persons covered under a

policy, certificate, or contract issued by a carrier.

(d) The dollar amount of claims paid and the dollar amount of

claims incurred but not reported.

(e) The claims experience, by coverage component and by

provider.

(f) The dollar amount of premiums or fees paid, if any.

(g) The dollar amount of administrative expenses incurred or

paid.

(h) The dollar amount of retentions.

(i) The dollar amount for each of the following fees:

provider; network; case management; precertification; and other

service fees paid.

(j) The dollar amount of any fees or commissions paid to

agents or brokers by the school medical benefit plan or by any

school employer or carrier participating in or providing services

to the school medical benefit plan.

(k) Other information as may be required by the commissioner.

(3) The claims utilization and cost information required to be

compiled under this section shall be compiled on an annual basis

and shall cover a relevant period. For purposes of this subsection,

the term "relevant period" means the 36-month period ending no more

than 120 days prior to the effective date or renewal date of the

school medical benefit plan under consideration. However, if the

school medical benefit plan has been in effect for a period of less

than 36 months, the relevant period shall be that shorter period.

(4) A school employer or combination of school employers shall

make public the claims utilization and cost information required

under this section no later than 60 days before the effective date

or renewal date of the school medical benefit plan or the

administrative services agreement under consideration. The school

employer shall make the claims utilization and cost information

required under this section available for inspection by any person

at all reasonable times during regular business hours, and, upon

the request of such person, copies of documents containing the

information shall be provided at cost within a reasonable period of

time.

(5) The claims utilization and cost information required under

this section shall include only de-identified health information as

permitted under the health insurance portability and accountability

act of 1996, Public Law 104-191, or regulations promulgated under

that act, 45 CFR parts 160 and 164, and shall not include any

protected health information as defined in the health insurance

portability and accountability act of 1996, Public Law 104-191, or

regulations promulgated under that act, 45 CFR parts 160 and 164.

Sec. 17. To encourage and facilitate informed decisions

concerning school medical benefit plan design, the administration

of school medical benefit plans, the selection of medical service

providers, and the planning of medical care, the commissioner shall

do all of the following:

(a) Gather data that evaluate and compare the cost,

efficiency, and performance of administrative services provided to

school medical benefit plans, including claims payment timeliness

and accuracy, and make available easily accessible comparative

ratings and descriptions of those plan administrators on a regular

basis.

(b) Working with other state departments and agencies, ensure

access on a regular basis for school employers, school medical

benefit plans, and covered school employees to all of the following

information:

(i) Information concerning cost and performance of Michigan

hospitals, medical clinics, and other health care facilities,

including, but not limited to, licensure, accreditation, and

performance measures for those facilities as recommended by

national organizations such as the national quality forum.

(ii) Information concerning cost and performance of Michigan

physicians and other health care providers, including, but not

limited to, medical training, years in practice, board

certification, verified licensure information, patient experience,

and the results of at least 2 clinical performance measures of

physicians and other health care providers recommended by national

organizations such as the national quality forum.

distribution to school employers and other interested persons a

buyer's guide for school employers that provides information

necessary to make informed decisions concerning school medical

benefit plan design, the administration of school medical benefit

plans, the selection of medical service providers, and the planning

of medical care similar to information provided to assist buyers in

making informed decisions in the buyer's guide to auto insurance in

Michigan, the buyer's guide to home and renter's insurance in

Michigan, and the HMO consumer's guide.

Enacting section 1. This act does not take effect unless all

of the following bills of the 93rd Legislature are enacted into

law:

(a) Senate Bill No. 895.

(b) Senate Bill No. 897.