SB 418, As Passed Senate

SB-0418, As Passed Senate, September 4, 2007

SUBSTITUTE FOR

SENATE BILL NO. 418

A bill to prescribe the conditions upon which public employers

may provide certain benefits; to require the compilation and

release of certain information and data; to provide certain powers

and duties to certain state officials, departments, agencies, and

authorities; and to provide for appropriations.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

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

"public employees health benefit act".

Sec. 3. As used in this act:

(a) "Carrier" means a health, dental, or vision insurance

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

maintenance organization or multiple employer welfare arrangement

operating under, the insurance code of 1956, 1956 PA 218, MCL

500.100 to 500.8302; a system of health care delivery and financing

operating under section 3573 of the insurance code of 1956, 1956 PA

218, MCL 500.3573; a nonprofit dental care corporation operating

under 1963 PA 125, MCL 550.351 to 550.373; a nonprofit health care

corporation operating under the nonprofit health care corporation

reform act, 1980 PA 350, MCL 550.1101 to 550.1704; a voluntary

employees' beneficiary association described in section 501(c)(9)

of the internal revenue code, 26 USC 501(c)(9); a pharmacy benefits

manager; and any other person providing a plan of health benefits,

coverage, or insurance in this state.

(b) "Commissioner" means the commissioner of the office of

financial and insurance services.

maintained by a carrier or 1 or more public employers, that

provides for the payment of medical, optical, or dental benefits,

including, but not limited to, hospital and physician services,

prescription drugs, and related benefits, to public employees.

(d) "Public employee" means an employee of a public employer.

(e) "Public employer" means a city, village, township, county,

or other political subdivision of this state; any

intergovernmental, metropolitan, or local department, agency, or

authority, or other local political subdivision; 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; or a community college or junior college

described in section 7 of article VIII of the state constitution of

1963. Public employer includes the following:

(i) A public university that elects to come under the

provisions of this act.

(ii) This state through the civil service commission that

elects to come under the provisions of this act or any other state

employer on behalf of its state employees that elects to come under

the provisions of this act.

(f) "Public employer pooled plan" or "pooled plan" means a

public employer pooled plan established pursuant to section

5(1)(b).

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

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

1963.

Sec. 5. (1) Subject to collective bargaining requirements, a

public employer may provide medical, optical, or dental benefits to

public employees and their dependents by any of the following

methods:

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

basis. 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 public employers and establishing

and maintaining a public employer pooled plan to provide medical,

optical, or dental benefits to not fewer than 250 public employees

on a self-insured basis as provided in this act. A pooled plan

shall accept any public employer that applies to become a member of

the pooled plan, agrees to make the required payments, agrees to

remain in the pool for a 3-year period, and satisfies the other

reasonable provisions of the pooled plan. A public employer that

leaves a pooled plan may not rejoin the pooled plan for 2 years

after leaving the plan. A pooled plan under this subdivision does

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

except as provided in this act, is not subject to the insurance

laws of this state. A pooled plan under this subdivision may enter

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

either on an individual basis or with 1 or more other public

employers.

(2) A public employer or pooled plan procuring coverage or

benefits from 1 or more carriers shall solicit 4 or more bids when

establishing a medical benefit plan, including at least 1 bid from

a voluntary employees' beneficiary association described in section

501(c)(9) of the internal revenue code, 26 USC 501(c)(9). A public

employer or pooled plan procuring coverage or benefits from 1 or

more carriers shall solicit 4 or more bids every 3 years when

renewing or continuing a medical benefit plan, including at least 1

bid from a voluntary employees' beneficiary association described

in section 501(c)(9) of the internal revenue code, 26 USC

501(c)(9). A public employer or pooled plan that provides for

administration of a medical benefit plan using an authorized third

party administrator, an insurer, a nonprofit health care

corporation, or other entity authorized to provide services in

connection with a noninsured medical benefit plan shall solicit 4

or more bids for those administrative services when establishing a

medical benefit plan. A public employer or pooled plan that

provides for administration of a medical benefit plan using an

authorized third party administrator, an insurer, a nonprofit

health care corporation, or other entity authorized to provide

services in connection with a noninsured medical benefit plan shall

solicit 4 or more bids for those administrative services every 3

years when renewing or continuing a medical benefit plan.

(3) This act does not prohibit a public employer from

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

purchasing pool or coalition to procure insurance, benefits, or

coverage, or health care plan services or administrative services.

(4) A public university and a state employer may establish a

medical benefit plan to provide medical, dental, or optical

benefits to its employees and their dependents by any of the

methods set forth in this section.

(5) A medical benefit plan that provides medical benefits

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. 7. (1) A person shall not establish or maintain a public

employer pooled plan in this state unless the pooled plan obtains

and maintains a certificate of registration pursuant to this act.

(2) A person wishing to establish a pooled plan shall apply

for a certificate of registration on a form prescribed by the

commissioner. The application shall be completed and submitted to

the commissioner along with all of the following:

(a) Copies of all articles, bylaws, agreements, or other

documents or instruments describing the rights and obligations of

employers, employees, and beneficiaries with respect to the pooled

plan and the expected number of public employees to be covered for

medical, optical, or dental benefits under the pooled plan.

(b) Current financial statements of the pooled plan or, for a

newly established pooled plan, 3 years of financial projections.

pooled plan proposes to transact business and a copy of all

contracts or other instruments that it proposes to make with or

sell to its members, together with a copy of its plan description.

(3) The commissioner shall examine the application and

documents submitted by the applicant for completeness and shall

notify the applicant not later than 30 days after receipt of the

application of any additional information needed. The commissioner

may conduct any investigation that the commissioner considers

necessary and examine under oath any person interested in or

connected with the pooled plan.

(4) The commissioner shall issue or deny a certificate of

registration within 90 days of receipt of the applicant's

substantially completed application. The commissioner shall not

issue a certificate of registration to the pooled plan unless the

commissioner is satisfied that the pooled plan is in a stable and

unimpaired financial condition, that the pooled plan is qualified

to maintain a medical benefit plan in compliance with this act, and

that the pooled plan meets the requirements in section 9(1)(a),

(e), (f), (g), and (h). The commissioner shall deny a certificate

of registration to an applicant who fails to meet the requirements

of this act. Notice of denial shall be in writing and shall set

forth the basis for the denial. If the applicant submits a written

request within 60 days after mailing of the notice of denial, the

commissioner shall promptly conduct a hearing pursuant to the

administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to

24.328, in which the applicant shall be given an opportunity to

show compliance with the requirements of this act.

(5) The pooled plan, upon receipt of its initial certificate

of registration, which shall be a temporary certificate, shall

proceed to the completion of organization of the proposed pooled

plan.

(6) A pooled plan shall open its books to the commissioner,

and a final certificate of registration shall not be issued by the

commissioner to a pooled plan until the pooled plan has collected

cash reserves as provided in section 9.

Sec. 9. (1) In addition to other requirements as provided in

this act, a public employer pooled plan established on or after the

effective date of this act shall do all of the following:

(a) Establish and maintain minimum cash reserves of not less

than 25% of the aggregate contributions in the current fiscal year

or in the case of new applicants, 25% of the aggregate

contributions projected to be collected during its first 12 months

of operation, as applicable; or not less than 35% of the claims

paid in the preceding fiscal year, whichever is greater. Reserves

established pursuant to this section shall be maintained in a

separate, identifiable account and shall not be commingled with

other funds of the pooled plan. The pooled plan shall invest the

required reserve in the types of investments allowed under section

910, 912, or 914 of the insurance code of 1956, 1956 PA 218, MCL

500.910, 500.912, and 500.914. The pooled plan may satisfy up to

100% of the reserve requirement in the first year of operation, up

to 75% of the reserve requirement in the second year of operation,

and up to 50% of the reserve requirement in the third and

subsequent years of operation, through an irrevocable and

unconditional letter of credit. As used in this subdivision,

"letter of credit" means a letter of credit that meets all of the

following requirements:

(i) Is issued by a federally insured financial institution.

(ii) Is issued upon such terms and in a form as approved by the

commissioner.

(iii) Is subject to draw by the commissioner, upon giving 5

business days' written notice to the pooled plan, or by the pooled

plan for the member's benefit if the pooled plan is unable to pay

claims as they come due.

(b) Within 90 days after the end of each fiscal year, file

with the commissioner financial statements audited by a certified

public accountant. An actuarial opinion regarding reserves for

known claims and associated expenses and incurred but not reported

claims and associated expenses, in accordance with subdivision (d),

shall be included in the audited financial statement. The opinion

shall be rendered by an actuary approved by the commissioner or who

has 5 or more years of experience in this field.

with the commissioner unaudited financial statements, affirmed by

an appropriate officer or agent of the pooled plan.

(d) Within 60 days after the end of each fiscal quarter, file

with the commissioner a report certifying that the pooled plan

maintains reserves that are sufficient to meet its contractual

obligations, and that it maintains coverage for excess loss as

required in this act.

(e) File with the commissioner a schedule of premium

contributions, rates, and renewal projections.

(f) Possess a written commitment, binder, or policy for excess

loss insurance issued by an insurer authorized to do business in

this state in an amount approved by the commissioner. The binder or

policy shall provide not less than 30 days' notice of cancellation

to the commissioner.

(g) Establish a procedure, to the satisfaction of the

commissioner, for handling claims for benefits in the event of

dissolution of the pooled plan.

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

the pooled plan, provided that the pooled plan has within its own

organization adequate facilities and competent personnel to service

the medical benefit plan, or by awarding a competitively bid

contract, to an authorized third party administrator, an insurer, a

nonprofit health care corporation, or other entity authorized to

provide services in connection with a noninsured medical benefit

plan.

(2) If the commissioner finds that a pooled plan's reserves

are not sufficient to meet the requirements of subsection (1)(a),

the commissioner shall order the pooled plan to immediately collect

from any public employer that is or has been a member of the pooled

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 pooled

plan, if the pooled plan is consistently failing to maintain

reserves as required in this section, 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 and 500.7078.

Sec. 11. The commissioner, or any person appointed by the

commissioner, may examine the affairs of any pooled plan, and for

such purposes shall have free access to all the books, records, and

documents that relate to the business of the plan, and may examine

under oath its trustees, officers, agents, and employees in

relation to the affairs, transactions, and condition of the pooled

plan. Each authorized pooled plan shall pay an assessment annually

to the commissioner to be deposited into the insurance bureau fund

created in section 225 of the insurance code of 1956, 1956 PA 218,

MCL 500.225, in an amount equal to 1/4 of 1% of the annual self-

funded contributions made to the pooled plan for that year. The

assessments paid under this section shall be appropriated to the

office of financial and insurance services to cover the additional

costs incurred by the office of financial and insurance services in

the examination and regulation of pooled plans under this act.

Sec. 13. (1) The articles, bylaws, and trust agreement of the

pooled plan and all amendments thereto shall be filed with and

presumed approved by the commissioner before becoming operative.

The trust agreement shall be filed on a form prescribed by the

commissioner.

(2) Each member employer of a pooled plan shall be given

notice of every meeting of the members and shall be entitled to an

equal vote, either in person or by proxy in writing by such member.

(3) The powers of a pooled plan, except as otherwise provided,

shall be exercised by the board of trustees chosen to carry out the

purposes of the trust agreement. Not less than 50% of the trustees

shall be persons who are covered under the pooled plan or the

collective bargaining representatives of those persons. No trustee

shall be an owner, officer, or employee of a third party

administrator providing services to the pooled plan.

Sec. 15. (1) A public employer that has 100 or more employees

in a medical benefit plan shall be provided with claims utilization

and cost information as provided in subsection (2). A public

employer who is in an arrangement with 1 or more other public

employers, and together have 100 or more employees in a medical

benefit plan or have signed a letter of intent to enter together

100 or more public employees into a medical benefit plan, shall be

provided with claims utilization and cost information aggregated

for all the public employees together of those public employers as

provided in subsection (2).

(2) All medical benefit plans in this state shall compile, and

shall make available electronically as provided in subsection (1),

complete and accurate claims utilization and cost information for

the medical benefit plan in the aggregate and for each public

employer as follows:

(a) For persons covered under the medical benefit plan, census

information, including date of birth, gender, zip code, and medical

tier, such as single, dependent, or family.

(b) Monthly claims by provider type and service category

reported by the total number and dollar amounts of claims paid and

reported separately for in-network and out-of-network providers.

dollar amount of those claims.

(d) The dollar amounts paid for specific and aggregate stop-

loss insurance.

(e) The dollar amount of administrative expenses incurred or

paid, reported separately for medical, pharmacy, dental, and

vision.

(f) The total dollar amount of retentions and other expenses.

(g) The dollar amount for all service fees paid.

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

agents, consultants, or brokers by the medical benefit plan or by

any public employer or carrier participating in or providing

services to the medical benefit plan, reported separately for

medical, pharmacy, stop-loss, dental, and vision.

(i) 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

medical benefit plan under consideration. However, if the 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 public employer or combination of public employers shall

disclose the claims utilization and cost information required to be

provided under subsection (1) to any carrier or administrator it

solicits to provide benefits or administrative services for its

medical benefit plan, and to the employee representative of

employees covered under the medical benefit plan, and upon request

to any carrier or administrator who requests the opportunity to

submit a proposal to provide benefits or administrative services

for the medical benefit plan at the time of the request for bids.

The public employer shall make the claims utilization and cost

information required under this section available at cost and

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.

(6) All claims utilization and cost information described in

this section is required to be compiled beginning 60 days after the

effective date of this act. However, claims utilization and cost

information already being compiled on the effective date of this

act is subject to this section on the effective date of this act.

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

of the following bills of the 94th Legislature are enacted into

law:

(a) Senate Bill No. 419.

(b) Senate Bill No. 420.