May 13, 2009, Introduced by Reps. Coulouris, Ball, Corriveau, Johnson, Simpson, Melton, Haugh, Young, Lipton, Marleau, Mayes, Gregory, Roy Schmidt, Hansen, LeBlanc, Scripps, Meadows, Moore and Green 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 401e, 402b, 608, 609, 610, 612, and 613 (MCL
550.1401e, 550.1402b, 550.1608, 550.1609, 550.1610, 550.1612, and
550.1613), section 401e as added by 1996 PA 516, section 402b as
amended by 1999 PA 7, section 608 as amended by 1991 PA 73, and
section 609 as amended by 2003 PA 59, and by adding sections 220
and 613a; and to repeal acts and parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 220. A nonprofit health care corporation is subject to
chapter 37A of the insurance code of 1956, 1956 PA 218, MCL
500.3751 to 500.3781.
Sec.
401e. (1) Except as provided in this section, a health
care
corporation that has issued a nongroup certificate shall renew
or
continue in force the certificate at the option of the
individual.
(1) (2)
Except as provided in this section,
a health care
corporation that has issued a group certificate shall renew or
continue in force the certificate at the option of the sponsor of
the plan.
(2) (3)
Guaranteed renewal is not required
in cases of fraud,
intentional misrepresentation of material fact, lack of payment, if
the health care corporation no longer offers that particular type
of coverage in the market, or if the individual or group moves
outside the service area.
Sec.
402b. (1) For an individual covered under a nongroup
certificate
or under a certificate not covered under subsection
(2),
a health care corporation may exclude or limit coverage for a
condition
only if the exclusion or limitation relates to a
condition
for which medical advice, diagnosis, care, or treatment
was
recommended or received within 6 months before enrollment and
the
exclusion or limitation does not extend for more than 6 months
after
the effective date of the certificate.
(2)
A health care corporation shall not
exclude or limit
coverage for a preexisting condition for an individual covered
under a group certificate.
(3)
Notwithstanding subsection (1), a health care corporation
shall
not issue a certificate to a person eligible for nongroup
coverage
or eligible for a certificate not covered under subsection
(2)
that excludes or limits coverage for a preexisting condition or
provides
a waiting period if all of the following apply:
(a)
The person's most recent health coverage prior to applying
for
coverage with the health care corporation was under a group
health
plan.
(b)
The person was continuously covered prior to the
application
for coverage with the health care corporation under 1
or
more health plans for an aggregate of at least 18 months with no
break
in coverage that exceeded 62 days.
(c)
The person is no longer eligible for group coverage and is
not
eligible for medicare or medicaid.
(d)
The person did not lose eligibility for coverage for
failure
to pay any required contribution or for an act to defraud a
health
care corporation, a health insurer, or a health maintenance
organization.
(e)
If the person was eligible for continuation of health
coverage
from that group health plan pursuant to the consolidated
omnibus
budget reconciliation act of 1985, Public Law 99-272, 100
Stat.
82, he or she has elected and exhausted that coverage.
(4)
As used in this section,
"group" means a group of 2 or
more subscribers.
Sec. 608. (1) The rates charged to nongroup subscribers for
each certificate shall be filed with the commissioner and the
attorney
general in accordance with section 610. and
shall be
subject
to the prior approval of the commissioner. Annually, the
commissioner
shall approve, disapprove, or modify and approve the
proposed
or existing rates for each certificate subject to the
standard
that the rates must be determined to be equitable,
adequate,
and not excessive, as defined in section 609. The burden
of
proof that rates to be charged meet these standards shall be
upon
the health care corporation proposing to use the rates. The
rate filing shall include an actuarial certification that the rates
are reasonable in relation to the benefits provided, are adequate,
equitable, and not excessive, and promote the health care
corporation's charitable and social mission obligations. The rate
filing shall show the anticipated loss ratio. If surplus exceeds
the maximum surplus permitted under section 204a(5), a contribution
from surplus may be considered in the determination of whether
rates are reasonable in relation to the benefits provided, are
adequate, equitable, and not excessive, and promote the health care
corporation's charitable and social mission obligations. A rate for
a nongroup or group conversion certificate shall be presumed
reasonable in relation to the benefits provided, is adequate,
equitable, and not excessive, and promotes the health care
corporation's charitable and social mission obligations if the
anticipated loss ratio equals or exceeds 80%. Anticipated loss
ratios for nongroup certificates shall be calculated separately
from anticipated loss ratios for group conversion certificates. A
medicare supplement rate shall be presumed reasonable in relation
to the benefits provided, is adequate, equitable, and not
excessive, and promotes the health care corporation's charitable
and social mission obligations if the anticipated loss ratio equals
or exceeds 90%. Sections 3759 to 3763 of the insurance code of
1956, 1956 PA 218, MCL 500.3759 to 500.3763, apply to adjusting
premiums for each certificate. For certificates introduced on or
after January 1, 2010, any premium differences among the
certificates shall reflect the actuarial value of the certificate
differences and not the underlying experience of the certificates.
(2) The methodology and definitions of each rating system,
formula, component, and factor used to calculate rates for group
subscribers for each certificate, including the methodology and
definitions used to calculate administrative costs for
administrative services only and cost-plus arrangements, shall be
filed
in accordance with section 610 and shall be are subject
to
the prior approval of the commissioner. The definition of a group,
including any clustering principles applied to nongroup subscribers
or small group subscribers for the purpose of group formation,
shall
be are subject to the prior approval of the commissioner.
However, if a Michigan caring program is created under section 436,
that program shall be defined as a group program for the purpose of
establishing rates. The commissioner shall approve, disapprove, or
modify and approve the methodology and definitions of each rating
system, formula, component, and factor for each certificate subject
to the standard that the resulting rates for group subscribers must
be determined to be equitable, adequate, and not excessive, as
defined in section 609. In addition, the commissioner may from time
to time review the records of the corporation to determine proper
application of a rating system, formula, component, or factor with
respect to any group. The corporation shall refile for approval
under this subsection, every 3 years, the methodology and
definitions of each rating system, formula, component, and factor
used to calculate rates for group subscribers, including the
methodology and definitions used to calculate administrative costs
for administrative services only and cost-plus arrangements. If
surplus exceeds the maximum surplus permitted under section
204a(5), a contribution from surplus may be considered in the
determination of whether rates are reasonable in relation to the
benefits provided, are adequate, equitable, and not excessive, and
promote the health care corporation's charitable and social mission
obligations. The burden of proof that the resulting rates to be
charged meet these standards shall be upon the health care
corporation proposing to use the rating system, formula, component,
or factor.
(3) A proposed rate shall not take effect until a filing has
been made with the commissioner and approved under section 607 or
this section, as applicable, except as provided in subsections (4)
and (5).
(4) Upon request by a health care corporation, the
commissioner may allow rate adjustments to become effective prior
to approval, for federal or state mandated benefit changes.
However, a filing for these adjustments shall be submitted before
the effective date of the mandated benefit changes. If the
commissioner disapproves or modifies and approves the rates, an
adjustment shall be made retroactive to the effective date of the
mandated benefit changes or additions.
(5) Implementation prior to approval may be allowed if the
health care corporation is participating with 1 or more health care
corporations to underwrite a group whose employees are located in
several states. Upon request from the commissioner, the corporation
shall file with the commissioner, and the commissioner shall
examine, the financial arrangement, formulae, and factors. If any
are determined to be unacceptable, the commissioner shall take
appropriate action.
(6) For rates submitted under subsection (1), no later than 4
months after the end of a 12-month rating period, the health care
corporation shall submit information to the commissioner and the
attorney general that shows the actual loss ratio for the rating
period for all certificates subject to that 12-month rating period,
including certificates that have been or will be closed to new
applicants. If the actual loss ratio for those certificates does
not equal or exceed the applicable anticipated loss ratio under
subsection (1), the commissioner shall order the corporation to
issue rate credits or refunds to individuals currently covered
under a certificate in that line of business in an amount that will
result in a minimum loss ratio for the rating period equal to the
applicable anticipated loss ratio for the line of business. The
corporation shall not be ordered to issue a refund in an amount
less than $25.00 per individual applicant. The rate credits or
refunds shall be issued no later than 90 days after the
commissioner's order to issue rate credits or refunds. The rate
credits or refunds shall include interest from the beginning of the
rating period to the date of the credit or refund calculated at the
average rate of interest for 13-week United States treasury notes,
as determined by the commissioner. The attorney general may bring
an action or apply to the circuit court for a court order to
enforce an order of the commissioner under this section. As used in
this subsection, each of the following constitutes a separate line
of business:
(a) All certificates that are medicare supplement
certificates.
(b) All certificates that are group conversion certificates a
corporation is required to offer under section 410a.
(c) All nongroup certificates that are neither medicare
supplement nor group conversion certificates.
(7) As used in this section:
(a) "Actual loss ratio" means the ratio for a 12-month rating
period of the incurred claims to premiums.
(b) "Anticipated loss ratio" means the ratio at the time of
the rate filing, or at a time of subsequent rate revisions, of the
expected future incurred claims during the rating period defined in
the rate filing to the future premiums, based on a credible premium
volume over a reasonable period of time with proper weight given to
rating trends and other relevant factors. Statistical data relating
to expected future incurred claims shall be provided to the
commissioner and the attorney general for certificates sold or to
be sold when available.
Sec. 609. (1) A rate is not excessive if the rate is not
unreasonably high relative to the following elements, individually
or collectively; provision for anticipated benefit costs; provision
for administrative expense; provision for cost transfers, if any;
provision for a contribution to or from surplus that is consistent
with the attainment or maintenance of adequate and unimpaired
surplus as provided in section 204a; and provision for adjustments
due to prior experience of groups, as defined in the group rating
system. A determination as to whether a rate is excessive relative
to these elements, individually or collectively, shall be based on
the following: reasonable evaluations of recent claim experience;
projected trends in claim costs; the allocation of administrative
expense budgets; and the present and anticipated unimpaired surplus
of the health care corporation. To the extent that any of these
elements are considered excessive, the provision in the rates for
these elements shall be modified accordingly.
(2) The administrative expense budget must be reasonable, as
determined by the commissioner after examination of material and
substantial administrative and acquisition expense items.
(3) A rate is equitable if the rate can be compared to any
other rate offered by the health care corporation to its
subscribers, and the observed rate differences can be supported by
differences in anticipated benefit costs, administrative expense
cost, differences in risk, or any identified cost transfer
provisions.
(4) A rate is adequate if the rate is not unreasonably low
relative to the elements prescribed in subsection (1), individually
or collectively, based on reasonable evaluations of recent claim
experience, projected trends in claim costs, the allocation of
administrative expense budgets, and the present and anticipated
unimpaired surplus of the health care corporation.
(5) Except for identified cost transfers, each line of
business, over time, shall be self-sustaining. However, there may
be cost transfers for the benefit of senior citizens who are
residents of this state and group conversion subscribers. Cost
transfers for the benefit of senior citizens, in the aggregate,
annually shall not exceed 1% of the earned subscription income of
the health care corporation as reported in the most recent annual
statement of the corporation. Group conversion subscribers are
those who have maintained coverage with the health care corporation
on an individual basis after leaving a subscriber group. Cost
transfers for the benefit of senior citizens shall be expended in
the following order of priority:
(a) To provide a subsidy for seniors with a household income
of not more than 300% of the federal poverty level as defined in
the poverty guidelines published annually in the Federal Register
by the United States department of health and human services under
its authority to revise the poverty line under section 673(2) of
subtitle B of title VI of the omnibus budget reconciliation act of
1981, Public Law 97-35, 42 USC 9902.
(b) To provide a subsidy for seniors with a household income
of more than 300% of the federal poverty level as defined in the
poverty guidelines published annually in the Federal Register by
the United States department of health and human services under its
authority to revise the poverty line under section 673(2) of
subtitle B of title VI of the omnibus budget reconciliation act of
1981, Public Law 97-35, 42 USC 9902.
(6) Subsections (1) to (4) apply only to rate filings
submitted pursuant to section 608(2).
Sec. 610. (1) Except as provided under section 608(4) or (5),
a filing of information and materials relative to a proposed rate
under
section 608(1) or (2) shall be made not
less than 120 60 days
before the proposed effective date of the proposed rate. A filing
shall not be considered to have been received until there has been
substantial and material compliance with the requirements
prescribed
in subsections (6) and (8) this
section.
(2)
Within 30 15 days after a filing is made of information
and materials relative to a proposed rate, the commissioner shall
do either of the following:
(a)
Give For a rate filing
under section 608(2), give written
notice to the corporation, and to each person described under
section 612(1), that the filing is in material and substantial
compliance
with subsections (6) and (8) this
section and that the
filing is complete. The commissioner shall then proceed to approve,
approve with modifications, or disapprove the rate filing 60 days
after receipt of the filing, based upon whether the filing meets
the requirements of this act. However, if a hearing has been
requested under section 613, the commissioner shall not approve,
approve with modifications, or disapprove a filing until the
hearing has been completed and an order issued.
(b) Give written notice to the corporation that the
corporation
has not yet complied with subsections (6) and (8) this
section. The notice shall state specifically in what respects the
filing
fails to meet the requirements of subsections (6) and (8)
this section.
(3)
Within 10 8 days after the filing of notice pursuant to
subsection (2)(b), the corporation shall submit to the commissioner
such additional information and materials, as requested by the
commissioner.
Within 10 8 days after receipt of the additional
information and materials, the commissioner shall determine whether
the filing is in material and substantial compliance with
subsections
(6) and (8) this section. If the commissioner
determines that the filing does not yet materially and
substantially
meet the requirements of subsections (6) and (8) this
section, the commissioner shall give notice to the corporation
pursuant to subsection (2)(b) or use visitation of the
corporation's facilities and examination of the corporation's
records to obtain the necessary information described in the notice
issued pursuant to subsection (2)(b). The commissioner shall use
either procedure previously mentioned, or a combination of both
procedures, in order to obtain the necessary information as
expeditiously as possible. The per diem, traveling, reproduction,
and other necessary expenses in connection with visitation and
examination shall be paid by the corporation, and shall be credited
to the general fund of the state.
(4)
If a filing is approved, approved with modifications, or
disapproved
under subsection (2)(a), the commissioner shall issue a
written
order of the approval, approval with modifications, or
disapproval.
If the filing was approved with modifications or
disapproved,
the order shall state specifically in what respects
the
filing fails to meet the requirements of this act and, if
applicable,
what modifications are required for approval under this
act.
If the filing was approved with modifications, the order shall
state
that the filing shall take effect after the modifications are
made
and approved by the commissioner. If the filing was
disapproved,
the order shall state that the filing shall not take
effect.
(5)
The inability to approve 1 or more rating classes of
business
within a line of business because of a requirement to
submit
further data or because a request for a hearing under
section
613 has been granted shall not delay the approval of rates
by
the commissioner which could otherwise be approved or the
implementation
of rates already approved, unless the approval or
implementation
would affect the consideration of the unapproved
classes
of business.
(4) The commissioner shall determine whether a rate filing
under section 608(1) is in material and substantial compliance with
this section and is complete by not later than 30 days before the
proposed effective date of the proposed rate. A rate filing under
section 608(1) that is in material and substantial compliance with
this section and is complete shall be considered approved and
become effective 60 days after the rates are filed with the
commissioner.
(5) The commissioner, the attorney general, or a person who
has standing may request a hearing under section 613a for a rate
filing approved under subsection (4) if the commissioner, the
attorney general, or the person who has standing has reasonable
cause to believe the proposed rates do not satisfy the standards in
section 608(1). Rates considered approved and effective under
subsection (4) shall remain in effect during the pendency of a
hearing under section 613a.
(6) Information furnished under subsection (1) in support of a
nongroup rate filing shall include the following:
(a) Recent claim experience on the benefits or comparable
benefits for which the rate filing applies.
(b) Actual prior trend experience.
(c) Actual prior administrative expenses.
(d) Projected trend factors.
(e) Projected administrative expenses.
(f)
Contributions for risk and contingency reserve surplus
factors.
(g)
Actual health care corporation contingency reserve surplus
position.
(h)
Projected health care corporation contingency reserve
surplus position.
(i)
Other information which that
the corporation considers
pertinent
to evaluating the risks to be rated
, or relevant to the
determination to be made under this section.
(j)
Other information which that
the commissioner considers
pertinent
to evaluating the risks to be rated
, or relevant to the
determination to be made under this section.
(7) A copy of the filing, and all supporting information,
except for the information which may not be disclosed under section
604, shall be open to public inspection as of the date filed with
the commissioner.
(8) The commissioner shall make available forms and
instructions for filing for proposed rates under sections 608(1)
and 608(2). The forms with instructions shall be available not less
than 180 days before the proposed effective date of the filing.
Sec. 612. (1) Upon receipt of a rate filing under section 610,
the commissioner immediately shall notify each person who has
requested in writing notice of those filings within the previous 2
years, specifying the nature and extent of the proposed rate
revision and identifying the location, time, and place where the
copy of the rate filing described in section 610(7) shall be open
to
public inspection and copying. The For a rate filing made under
section 608(2) only, the notice shall also state that if the person
has standing, the person shall have, upon making a written request
for a hearing within 60 days after receiving notice of the rate
filing, an opportunity for an evidentiary hearing under section 613
to determine whether the proposed rates meet the requirements of
this act. The request shall identify the issues which the
requesting party asserts are involved, what portion of the rate
filing is requested to be heard, and how the party has standing.
The corporation shall place advertisements giving notice,
containing the information specified above, in at least 1 newspaper
which serves each geographic area in which significant numbers of
subscribers reside.
(2) The commissioner may charge a fee for providing, pursuant
to subsection (1), a copy of the rate filing described in section
610(7). The commissioner may charge a fee for providing a copy of
the entire filing to a person whose request for a hearing has been
granted by the commissioner pursuant to section 613 or 613a. The
fee shall be limited to actual mailing costs and to the actual
incremental cost of duplication, including labor and the cost of
deletion and separation of information as provided in section 14 of
Act
No. 442 of the Public Acts of 1976, being section 15.244 of the
Michigan Compiled Laws the freedom of information act, 1976 PA 442,
MCL 15.244. Copies of the filing may be provided free of charge or
at a reduced charge if the commissioner determines that a waiver or
reduction of the fee is in the public interest because the
furnishing of a copy of the filing will primarily benefit the
general public. In calculating the costs under this subsection, the
commissioner shall not attribute more than the hourly wage of the
lowest
paid, full-time clerical employee of the insurance bureau
office of financial and insurance regulation to the cost of labor
incurred in duplication and mailing and to the cost of separation
and deletion. The commissioner shall use the most economical means
available to provide copies of a rate filing.
Sec. 613. (1) If the request for a hearing under this section
is with regard to a rate filing under section 608(2) not yet acted
upon under section 610(2)(a), no such action shall be taken by the
commissioner until after the hearing has been completed. However,
the commissioner shall proceed to act upon those portions of a rate
filing under section 608(2) upon which no hearing has been
requested. Within 15 days after receipt of a request for a hearing,
the commissioner shall determine if the person has standing. If the
commissioner determines that the person has standing, the person
may have access to the entire filing subject to the same
confidentiality requirements as the commissioner under section 604,
and shall be subject to the penalty provision of section 604(5).
Upon determining that the person has standing, the commissioner
shall immediately appoint an independent hearing officer before
whom the hearing shall be held. In appointing an independent
hearing officer, the commissioner shall select a person qualified
to conduct hearings, who has experience or education in the area of
health care corporation or insurance rate determination and
finance, and who is not otherwise associated financially with a
health care corporation or a health care provider. The person
selected shall not be currently or actively employed by this state.
For purposes of this subsection, an employee of an educational
institution shall not be considered to be employed by this state.
For purposes of this section, a person has "standing" if any of the
following circumstances exist:
(a) The person is, or there are reasonable grounds to believe
that the person could be, aggrieved by the proposed rate.
(b) The person is acting on behalf of 1 or more named persons
described in subdivision (a).
(c) The person is the commissioner, the attorney general, or
the health care corporation.
(2) Not more than 30 days after receipt of a request for a
hearing, and upon not less than 15 days' notice to all parties, the
hearing shall be commenced. Each party to the hearing shall be
given a reasonable opportunity for discovery before and throughout
the course of the hearing. However, the hearing officer may
terminate discovery at any time, for good cause shown. The hearing
officer shall conduct the hearing pursuant to the administrative
procedures act. The hearing shall be conducted in an expeditious
manner. At the hearing, the burden of proving compliance with this
act shall be upon the health care corporation.
(3) In rendering a proposal for a decision, the hearing
officer shall consider the factors prescribed in section 609.
(4) Within 30 days after receipt of the hearing officer's
proposal for decision, the commissioner shall by order render a
decision which shall include a statement of findings.
(5) The commissioner shall withdraw an order of approval or
approval with modifications if the commissioner finds that the
filing no longer meets the requirements of this act.
Sec. 613a. (1) By not later than 30 days after rates are
considered approved and effective under section 610(4), the
commissioner, the attorney general, or a person who has standing
may request a hearing if there is reasonable cause to believe that
the proposed rates do not satisfy the standards in section 608(1).
(2) Upon receipt of a request for a hearing, the commissioner
shall immediately appoint an independent hearing officer before
whom the hearing shall be held. In appointing an independent
hearing officer, the commissioner shall select a person qualified
to conduct hearings, who has experience or education in the area of
health care corporation or insurance rate determination and
finance, and who is not otherwise associated financially with a
health care corporation or a health care provider. The person
selected shall not be currently or actively employed by this state.
For purposes of this subsection, an employee of an educational
institution shall not be considered to be employed by the state.
(3) Not more than 30 days after receipt of a request for a
hearing, and upon not less than 15 days' notice to all parties, the
hearing shall be commenced. Each party to the hearing shall be
given a reasonable opportunity for discovery before and throughout
the course of the hearing. However, the hearing officer may
terminate discovery at any time, for good cause shown. The hearing
officer shall conduct the hearing pursuant to the administrative
procedures act. The hearing shall be conducted in an expeditious
manner. At the hearing, the burden of proving compliance with
section 608(1) shall be upon the health care corporation.
(4) Within 30 days after the conclusion of the hearing, the
hearing officer shall issue a proposal for decision. In rendering a
proposal for decision, the hearing officer shall consider the
factors in section 608(1).
(5) Within 30 days after receipt of the hearing officer's
proposal for decision, the commissioner shall by order determine
whether the rates satisfy the standards in section 608(1). The
decision shall include a statement of findings.
(6) The commissioner shall issue an order of disapproval or
approval with modifications if the commissioner finds that the
filing no longer meets the requirements of section 608(1).
(7) The commissioner's order under subsections (5) and (6)
shall be issued no later than 180 days after the proposed rates are
filed under section 608(1). If the commissioner does not issue an
order within 180 days of filing, the rates considered approved and
effective under section 610(4) shall remain in effect and the rates
shall not be subject to further challenge by the commissioner, the
attorney general, or a person with standing. The 180-day period,
however, shall be tolled for any period of time the health care
corporation takes to submit additional information under section
610(3) that is beyond the time the health care corporation is
permitted to take.
(8) If the commissioner's order under subsection (6) results
in approval of a lower rate, appropriate refunds or adjustments, as
determined by the commissioner, shall be made to reflect payments
in excess of the approved rate. The refunds or adjustments shall
include interest from the date the rates were considered approved
and effective under section 610(4) to the date of the refund or
adjustment calculated at the average rate of interest for 13-week
United States treasury notes as determined by the commissioner.
Enacting section 1. Section 614 of the nonprofit health care
corporation reform act, 1980 PA 350, MCL 550.1614, is repealed.
Enacting section 2. This amendatory act takes effect October
1, 2009.
Enacting section 3. This amendatory act does not take effect
unless Senate Bill No.____ or House Bill No. 4934(request no.
00801'09) of the 95th Legislature is enacted into law.