SB-0061, As Passed Senate, March 5, 2013

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 61

A bill to amend 1980 PA 350, entitled

"The nonprofit health care corporation reform act,"

by amending the title and sections 218, 401e, and 414b (MCL

550.1218, 550.1401e, and 550.1414b), the title as amended by 1994

PA 169, section 218 as added by 2002 PA 559, section 401e as added

by 1996 PA 516, and section 414b as added by 2006 PA 413, and by

adding sections 201a, 220, 400, 401m, 410b, 501c, and 620 and part

6A.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

TITLE

An act to provide for the incorporation of nonprofit health

care corporations; to provide their rights, powers, and immunities;

to prescribe the powers and duties of certain state officers

relative to the exercise of those rights, powers, and immunities;

to prescribe certain conditions for the transaction of business by

those corporations in this state; to define the relationship of

health care providers to nonprofit health care corporations and to

specify their rights, powers, and immunities with respect thereto;

to provide for a Michigan caring program; to provide for the

regulation and supervision of nonprofit health care corporations by

the commissioner of insurance; to prescribe powers and duties of

certain other state officers with respect to the regulation and

supervision of nonprofit health care corporations; to provide for

the imposition of a regulatory fee; to regulate the merger or

consolidation of certain corporations; to prescribe an expeditious

and effective procedure for the maintenance and conduct of certain

administrative appeals relative to provider class plans; to provide

for certain administrative hearings relative to rates for health

care benefits; to provide for the creation of and the powers and

duties of certain nonprofit corporations for the purpose of

receiving and administering funds for the public welfare; to

provide for certain causes of action; to prescribe penalties and to

provide civil fines for violations of this act; and to repeal

~~certain~~ acts and parts of acts.

Sec. 201a. Notwithstanding section 201, a health care

corporation shall not be formed in this state on or after January

1, 2014.

Sec. 218. A health care corporation shall not do any of the

following:

(a) Take any action to change its nonprofit status.

(b) ~~Dissolve,~~ Except as otherwise provided in section 220,

dissolve, merge, consolidate, mutualize, or take any other action

that results in a change in direct or indirect control of the

health care corporation or sell, transfer, lease, exchange, option,

or convey assets that results in a change in direct or indirect

control of the health care corporation.

Sec. 220. (1) Notwithstanding any provision of this act to the

contrary, a health care corporation may establish, own, operate,

and merge with a nonprofit mutual disability insurer formed under

chapter 58 of the insurance code of 1956, 1956 PA 218, MCL 500.5800

to 500.5840. The surviving entity of a merger described in this

subsection is the nonprofit mutual disability insurer. A merger

described in this subsection is exempt from the application of

sections 1311 to 1319 of the insurance code of 1956, 1956 PA 218,

MCL 500.1311 to 500.1319.

(2) The merger of a health care corporation with a nonprofit

mutual disability insurer is effective upon completion of both of

the following:

(a) The adoption of a plan of merger by the majority of the

boards of directors of both the health care corporation and the

nonprofit mutual disability insurer. The health care corporation

shall include in the plan of merger that beginning in April of the

first full calendar year after the adoption of the plan of merger

the surviving entity of a merger described in subsection (1) shall

use its best efforts to make annual social mission contributions in

an aggregate amount of up to $1,560,000,000.00 over a period of up

to 18 years beginning in April of the first full calendar year

after the adoption of the plan of merger to a nonprofit corporation

created under part 6A. If adopted, the boards of directors shall

submit the plan of merger to the commissioner for his or her

consideration as provided in subdivision (b). A nonprofit mutual

disability insurer is considered to be making its best effort under

this subdivision if it makes the annual social mission contribution

to a nonprofit corporation created in part 6A when the nonprofit

mutual disability insurer's surplus is at least 375% of the

authorized control level under risk-based capital requirements.

(b) The approval of the plan of merger by the commissioner.

The commissioner shall make a determination to approve or

disapprove a plan of merger within 90 days of receipt of the plan,

and the commissioner shall not unreasonably withhold approval of a

plan of merger submitted under subdivision (a).

(3) Notwithstanding any other provision of this act to the

contrary, the directors of a health care corporation may serve as

incorporators of the corporate body of, directors of, or officers

of the nonprofit mutual disability insurer formed through a merger

described in subsection (1).

(4) A merger described in subsection (1) is the dissolution of

the health care corporation, and the surviving nonprofit mutual

disability insurer assumes the performance of all contracts and

policies of the merged health care corporation that exist on the

date of the merger, including the participating hospital agreement,

and its definition of certificate which excludes as covered

services benefits provided pursuant to automobile no-fault or

worker's compensation coverage, and all related contract

obligations that result from orders relating to hospital provider

Senate Bill No. 61 (H-3) as amended February 28, 2013

class plans that are issued by the commissioner after July 1, 2012.

However, the officers of a health care corporation may perform any

act or acts necessary to close the affairs of the merged health

care corporation after the date of the merger.

[(5) Notwithstanding anything in this act to the contrary, if the merger of a health care corporation and a nonprofit mutual disability insurer becomes effective as described in subsection (2), the property of the health care corporation is subject to the collection of general ad valorem taxes and applicable specific taxes under the general property tax act, 1893 PA 206, MCL 211.1 to 211.155, beginning December 31, 2013. As provided in section 201, the property of a health care corporation is exempt from taxation before December 31, 2013. This act does not confer an exemption from taxation on a nonprofit mutual disability insurer that merges with a health care corporation.]

Sec. 400. (1) Notwithstanding any provision of this act to the

contrary, this section applies to the use of a most favored nation

clause in a provider contract on and after February 1, 2013.

(2) Subject to subsection (3), beginning February 1, 2013, a

health care corporation shall not use a most favored nation clause

in any provider contract, including a provider contract in effect

on February 1, 2013, unless the most favored nation clause has been

filed with and approved by the commissioner. Subject to subsection

(3), beginning February 1, 2013, a health care corporation shall

not enforce a most favored nation clause in any provider contract

without the prior approval of the commissioner.

(3) Beginning January 1, 2014, a health care corporation shall

not use a most favored nation clause in any provider contract,

including a provider contract in effect on January 1, 2014.

(4) As used in this section, "most favored nation clause"

means a clause that does any of the following:

(a) Prohibits, or grants a contracting health care corporation

an option to prohibit, a provider from contracting with another

party to provide health care services at a lower rate than the

payment or reimbursement rate specified in the contract with the

health care corporation.

(b) Requires, or grants a contracting health care corporation

an option to require, a provider to accept a lower payment or

reimbursement rate if the provider agrees to provide health care

services to any other party at a lower rate than the payment or

reimbursement rate specified in the contract with the health care

corporation.

an option to require, termination or renegotiation of an existing

provider contract if a provider agrees to provide health care

services to any other party at a lower rate than the payment or

reimbursement rate specified in the contract with the health care

corporation.

(d) Requires a provider to disclose, to the health care

corporation or its designee, the provider's contractual payment or

reimbursement rates with other parties.

Sec. 401e. (1) Except as otherwise 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.

(2) Except as otherwise 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.

(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.

(4) A health care corporation shall not discontinue offering a

particular plan or product in the nongroup or group market unless

the health care corporation does all of the following:

(a) Provides notice to the commissioner and to each covered

individual or group, as applicable, provided coverage under the

plan or product of the discontinuation at least 90 days before the

date of the discontinuation.

(b) Offers to each covered individual or group, as applicable,

provided coverage under the plan or product the option to purchase

any other plan or product currently being offered in the nongroup

market or group market, as applicable, by that health care

corporation without excluding or limiting coverage for a

preexisting condition or providing a waiting period.

of enrolled individuals or individuals who may become eligible for

coverage in making the determination to discontinue coverage and in

offering other plans or products.

(5) A health care corporation shall not discontinue offering

all coverage in the nongroup or group market unless the health care

corporation does all of the following:

(a) Provides notice to the commissioner and to each covered

individual or group, as applicable, of the discontinuation at least

180 days before the date of the expiration of coverage.

(b) Discontinues all health benefit plans issued in the

nongroup or group market from which the health care corporation

withdrew and, except as allowed under subsection (6), does not

renew coverage under those plans.

(6) If a health care corporation discontinues coverage under

subsection (5), the health care corporation shall not provide for

the issuance of any health benefit plans in the nongroup or group

market from which the health care corporation withdrew during the

5-year period beginning on the date of the discontinuation of the

last plan not renewed under that subsection.

Sec. 401m. Until January 1, 2014, a health care corporation

established, maintained, or operating in this state shall offer

health care benefits to all residents of this state regardless of

health status.

Sec. 410b. Notwithstanding section 410a(8), for a certificate

delivered, issued for delivery, or renewed in this state on or

after January 1, 2014, the premium for a group conversion

certificate under section 410a shall be determined only by using

the rating factors set forth in section 3474a of the insurance code

of 1956, 1956 PA 218, MCL 500.3474a.

Sec. 414b. (1) A health care corporation may offer group

wellness coverage. Wellness coverage may provide for an appropriate

rebate or reduction in premiums or for reduced copayments,

coinsurance, or deductibles, or a combination of these incentives,

for participation in any health behavior wellness, maintenance, or

improvement program offered by the employer. The employer shall

provide evidence of demonstrative maintenance or improvement of the

members' health behaviors as determined by assessments of agreed-

upon health status indicators between the employer and the health

care corporation. Any rebate or premium provided by the health care

corporation is presumed to be appropriate unless credible data

demonstrate otherwise, but shall not exceed ~~10%~~ 30% of paid

premiums, unless otherwise approved by the commissioner. A health

care corporation shall make available to employers all wellness

coverage plans that it markets to employers in this state.

(2) A health care corporation may offer nongroup wellness

coverage. Wellness coverage may provide for an appropriate rebate

or reduction in premiums or for reduced copayments, coinsurance, or

deductibles, or a combination of these incentives, for

participation in any health behavior wellness, maintenance, or

improvement program approved by the health care corporation. The

member shall provide evidence of demonstrative maintenance or

improvement of the individual's or family's health behaviors as

determined by assessments of agreed-upon health status indicators

between the member and the health care corporation. Any rebate of

premium provided by the health care corporation is presumed to be

appropriate unless credible data demonstrate otherwise, but shall

not exceed ~~10%~~ 30% of paid premiums, unless otherwise approved by

the commissioner. A health care corporation shall make available to

individuals all wellness coverage plans that it markets to

individuals in this state.

(3) A health care corporation is not required to continue any

health behavior wellness, maintenance, or improvement program or to

continue any incentive associated with a health behavior wellness,

maintenance, or improvement program.

Sec. 501c. Beginning January 1, 2014, a health care

corporation shall establish and maintain a provider network that,

at a minimum, satisfies any network adequacy requirements imposed

by the commissioner pursuant to federal law.

Sec. 620. (1) Notwithstanding any provision of this act to the

contrary, a certificate delivered, issued for delivery, or renewed

in this state on or after January 1, 2014 by a health care

corporation is subject to the policy and certificate issuance and

rate filing requirements of the insurance code of 1956, 1956 PA

218, MCL 500.100 to 500.8302, including the rating factor

requirements of section 3474a of the insurance code of 1956, 1956

PA 218, MCL 500.3474a.

(2) For a certificate delivered, issued for delivery, or

renewed in this state on or after January 1, 2014, subject to the

prior approval of the commissioner, a health care corporation may

establish reasonable open enrollment periods.

(3) The commissioner shall establish minimum standards for the

frequency and duration of open enrollment periods established under

subsection (2). The commissioner shall uniformly apply the minimum

standards for the frequency and duration of open enrollment periods

established under this subsection to all health care corporations.

(4) A health care corporation offering coverage during an open

enrollment period established under subsection (2) shall not deny

or condition the issuance or effectiveness of a certificate and

shall not discriminate in the pricing of the certificate on the

basis of health status, claims experience, receipt of health care,

or medical condition.

PART 6A

HEALTH ENDOWMENT FUND CORPORATIONS

Sec. 651. As used in this part:

(a) "Board" means the board of a health endowment fund

corporation incorporated under this part.

(b) "Executive director" means the executive director of a

fund appointed by the board.

as a nonprofit corporation under section 653.

Sec. 652. (1) A health endowment fund corporation shall not be

incorporated in this state except under this part.

(2) A board shall adopt a conflict of interest policy. A board

member with a direct or indirect interest in any matter before the

fund shall disclose the member's interest to the board before the

board takes any action on the matter. The board shall record the

member's disclosure in the minutes of the board meeting. If a board

member or a member of his or her immediate family, organizationally

or individually, would derive a direct and specific benefit from a

decision of the board, that member shall recuse himself or herself

from the discussion and the vote on the issue.

(3) Subject to this subsection, the governor shall appoint the

members of a board with the advice and consent of the senate. An

individual who is an employee, officer, or board member of a health

care corporation; a lobbyist affiliated with a health care

corporation; or an employee of a health insurer, health care

provider, or third party administrator is not eligible to be

appointed and shall not be appointed to a board under this

subsection. On or before the expiration of 60 days after the

incorporation of a fund under section 653, the governor shall

appoint the following initial members of the board with the advice

and consent of the senate:

(a) One member from a list of 3 or more individuals

recommended by the senate majority leader.

(b) One member from a list of 3 or more individuals

recommended by the speaker of the house of representatives.

(d) One member representing the interests of senior citizens.

(e) Two members of the general public.

(f) One member representing the business community.

(g) One member from a list of 3 or more individuals

recommended by the house minority leader.

(h) One member from a list of 3 or more individuals

recommended by the senate minority leader.

(4) A vacancy on a board shall be filled in the same manner as

the initial appointment under subsection (3). Except as otherwise

provided in this subsection, a board member shall be appointed for

a term of 4 years or until a successor is appointed, whichever is

later. For the initial members appointed under subsection (3), 3

members shall be appointed for 2-year terms, 3 members shall be

appointed for 3-year terms, and 3 members shall be appointed for 4-

year terms.

(5) Six members of a board constitute a quorum for the

transaction of business at a meeting of the board. An affirmative

vote of 5 board members is necessary for official action of a

board.

(6) The business that a board may perform shall be conducted

at a meeting of the board that is held in this state, is open to

the public, and is held in a place that is available to the general

public. However, a board may establish reasonable rules and

regulations to minimize disruption of a meeting of the board. At

least 10 days and not more than 60 days before a meeting, a board

shall provide public notice of its meeting at its principal office

and on its internet website. A board shall include in the public

notice of its meeting the address where board minutes required

under subsection (7) may be inspected by the public. A board may

meet in a closed session for any of the following purposes:

(a) To consider the hiring, dismissal, suspension, or

disciplining of board members or employees or agents of the fund.

(b) To consult with its attorney.

regarding privacy or confidentiality.

(7) A board shall keep minutes of each meeting. Board minutes

shall be open to public inspection, and the board shall make the

minutes available at the address designated on the public notice of

its meeting under subsection (6). A board shall make copies of the

minutes available to the public at the reasonable estimated cost

for printing and copying. A board shall include all of the

following in its board minutes:

(a) The date, time, and place of the meeting.

(b) Board members who are present and absent.

(d) All roll call votes taken at the meeting.

(8) Board members shall serve without compensation. However,

board members may be reimbursed for their actual and necessary

expenses incurred in the performance of their official duties as

board members.

Sec. 653. (1) A charitable purpose nonprofit corporation may

be incorporated on a nonstock, directorship basis, under the

nonprofit corporation act, 1982 PA 162, MCL 450.2101 to 450.3192

consistent with this part and, if incorporated under this section,

shall be organized to receive and administer funds for the public

welfare. The articles of incorporation must include the word

"Michigan" and the phrase "health endowment fund" in the name of

the fund. As soon as practicable after the incorporation of a fund

under this subsection, the fund shall apply for and make its best

effort to obtain tax-exempt status under section 501(c)(3) of the

internal revenue code, 26 USC 501.

(2) The articles of incorporation of a fund must provide that

the fund is organized for the following purposes:

(a) Supporting efforts that improve the quality of health care

while reducing costs to residents of this state.

(b) Benefitting the health and wellness of minor children and

seniors throughout this state with a significant focus in the

following areas:

(i) Access to prenatal care and reduction of infant mortality

rates.

(ii) Health services for foster and adopted children.

(iii) Access to healthy food.

(iv) Wellness programs and fitness programs.

(v) Access to mental health services.

(vi) Technology enhancements.

(vii) Health-related transportation needs.

Senate Bill No. 61 (H-3) as amended February 27, 2013

(viii) Foodborne illness prevention.

duration for projects that will promote the purposes of the fund.

(d) Subsidizing the cost of individual medigap coverage to

[medicare-eligible individuals] in this state who demonstrate a

financial need in

order to be able to purchase individual medigap coverage.

(3) The board shall establish a comprehensive and competitive

process to award grants.

(4) The nonprofit corporation act, 1982 PA 162, MCL 450.2101

to 450.3192, applies to a fund. If a provision relating to a fund

under this part conflicts with other state law, this part controls.

(5) If a fund is eligible to receive social mission

contributions under section 220(2), the eligible fund shall

implement a program to disburse money to subsidize the cost of

individual medigap coverage to [medicare-eligible individuals] in this

state who

demonstrate a financial need in order to be able to purchase

individual medigap coverage. The commissioner shall develop a means

test to be used to determine if a [medicare-eligible individual]

applicant is

eligible for the medigap coverage subsidy provided for in this

subsection and shall submit the test developed to the attorney

general for approval.

(6) If a fund is eligible to receive social mission

contributions under section 220(2), beginning on the first day of

the third August after the fund receives its initial social mission

contribution, and ending on the thirty-first day of the eighth

December after the fund receives its initial social mission

contribution, the fund shall disburse $120,000,000.00 to subsidize

the cost of individual medigap coverage purchased by medicare-

eligible individuals in this state, subject to subsection (5).

(7) A fund is a private, nonprofit corporation organized for

charitable purposes and is not a state agency, governmental agency,

or other political subdivision of this state. Money of a fund is

held by the fund for the purposes consistent with this part and is

not money of this state or a political subdivision of this state

and shall not be deposited in the state treasury. A member of a

board is not a public officer of this state.

Sec. 654. (1) A board shall appoint an executive director to

serve as the chief executive officer of the fund. The executive

director shall serve at the pleasure of the board. The executive

director may employ staff and hire consultants as necessary with

the approval of the board. The board shall determine compensation

for the executive director and staff employed under this subsection

and shall approve contracts under this subsection.

(2) The executive director shall display on the fund internet

website information relevant to the public, as defined by the

board, concerning the fund's operations and efficiencies, as well

as the board's assessments of those activities.

Sec. 655. (1) Subject to this section, a fund may disburse

money contributed to the fund each year, not including any

interest, earnings, or unrealized gains or losses on those

contributions, for the purposes of the fund as described in section

653. A fund may expend a portion of the money contributed to the

fund in each year following the initial contribution to the fund

according to the following schedule:

(a) Years 1 through 4, 80%.

(b) Years 5 through 8, 67%.

(d) Years 13 through 18, 25%.

(2) On and after the date that the accumulated principal of

money held by a fund reaches $750,000,000.00, the fund shall

maintain that amount for investment to provide an ongoing income to

the fund. On and after the date that the accumulated principal in

the fund reaches $750,000,000.00, the board shall not allow the

accumulated principal of the fund to fall below $750,000,000.00 due

to expenditures made for the purposes of the fund as described in

section 653.

(3) A fund may expend money received by the fund from any

source in a fiscal year of the fund that is in excess of the amount

required to maintain the accumulated principal goals as described

in subsection (2), not including any interest, earnings, or

unrealized gains or losses on those funds, on the reasonable

administrative costs of the fund and for the purposes of the fund

as described in this part. The investment of fund money and

donations by the fund are under the exclusive control and

discretion of the fund and are not subject to requirements

applicable to public funds.

(4) A fund may invest accumulated principal in the fund only

in securities permitted by the laws of this state for the

investment of assets of life insurance companies, as described in

chapter 9 of the insurance code of 1956, 1956 PA 218, MCL 500.901

to 500.947.

(5) A fund's articles of incorporation or bylaws must provide

for a system of financial accounting, controls, audits, and

reports. The board annually shall have an audit of the fund

conducted by an independent public accountant firm, and the

auditor's audit report and findings shall be submitted to the

board. The expense of an audit required under this subsection is

considered a reasonable administrative cost under subsection (3).

(6) A fund's articles of incorporation or bylaws must require

that the board shall appoint from its members an audit committee

consisting of no fewer than 3 members and for the audit committee

to contract with an independent auditing firm to provide an annual

financial audit in accordance with applicable auditing standards.

(7) The executive director shall do all of the following:

(a) Review and certify external auditor reports.

(b) Make external auditor reports available to the board and

to the general public.

weaknesses identified in an audit report.

(8) The articles of incorporation or bylaws of a fund must

require the fund to keep an accurate accounting of all activities,

receipts, and expenditures and annually submit to the board, the

governor, the senate and house of representatives appropriations

committees, and the senate and house of representatives standing

committees on health policy a report regarding those accountings.

(9) A fund and its directors, officers, and employees shall

fully cooperate with any investigation conducted by this state or a

federal agency under its authority under state or federal law, to

do any of the following:

(a) Investigate the affairs of the fund.

(b) Examine the assets and records of the fund.

undertaken by the fund in compliance with applicable law.

Enacting section 1. This amendatory act does not take effect

unless Senate Bill No. 62 of the 97th Legislature is enacted into

law.