November 9, 2016, Introduced by Senator HANSEN and referred to the Committee on Insurance.
A bill to amend 2007 PA 106, entitled
"Public employees health benefit act,"
by amending section 9 (MCL 124.79).
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
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 October 1,
2007 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. As an
alternative, a pooled plan that has operated for 5 years or more
may elect to maintain minimum cash reserves in an amount equal to
2.5% of the immediately preceding year's claims plus its most
recent designated reserve for incurred but not reported claims, as
indicated in its financial statement filed with the commissioner
under subdivision (b). 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
Except as otherwise provided in this subdivision, 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. A pooled plan that elects the
alternative minimum cash reserve may not satisfy any portion of the
reserve requirement with a 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.
(c) Within 60 days after the end of each fiscal quarter, file
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 are governed by the requirements and procedures of
sections 7074 to 7078 of the insurance code of 1956, 1956 PA 218,
MCL
500.7074 and to 500.7078.
Enacting section 1. This amendatory act takes effect 90 days
after the date it is enacted into law.