HB-5283, As Passed Senate, May 1, 2008

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 5283

A bill to amend 1980 PA 350, entitled

"The nonprofit health care corporation reform act,"

by amending sections 301, 308, 401e, 402b, 610, 612, 613, and 614

(MCL 550.1301, 550.1308, 550.1401e, 550.1402b, 550.1610, 550.1612,

550.1613, and 550.1614), section 301 as amended by 1988 PA 45,

section 401e as added by 1996 PA 516, and section 402b as amended

by 1999 PA 7, and by adding sections 102a, 220, and 401k.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 102a. By April 1 of each year, a health care corporation

shall file with the commissioner in a format approved by the

commissioner and with the senate and house of representatives

standing committees on health and insurance issues a report that

details in the aggregate and by county how the health care

corporation met its charitable and social mission obligations for

the immediately preceding calendar year, including, but not limited

to, all of the following:

(a) What, if any, subsidies were issued to assist with the

cost of individual health coverage to state residents.

(b) What, if any, efforts were made to expand or enhance

access to health care by augmenting or creating health care

programs and augmenting public health care programs that deliver

health services.

otherwise supported to inform and educate residents of this state

about public health issues and that empower communities to address

public health issues by becoming more effective at identifying and

articulating health care needs and implementing solutions.

(d) What, if any, measures were taken to maintain and promote

health science research and health care provider education.

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. 301. (1) The property and lawful business of a health

care corporation existing and authorized to do business under this

act shall be held and managed by a board of directors to consist of

not more than 35 37 members. The board shall exercise the powers

and authority necessary to carry out the lawful purposes of the

corporation, as limited by this act and the articles of

incorporation and the bylaws of the corporation.

(2) Four voting members of the board shall be representatives

of the public appointed by the governor by and with the advice and

consent of the senate. Two of those members shall be retired

individuals 62 years of age or older. Effective January 1, 2009, 2

additional voting members of the board shall be representatives of

the public, 1 of whom shall be appointed by the senate majority

leader and 1 of whom shall be appointed by the speaker of the house

of representatives. The term of office of each representative of

the public shall be 2 years, and until a successor is appointed and

qualified. If a vacancy occurs before the conclusion of a 2-year

term, the appointment of a representative to complete the term

shall be made in the same manner as the original appointment.

(3) The board of directors shall consist of not more than 25%

provider directors. In addition to physician and hospital provider

directors, not less than 1 provider director shall be a registered

professional nurse who shall be representative of licensees under

part 172 of the public health code, ~~Act No. 368 of the Public Acts~~

~~of 1978, as amended, being sections 333.17201 to 333.17242 of the~~

~~Michigan~~ ~~Compiled Laws~~ 1978 PA 368, MCL 333.17201 to 333.17242, and

not less than 1 provider director shall be representative of the

provider whose services, in the 1984 calendar year in the case of

an existing health care corporation, or, in the calendar year

immediately following incorporation in the case of a newly-formed

health care corporation, generated the largest number of benefit

claims received by the corporation from its subscribers. Other

provider directors shall be as broadly representative of provider

classes as possible.

(4) The bylaws of a health care corporation may authorize not

more than 1 officer or employee of the corporation to serve as a

voting or nonvoting director.

(5) The remaining members of the board of directors shall

include representatives of large subscriber groups, medium

subscriber groups, small subscriber groups, and nongroup

subscribers, in proportions ~~which~~ that fairly represent the total

subscriber population of the health care corporation. However, at

least 3 directors shall represent nongroup subscribers, at least 1

of whom shall be a retired individual 62 years of age or older, and

at least 3 directors shall represent small subscriber groups. Large

and medium subscriber groups shall be represented, to the greatest

extent possible, by an equal number of labor and management

representatives and shall be categorized as labor subscriber

representatives or management subscriber representatives.

(6) The method of selection of the directors, other than the

directors who are representatives of the public, and additional

provisions and requirements for further refinement or specification

regarding the number of directors comprising each component shall

be specified in the bylaws. The terms of office of directors, other

than the directors who are representatives of the public, and the

method for filling vacancies in those offices shall be provided in

the bylaws. However, if a term of office of more than 1 year is

prescribed by the bylaws, at least 1/3 of the members of the board

shall be selected each year.

(7) The method of selection of each category of subscribers

entitled to representation on the board under subsection (5) shall

maximize subscriber participation to the extent reasonably

practicable. This subsection ~~shall permit~~ permits, but does not

require, the statewide election of a director or member of the

corporate body. The method of selection shall neither permit nor

require nomination, endorsement, approval, or confirmation of a

candidate or director by the corporate body, the board of

directors, or the management of the health care corporation, or any

member or members of any of these. This subsection shall not apply

to the selection of an officer or employee as a director pursuant

to subsection (4). This subsection shall not limit the rights of

any director, member of the corporate body, or employee or officer

of the health care corporation to participate in the selection

process in his or her capacity as a subscriber, to the same extent

as any other subscriber may participate.

(8) For the purposes of this section:

(a) "Health care provider" or "provider" includes:

(i) A person defined as a health care provider or provider in

section 105(4); a person employed by a health care facility, as

defined in section 105(3); or a director, officer, or trustee of a

health care provider, as defined in section 105(4), unless the

person serves in that capacity as a representative selected by the

same subscriber group or collective bargaining representative which

the person represents on the board of a health care corporation.

(ii) Except as provided in subdivision (b), a spouse, child, or

parent of a health care provider who resides in the same household.

(iii) A person who receives more than 25% of his or her annual

income through the provision of goods or services to health care

providers, or who is an employee, officer, trustee, or director of

a firm or organization ~~which~~ that receives more than 25% of its

annual income through the provision of goods or services to health

care providers.

(b) For purposes of determining whether a director is a

provider director, "health care provider" or "provider" does not

include a spouse, child, or parent of a health care provider who

resides in the same household if all of the following criteria are

met:

(i) Not more than 1/3 of the total annual household income is

earned by that health care provider.

(ii) The term of office of the director commences in the 1988

calendar year.

(iii) Not more than 2 directors qualify for the exemption under

this subdivision.

(9) A director shall not be an employee, agent, officer, or

director of an insurance company writing disability insurance

inside or outside this state.

Sec. 308. (1) To the extent provided by resolution of the

board or in the bylaws or articles, a committee established

pursuant to section 307 may exercise the powers and authority of

the board in management of the business and affairs of the health

care corporation. The board shall review and may modify subject to

the rights of third parties any action or decision of a committee.

A committee shall not do any of the following:

(a) Amend the articles of incorporation.

(b) Adopt an agreement of merger or consolidation.

substantially all of the corporation's property and assets.

(d) Approve, adopt, or amend provider contracts, provider

class plans, or rates charged to subscribers. ~~, or a certificate.~~

(e) Amend the bylaws of the corporation.

(f) Fill vacancies on the board.

(g) Fix compensation of the directors or officers.

(h) Perform other similar acts of a final or binding nature

with respect to the business of the corporation.

(2) This section ~~shall~~ does not prohibit emergency actions by

the executive committee on behalf of the board, as authorized in

the bylaws of the health care corporation.

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. 401k. The rates charged to nongroup, group conversion,

and medicare supplemental coverage may include rate differentials

based on tobacco use and the subscriber's participation in covered

health screenings and covered wellness programs.

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. 610. (1) Except as provided under section 608(4) or (5),

a filing of information and materials relative to a proposed rate

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 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.

(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.

(d) Projected trend factors.

(e) Projected administrative expenses.

(f) Contributions for risk and contingency reserve factors.

(g) Actual health care corporation contingency reserve

position.

(h) Projected health care corporation contingency reserve

position.

(i) Other information which 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 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~~ section

608(1) and ~~608(2)~~ (2). The forms with instructions shall be

available not less than ~~180~~ 90 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 notice shall also state that

if the person has standing, the person shall have, upon making a

written request for a hearing within 60 30 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. 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 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 upon

which no hearing has been requested. Within 15 8 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).

the health care corporation.

(2) Not more than 30 15 days after receipt of a request for a

hearing, and upon not less than 15 8 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, and except for good cause shown, the hearing officer shall

render a proposal for decision not later than 30 days after the

start of the hearing. 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 8 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. 614. (1) ~~Not less than 75 days after a filing is~~

~~received, as provided in section 610~~ If a hearing is requested on a

nongroup rate filing, the health care corporation may immediately

petition the commissioner, who shall make a determination with

respect to interim rates and shall order interim rates in the

amount prescribed in subsection (2). Interim rates shall not be

implemented if the commissioner finds that the health care

corporation has substantially contributed to the delay or that the

health care corporation has not provided information requested by

the commissioner relative to a determination under this section.

The interim rate determination shall not be a contested case under

chapter 4 of the administrative procedures act.

(2) The commissioner shall grant an interim rate, in an amount

as determined by the commissioner, if the commissioner makes a

finding that the corporation has made a convincing showing that

there is probable cause to believe that the failure to grant the

interim rate will result in an underwriting loss for that line of

business for the period for which rates are being requested. As

used in this subsection, "underwriting loss" means the difference

between income from current rates plus investment income, and

projected claims plus projected administrative expenses.

(3) If the final rate determination results in approval of a

lower rate, appropriate refunds or adjustments, as determined by

the commissioner, shall be made to reflect payments made in excess

of the approved rate.

(4) The order establishing an interim rate adjustment made

pursuant to this section shall be limited to adjusting rates for

certificates then in effect, and shall not be used to alter

certificates or implement new certificates.

(5) This section shall apply only to rates subject to section

608(1) for which a hearing has been requested.

Enacting section 1. This amendatory act takes effect October

1, 2008.

Enacting section 2. This amendatory act does not take effect

unless House Bill No. 5282 of the 94th Legislature is enacted into

law.