HOUSE BILL NO. 536

INTRODUCED BY B. KASTEN, R. PECK, S. ANDERSON, S. BARTLETT, T. BECK, C. CHRISTIAENS, G. DEVLIN, D. ECK, D. EWER, E. FRANKLIN, D. GRIMES, L. GROSFIELD, M. GUGGENHEIM, J. HARP, H. HARPER, D. HARRINGTON, C. HIBBARD, T. KEATING, B. KEENAN, S. KITZENBERG, D. MAHLUM, B. MCCARTHY, D. MCGEE, J. QUILICI, P. SLITER, L. SOFT, S. STANG, E. SWANSON, J. TESTER, F. THOMAS, M. WATERMAN, B. WILSON, P. EKEGREN

A BILL FOR AN ACT ENTITLED: "AN ACT ESTABLISHING A FIXED ANNUAL ASSESSMENT AMOUNT FOR THE MONTANA COMPREHENSIVE HEALTH ASSOCIATION; AUTHORIZING THE ASSOCIATION TO ABATE ASSESSMENTS; ALLOWING THE ASSOCIATION TO BORROW FROM THE BOARD OF INVESTMENTS; REQUIRING HEALTH MAINTENANCE ORGANIZATIONS TO BE MEMBERS OF THE ASSOCIATION; PROVIDING FOR A SEMIANNUAL REPORT TO THE LEGISLATIVE FINANCE COMMITTEE; AMENDING SECTIONS 33-22-1503, 33-22-1504, 33-22-1513, AND 33-22-1514, MCA; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE AND A RETROACTIVE APPLICABILITY DATE."

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:

NEW SECTION. Section 1. Association authority for borrowing. (1) If the amount of the annual assessment collected under 33-22-1513(5) and other available funds is insufficient to meet incurred or estimated claims expenses of the association plan and the association portability plan and the operating and administrative expenses of the association, the association may borrow from the board of investments for a period not to exceed 2 years any funds necessary for the continued operation of the association plan and the association portability plan.

(2) Whenever the association accepts a loan from the board of investments pursuant to this section, it shall repay the loan and any interest required under the terms of the loan through assessments and premium income.

Section 2. Section 33-22-1503, MCA, is amended to read:

"33-22-1503. Comprehensive health association -- mandatory membership. (1) There is established a nonprofit legal entity, to be known as the Montana comprehensive health association, with participating membership consisting of all insurers, insurance arrangements, societies, health maintenance organizations, and health service corporations licensed or authorized to do business in this state. The association is exempt from taxation under the laws of this state, and all property owned by the association is exempt from taxation.

(2) All participating members shall maintain their membership in the association as a condition for writing health care benefits policies or contracts in this state. The association shall submit its articles, bylaws, and operating rules to the commissioner for approval.

(3) The association may:

(a) exercise the powers granted to insurers under the laws of this state;

(b) sue or be sued;

(c) enter into contracts with insurers, administrators, similar associations in other states, or other persons for the performance of administrative functions;

(d) establish administrative and accounting procedures for the operation of the association;

(e) provide for the reinsuring of risks incurred as a result of issuing the coverages required by members of the association;

(f) provide for the administration by the association of policies that are reinsured pursuant to subsection (3)(e); and

(g) issue additional types of health insurance policies to provide optional coverage, including medicare supplemental health insurance."

Section 3. Section 33-22-1504, MCA, is amended to read:

"33-22-1504. Association board of directors -- organization. (1) There is a board of directors of the association, consisting of eight individuals:

(a) one from each of the five participating members of the association with the highest annual premium volume of disability insurance contracts, health maintenance organization health care services agreements, or health service corporation contracts, derived from or on behalf of residents in the previous calendar year, as determined by the commissioner;

(b) two members at large who must be participating members of the association, appointed by the commissioner; and

(c) a member at large, appointed by the commissioner to represent the public interest, who shall serve in an advisory capacity only.

(2) Each of the seven board members representing the association members is entitled to a weighted average vote, in person or by proxy, based on the association member's annual Montana premium volume. However, a board member may not have more than 50% of the vote.

(3) Members of the board may be reimbursed from the money of the association for expenses incurred by them because of their service as board members but may not otherwise be compensated by the association for their services. The costs of conducting the meetings of the association and its board of directors must be borne by participating members of the association in accordance with 33-22-1513."

Section 4. Section 33-22-1513, MCA, is amended to read:

"33-22-1513. Operation of association plan and association portability plans. (1) Upon acceptance by the lead carrier under 33-22-1516, an eligible person may enroll in the association plan by payment of the association plan premium to the lead carrier.

(2) Upon application by a federally defined eligible individual to the lead carrier for an association portability plan, the association may not:

(a) decline to offer an association portability plan; or

(b) impose a preexisting condition exclusion with respect to an individual's association portability plan coverage if application for association portability plan coverage is made within 63 days following termination of the applicant's most recent prior creditable coverage.

(3) Not less than 88% of the association plan premiums paid to the lead carrier may be used to pay claims and not more than 12% may be used for payment of the lead carrier's direct and indirect expenses as specified in 33-22-1514.

(4) Any income in excess of the costs incurred by the association in providing reinsurance or administrative services must be held at interest and used by the association to offset past and future losses due to claims expenses of the association plan and the association portability plan or be allocated to reduce association plan premiums.

(5) (a) Each participating member of the association shall share the losses due to claims expenses of the association plan and the association portability plan for plans issued or approved for issuance by the association and shall share in the operating and administrative expenses incurred or estimated to be incurred by the association incident to the conduct of its affairs in the following manner:

(i) Each participating member of the association must be assessed by the association on an annual basis an amount equal to 1% of the association member's total disability insurance premium received from or on behalf of Montana residents as determined by the commissioner. Assessments made under this subsection (5)(a) or funds from any other source must be allocated to the association plan and the association portability plan in proportion to the needs of the two plans. If the needs of the association plan and the association portability plan exceed the funds generated by the 1% assessment, the association is then authorized to spend any funds appropriated pursuant to the provisions of [section 5] for the support of the plans.

(ii) The association may abate, in whole or in part, the 1% assessment if the needs of the association plan and the association portability plan do not require the funds generated by the full 1% assessment. The commissioner shall approve any abatement of the 1% assessment.

(iii) Payment of an assessment is due within 30 days of receipt by a member of a written notice of the annual assessment. Failure by a contributing member to tender the association assessment within the 30-day period is grounds for termination of membership. A member terminated for failure to tender the association assessment is ineligible to write health care benefit policies or contracts in this state under 33-22-1503(2).

(iv) An associate member that ceases to do disability insurance business within the state remains liable for assessments through the calendar year in which the member ceased doing disability insurance business. The association may decline to levy an assessment against an association member if the assessment, as determined pursuant to this section, would not exceed $10.

(b) For purposes of this subsection (5), "total disability insurance premium" does not include premiums received from disability income insurance, credit disability insurance, disability waiver insurance, life insurance, medicare risk or other similar medicare health maintenance organization payments, or medicaid health maintenance organization payments.

(c) Any income in excess of the incurred or estimated claims expenses of the association plan, the association portability plan, and the operating and administrative expenses of the association must be held at interest and used by the association to offset past and future losses due to claims expenses of the association plan and the association portability plan or be allocated to reduce association plan premiums.

(6)

The proportion of the annual assessment allocated to the operation and expenses of the association plan may be offset by an association member against the premium tax payable by that association member pursuant to 33-2-705 for the year in which the annual assessment is levied. The insurance commissioner shall report to the office of budget and program planning, as a part of the information required by 17-7-111, the total amount of premium tax offset claimed by association members during the preceding biennium. The proportion of the annual assessment allocated to the operation and expenses of the association portability plan and levied against an association member may not be offset against the premium tax payable by that association member."

Section 5. Section 33-22-1514, MCA, is amended to read:

"33-22-1514. Administration of association plan -- rules. (1) The association shall select one lead carrier to issue the association plan. The board of directors of the association shall prepare appropriate specifications and bid forms and may solicit bids from licensed administrators and the members of the association for the purpose of selecting the lead carrier. The selection of the lead carrier must be based upon criteria established by the board of directors.

(2) The lead carrier shall perform all administrative and claims payment functions required by this section upon the commissioner's approval of the policy forms and contracts submitted. The lead carrier shall provide these services for a period of at least 3 years, unless a request to terminate is approved by the association and the commissioner. The association and the commissioner shall approve or deny a request to terminate within 90 days of its receipt. A failure to make a final decision on a request to terminate within the specified period is considered an approval. The association shall invite submissions of policy forms from members of the association, including the lead carrier, 6 months prior to the expiration of each 3-year period. The association shall follow the procedure provided in subsection (1) in selecting a lead carrier for the subsequent 3-year period or, if a request to terminate is approved, on or before the end of the 3-year period.

(3) The lead carrier shall provide all eligible persons involved in the association plan an individual certificate setting forth a statement as to the insurance protection to which the person is entitled, the method and place of filing claims, and to whom benefits are payable. The certificate must indicate that coverage was obtained through the association.

(4) The lead carrier shall submit to the association, the legislative finance committee, and the commissioner on a semiannual basis a report of the operation of the association plan. The association must determine the specific information to be contained in the report prior to the effective date of the association plan.

(5) The lead carrier shall pay all claims pursuant to this part and shall indicate that the claim was paid by the association plan. Each claim payment must include information specifying the procedure involved in the event a dispute over the amount of payment arises.

(6) The lead carrier must be reimbursed from the association plan premiums received for its direct and indirect expenses. Direct and indirect expenses include a prorated reimbursement for the portion of the lead carrier's administrative, printing, claims administration, management, and building overhead expenses, which are assignable to the maintenance and administration of the association plan. The association must approve cost accounting methods to substantiate the lead carrier's cost reports consistent with generally accepted accounting principles. Direct and indirect expenses may not include costs directly related to the original submission of policy forms prior to selection as the lead carrier.

(7) The lead carrier is, when carrying out its duties under this part, an independent contractor for the association and is individually liable for its actions, subject to the laws of this state."

NEW SECTION. Section 6. Codification instruction. [Section 1] is intended to be codified as an integral part of Title 33, chapter 22, part 15, and the provisions of Title 33, chapter 22, part 15, apply to [section 1].

NEW SECTION. Section 7. Coordination instruction. If [section 4] of this bill passes, then [section 4] of House Bill No. 136, amending 33-22-1513, is void.

NEW SECTION. Section 8. Effective date. [This act] is effective on passage and approval.

NEW SECTION. Section 9. Retroactive applicability. [Section 6] applies retroactively, within the meaning of 1-2-109, to money recovered by the state of Montana on or after January 1, 1999, from any judgment, settlement, or fine that is received as a result of a criminal or civil claim against a tobacco company related to the production, marketing, or use of tobacco products.

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