2014 -- S 2484

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LC004801

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2014

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A N   A C T

AN ACT RELATING TO HEALTH AND SAFETY -- EQUITABLE FUNDING FOR

ESSENTIAL HEALTH SERVICES

     Introduced By: Senator Walter S.Felag

     Date Introduced: February 27, 2014

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Section 23-1-46 of the General Laws in Chapter 23-1 entitled "Department

of Health" is hereby amended to read as follows:

     23-1-46. Insurers. -- (a) Beginning in the fiscal year 2007, each insurer licensed or

regulated pursuant to the provisions of chapters 18, 19, 20, and 41 of title 27 shall be assessed a

child immunization assessment and an adult immunization assessment for the purposes set forth

in this section. The department of health shall make available to each insurer, upon its request,

information regarding the department of health's immunization programs and the costs related to

the program. Further, the department of health shall submit to the general assembly an annual

report on the immunization programs and cost related to the programs, on or before February 1 of

each year. Annual assessments shall be based on direct premiums written in the year prior to the

assessment and for the child immunization program shall not include any Medicare Supplement

Policy (as defined in section 27-18.2-1(g)), Medicaid or Medicare premiums. Adult influenza

immunization program annual assessments shall include contributions related to the program

costs from Medicare, Medicaid and Medicare Managed Care. As to accident and sickness

insurance, the direct premium written shall include, but is not limited to, group, blanket, and

individual policies. Those insurers assessed greater than ten thousand dollars ($10,000) for the

year shall be assessed four (4) quarterly payments of twenty-five percent (25%) of their total

assessment. Beginning July 1, 2001, the annual rate of assessment shall be determined by the

director of health in concurrence with the primary payors, those being insurers assessed at greater

than ten thousand dollars ($10,000) for the previous year. This rate shall be calculated by the

projected costs for the Advisory Committee on Immunization Practices (ACIP) recommended

and state mandated vaccines after the federal share has been determined by the Centers for

Disease Control and Prevention. The primary payors shall be informed of any recommended

change in rates at least six (6) months in advance, and rates shall be adjusted no more frequently

than one time annually. For the childhood vaccine program the director of the department of

health shall deposit these amounts in

     Beginning July 1, 2015, a portion of the amount collected pursuant to § 42-7.4-3, up to

the actual amount expended or projected to be expended by the state for vaccines for children that

are recommended by the Advisory Committee on Immunization Practices (ACIP), the American

Academy of Pediatrics (AAP), and/or mandated by state law, less the federal share determined by

the Centers for Disease Control and Prevention, less any amount collected in excess of the prior

year’s funding requirement as indicated in subsection (b) (the "child immunization funding

requirement") shall be deposited into the "childhood immunization account". described in § 23-1-

45(a). These assessments funds shall be used solely for the purposes of the "childhood

immunization programs" described in §23-1-44, and no other. For the adult immunization

program the director of the department of health shall deposit these amounts in the "adult

immunization account". Beginning July 1, 2015, a portion of the amount collected from the

healthcare services funding method described in § 42-7.4-3, up to the actual amount expended or

projected to be expended by the state for adult immunizations recommended by ACIP and/or

mandated by state law, less the federal share determined by the Centers for Disease Control and

Prevention, less any amount collected in excess of the prior year’s funding requirement as

indicated in subsection (b) (the "adult immunization funding requirement") shall be deposited into

the "adult immunization account" described in § 23-1-45(c). These funds shall be used solely for

the purposes of the "adult immunization programs" described in § 23-1-44 and no other.

      (b) The department of health shall submit to the general assembly an annual report on the

immunization programs and costs related to the programs, on or before February 1 of each year.

Any funds collected in excess of funds needed to carry-out ACIP recommendations, taking into

account a reasonable annual carry forward surplus, shall be deducted from the subsequent year's

assessments. funding requirements.

     SECTION 2. Section 42-12-29 of the General Laws in Chapter 42-12 entitled

"Department of Human Services" is hereby amended to read as follows:

     42-12-29. Children's health account. -- (a) There is created within the general fund a

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restricted receipt account to be known as the "children's health account". All money in the

account shall be utilized by the department of human services to effectuate coverage for the

following service categories: (1) home health services, which include pediatric private duty

nursing and certified nursing assistant services; (2) comprehensive, evaluation, diagnosis,

assessment, referral and evaluation (CEDARR) services, which include CEDARR family center

services, home based therapeutic services, personal assistance services and supports (PASS) and

kids connect services and (3) child and adolescent treatment services (CAITS). All money

received pursuant to this section shall be deposited in the children's health account. The general

treasurer is authorized and directed to draw his or her orders on the account upon receipt of

properly authenticated vouchers from the department of human services.

      (b) Beginning in the fiscal year 2007, each insurer licensed or regulated pursuant to the

provisions of chapters 18, 19, 20, and 41 of title 27 shall be assessed for the purposes set forth in

this section. The department of human services shall make available to each insurer, upon its

request, information regarding the department of human services child health program and the

costs related to the program. Further, the department of human services shall submit to the

general assembly an annual report on the program and cost related to the program, on or before

February 1 of each year. Annual assessments shall be based on direct premiums written in the

year prior to the assessment and shall not include any Medicare Supplement Policy (as defined in

section 27-18-2.1(g)), Medicare managed care, Medicare, Federal Employees Health Plan,

Medicaid/RIte Care or dental premiums. As to accident and sickness insurance, the direct

premium written shall include, but is not limited to, group, blanket, and individual policies. Those

insurers assessed greater than five hundred thousand dollars ($500,000) for the year shall be

assessed four (4) quarterly payments of twenty-five percent (25%) of their total assessment.

Beginning July 1, 2006, the annual rate of assessment shall be determined by the director of

human services in concurrence with the primary payors, those being insurers likely to be assessed

at greater than five hundred thousand dollars ($500,000). The director of the department of

human services shall deposit that amount Beginning July 1, 2015, a portion of the amount

collected pursuant to § 42-7.4-3, up to the actual amount expended or projected to be expended

by the state for the services described in § 42-12-29(a), less any amount collected in excess of the

prior year’s funding requirement as indicated in § 42-12-29(c), but in no event more than the limit

set forth in § 42-12-29(d) (the "child health services funding requirement"), shall be deposited in

the "children's health account". The assessment funds shall be used solely for the purposes of the

"children's health account", and no other.

      (c) The department of human services shall submit to the general assembly an annual

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report on the program and costs related to the program, on or before February 1 of each year. The

department shall make available to each insurer required to make a contribution pursuant to § 42-

7.4-3, upon its request, detailed information regarding the children's health programs described in

subsection (a) and the costs related to those programs. Any funds collected in excess of funds

needed to carry out the programs shall be deducted from the subsequent year's assessment.

funding requirements.

      (d) The total annual assessment on all insurers amount required to be deposited into the

children's health account shall be equivalent to the amount paid by the department of human

services for all services, as listed in subsection (a), but not to exceed seven thousand five hundred

dollars ($7,500) per child per service per year.

      (e) The children's health account shall be exempt from the indirect cost recovery

provisions of section 35-4-27 of the general laws.

     SECTION 3. Section 44-17-1 of the General Laws in Chapter 44-17 entitled "Taxation of

Insurance Companies" is hereby amended to read as follows:

     44-17-1. Companies required to file -- Payment of tax -- Retaliatory rates. -- Every

domestic, foreign, or alien insurance company, mutual association, organization, or other insurer,

including any health maintenance organization, as defined in section 27-41-1, any medical

malpractice insurance joint underwriters association as defined in section 42-14.1-1, and any

nonprofit dental service corporation as defined in section 27-20.1-2, and any nonprofit hospital or

medical service corporation, as defined in chapters 27-19 and 27-20, except companies mentioned

in section 44-17-6, and organizations defined in §27-25-1, transacting business in this state, shall,

on or before March 1 in each year, file with the tax administrator, in the form that he or she may

prescribe, a return under oath or affirmation signed by a duly authorized officer or agent of the

company, containing information that may be deemed necessary for the determination of the tax

imposed by this chapter, and shall at the same time pay an annual tax to the tax administrator of

two percent (2%) of the gross premiums on contracts of insurance, except for ocean marine

insurance, as referred to in section 44-17-6, covering property and risks within the state, written

during the calendar year ending December 31st next preceding, but in the case of foreign or alien

companies, except as provided in section 27-2-17(d) the tax is not less in amount than is imposed

by the laws of the state or country under which the companies are organized upon like companies

incorporated in this state or upon its agents, if doing business to the same extent in the state or

country. Provided, however, that this section shall not apply to companies mentioned in or ocean

marine insurance as referred to in § 44-17-6; and provided, further, that this section shall not

apply to organizations defined in § 27-25-1, health maintenance organizations as defined in § 27-

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41-2, nonprofit hospital or medical service corporations as defined in chapters 19 and 20 of title

27, or insurers as defined in § 42-62-4, except to the extent of gross premium on contracts for

dental services.

     SECTION 4. Transition period. The department of taxation shall create a process to

facilitate the transition to the contribution and avoid overlapping tax liability. An entity that paid

a premium tax or made an estimated tax payment pursuant to § 44-17-1 for a time period during

which it would also be liable for a contribution described in § 42-7.4-3(a)(2), shall receive credit

against its contribution liability in an amount equal to any premium tax paid for that period.

     SECTION 5. Title 42 of the General Laws entitled "STATE AFFAIRS AND

GOVERNMENT" is hereby amended by adding thereto the following chapter:

CHAPTER 7.4

THE HEALTHCARE SERVICES FUNDING PLAN ACT

     42-7.4-1. Short title. -- The Healthcare services funding plan act. -- This chapter shall

be known and may be cited as "The Healthcare Services Funding Plan Act."

     42-7.4-2. Definitions. -- The following words and phrases as used in this chapter shall

have the following meaning:

     (1) "Secretary" means the secretary of health and human services.

     (2)(i) "Insurer" means all persons offering, administering, and/or insuring healthcare

services, including, but not limited to:

     (A) Policies of accident and sickness insurance, as defined by chapter 18 of title 27:

     (B) Nonprofit hospital or medical service plans, as defined by chapters 19 and 20 of title

27;

     (C) Any person whose primary function is to provide diagnostic, therapeutic, or

preventive services to a defined population on the basis of a periodic premium;

     (D) All domestic, foreign, or alien insurance companies, mutual associations and

organizations;

     (E) Health maintenance organizations, as defined by chapter 41 of title 27;

     (F) All persons providing health benefits coverage on a self-insurance basis;

     (G) All third-party administrators described in chapter 20.7 of title 27; and

     (H) All persons providing health benefit coverage under Title XIX of the Social Security

Act (Medicaid) as a Medicaid managed care organization offering managed Medicaid and the

state's Medicaid fee-for-service plan.

     (ii) "Insurer" shall not include any nonprofit dental service corporation as defined in § 27-

20.1-2, nor any insurer offering only those coverages described in §42-7.4-14.

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      (3)(i) "Contribution enrollee" means an individual residing in this state, with respect to

whom an insurer administers, provides, pays for, insures, or covers health care services, unless

excepted by this section.

     (ii) "Contribution enrollee" shall not include an individual whose healthcare services are

paid or reimbursed by Part A or Part B of the Medicare program, a Medicare supplemental policy

as defined in section 1882(g)(1) of the Social Security Act, 42 U.S.C. 1395ss(g)(1), or Medicare

managed care policy, the federal employees' health benefit program, Tricare, CHAMPUS, the

Veterans' healthcare program, the Indian health service program, or any local governmental

corporation, district, or agency providing health benefits coverage on a self-insured basis.

     (4) "Person" means any individual, corporation, company, association, partnership,

limited liability company, firm, state governmental corporations, districts, and agencies, joint

stock associations, trusts, and the legal successor thereof.

     (5) "Healthcare services funding contribution" means per capita amount each contributing

insurer must contribute to support the programs funded by the method established under this

section, with respect to each contribution enrollee.

     42-7.4-3. Imposition of healthcare services funding contribution. -- (a) Each insurer is

required to pay the healthcare services funding contribution for each contribution enrollee of the

insurer at the time the contribution is calculated and paid, at the rate set forth in this section.

     (1) Beginning July 1, 2015, the secretary shall set the healthcare services funding

contribution each fiscal year in an amount equal to: (i) The child immunization funding

requirement described in § 23-1-46; plus (ii) The adult immunization funding requirement

described in § 23-1-46; plus (iii) The children's health services funding requirement described in

§ 42-12-29; and all as divided by (iv) The number of contribution enrollees of all insurers.

     (2) Beginning January 1, 2016, the secretary shall set the healthcare services funding

contribution each fiscal year in an amount equal to: (i) The child immunization funding

requirement described in § 23-1-46; plus (ii) The adult immunization funding requirement

described in § 23-1-46; plus (iii) The children's health services funding requirement described in

§ 42-12-29; plus (iv) An amount, calculated by the division of taxation, and reported to the

secretary, equivalent to the amount of tax revenue described in § 44-17-1, excluding gross

premiums for dental services contracts, that would have imposed on health maintenance

organizations as defined in § 27-41-1, nonprofit hospital or medical service corporations as

defined in chapters 19 and 20 of title 27, and insurers as defined in § 42-62-4, during the calendar

year ending December 31, 2013; and all divided by (v) The number of contribution enrollees of

all insurers.

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     (3) The contribution set forth herein shall be in addition to any other fees or assessments

upon the insurer allowable by law.

     (b) The contribution shall be paid by the insurer; provided, however, a person providing

health benefits coverage on a self-insurance basis that uses the services of a third-party

administrator shall not be required to make a contribution for a contribution enrollee where the

contribution on that enrollee has been or will be made by the third-party administrator.

     42-7.4-4. Returns and payment. -- (a) Subject to subsection (b), every insurer required

to make a contribution shall, on or before the last day of July, October, January and April of each

year, make a return to the secretary together with payment of the quarterly healthcare services

funding contribution for the preceding three (3) month period.

     (b)(1) Upon request of the director of the department of health or the director of the

department of taxation, the secretary shall develop a process whereby an insurer required to make

the contribution may be directed to make estimated payments for the related portion(s) of the

liability arising under § 42-7.4-3(a) and the secretary shall make that pre-paid amount available to

the department of health or the department of taxation, as requested.

     (2) Unless requested to make an estimated payment as described in subsection (b)(1)

above, any insurer required to make the contribution that can substantiate that the insurer's

contribution liability would average less than twenty-five thousand dollars ($25,000) per month

may file returns and remit payment annually on or before the last day of June each year; provided,

however, that the insurer shall be required to make quarterly payments if the secretary determines

that:

     (i) The insurer has become delinquent in either the filing of the return or the payment of

the healthcare services funding contribution due thereon; or

     (ii) The liability of the insurer exceeds seventy-five thousand dollars ($75,000) in

healthcare services funding contribution per quarter for any two (2) subsequent quarters.

      (c) All returns shall be signed by the insurer required to make the contribution, or by its

authorized representative, subject to the pains and penalties of perjury.

     (d) If a return shows an overpayment of the contribution due, the secretary shall refund or

credit the overpayment to the insurer required to make the contribution, or the insurer may deduct

the overpayment from the next quarterly or annual return.

     (e) The secretary, for good cause shown, may extend the time within which an insurer is

required to file a return, and if the return is filed during the period of extension no penalty or late

filing charge may be imposed for failure to file the return at the time required by this section, but

the insurer shall be liable for interest as prescribed in this section. Failure to file the return during

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the period for the extension shall void the extension.

      42-7.4-5. Set-off for delinquent payment. -- If an insurer required to make the

contribution pursuant to this chapter shall fail to pay a contribution within thirty (30) days of its

due date, the secretary may request any agency of state government making payments to the

insurer to set-off the amount of the delinquency against any payment or amount due the insurer

from the agency of state government and remit the sum to the secretary. Upon receipt of the setoff

request from the secretary, any agency of state government is authorized and empowered to set-

off the amount of the delinquency against any payment or amounts due the insurer. The amount

of set-off shall be credited against the contribution due from the insurer.

     42-7.4-6. Assessment on available information -- Interest on delinquencies --

Penalties -- Collection powers. -- If any insurer shall fail to file a return within the time required

by this chapter, or shall file an insufficient or incorrect return, or shall not pay the contribution

imposed by this section when it is due, the secretary shall assess the contribution upon the

information as may be available, which shall be payable upon demand and shall bear interest at

the annual rate provided by § 44-1-7, from the date when the contribution should have been paid.

If the failure is due, in whole or part, to negligence or intentional disregard of the provisions of

this section, a penalty of ten percent (10%) of the amount of the determination shall be added to

the contribution. The secretary shall collect the contribution with interest. The secretary may

request any agency to assist in collection, including the tax administrator, who may collect the

contribution with interest in the same manner and with the same powers as are prescribed for

collection of taxes in title 44.

     42-7.4-7. Claims for refund -- Hearing upon denial. -- (a) Any insurer required to pay

the contribution may file a claim for refund with the secretary at any time within two (2) years

after the contribution has been paid. If the secretary shall determine that the contribution has been

overpaid, he or she shall make a refund with ten percent (10%) interest from the date of

overpayment.

     (b) Any insurer whose claim for refund has been denied may, within thirty (30) days from

the date of the mailing by the secretary of the notice of the decision, request a hearing and the

secretary shall, as soon as practicable, set a time and place for the hearing and shall notify the

person.

     42-7.4-8. Hearing by secretary on application. -- Any insurer aggrieved by the action

of the secretary in determining the amount of any contribution or penalty imposed under the

provisions of this chapter may apply to the secretary, within thirty (30) days after the notice of the

action is mailed to it, for a hearing relative to the contribution or penalty. The secretary shall fix a

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time and place for the hearing and shall so notify the person. Upon the hearing the secretary shall

correct manifest errors, if any, disclosed at the hearing and thereupon assess and collect the

amount lawfully due together with any penalty or interest thereon.

     42-7.4-9. Appeals. -- Appeals from administrative orders or decisions made pursuant to

any provisions of this chapter shall be pursued pursuant to chapter 35 of title 42. The right to

appeal under this section shall be expressly made conditional upon prepayment of all

contribution, interest, and penalties unless the insurer demonstrates to the satisfaction of the court

that the insurer has a reasonable probability of success on the merits and is unable to prepay all

contribution, interest, and penalties, considering not only the insurer’s own financial resources

but also the ability of the insurer to borrow the required funds. If the court, after appeal, holds that

the insurer is entitled to a refund, the insurer shall also be paid interest on the amount at the rate

provided in § 44-1-7.1 of the Rhode Island general laws, as amended.

     42-7.4-10. Records. -- Every insurer required to make the contribution shall:

     (1) Keep records as may be necessary to determine the amount of its liability under this

section;

     (2) Preserve those records for a period of three (3) years following the date of filing of

any return required by this section, or until any litigation or prosecution under this section is

finally determined; and

     (3) Make those records available for inspection by the secretary or his/her authorized

agents, upon demand, at reasonable times during regular business hours.

     42-7.4-11. Method of payment and deposit of contribution. -- (a) The payments

required by this chapter may be made by electronic transfer of monies to the general treasurer.

     (b) The general treasurer shall take all steps necessary to facilitate the transfer of monies

to:

     (1) The "childhood immunization account" described in § 23-1-45(a) in the amount

described in § 23-1-46(a);

     (2) To the "adult immunization account" described in § 23-1-45(c) in the amount

described in § 23-1-46(a);

     (3) To the "children's health account" described in § 42-12-29(a) in the amount described

in § 42-12-29(b);

     (4) To the general fund in the amount described in § 42-7.4-3(a); and

     (5) Any remainder of the payments shall be proportionally distributed to those accounts

and credited against the next year’s healthcare services funding contribution.

     (c) The general treasurer shall provide the secretary with a record of any monies

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transferred and deposited.

     42-7.4-12. Rules and regulations. -- The secretary is authorized to make and promulgate

rules, regulations, and procedures not inconsistent with state law and fiscal procedures as he or

she deems necessary for the proper administration of this healthcare services funding plan act and

to carry out the provisions, policies, and purposes of this chapter including, but not limited to,

data it must collect from insurers for the correct computation of the healthcare services funding

contribution, collaboration with other state agencies for collecting necessary information, and the

form of the return and the data that it must contain for the correct computation of the healthcare

services funding contribution..

     42-7.4-13. Allocation. -- An insurer required to make a healthcare services funding

contribution may pass on the cost of that contribution in the cost of its services, such as its

premium rates (for insurers), without being required to specifically allocate those costs to

individuals or populations that actually incurred the contribution.

     42-7.4-14. Excluded coverage from the healthcare services funding plan act. -- (a) In

addition to any exclusion and exemption contained elsewhere in this chapter, this chapter shall

not apply to insurance coverage providing benefits for, nor shall an individual be deemed a

contribution enrollee solely by virtue of receiving benefits for the following:

     (1) Hospital confinement indemnity;

     (2) Disability income;

     (3) Accident only;

     (4) Long-term care;

     (5) Medicare supplement;

     (6) Limited benefit health;

     (7) Specified disease indemnity;

     (8) Sickness or bodily injury or death by accident or both; and

     (9) Other limited benefit policies.

     42-7.4-15. Oversight. -- The health insurance commissioner shall validate, through the

rate review and approval process, that the rates filed for fully insured groups and individuals,

pursuant to chapter 18.5, 18.6 or 50 of title 27, reflect the transition to the funding method

described in this section.

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     SECTION 6. Sections 1 and 2 of this act shall take effect July 1, 2015, sections 3 and 4

of this act shall take effect January 1, 2016, and the remaining sections of this act shall take effect

upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

AN ACT RELATING TO HEALTH AND SAFETY -- EQUITABLE FUNDING FOR

ESSENTIAL HEALTH SERVICES

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     This act would phase-in a replacement of the current immunization and children's

healthcare services assessments and premium tax with a healthcare services funding plan. The act

includes a number of calculations for making contributions and distributions. The act would

provide that health insurers would be required to make a healthcare services funding contribution

in an amount calculated by taking several funding requirements and dividing by the number of

contribution enrollees of all insurers. Finally, the act would include a process for insurers to have

a hearing and appeal regarding the amount established for the contribution.

     Sections 1 and 2 of this act would take effect July 1, 2015, sections 3 and 4 of this act

would take effect January 1, 2016, and the remaining sections of this act would take effect upon

passage.

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