Feed for /2005/related/proposals/ab1140 PDF
LRB-2922/3
PJK/RAC/MES:lmk:rs
2005 - 2006 LEGISLATURE
March 21, 2006 - Introduced by Representatives Gielow and Richards. Referred
to Committee on Insurance. Referred to Joint Survey Committee on Tax
Exemptions.
AB1140,1,9 1An Act to amend 40.51 (1), 111.70 (1) (dm), 632.755 (1g) (a) and 632.755 (1g) (b);
2and to create 13.94 (1s) (c) 5., 20.855 (8m), 25.17 (1) (gd), 25.775, 71.83 (1) (ce),
3subchapter XVI of chapter 71 [precedes 71.98], 111.91 (2) (pm), 149.12 (2) (g) 7.
4and chapter 260 of the statutes; relating to: creating the Private Health
5Insurance Purchasing Corporation of Wisconsin, establishing a health
6insurance purchasing arrangement through the use of private accounts for all
7state residents, adopting federal law as it relates to health savings accounts for
8state income and franchise tax purposes, making appropriations, and
9providing a penalty.
Analysis by the Legislative Reference Bureau
Health insurance purchasing arrangement; corporation
This bill establishes a private health insurance purchasing arrangement
(PHIPA) to provide health insurance coverage for state residents, and creates a
private, nonstock corporation, called the Private Health Insurance Purchasing
Corporation of Wisconsin (corporation), to facilitate and administer PHIPA. The
eight members of the corporation's board of directors are designated by the governor
and various business organizations and labor unions. The corporation's meetings

must be open to the public, and it must keep its records open to inspection by the
governor, the secretary of administration, any committee of the legislature, the
Legislative Fiscal Bureau, and the Legislative Audit Bureau, which must conduct
both a financial audit of the corporation and a performance evaluation audit of
PHIPA at least once every two years. The corporation must keep its hiring practices
and its procedures for soliciting bids or proposals in writing and open to public
inspection, as well as all of its requests for bids or proposals and its analyses of, and
final decisions on, bids and proposals received. The corporation must annually
report to the governor and the legislature on its activities.
Eligibility; establishing accounts
Every eligible resident is eligible for PHIPA. An eligible resident is defined in
the bill as an individual who is under 65 years of age; who has been domiciled in the
state for at least six months or, if under six months old, whose parent or guardian
has been domiciled in the state for at least six months; who maintains a substantial
presence in the state; and who is not an inmate of a penal facility, not a resident of
an institution for the mentally ill or developmentally disabled, not eligible for health
care coverage from the federal government, and not eligible for Medical Assistance
or Badger Care unless a waiver from the federal secretary of health and human
services is granted that allows individuals who are eligible for Medical Assistance
or Badger Care to be covered under PHIPA.
Beginning in 2008, the corporation must establish for every eligible resident,
except for one who objects for religious reasons, a private health insurance
purchasing account (account). The account of every eligible resident who is at least
18 years of age will include a health savings account (HSA).
Insurers; health care plans
The corporation must solicit bids from, and contract with, insurers to offer
health care plans under PHIPA. There must be at least two health care plans offered
by at least two insurers in each county of the state. The corporation must rank, on
a countywide basis, each of the health care plans offered, assign each plan to one of
three tiers, and determine the premium for each. Plans that the corporation
determines provide high quality care at a low risk-adjusted cost will be assigned to
Tier 1; plans that the corporation determines provide care at a higher risk-adjusted
cost will be assigned to Tier 2; and plans that the corporation determines provide care
at the highest risk-adjusted cost will be assigned to Tier 3. Every year there will be
an open enrollment period during which each eligible resident may select a health
care plan from among those offered. An eligible resident who does not select a plan
will be randomly assigned to a Tier 1 plan.
Funding and uses of accounts
Although the bill does not provide a funding source or mechanism, the accounts
and HSAs are to be funded beginning in 2009, which is also when coverage under
PHIPA begins. The amount that is to be credited to each eligible resident's account
is the full premium amount for coverage under a Tier 1 plan in the county in which
the eligible resident resides, actuarially adjusted for the eligible resident's age, sex,
and other appropriate risk factors. The corporation pays this amount to the health
care plan selected by the eligible resident. Only if an eligible resident has selected

a Tier 2 or Tier 3 plan must he or she pay any additional, out-of-pocket amount for
the premium. The bill provides that the amount credited to an eligible resident's
HSA will be $500 in 2009, and adjusted to reflect changes in the U.S. consumer price
index for years after that. The amount credited to an HSA, however, may be
increased or decreased for various reasons, such as whether the eligible resident
follows a healthy lifestyle protocol and whether the corporation estimates that
revenues will exceed expenses or expenses will exceed revenues in a given year.
Federal law requires that amounts credited to an HSA must be used to pay for
medical care.
Benefits; cost-sharing; preexisting condition exclusion
Every health care plan offered will provide the same benefits and, except for
premiums, will require the same cost-sharing. Benefits under PHIPA include
medical and hospital care coverage and related health care services, prescription
drug coverage, and limited dental care. Cost-sharing, including deductibles,
coinsurance, and copayments, will not apply to certain types of care, including
emergency care, prenatal care, medically indicated immunizations for children, and
other specified types of preventive care. However, benefits may be reduced, under
a procedure outlined in the bill, if the corporation determines that expenses will
exceed revenues for a given year or years.
Except for those services to which cost-sharing does not apply, each eligible
resident who is at least 18 years old on January 1 must pay a deductible of $1,200
in that year, and each eligible resident who is less than 18 years old on January 1
must pay a deductible of $100 in that year. After the deductible has been satisfied,
an eligible resident must pay coinsurance of between 10 and 20 percent, as
determined by the corporation, for prescription drugs and covered services, except
for those services to which cost-sharing does not apply. Prescription drugs are
subject to additional coinsurance or copayments, as determined by the corporation.
The additional coinsurance or copayments must be higher for prescription drugs that
are not on a preferred list determined by the corporation.
Notwithstanding the required deductible, coinsurance, and copayment
amounts, an eligible resident who is at least 18 years old on January 1 may not be
required to pay more than $2,000 per year in total cost-sharing; an eligible resident
who is less than 18 years old on January 1 may not be required to pay more than $500
per year in total cost-sharing; and a family of two or more eligible residents may not
be required to pay more than $3,000 per year in total cost-sharing. In addition, the
corporation must reduce one or more of the cost-sharing amounts for low-income
eligible residents, and the deductible and maximum cost-sharing amounts are to be
adjusted annually to reflect changes in the U.S. consumer price index.
There is a coverage exclusion for any preexisting condition of an eligible
resident who, at any time during the 18 months before becoming an eligible resident,
resided outside of Wisconsin and did not have health insurance coverage
substantially similar to the coverage under PHIPA. However, the preexisting
condition exclusion may not extend beyond the date on which the eligible resident
has been continuously covered under PHIPA for a total of 18 months.

Health care advisory committee
The corporation is required to establish a health care advisory committee to
advise it on specified health-related issues. The corporation must consult with the
health care advisory committee and other experts on various health-related issues,
such as creating incentives for eligible residents to adopt healthier lifestyles and
increasing transparency of health care cost and quality information, and must adopt
policies that further these goals.
Waiver of federal requirements; proposed legislation
Under the bill, the corporation and the Department of Health and Family
Services (DHFS) must develop a plan for providing coverage under PHIPA for
individuals who would be eligible residents except that they are eligible for Badger
Care or for Medical Assistance under what DHFS determines is the low-income
families category. DHFS must submit the plan to the legislature, along with its
recommendations on the desirability of requesting waivers that would allow
implementation of the plan and the use of federal financial participation to fund
health care coverage for those individuals under PHIPA. If DHFS requests waivers
upon the authorization of the legislature, and if the waivers are granted, DHFS must
submit proposed legislation implementing the provisions approved under the
waivers. In addition, to facilitate the provision of coverage under PHIPA for
individuals who are eligible for Badger Care or for Medical Assistance under what
DHFS determines is the low-income families category, DHFS and the Legislative
Fiscal Bureau must submit proposed legislation that separates the Medical
Assistance provisions of the statutes, including related appropriations, into two
eligibility categories, one for low-income families and one for elderly and disabled
persons.
Adoption of federal law for health savings accounts
The bill adopts, for state income and franchise tax purposes, section 1201 of
Public Law 108-173 as it relates to claiming a deduction for an amount that a person
pays into a health savings account.
This bill will be referred to the Joint Survey Committee on Tax Exemptions for
a detailed analysis, which will be printed as an appendix to this bill.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB1140, s. 1 1Section 1. 13.94 (1s) (c) 5. of the statutes is created to read:
AB1140,4,32 13.94 (1s) (c) 5. The Private Health Insurance Purchasing Corporation of
3Wisconsin for the cost of the audits under s. 260.05 (4).
AB1140, s. 2
1Section 2. 20.855 (8m) of the statutes is created to read:
AB1140,5,122 20.855 (8m) Private Health Insurance Purchasing Corporation of
3Wisconsin.
(r) Health insurance purchasing accounts and administration. After
4deducting the amounts appropriated for the state's share of benefits and
5administrative costs under the Medical Assistance program that are attributable to
6the low-income families category, as determined under 2005 Wisconsin Act .... (this
7act), section 14 (1) (b ) and the amounts appropriated for the state's share of benefits
8and administrative costs under the Badger Care health care program under s.
949.665, the balance of the moneys in the health insurance purchasing trust fund to
10be paid to the Private Health Insurance Purchasing Corporation of Wisconsin for
11establishing, funding, managing, and assisting individuals with the use of, the
12health insurance purchasing accounts established under ch. 260.
AB1140, s. 3 13Section 3. 25.17 (1) (gd) of the statutes is created to read:
AB1140,5,1414 25.17 (1) (gd) Health insurance purchasing trust fund (s. 25.775);
AB1140, s. 4 15Section 4. 25.775 of the statutes is created to read:
AB1140,5,19 1625.775 Health insurance purchasing trust fund. There is established a
17separate, nonlapsible trust fund designated as the health insurance purchasing
18trust fund, consisting of all moneys appropriated or transferred to or deposited in the
19fund.
AB1140, s. 5 20Section 5. 40.51 (1) of the statutes is amended to read:
AB1140,5,2521 40.51 (1) The procedures and provisions pertaining to enrollment, premium
22transmitted and coverage of eligible employees for health care benefits shall be
23established by contract or rule except as otherwise specifically provided by this
24chapter. Health care benefits provided under this subchapter shall be in addition to
25health care benefits provided eligible employees under ch. 260.
AB1140, s. 6
1Section 6. 71.83 (1) (ce) of the statutes is created to read:
AB1140,6,62 71.83 (1) (ce) Health savings accounts. Any person who is liable for a penalty
3for federal income tax purposes under section 223 (f) (4) of the Internal Revenue Code
4is liable for a penalty equal to 33 percent of that penalty. The department of revenue
5shall assess, levy, and collect the penalty under this paragraph as it assesses, levies,
6and collects taxes under this chapter.
AB1140, s. 7 7Section 7. Subchapter XVI of chapter 71 [precedes 71.98] of the statutes is
8created to read:
AB1140,6,99 Chapter 71
AB1140,6,1110 subchapter xvi
11 Internal revenue code update
AB1140,6,13 1271.98 Internal Revenue Code update. The following federal laws, to the
13extent that they apply to the Internal Revenue Code, apply to this chapter:
AB1140,6,15 14(1) Health savings accounts. Section 1201 of P.L. 108-173, relating to health
15savings accounts.
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