AB1140: Bill Text

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 Section 1. 13.94 (1s) (c) 5. of the statutes is created to read:

AB1140,4,3 13.94 (1s) (c) 5. The Private Health Insurance Purchasing Corporation of Wisconsin for the cost of the audits under s. 260.05 (4).

AB1140, s. 2 Section 2. 20.855 (8m) of the statutes is created to read:

AB1140,5,12 20.855 (8m) Private Health Insurance Purchasing Corporation of Wisconsin. (r) Health insurance purchasing accounts and administration. After deducting the amounts appropriated for the state's share of benefits and administrative costs under the Medical Assistance program that are attributable to the low-income families category, as determined under 2005 Wisconsin Act .... (this act), section 14 (1) (b ) and the amounts appropriated for the state's share of benefits and administrative costs under the Badger Care health care program under s. 49.665, the balance of the moneys in the health insurance purchasing trust fund to be paid to the Private Health Insurance Purchasing Corporation of Wisconsin for establishing, funding, managing, and assisting individuals with the use of, the health insurance purchasing accounts established under ch. 260.

AB1140, s. 3 Section 3. 25.17 (1) (gd) of the statutes is created to read:

AB1140,5,14 25.17 (1) (gd) Health insurance purchasing trust fund (s. 25.775);

AB1140, s. 4 Section 4. 25.775 of the statutes is created to read:

AB1140,5,19 25.775 Health insurance purchasing trust fund. There is established a separate, nonlapsible trust fund designated as the health insurance purchasing trust fund, consisting of all moneys appropriated or transferred to or deposited in the fund.

AB1140, s. 5 Section 5. 40.51 (1) of the statutes is amended to read:

AB1140,5,25 40.51 (1) The procedures and provisions pertaining to enrollment, premium transmitted and coverage of eligible employees for health care benefits shall be established by contract or rule except as otherwise specifically provided by this chapter. Health care benefits provided under this subchapter shall be in addition to health care benefits provided eligible employees under ch. 260.

AB1140, s. 6 Section 6. 71.83 (1) (ce) of the statutes is created to read:

AB1140,6,6 71.83 (1) (ce) Health savings accounts. Any person who is liable for a penalty for federal income tax purposes under section 223 (f) (4) of the Internal Revenue Code is liable for a penalty equal to 33 percent of that penalty. The department of revenue shall assess, levy, and collect the penalty under this paragraph as it assesses, levies, and collects taxes under this chapter.

AB1140, s. 7 Section 7. Subchapter XVI of chapter 71 [precedes 71.98] of the statutes is created to read:

AB1140,6,9 Chapter 71

AB1140,6,11 subchapter xvi Internal revenue code update

AB1140,6,13 71.98 Internal Revenue Code update. The following federal laws, to the extent that they apply to the Internal Revenue Code, apply to this chapter:

AB1140,6,15 (1) Health savings accounts. Section 1201 of P.L. 108-173, relating to health savings accounts.

AB1140, s. 8 Section 8. 111.70 (1) (dm) of the statutes is amended to read:

AB1140,7,4 111.70 (1) (dm) "Economic issue" means salaries, overtime pay, sick leave, payments in lieu of sick leave usage, vacations, clothing allowances in excess of the actual cost of clothing, length-of-service credit, continuing education credit, shift premium pay, longevity pay, extra duty pay, performance bonuses, health insurance coverage of benefits not provided under ch. 260, life insurance, dental insurance, disability insurance, vision insurance, long-term care insurance, worker's compensation and unemployment insurance, social security benefits, vacation pay, holiday pay, lead worker pay, temporary assignment pay, retirement contributions, supplemental retirement benefits, severance or other separation pay, hazardous duty pay, certification or license payment, limitations on layoffs that create a new or increased financial liability on the employer and contracting or subcontracting of work that would otherwise be performed by municipal employees in the collective bargaining unit with which there is a labor dispute.

AB1140, s. 9 Section 9. 111.91 (2) (pm) of the statutes is created to read:

AB1140,7,6 111.91 (2) (pm) Health care coverage of employees under ch. 260.

AB1140, s. 10 Section 10. 149.12 (2) (g) 7. of the statutes is created to read:

AB1140,7,9 149.12 (2) (g) 7. Health care coverage under the health insurance purchasing arrangement under ch. 260.

AB1140, s. 11 Section 11. Chapter 260 of the statutes is created to read:

AB1140,7,12 chapter 260 Health insurance purchasing accounts

AB1140,7,13 260.01 Definitions. In this chapter:

AB1140,7,14 (1) "Board" means the board of directors of the corporation.

AB1140,7,16 (2) "Corporation" means the Private Health Insurance Purchasing Corporation of Wisconsin.

AB1140,7,18 (3) (a) "Eligible resident" means an individual who satisfies all of the following criteria:

AB1140,7,23 1. The individual has been domiciled, as defined by the corporation, in this state for at least 6 months, except that, if a child is under 6 months of age, the child is an "eligible resident" if the child lives in this state and at least one of the child's parents or the child's guardian has been domiciled, as defined by the corporation, in this state for at least 6 months.

AB1140,8,10 2. The individual maintains a substantial presence in this state, as defined by the corporation. In defining what constitutes a substantial presence in this state, the corporation shall consider such factors as the amount of time per year that an individual is actually present in the state and the amount of taxes that an individual pays in this state, except that if the individual attends school outside of this state and is under 23 years of age, the factors shall include the amount of time that the individual's parent or guardian is actually present in the state and the amount of taxes that the individual's parent or guardian pays in this state, and if the individual is in active service with the U.S. armed forces outside of this state, the factors shall include the amount of time that the individual's parent, guardian, or spouse is actually present in the state and the amount of taxes that the individual's parent, guardian, or spouse pays in this state.

AB1140,8,11 3. The individual is under 65 years of age.

AB1140,8,15 4. The individual is not eligible for health care coverage from the federal government, is not an inmate of a penal facility, as defined in s. 19.32 (1e), and is not placed or confined in, or committed to, an institution for the mentally ill or developmentally disabled.

AB1140,8,18 5. Unless a waiver is requested under s. 260.60 and granted and in effect, the individual is not eligible for medical assistance under subch. IV of ch. 49 or for health care coverage under the Badger Care health care program under s. 49.665.

AB1140,8,22 (b) Notwithstanding par. (a), an individual who satisfies par. (a) 1. to 5. and who receives health care coverage under a collective bargaining agreement that is in effect on January 1, 2009, is not an "eligible individual" until the day on which the collective bargaining agreement expires.

AB1140,8,25 260.05 Private Health Insurance Purchasing Corporation of Wisconsin. (1) Incorporation. The secretary of administration shall do all of the following:

AB1140,9,3 (a) Draft and file articles of incorporation for a nonstock corporation under ch. 181 and take all actions necessary to exempt the corporation from federal taxation under section 501 (c) (3) of the Internal Revenue Code.

AB1140,9,5 (b) Provide in the articles of incorporation filed under par. (a) all of the following:

AB1140,9,7 1. That the name of the corporation is the "Private Health Insurance Purchasing Corporation of Wisconsin."

AB1140,9,9 2. That the board shall consist of 8 directors who, except for the initial directors, shall be designated or appointed as follows:

AB1140,9,10 a. One designated by Wisconsin Manufacturers and Commerce.

AB1140,9,12 b. One designated by the Wisconsin State American Federation of Labor and Congress of Industrial Organizations.

AB1140,9,13 c. One designated by the Metropolitan Milwaukee Association of Commerce.

AB1140,9,15 d. One designated by the Wisconsin office of the National Federation of Independent Business.

AB1140,9,16 e. One designated by the Wisconsin Farm Bureau Federation.

AB1140,9,17 f. One designated by the SEIU Wisconsin State Council.

AB1140,9,18 g. Two designated by the governor to represent consumers.

AB1140,9,20 3. That the term of a director shall be 4 years, except that the term of an initial director shall be one year.

AB1140,9,21 4. The names and addresses of the initial directors.

AB1140,9,24 5. That 7 votes shall be necessary for adoption of any decision of the board, except for those designated categories of decisions, if any, that the board agrees to adopt by a simple majority of the votes.

AB1140,10,2 (c) In consultation with the persons charged with designating the directors under par. (b) 2. a. to g., designate the initial directors.

AB1140,10,3 (d) Draft bylaws for adoption by the board.

AB1140,10,5 (2) Duties. As a condition for the release of funds under s. 20.855 (8m) (r), the corporation shall do all of the following:

AB1140,10,9 (a) Establish, fund, and manage health insurance purchasing accounts in the manner provided in this chapter; assist eligible residents in using their accounts to purchase health care coverage; and perform all other functions required of the corporation under this chapter.

AB1140,10,11 (b) Establish an independent and binding appeals process for resolving disputes over eligibility and other determinations made by the corporation.

AB1140,10,14 (c) Keep its records open at all times to inspection and examination by the governor, the secretary of administration, any committee of either or both houses of the legislature, the legislative fiscal bureau, and the legislative audit bureau.

AB1140,10,16 (d) Keep its meetings open to the public to the extent required of governmental bodies under subch. V of ch. 19.

AB1140,10,18 (e) Cooperate with the legislative audit bureau in the performance of the audits under sub. (4).

AB1140,10,21 (f) Submit on each October 1 an annual report to the legislature under s. 13.172 (2) and to the governor regarding its activities and including any recommendations of the health care advisory committee under s. 260.40 (1) (d).

AB1140,10,25 (3) Contracts and hiring. (a) The corporation may contract with other organizations, entities, or individuals for the performance of any of its functions. With respect to contracts under this subsection, the corporation shall do all of the following:

AB1140,11,4 1. Use generally accepted procedures, which shall be in writing and open to public inspection, for soliciting bids or proposals and for awarding contracts to the lowest-bidding, qualified person or to the most qualified person submitting a proposal.