AB844: Bill Text

LRB-3798/2

PJK&JK:wlj/lk/kf:pg

2005 - 2006 LEGISLATURE

2005 Assembly BILL 844

November 23, 2005 - Introduced by Representatives Nischke, Gielow, Rhoades, Gard, Huebsch, Kreuser, Sheridan, Montgomery, McCormick, Lehman, Ballweg, Moulton, Van Roy, Underheim, Nelson, Stone, Jensen, J. Fitzgerald, Hahn, Molepske, Gottlieb, Hundertmark, Honadel, Shilling, Krawczyk, Seidel, Sinicki, Boyle, Vruwink and Townsend, cosponsored by Senators Kapanke, Brown, Darling, Schultz, S. Fitzgerald, Taylor, Olsen, Roessler, Jauch, Hansen, Lazich and Plale. Referred to Committee on Insurance.

AB844,3,2 An Act to repeal 20.435 (4) (u), 20.435 (4) (v), 25.17 (1) (gf), 25.55 (intro.), 149.10 (2m), 149.10 (10), 149.12 (3) (c), 149.14 (3) (c) 2., 149.14 (4c), 149.14 (5) (d), 149.14 (5) (e), 149.14 (5m), 149.14 (6) (a), 149.14 (8), 149.142 (1) (b), 149.142 (2), 149.144, 149.145, 149.146 (2) (am), 149.146 (2) (b), 149.15, 149.16, 149.165 (4), 149.17 (2), 149.17 (4), 149.175, 149.20, 149.25 and 149.40; to renumber 149.14 (3) (p) and 149.14 (6) (b); to renumber and amend 25.55 (3), 25.55 (4), 149.12 (2) (f), 149.14 (4m), 149.142 (1) (a) and 149.146 (2) (a); to consolidate, renumber and amend 149.146 (1) (a) and (b); to amend 1.12 (1) (b), 13.172 (1), 13.62 (2), 13.94 (1) (b), 13.94 (1) (g), 13.95 (intro.), 16.002 (2), 16.004 (4), 16.004 (5), 16.004 (12) (a), 16.045 (1) (a), 16.15 (1) (ab), 16.41 (4), 16.417 (1) (a), 16.52 (7), 16.528 (1) (a), 16.53 (2), 16.54 (9) (a) 1., 16.70 (2), 16.72 (2) (e) (intro.), 16.72 (2) (f), 16.75 (1m), 16.75 (8) (a) 1., 16.75 (8) (a) 2., 16.75 (9), 16.765 (1), 16.765 (2), 16.765 (4), 16.765 (5), 16.765 (6), 16.765 (7) (intro.), 16.765 (7) (d), 16.765 (8), 16.85 (2), 16.865 (8), 71.21 (4), 71.26 (2) (a), 71.34 (1) (g), 71.45 (2) (a) 10., 76.67 (2), 77.92 (4), 101.055 (2) (a), 101.177 (1) (d), chapter 149 (title), 149.10 (intro.), 149.10 (2), 149.10 (2j) (a) 3., 149.10 (2t) (c), 149.10 (3), 149.10 (3e), 149.10 (7), 149.10 (8), 149.10 (9), 149.115, 149.12 (1) (intro.), 149.12 (1) (a), 149.12 (1m), 149.12 (3) (a), 149.13 (1), 149.13 (3) (a), 149.13 (3) (b), 149.13 (4), 149.14 (1) (a), 149.14 (2) (a), 149.14 (3) (intro.), 149.14 (3) (c) 3., 149.14 (3) (c) 3., 149.14 (3) (d), 149.14 (3) (e), 149.14 (3) (m), 149.14 (3) (o), 149.14 (4) (d), 149.14 (4) (m), 149.14 (5) (b), 149.14 (5) (c), 149.14 (7) (b), 149.14 (7) (c), 149.165 (1), 149.165 (2) (a) (intro.), 149.165 (2) (bc), 149.165 (3) (a), 149.165 (3) (b) (intro.), 149.165 (3m), 149.17 (1), 149.18, 230.03 (3), 230.80 (4), 601.41 (1), 601.415 (12), 601.64 (1), 601.64 (3) (a), 601.64 (3) (c), 601.64 (4), 613.03 (4), 632.785 (title) and 895.65 (1) (c); to repeal and recreate 149.11, 149.14 (3) (b), 149.14 (3) (c) 1., 149.14 (4), 149.14 (5) and 149.143; and to create 13.94 (1) (dh), 20.145 (5), 71.07 (5g), 71.10 (4) (cp), 71.28 (5g), 71.30 (3) (dm), 71.47 (5g), 71.49 (1) (dm), 76.655, subchapter I (title) of chapter 149 [precedes 149.10], 149.10 (1), 149.105, subchapter II (title) of chapter 149 [precedes 149.11], 149.12 (2) (f) 2., 149.12 (2) (g), 149.12 (4) and (5), 149.14 (3) (f), 149.141, subchapter III of chapter 149 [precedes 149.40], subchapter IV of chapter 149 [precedes 149.60] and 631.20 (2) (f) of the statutes; relating to: the Health Insurance Risk-Sharing Plan; creating the Health Insurance Risk-Sharing Plan Authority; a health benefit program for persons eligible for tax credits for payment of premiums; an income and franchise tax credit for Health Insurance Risk-Sharing Plan assessments; and making an appropriation.

Analysis by the Legislative Reference Bureau

Background of Health Insurance Risk-Sharing Plan

The Health Insurance Risk-Sharing Plan (HIRSP) under current law provides major medical health insurance coverage for persons who are covered under Medicare because they are disabled, persons who have tested positive for human immunodeficiency virus (HIV), persons who have been refused coverage, or coverage at an affordable price, in the private health insurance market because of their mental or physical health condition, as well as persons (called "eligible individuals" in the statutes) who do not currently have health insurance coverage, but who were covered under certain types of health insurance coverage (called creditable coverage) for at least 18 months in the past. HIRSP is funded by premiums paid by covered persons, insurer assessments, and provider payment discounts, and is administered by the Department of Health and Family Services (DHFS), a board of governors, and a plan administrator.

Creation of Health Insurance Risk-Sharing Plan Authority

This bill creates the Health Insurance Risk-Sharing Plan Authority (HIRSP Authority) for the primary purpose of assuming the administration of HIRSP, beginning on July 1, 2006. An authority is a public body with a board of directors that is created by state law but that is not a state agency. The board of directors of the HIRSP Authority consists of the commissioner of insurance (commissioner), or the commissioner's designee, as a nonvoting member and 13 other members who are appointed by the governor, with the advice and consent of the senate, for three-year terms. These 13 members must include persons with coverage under HIRSP and representatives of insurers, health care providers, and small businesses. The board may appoint an executive director, who may not be a member of the board.

Because the HIRSP Authority is not a state agency, numerous laws that apply to state agencies do not apply to the HIRSP Authority. However, the HIRSP Authority is treated like a state agency in the following respects, among others: 1) it is generally subject to the open records and open meetings laws; 2) it is treated like a state agency for purposes of the law regulating lobbying; 3) its employees may not engage in political activities while engaged in official duties; 4) it must use a competitive bid or proposal process whenever contracting for professional services; and 5) the Code of Ethics for Public Officials and Employees covers the HIRSP Authority.

The HIRSP Authority is unlike a state agency in many other ways, including: 1) it approves its own budget without going through the state budgetary process; 2) its employees are not state employees, are not included in the state system of personnel management, may not participate in the system for state retirement benefits or health insurance coverage, and are hired outside the state hiring system; 3) it is not subject to statutory rule-making procedures, including requirements for legislative review of proposed rules; and 4) although HIRSP is subject to an annual financial audit by the Legislative Audit Bureau, the HIRSP Authority is not subject to auditing by the Legislative Audit Bureau.

Unlike most other authorities under current law, the HIRSP Authority may not issue bonds. It pays the administrative and operating expenses of HIRSP, as under current law, through premiums paid by persons with coverage under HIRSP, insurer assessments, and provider payment discounts. The HIRSP Authority must annually submit a report to the legislature and to the governor on the operation of HIRSP.

Changes to the Health Insurance Risk-Sharing Plan

This bill makes a number of changes to HIRSP, including the following:

1. Administration. Under current law, HIRSP is administered by DHFS, a board of governors, and a plan administrator under contract with DHFS. Effective July 1, 2006, the bill eliminates the HIRSP board of governors and transfers administrative authority over HIRSP from DHFS to the HIRSP Authority and its board of directors. The bill requires DHFS to terminate its contract with the plan administrator, effective July 1, 2006, and requires the HIRSP Authority to enter into an identical contract with the same plan administrator with a beginning date of July 1, 2006, and an ending date that is the same as the ending date of the original contract between DHFS and the plan administrator. Because the bill authorizes the HIRSP Authority to enter into contracts for the administration of HIRSP, after the end of its contract with the current plan administrator, it may contract with the same or a different plan administrator, but must use a competitive request-for-proposals process to do so.

2. Eligibility. To be eligible for HIRSP, a person must be a state resident. The bill changes from 30 days to three months the length of time that a person must be domiciled in this state to be considered a state resident for purposes of HIRSP eligibility.

In general, a person who is eligible for Medical Assistance (MA) is not eligible for HIRSP. The bill provides that persons who are eligible for only certain limited services provided under MA, such as family planning services for low-income women and payment of Medicare premiums, deductibles, and coinsurance for persons eligible for Medicare who meet the income and resource limitations, are not ineligible for HIRSP coverage because of their eligibility for only those MA services. The bill provides, however, that HIRSP will not pay for services that are reimbursed under MA. The bill also specifically provides that persons who are eligible for certain listed programs or benefits, such as the Badger Care Health Care Program and Long-Term Support Community Options Program, are ineligible for HIRSP coverage.

Under current law, a person who is rejected for health insurance coverage by one or more insurers within nine months of applying for HIRSP coverage is eligible for HIRSP. The bill changes that requirement to two or more insurers.

The bill adds Medicare Part D, which is the prescription drug benefit under Medicare, to the definition of Medicare for purposes of HIRSP. Thus, a person who is eligible for HIRSP based on their coverage under Medicare because they are disabled would be eligible for HIRSP coverage if they had coverage under Medicare Part D. In addition, HIRSP does not pay for benefits that are paid for by Medicare, so HIRSP would not pay for prescription drugs covered under the person's Medicare Part D coverage.

3. Benefit design. Benefits provided by HIRSP, as well as deductibles and out-of-pocket limits, are specified in the statutes. Except for eligible individuals, who are not subject to any preexisting condition exclusion, a condition that a person was diagnosed with or treated for within six months of obtaining coverage under HIRSP is excluded from coverage for the first six months. Current law authorizes DHFS to establish copayments and out-of-pocket limits for prescription drug coverage. The bill retains all current law benefits, deductibles, copayments, out-of-pocket limits, and the preexisting condition exclusion through December 31, 2006. Beginning on January 1, 2007, benefits are modified somewhat, mostly by limiting the extent of certain benefits to the extent that commercial insurers are required to provide under the statutes known as health insurance mandates, and coverage for the services of a home health agency, to the extent required by the health insurance mandate, is added. No benefits are eliminated. Also beginning on that date, the HIRSP Authority is authorized to establish deductibles, copayments, coinsurance, limitations, and, except for eligible individuals, exclusions that are not specified in the statutes, and to develop additional benefit designs that are responsive to market conditions. The Office of the Commissioner of Insurance (OCI) may disapprove any policy developed by the HIRSP Authority if the benefit design is not comparable to a typical comprehensive individual health insurance policy in the private market, the benefit levels do not generally reflect comprehensive individual health insurance in the private market, or the deductibles, copayments, or coinsurance are not actuarially equivalent to comprehensive individual health insurance in the private market or would create undue financial hardship.

4. Payment of plan costs. Current law sets out a complex formula for payment of the administrative and operating expenses of HIRSP. In general, premiums must be set at a rate that pays for 60 percent of costs and may not exceed 200 percent of the rate a standard risk would be charged for the same coverage and deductibles. Insurer assessments and provider payment discounts must each pay for half of the remaining 40 percent of costs. The bill eliminates the formula but retains the requirements that premiums must be set at a rate to pay for 60 percent of costs, excluding premium, deductible, and copayment subsidy costs (subsidy costs), and may not exceed 200 percent of rates applicable to standard risks, that insurer assessments must be set at an amount to cover 20 percent of costs, excluding subsidy costs, and that provider payment discounts must be set at a rate to cover 20 percent of costs, excluding subsidy costs. Subsidy costs are to be paid first from any federal high risk pool grant funds that are received by OCI, and the remainder of subsidy costs are paid equally through insurer assessments and provider payment discounts. If federal high risk pool grant funds received in a year exceed subsidy costs in that year, the excess federal funds must be used to pay the administrative and operating costs before premiums, insurer assessments, and provider discounts are applied to the costs.

5. Subsidies. Under current law, generally, persons with coverage under HIRSP who have household incomes below $25,000 receive premium and deductible subsidies and may receive prescription drug copayment subsidies. For a person who is eligible for a subsidy, the statutes set out, on the basis of the person's household income category, the specific deductible amount that the person must pay and the premium rate that the person must pay as a percentage of the rate that a standard risk would be charged for the same coverage and deductibles. The bill retains the subsidies and makes no changes to the categories of persons who are eligible for subsidies and no changes to the standard risk rates that are the basis for premium reductions. Beginning on January 1, 2007, however, the specific reduced deductible amounts are eliminated and the HIRSP Authority is directed to establish and provide deductible subsidies for those persons paying reduced deductibles under current law and is authorized to provide prescription drug copayment subsidies for those same persons.

Health Care Tax Credit Program

The federal Trade Adjustment Assistance Reform Act of 2002 (TAA) provides, among other benefits related to employment, a federal income tax credit for up to 65 percent of the amount of the premium paid by eligible persons for coverage for themselves and their dependents under qualified health insurance. Eligible persons are those who are eligible for TAA employment-related benefits because they have lost their jobs or experienced reduced work hours and wages because of increased imports and those who are at least 55 years of age and receiving benefits from the Pension Benefit Guaranty Corporation. The bill requires the HIRSP Authority to design and administer, as long as the federal income tax credit is available, a plan of health care coverage that satisfies the requirements for qualified health insurance for coverage of persons who are eligible for the tax credit.

Assessment Credits

The bill creates an income and franchise tax credit and a license fee credit for insurers that pay assessments to OCI. The amount of the credit is equal to a percentage of the amount of the assessment that the insurer paid in the calendar year in which the insurer's taxable year begins. The Department of Revenue and OCI determine the percentage of the amount that each insurer may claim in each taxable year so that the total amount of the credits awarded to all insurers in each fiscal year is approximately $5,000,000. Although the credits apply to taxable years beginning after December 31, 2005, the credits awarded for the 2006 and 2007 taxable years may not be claimed until taxable years beginning after December 31, 2007.

For further information see the state and local 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:

AB844, s. 1 Section 1. 1.12 (1) (b) of the statutes is amended to read:

AB844,7,6 1.12 (1) (b) "State agency" means an office, department, agency, institution of higher education, the legislature, a legislative service agency, the courts, a judicial branch agency, an association, society, or other body in state government which that is created or authorized to be created by the constitution or by law, for which appropriations are made by law, excluding the Health Insurance Risk-Sharing Plan Authority.

AB844, s. 2 Section 2. 13.172 (1) of the statutes is amended to read:

AB844,7,12 13.172 (1) In this section, "agency" means an office, department, agency, institution of higher education, association, society, or other body in state government created or authorized to be created by the constitution or any law, which that is entitled to expend moneys appropriated by law, including the legislature and the courts, and any authority created in subch. III of ch. 149 or in ch. 231, 233, or 234.

AB844, s. 3 Section 3. 13.62 (2) of the statutes is amended to read:

AB844,7,17 13.62 (2) "Agency" means any board, commission, department, office, society, institution of higher education, council, or committee in the state government, or any authority created in subch. III of ch. 149 or in ch. 231, 232, 233, 234, or 237, except that the term does not include a council or committee of the legislature.

AB844, s. 4 Section 4. 13.94 (1) (b) of the statutes is amended to read:

AB844,8,9 13.94 (1) (b) Audit the records of every state department, board, commission, independent agency, or authority, excluding the Health Insurance Risk-Sharing Plan Authority, at least once each 5 years and audit the records of other departments as defined in sub. (4) when the state auditor deems it advisable or when he or she is so directed and, in conjunction therewith, reconcile the records of the department audited with those of the department of administration. Audits of the records of a county, city, village, town, or school district may be performed only as provided in par. (m). Within 30 days after completion of any such audit, the bureau shall file with the chief clerk of each house of the legislature, the governor, the department of administration, the legislative reference bureau, the joint committee on finance, the legislative fiscal bureau, and the department audited, a detailed report thereof, including its recommendations for improvement and efficiency and including specific instances, if any, of illegal or improper expenditures. The chief clerks shall distribute the report to the joint legislative audit committee, the appropriate standing committees of the legislature, and the joint committee on legislative organization.

AB844, s. 5 Section 5. 13.94 (1) (dh) of the statutes is created to read:

AB844,8,13 13.94 (1) (dh) Notwithstanding par. (b), annually conduct a financial audit of the Health Insurance Risk-Sharing Plan under subch. II of ch. 149 and file copies of each audit report under this paragraph with the distributees specified in par. (b).

AB844, s. 6 Section 6. 13.94 (1) (g) of the statutes is amended to read:

AB844,8,25 13.94 (1) (g) Require each state department, board, commission, independent agency, or authority, excluding the Health Insurance Risk-Sharing Plan Authority, to file with the bureau on or before September 1 of each year a report on all receivables due the state as of the preceding June 30 which were occasioned by activities of the reporting unit. The report may also be required of other departments, except counties, cities, villages, towns, and school districts. The report shall show the aggregate amount of such receivables according to fiscal year of origin and collections thereon during the fiscal year preceding the report. The state auditor may require any department to file with the bureau a detailed list of the receivables comprising the aggregate amounts shown on the reports prescribed by this paragraph.

AB844, s. 7 Section 7. 13.95 (intro.) of the statutes, as affected by 2005 Wisconsin Act 25, is amended to read:

AB844,9,14 13.95 Legislative fiscal bureau. (intro.) There is created a bureau to be known as the "Legislative Fiscal Bureau" headed by a director. The fiscal bureau shall be strictly nonpartisan and shall at all times observe the confidential nature of the research requests received by it; however, with the prior approval of the requester in each instance, the bureau may duplicate the results of its research for distribution. Subject to s. 230.35 (4) (a) and (f), the director or the director's designated employees shall at all times, with or without notice, have access to all state agencies, the University of Wisconsin Hospitals and Clinics Authority, the Health Insurance Risk-Sharing Plan Authority, and the Fox River Navigational System Authority, and to any books, records, or other documents maintained by such agencies or authorities and relating to their expenditures, revenues, operations, and structure.

AB844, s. 8 Section 8. 16.002 (2) of the statutes is amended to read:

AB844,9,20 16.002 (2) "Departments" means constitutional offices, departments, and independent agencies and includes all societies, associations, and other agencies of state government for which appropriations are made by law, but not including authorities created in subch. III of ch. 149 and in chs. 231, 232, 233, 234, 235, and 237.

AB844, s. 9 Section 9. 16.004 (4) of the statutes is amended to read: