AB876: Bill Text

Analysis by the Legislative Reference Bureau

Private employer health care coverage program

Under current law, the private employer health care coverage board, attached to the department of employee trust funds (DETF), is required to design and oversee a health care coverage program for employers in the private sector. This bill requires that $850,000 in moneys received by the office of the commissioner of insurance for general program operations be used as a loan for the private employer health care coverage program. In addition, the bill authorizes DETF to seek funding from any person for the payment of costs of designing, marketing, and contracting for or providing administrative services under the private employer health care coverage program and for repaying the loan to the office of the commissioner of insurance.

Small employer catastrophic care

This bill creates a catastrophic care program for employees of small employers, which are, generally, employers with two to 50 employees. The program is to operate for five years, and is to be administered by a small employer catastrophic care board (catastrophic care board), which is attached to the office of the commissioner of insurance for administrative purposes. The catastrophic care board is composed of the commissioner of insurance (commissioner) and 10 other members who represent the medical professions, small employers, and small employer insurers, which are insurers that offer group health benefit plans to small employers. The program will operate in a limited region of the state, which must be determined and described by the commissioner by rule, but which must include Winnebago County.

Under the bill, an employee of a small employer is eligible for coverage under the program if: 1) the small employer is located in the region in which the program operates, 2) the employee is eligible for coverage under a group health benefit plan issued or renewed to the small employer, 3) the employee is determined by the small employer insurer issuing or renewing the group health benefit plan to be eligible in accordance with health status underwriting guidelines established by the catastrophic care board, 4) the small employer agrees to enroll the employee in the program, and 5) the small employer pays an additional premium for the employee's coverage under the program. If a small employer does not agree to enroll in the program an employee who is eligible for enrollment, the small employer insurer issuing or renewing the group health benefit plan to the small employer may disregard the rate restrictions in current law for small employer health insurance when determining the premium for the small employer's group health benefit plan.

The covered benefits for an employee enrolled in the program are the same as the benefits under the group health benefit plan for which the employee is eligible. The small employer insurer issuing the group health benefit plan for which the employee is eligible pays or denies payment of the employee's benefit claims. The commissioner, at the direction of the catastrophic care board, reimburses a small employer insurer for benefit claims that are properly paid for employees enrolled in the program. The program is funded by: 1) $500,000 annually from fees imposed under current law by the office of the commissioner of insurance for insurance-related services to pay for regulation of the insurance industry, 2) assessments, which must equal $500,000 annually, that are paid by all insurers authorized to sell health insurance in this state, 3) assessments that are paid by health care professionals, facilities, and organizations and that, in conjunction with health care provider payment rate discounts that the commissioner sets by rule, must equal $500,000 annually, and 4) the additional premiums that must be paid by small employers that agree to enroll under the program employees who are eligible for coverage under the program. The additional premiums, which are determined by the catastrophic care board by rule, must be calculated to cover the anticipated reimbursements to small employer insurers for benefit payments under the program to the extent that the other funding sources will not.

In addition to establishing various procedures for the operation of the program, the catastrophic care board must establish a budget every year, reconcile the program costs with the program funding every year and increase or decrease for the next fiscal year the insurer or provider assessments or provider payment rate discounts if they did not equal the required $500,000 in the previous year, and provide for a program administrator procurement process.

The bill provides that, if an employee who is enrolled in the small employer catastrophic care program loses eligibility, the employee may apply for coverage under the state's health insurance risk-sharing plan (HIRSP), which provides major medical health insurance coverage for persons who are covered under medicare because they are disabled, persons who have tested positive for HIV, and 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. The HIRSP board may, in its discretion, certify an employee who loses coverage under the small employer catastrophic care program as eligible for coverage under HIRSP even if the employee does not satisfy HIRSP's eligibility requirements. In addition, if such an employee obtains coverage under HIRSP and his or her application was received within 63 days after his or her coverage under the small employer catastrophic care program was terminated, he or she is not required to satisfy the six-month preexisting condition exclusion period that applies under HIRSP.

Small employer catastrophic reinsurance

This bill creates a catastrophic reinsurance program for small employers, which are, generally, employers with two to 50 employees. The program is to operate for five years, and is to be administered by a small employer catastrophic reinsurance board (reinsurance board), which is attached to the office of the commissioner of insurance for administrative purposes. The reinsurance board is composed of the commissioner of insurance (commissioner) and eight other members, one of whom is a physician and the rest of whom represent hospitals, small employers, and small employer insurers, which are insurers that offer group health benefit plans to small employers.

Under the program, a small employer insurer must select by December 1 every other year a threshold level of covered benefits, which may be $50,000 per calendar year, $100,000 per calendar year, $150,000 per calendar year, or $250,000 per calendar year. The threshold level selected by a small employer insurer will apply for the next two calendar years to each individual insured under every group health benefit plan issued by the small employer insurer to a small employer. If in a calendar year a small employer insurer pays benefits on behalf of an insured that exceed the threshold level selected by the small employer insurer, the commissioner, at the direction of the reinsurance board, reimburses the small employer insurer for 80% of the benefits payments that exceed the threshold level.

The reimbursements to the small employer insurers are funded by additional premium amounts paid by small employers for coverage under group health benefit plans. The additional premium amount, which is determined by a rule developed by the reinsurance board and promulgated by the commissioner, is based on a charge per covered individual that will generate sufficient funding to cover the small employer insurer reimbursements of 80% of costs over their selected threshold levels. In addition, during the program's operation, providers of health care services to employees covered under group health benefit plans issued to small employers must accept discounts to their payment rates and may not bill employees receiving the services for the difference. The payment rate discounts are set by the commissioner by rule.

State employee health care coverage

Under current law, the state is required to provide health care coverage for eligible state employees. The state must offer state employees at least two insured or uninsured health care coverage plans that provide substantially equivalent hospital and medical benefits. This bill requires the state also to offer state employees a defined contribution plan that permits employees to choose the level of premiums, deductibles, and co-payments and to select the hospital and medical benefits offered under the plan, but only if the group insurance board determines that such a defined contribution plan is available in the area of the place of employment and approves the plan.

Prescription drug rebates and reduced charges

Currently, under the program of prescription drug assistance for elderly persons, moneys from rebate agreements negotiated with prescription drug manufacturers that sell drugs for prescribed use in this state are used to reimburse pharmacies and pharmacists that are required, under the program, to charge eligible persons reduced rates for prescription drugs.

This bill authorizes the department of administration (DOA) or an entity with which DOA contracts, to assist health care providers, insurers, or self-insurers in this state or in conjunction with associations of health care providers, insurers, or self-insurers in states other than Wisconsin to negotiate with manufacturers or labelers rebate agreements or to develop in-state or multistate purchasing groups to negotiate reduced charges for prescription drugs that are produced by the manufacturers or repackaged by the labelers and sold for prescribed use. Under the bill, DOA must submit a report by January 1, 2003, that identifies: 1) the participation by health care providers, insurers, and self-insurers in negotiating rebate agreements and developing in-state or multistate purchasing groups, and 2) strategies that DOA proposes to pursue to reduce costs for prescription drugs. DOA also must submit a report by January 1, 2005, that specifies the status, including success or lack of success, in assisting health care providers, insurers, or self-insurers to negotiate rebate agreements or reduce charges for prescription drugs. Both reports must be submitted to appropriate standing committees of the legislature, to the joint committee on finance, and to the governor.

Notice of independent review

Under current law, an insured under a health benefit plan has the right to obtain, from an independent review organization certified by the commissioner of insurance, an independent review of certain denials of coverage (adverse determinations and experimental treatment determinations). Whenever an adverse determination or experimental treatment determination is made, the insurer is required to provide notice to the insured of his or her right to obtain an independent review, of how to request the review, and of the time within which the review must be requested and is required to provide a current listing of certified independent review organizations.

This bill provides that an insurer is not required to provide the notice about the independent review procedure to an insured who uses the insurer's internal grievance procedure until the insurer sends notice of the disposition of the internal grievance if the health benefit plan issued by the insurer contains a description of the procedure, including a description of the insured's right to obtain an independent review, how to request the review, the time within which the review must be requested, and how to obtain a current listing of certified independent review organizations. In addition, the insurer must provide on its explanation of benefits form a reference to the section of the policy or certificate that contains the description. (An insurer sends its explanation of benefits form to an insured after the insured has received health care services to provide information about the extent to which the insurance covered the services.)

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:

AB876, s. 1 Section 1. 15.735 of the statutes is created to read:

AB876,6,4 15.735 Same; attached boards. (1) Small employer catastrophic reinsurance board. (a) There is created a small employer catastrophic reinsurance board that is attached to the office of the commissioner of insurance under s. 15.03. The board shall consist of the commissioner of insurance and the following members:

AB876,6,7 1. Two members who represent small employers, as defined in s. 635.02 (7), and who are selected from a list of nominees submitted by the National Federation of Independent Business and Wisconsin Independent Businesses, Inc.

AB876,6,11 2. Four members who represent small employer insurers, as defined in s. 635.02 (8), 2 of whom are selected from a list of nominees submitted by the Wisconsin Association of Life and Health Insurers, Inc., and 2 of whom are selected from a list of nominees submitted by the Wisconsin Association of Health Plans.

AB876,6,13 3. One member who is a physician, as defined in s. 448.01 (5), and who is selected from a list of nominees submitted by the State Medical Society of Wisconsin.

AB876,6,15 4. One member who represents hospitals and who is selected from a list of nominees submitted by the Wisconsin Health and Hospital Association.

AB876,6,17 (b) The members under par. (a) 1. to 4. shall be appointed for 3-year terms. Any such member may be removed by the governor for just cause.

AB876,6,21 (2) Small employer catastrophic care board. (a) There is created a small employer catastrophic care board that is attached to the office of the commissioner of insurance under s. 15.03. The board shall consist of the commissioner of insurance and the following members:

AB876,6,22 1. Four members who are small employers, as defined in s. 635.02 (7).

AB876,6,23 2. Four members who are small employer insurers, as defined in s. 635.02 (8).

AB876,6,25 3. Two members who represent the medical professions, at least one of whom is a physician, as defined in s. 448.01 (5).

AB876,7,2 (b) The members under par. (a) 1. to 3. shall be appointed for 3-year terms. Any such member may be removed by the governor for just cause.

AB876, s. 2 Section 2. 16.735 of the statutes is created to read:

AB876,7,5 16.735 Negotiations for purchase of prescription drugs; rebates. (1) In this section:

AB876,7,6 (a) "Health care provider" has the meaning given in s. 146.81 (1).

AB876,7,7 (b) "Insurer" has the meaning given in s. 632.745 (15).

AB876,7,11 (c) "Labeler" means a person that receives prescription drugs from a manufacturer or wholesaler, repackages the prescription drugs for later retail sale, and has a labeler code issued by the federal food and drug administration under 21 CFR 207.20 (b).

AB876,7,13 (d) "Manufacturer" means a manufacturer of prescription drugs and includes a subsidiary or affiliate of the manufacturer.

AB876,7,14 (e) "Pharmacist" has the meaning given in s. 450.01 (15).

AB876,7,15 (f) "Prescription drug" has the meaning given in s. 450.01 (20).

AB876,7,18 (g) "Self-insurer" means an employer or labor organization acting solely or acting jointly with a labor organization or an employer to provide employee health care benefits on a self-insured basis.

AB876,7,20 (2) The department or an entity with which the department contracts may do all of the following:

AB876,7,25 (a) Assist a health care provider, insurer, or self-insurer that acts in this state or that seeks to act in conjunction with associations of health care providers, insurers, or self-insurers in states other than this state to negotiate rebate agreements with manufacturers or labelers for prescription drugs that are produced by the manufacturers or repackaged by the labelers and are sold for prescribed use.

AB876,8,6 (b) Assist a health care provider, insurer, or self-insurer to develop an in-state purchasing group or, in conjunction with associations of health care providers, insurers, or self-insurers in states other than this state, a multistate purchasing group, for the direct negotiation with prescription drug manufacturers and labelers of reduced charges for prescription drugs that are produced by the manufacturers or repackaged by the labelers and are sold for prescribed use.

AB876, s. 3 Section 3. 20.145 (1) (g) of the statutes, as affected by 2001 Wisconsin Act 16, is amended to read:

AB876,8,15 20.145 (1) (g) General program operations. The amounts in the schedule for general program operations and to transfer to the small employer catastrophic care program fund $500,000 annually, by no later than January 30, beginning in 2003 and ending in 2007. Ninety percent of all moneys received under ss. 601.31, 601.32, 601.42 (7), 601.45, and 601.47 and by the commissioner for expenses related to insurance company restructurings, except for restructurings specified in par. (h), shall be credited to this appropriation account.

AB876, s. 4 Section 4. 20.145 (1) (j) of the statutes is created to read:

AB876,8,19 20.145 (1) (j) Small employer insurer catastrophic reimbursements. All moneys received under s. 635.25 (3) (b), to reimburse small employer insurers as provided in s. 635.25 (2) (c).

AB876, s. 5 Section 5. 20.145 (1) (q) of the statutes is created to read:

AB876,8,23 20.145 (1) (q) Small employer catastrophic care program reimbursements. From the small employer catastrophic care program fund, a sum sufficient for reimbursing claims costs under s. 635.30 (6) (c).

AB876, s. 6 Section 6. 20.515 (2) (g) of the statutes is amended to read:

AB876,9,6 20.515 (2) (g) Private employer health care coverage plan. All moneys received under subch. X of ch. 40 from employers who elect to participate in the private employer health care coverage program under subch. X of ch. 40 and from any other person under s. 40.98 (2) (h), for the costs of designing, marketing , and contracting for or providing administrative services for the program and for lapsing to the general fund the amounts required under s. 40.98 (6m).

AB876, s. 7 Section 7. 25.17 (1) (pd) of the statutes is created to read:

AB876,9,8 25.17 (1) (pd) Small employer catastrophic care program fund (s. 25.57);

AB876, s. 8 Section 8. 25.57 of the statutes is created to read:

AB876,9,12 25.57 Small employer catastrophic care program fund. There is established a separate nonlapsible trust fund designated as the small employer catastrophic care program fund, to consist of:

AB876,9,13 (1) The moneys transferred under s. 20.145 (1) (g).

AB876,9,14 (2) Insurer assessments established under s. 635.30 (3) (a) 2.

AB876,9,15 (3) Provider assessments established under s. 635.30 (3) (a) 3.

AB876,9,16 (4) Premiums established under s. 635.30 (3) (a) 4.

AB876, s. 9 Section 9. 40.51 (6) of the statutes is renumbered 40.51 (6) (a) and amended to read:

AB876,9,24 40.51 (6) (a) This Except as provided in par. (b), the state shall offer to all of its employees at least 2 insured or uninsured health care coverage plans providing substantially equivalent hospital and medical benefits, including a health maintenance organization or a preferred provider plan, if those health care plans are determined by the group insurance board to be available in the area of the place of employment and are approved by the group insurance board.

AB876, s. 10 Section 10. 40.51 (6) (b) of the statutes is created to read:

AB876,10,7 40.51 (6) (b) Notwithstanding s. 40.03 (6) (c), in addition to the health care coverage plans offered under par. (a), the state shall also offer to all of its employees a defined contribution plan that permits employees to choose the level of premiums, deductibles, and co-payments and to select the hospital and medical benefits offered under the plan, but only if the group insurance board determines that such a defined contribution plan is available in the area of the place of employment and approves the plan.

AB876, s. 11 Section 11. 40.98 (2) (h) of the statutes is created to read:

AB876,10,14 40.98 (2) (h) The department may seek funding from any person for the payment of costs of designing, marketing, and contracting for or providing administrative services under the health care coverage program and for lapsing to the general fund any amount required under sub. (6m). Any moneys received by the department under this paragraph shall be credited to the appropriation account under s. 20.515 (2) (g).

AB876, s. 12 Section 12. 40.98 (6m) of the statutes is created to read:

AB876,10,24 40.98 (6m) The secretary of administration shall lapse from the appropriation under s. 20.515 (2) (g) to the general fund the amounts necessary to repay the loan under s. 601.34 when the secretary of administration, after consulting with the board, determines that funds in the appropriation under s. 20.515 (2) (g) are sufficient to make the lapse. The amounts that are required to be lapsed under s. 20.515 (2) (g) shall equal the amount necessary to pay all principal and interest costs on the loan, less any amount that is lapsed to the general fund under s. 20.515 (2) (a) at the end of the 2001-03 fiscal biennium. The secretary of administration may lapse the amounts under s. 20.515 (2) (g) in installments.

AB876, s. 13 Section 13. 149.12 (1) (intro.) of the statutes is amended to read:

AB876,11,8 149.12 (1) (intro.) Except as provided in subs. (1m) and, (2), and (4), the board or plan administrator shall certify as eligible a person who is covered by medicare because he or she is disabled under 42 USC 423, a person who submits evidence that he or she has tested positive for the presence of HIV, antigen or nonantigenic products of HIV, or an antibody to HIV, a person who is an eligible individual, and any person who receives and submits any of the following based wholly or partially on medical underwriting considerations within 9 months prior to making application for coverage by the plan:

AB876, s. 14 Section 14. 149.12 (4) of the statutes is created to read:

AB876,11,17 149.12 (4) Notwithstanding subs. (1) to (3), the board may, in its discretion, certify as eligible for coverage under the plan a person who applies for coverage after his or her enrollment in the program under s. 635.30 is terminated under s. 635.30 (4) (b), regardless of whether the person satisfies the eligibility requirements under subs. (1) to (3). The board shall determine whether a person who obtains coverage under the plan under this subsection and who does not satisfy the eligibility requirements under subs. (1) to (3) may remain covered under the plan after the program under s. 635.30 is no longer in operation.

AB876, s. 15 Section 15. 149.14 (6) (a) of the statutes is amended to read:

AB876,11,23 149.14 (6) (a) Except as provided in par. pars. (b) and (c), no person who obtains coverage under the plan may be covered for any preexisting condition during the first 6 months of coverage under the plan if the person was diagnosed or treated for that condition during the 6 months immediately preceding the filing of an application with the plan.

AB876, s. 16 Section 16. 149.14 (6) (c) of the statutes is created to read:

AB876,12,5 149.14 (6) (c) A person who obtains coverage under the plan under s. 149.12 (4) and whose application for coverage was received within 63 after his or her enrollment in the program under s. 635.30 was terminated under s. 635.30 (4) (b), may not be subject to any preexisting condition exclusion under the plan, as provided in s. 635.30 (4) (b).

AB876, s. 17 Section 17. 601.34 of the statutes is created to read:

AB876,12,21 601.34 Loan to general fund. No later than the first day of the 2nd month after the effective date of this section .... [revisor inserts date], an amount equal to $850,000 shall be lapsed from the appropriation account under s. 20.145 (1) (g) to the general fund. The amount lapsed from the appropriation account shall be considered a loan to the general fund and interest shall accrue on the amount lapsed at the average rate earned by the state on its deposits in the state investment fund during the period of the loan. The general fund shall repay the loan from moneys lapsed to the general fund from the appropriation under s. 20.515 (2) (a) at the end of the 2001-03 fiscal biennium, if any, and from moneys lapsed to the general fund from the appropriation under s. 20.515 (2) (g) in the amounts specified in s. 40.98 (6m). If the secretary of administration determines that the moneys lapsed from these appropriations will not be sufficient to repay the loan within a reasonable period of time, as determined by the secretary and the commissioner, the secretary shall credit the appropriation account under s. 20.145 (1) (g) from moneys in the general fund an amount sufficient to repay the loan.

AB876, s. 18 Section 18. 632.835 (2) (b) of the statutes, as created by 1999 Wisconsin Act 155, is amended to read:

AB876,13,6 632.835 (2) (b) Whenever If an adverse determination or an experimental treatment determination is made, the insurer involved in the determination shall provide notice to the insured of the insured's right to obtain the independent review required under this section, how to request the review, and the time within which the review must be requested. The notice shall include a current listing of independent review organizations certified under sub. (4). An independent review under this section may be conducted only by an independent review organization certified under sub. (4) and selected by the insured.

AB876, s. 19 Section 19. 632.835 (2) (bg) of the statutes is created to read:

AB876,13,11 632.835 (2) (bg) Notwithstanding par. (b), an insurer is not required to provide the notice under par. (b) to an insured who uses the internal grievance procedure under s. 632.83 until the insurer sends it notice of the disposition of the internal grievance if all of the following apply:

AB876,13,16 1. The health benefit plan issued by the insurer contains a description of the independent review procedure under this section, including an explanation of the insured's rights under par. (d), how to request the review, the time within which the review must be requested, and how to obtain a current listing of independent review organizations certified under sub. (4).

AB876,13,19 2. The insurer includes on its explanation of benefits form a reference to the section of the policy or certificate that contains the description of the independent review procedure.