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1995 - 1996 LEGISLATURE
ASSEMBLY SUBSTITUTE AMENDMENT 1,
To 1995 ASSEMBLY BILL 416
May 30, 1995 - Offered by Representative Robson.
AB416-ASA1,1,13 1An Act to repeal subchapter I of chapter 635 [precedes 635.01], subchapter II
2(title) of chapter 635 [precedes 635.20] and 635.26 (1s); to amend 15.735 (1),
3111.70 (1) (a), 185.981 (4t), 185.983 (1) (intro.), 185.983 (1g), 600.01 (2) (b),
4619.12 (1) (intro.), 619.12 (2) (e) 2. (intro.), 619.12 (2) (e) 2. b., 625.03 (6), 625.12
5(2), 625.15 (1), 625.22 (1), 625.22 (4), 628.36 (2) (b) 1., 3. and 5., 631.01 (4),
6632.70, 632.76 (2) (a), 632.896 (4), 632.897 (2) (d), 632.897 (9) (c), chapter 635
7(title), 635.20 (intro.), 635.20 (10), 635.25 (1) (a) (intro.), 635.25 (1) (b), 635.25
8(1m), 635.254 (1), 635.254 (3), 635.28, 635.29, 635.31 and 646.35 (5); to repeal
9and recreate
635.20 (1c), 635.20 (1m) and 635.20 (13); and to create 20.145
10(1) (h), 111.70 (4) (m), 601.424, 628.34 (3) (c), 632.727, 632.745, 632.746,
11632.7465, 632.747, 632.748, 632.749 and 632.83 of the statutes; relating to:
12health insurance market reform, granting rule-making authority and making
13an appropriation.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB416-ASA1, s. 1 14Section 1. 15.735 (1) of the statutes is amended to read:
AB416-ASA1,2,10
115.735 (1) Small employer insurance board. There is created a small employer
2insurance board which is attached to the office of the commissioner of insurance
3under s. 15.03. The board shall consist of 11 members. Notwithstanding s. 15.07 (2)
4(intro.), one member shall be the commissioner of insurance, or his or her designee,
5who shall be a nonvoting member and who shall serve permanently as chairperson
6of the board. The other 10 members shall be nominated by the governor, and with
7the advice and consent of the senate appointed, for 3-year terms. Five members shall
8represent employers that are eligible to participate in the plan under subch. II of ch.
9635, and 5 members shall represent employes of employers that are eligible to
10participate in the plan under subch. II of ch. 635.
AB416-ASA1, s. 2 11Section 2. 20.145 (1) (h) of the statutes is created to read:
AB416-ASA1,2,1412 20.145 (1) (h) Risk adjustment mechanism. All moneys received from risk
13adjustment assessments against health insurers for risk adjustment
14reimbursements to health insurers under rules promulgated under s. 632.747 (4).
AB416-ASA1, s. 3 15Section 3. 111.70 (1) (a) of the statutes is amended to read:
AB416-ASA1,3,1116 111.70 (1) (a) "Collective bargaining" means the performance of the mutual
17obligation of a municipal employer, through its officers and agents, and the
18representatives of its employes, to meet and confer at reasonable times, in good faith,
19with the intention of reaching an agreement, or to resolve questions arising under
20such an agreement, with respect to wages, hours and conditions of employment, and
21with respect to a requirement of the municipal employer for a municipal employe to
22perform law enforcement and fire fighting services under s. 61.66, except as provided
23in sub. (4) (m) and s. 40.81 (3) and except that a municipal employer shall not meet
24and confer with respect to any proposal to diminish or abridge the rights guaranteed
25to municipal employes under ch. 164. The duty to bargain, however, does not compel

1either party to agree to a proposal or require the making of a concession. Collective
2bargaining includes the reduction of any agreement reached to a written and signed
3document. The employer shall not be required to bargain on subjects reserved to
4management and direction of the governmental unit except insofar as the manner
5of exercise of such functions affects the wages, hours and conditions of employment
6of the employes. In creating this subchapter the legislature recognizes that the
7public employer must exercise its powers and responsibilities to act for the
8government and good order of the municipality, its commercial benefit and the
9health, safety and welfare of the public to assure orderly operations and functions
10within its jurisdiction, subject to those rights secured to public employes by the
11constitutions of this state and of the United States and by this subchapter.
AB416-ASA1, s. 4 12Section 4. 111.70 (4) (m) of the statutes is created to read:
AB416-ASA1,3,1613 111.70 (4) (m) Health insurance market reform requirements. A municipal
14employer that is an employer under the definition specified in s. 632.745 (1) (b) 2. is
15prohibited from bargaining collectively with respect to the health insurance
16requirements under ss. 632.745 to 632.749.
AB416-ASA1, s. 5 17Section 5. 185.981 (4t) of the statutes is amended to read:
AB416-ASA1,3,2018 185.981 (4t) A sickness care plan operated by a cooperative association is
19subject to ss. 252.14, 631.89, 632.72 (2), 632.745 to 632.749, 632.87 (2m), (3), (4) and
20(5), 632.895 (10) and 632.897 (10) and ch. 155.
AB416-ASA1, s. 6 21Section 6. 185.983 (1) (intro.) of the statutes is amended to read:
AB416-ASA1,4,222 185.983 (1) (intro.)  Every such voluntary nonprofit sickness care plan shall be
23exempt from chs. 600 to 646, with the exception of ss. 601.04, 601.13, 601.31, 601.41,
24601.42, 601.43, 601.44, 601.45, 611.67, 619.04, 628.34 (10), 631.89, 631.93, 632.72
25(2), 632.745 to 632.749, 632.775, 632.79, 632.795, 632.87 (2m), (3), (4) and (5),

1632.895 (5), (9) and (10), 632.896 and 632.897 (10), subch. II of ch. 619 and chs. 609,
2630, 635, 645 and 646, but the sponsoring association shall:
AB416-ASA1, s. 7 3Section 7. 185.983 (1g) of the statutes is amended to read:
AB416-ASA1,4,74 185.983 (1g) A cooperative association that is a small employer insurer, as
5defined in s. 635.02 (8) 635.20 (13), is subject to the health insurance mandates, as
6defined in s. 601.423 (1), to the same extent as any other small employer insurer, as
7defined in s. 635.02 (8) 635.20 (13).
AB416-ASA1, s. 8 8Section 8. 600.01 (2) (b) of the statutes is amended to read:
AB416-ASA1,4,109 600.01 (2) (b) Group or blanket insurance described in sub. (1) (b) 3. and 4. is
10not exempt from ss. 632.745 to 632.749 or ch. 633 or 635.
AB416-ASA1, s. 9 11Section 9. 601.424 of the statutes is created to read:
AB416-ASA1,4,18 12601.424 Reports on market reform impact on the health insurance
13risk-sharing plan.
The commissioner shall study the effects of the health
14insurance market reforms under ss. 632.745 to 632.749 on enrollment under, and
15other aspects of, the health insurance risk-sharing plan under subch. II of ch. 619.
16The commissioner shall annually submit a report on the effects and any
17recommendations to the legislature under s. 13.172 (2) commencing on October 1,
181997.
AB416-ASA1, s. 10 19Section 10. 619.12 (1) (intro.) of the statutes is amended to read:
AB416-ASA1,5,220 619.12 (1) (intro.) Except as provided in subs. (1m) and (2) to (3), the board or
21administering carrier shall certify as eligible a person who is covered by medicare
22because he or she is disabled under 42 USC 423, a person who submits evidence that
23he or she has tested positive for the presence of HIV, antigen or nonantigenic
24products of HIV or an antibody to HIV, and any person who receives and submits any

1of the following based wholly or partially on medical underwriting considerations
2within 9 months prior to making application for coverage by the plan:
AB416-ASA1, s. 11 3Section 11. 619.12 (2) (e) 2. (intro.) of the statutes is amended to read:
AB416-ASA1,5,64 619.12 (2) (e) 2. (intro.) Subdivision 1 does not apply to a person who is eligible
5for health care benefits under the small employer health insurance plan under
6subch. II of ch. 635 if all of the following apply:
AB416-ASA1, s. 12 7Section 12. 619.12 (2) (e) 2. b. of the statutes is amended to read:
AB416-ASA1,5,108 619.12 (2) (e) 2. b. The board determines that the coverage under the small
9employer health insurance plan under subch. II of ch. 635 is not substantially
10equivalent to or greater than the coverage under the plan.
AB416-ASA1, s. 13 11Section 13. 625.03 (6) of the statutes is amended to read:
AB416-ASA1,5,1412 625.03 (6) Group and blanket accident and sickness insurance other than
13credit accident and sickness insurance, except as provided in s. 625.22 with regard
14to s. 632.746 and any rules promulgated under s. 632.7465
.
AB416-ASA1, s. 14 15Section 14. 625.12 (2) of the statutes is amended to read:
AB416-ASA1,5,2516 625.12 (2) Classification. Risks Subject to s. 632.746 and any rules
17promulgated under s. 632.7465, risks
may be classified in any reasonable way for the
18establishment of rates and minimum premiums, except that no such classifications
19may be based on race, color, creed or national origin, and classifications in automobile
20insurance may not be based on physical condition or developmental disability as
21defined in s. 51.01 (5). Subject to s. ss. 632.365 and 632.746 and any rules
22promulgated under s. 632.7465
, rates thus produced may be modified for individual
23risks in accordance with rating plans or schedules that establish reasonable
24standards for measuring probable variations in hazards, expenses, or both. Rates
25may also be modified for individual risks under s. 625.13 (2).
AB416-ASA1, s. 15
1Section 15. 625.15 (1) of the statutes is amended to read:
AB416-ASA1,6,102 625.15 (1) Rate making. An insurer may itself establish rates and
3supplementary rate information for one or more market segments based on the
4factors in s. 625.12 and, subject to s. 632.365 if the rates are for motor vehicle liability
5insurance, subject to s. 632.365, or s. 632.746 and any rules promulgated under s.
6632.7465 if the rates are for health benefit plans, as defined in s. 632.745 (1) (d). In
7the alternative,
the insurer may use rates and supplementary rate information
8prepared by a rate service organization, with average expense factors determined by
9the rate service organization or with such modification for its own expense and loss
10experience as the credibility of that experience allows.
AB416-ASA1, s. 16 11Section 16. 625.22 (1) of the statutes is amended to read:
AB416-ASA1,6,1512 625.22 (1) Order in event of violation. If the commissioner finds after a
13hearing that a rate is not in compliance with s. 625.11 or 632.746 or rules
14promulgated under s. 632.7465
, the commissioner shall order that its use be
15discontinued for any policy issued or renewed after a date specified in the order.
AB416-ASA1, s. 17 16Section 17. 625.22 (4) of the statutes is amended to read:
AB416-ASA1,7,217 625.22 (4) Interim rates. Whenever an insurer has no legally effective rates
18as a result of the commissioner's disapproval of rates or other act, the commissioner
19shall on request specify interim rates for the insurer that are high enough to protect
20the interests of all parties, and that comply with s. 632.746 and any rules
21promulgated under s. 632.7465 if the rates are for health benefit plans, as defined
22in s. 632.745 (1) (d),
and may order that a specified portion of the premiums be placed
23in an escrow account approved by the commissioner. When new rates become legally
24effective, the commissioner shall order the escrowed funds or any overcharge in the

1interim rates to be distributed appropriately, except that refunds to policyholders
2that are trifling shall not be required.
AB416-ASA1, s. 18 3Section 18. 628.34 (3) (c) of the statutes is created to read:
AB416-ASA1,7,54 628.34 (3) (c) Paragraphs (a) and (b) do not apply to coverage under a health
5benefit plan, as defined in s. 632.745 (1) (d), which is subject to ss. 632.745 to 632.749.
AB416-ASA1, s. 19 6Section 19. 628.36 (2) (b) 1., 3. and 5. of the statutes are amended to read:
AB416-ASA1,7,127 628.36 (2) (b) 1. Except for health maintenance organizations, preferred
8provider plans, limited service health organizations and the small employer health
9insurance plan under subch. II of ch. 635, no health care plan may prevent any
10person covered under the plan from choosing freely among providers who have
11agreed to participate in the plan and abide by its terms, except by requiring the
12person covered to select primary providers to be used when reasonably possible.
AB416-ASA1,7,1713 3. Except as provided in subd. 4., no provider may be denied the opportunity
14to participate in a health care plan, other than a health maintenance organization,
15a limited service health organization, a preferred provider plan or the small
16employer health insurance plan under subch. II of ch. 635, under the terms of the
17plan.
AB416-ASA1,7,2118 5. Except for the small employer health insurance plan under subch. II of ch.
19635 to the extent determined by the small employer insurance board under s. 635.23
20(1) (b), all health care plans, including health maintenance organizations, limited
21service health organizations and preferred provider plans are subject to s. 632.87 (3).
AB416-ASA1, s. 20 22Section 20. 631.01 (4) of the statutes is amended to read:
AB416-ASA1,8,723 631.01 (4) Group policies and annuities for eleemosynary institutions. This
24chapter, ch. 632 and the health insurance mandates under ch. 632 that apply to the
25plan under subch. II of ch. 635 do not apply to group policies or annuities provided

1on a basis as uniform nationally as state statutes permit to educational, scientific
2research, religious or charitable institutions organized without profit to any person,
3for the benefit of employes of such institutions. The commissioner may by order
4subject such contracts issued by a particular insurer to this chapter, ch. 632 or the
5health insurance mandates under ch. 632 that apply to the plan under subch. II of
6ch. 635 or any portion of those provisions upon a finding, after a hearing, that the
7interests of Wisconsin insureds or creditors or the public of this state so require.
AB416-ASA1, s. 21 8Section 21. 632.70 of the statutes is amended to read:
AB416-ASA1,8,12 9632.70 Exemption for plan under ch. 635. The health insurance mandates,
10as defined in s. 601.423 (1), that are provided under this subchapter apply to the
11small employer health insurance plan under subch. II of ch. 635 only to the extent
12determined by the small employer insurance board under s. 635.23 (1) (b).
AB416-ASA1, s. 22 13Section 22. 632.727 of the statutes is created to read:
AB416-ASA1,8,15 14632.727 Electronic claims capability. (1) Definition. In this section,
15"health care provider" has the meaning given in s. 146.81 (1) (a) to (m).
AB416-ASA1,8,19 16(2) Insurers. Beginning on January 1, 1996, every insurer that offers disability
17insurance must have and use the capability to accept all claims electronically and to
18allow electronic access to information on eligibility, claim status and remittance
19advice.
AB416-ASA1,8,22 20(3) Health care providers. (a) Beginning on January 1, 1996, every health
21care provider that has annual gross revenues of more than $1,000,000 must have and
22use the capability to electronically transmit disability insurance claims information.
AB416-ASA1,8,2523 (b) Beginning on January 1, 1998, every health care provider not specified in
24par. (a) must have and use the capability to electronically transmit disability
25insurance claims information.
AB416-ASA1, s. 23
1Section 23. 632.745 of the statutes is created to read:
AB416-ASA1,9,3 2632.745 Coverage requirements for health benefit plans. (1) Health
3insurance market reform; definitions.
In ss. 632.745 to 632.749:
AB416-ASA1,9,104 (a) "Eligible employe" means an employe who works on a permanent basis and
5has a normal work week of 30 or more hours. The term includes a sole proprietor,
6a business owner, including the owner of a farm business, a partner of a partnership,
7a member of a limited liability company and an independent contractor if the sole
8proprietor, business owner, partner, member or independent contractor is included
9as an employe under a health benefit plan of an employer, but the term does not
10include an employe who works on a temporary or substitute basis.
AB416-ASA1,9,1111 (b) "Employer" means any of the following:
AB416-ASA1,9,1412 1. An individual, firm, corporation, partnership, limited liability company or
13association that is actively engaged in a business enterprise in this state, including
14a farm business.
AB416-ASA1,9,1515 2. A municipality, as defined in s. 16.70 (8).
AB416-ASA1,9,1716 (c) "Established geographic service area" means a geographic area within
17which an insurer provides coverage and that has been approved by the commissioner.
AB416-ASA1,9,2418 (d) "Health benefit plan" means any hospital or medical policy or certificate,
19and includes a conversion health insurance policy. "Health benefit plan" does not
20include accident-only, credit, dental, vision, medicare supplement, medicare
21replacement, long-term care, or disability income insurance, coverage issued as a
22supplement to liability insurance, worker's compensation or similar insurance,
23automobile medical payment insurance, specified disease policies, hospital
24indemnity policies, as defined in s. 632.895 (1) (c), policies or certificates issued under

1the health insurance risk-sharing plan or an alternative plan under subch. II of ch.
2619 or other insurance exempted by rule of the commissioner.
AB416-ASA1,10,113 (e) "Insurer" means an insurer that is authorized to do business in this state,
4in one or more lines of insurance that includes health insurance, and that offers
5group health benefit plans covering eligible employes of one or more employers in
6this state, or that sells individual health benefit plans to individuals who are
7residents of this state. The term includes a health maintenance organization, as
8defined in s. 609.01 (2), a preferred provider plan, as defined in s. 609.01 (4), and an
9insurer operating as a cooperative association organized under ss. 185.981 to
10185.985, but does not include a limited service health organization, as defined in s.
11609.01 (3).
AB416-ASA1,10,1312 (em) "Qualifying coverage" means benefits or coverage provided under any of
13the following:
AB416-ASA1,10,1414 1. Medicare or medicaid.
AB416-ASA1,10,1715 2. An employer-based health insurance or health benefit arrangement that
16provides benefits similar to or exceeding benefits provided under a small employer
17health insurance plan under ch. 635.
AB416-ASA1,10,2018 3. An individual health insurance policy that provides benefits similar to or
19exceeding benefits provided under a small employer health insurance plan under ch.
20635, if the policy has been in effect for at least one year.
AB416-ASA1,10,2221 4. The health insurance risk-sharing plan or an alternative plan under subch.
22II of ch. 619.
AB416-ASA1,11,523 (f) "Resident" means a person who has maintained his or her place of
24permanent abode in this state for a period of 180 days immediately preceding his or
25her application for coverage under a health benefit plan. Domiciliary intent is

1required to establish that a person is maintaining his or her place of permanent
2abode in this state. Mere ownership of property is not sufficient to establish
3domiciliary intent. Evidence of domiciliary intent includes, without limitation, the
4location where the person votes, pays personal income taxes or obtains a driver's
5license.
AB416-ASA1,11,96 (g) "Restricted network provision" means a provision of a health benefit plan
7that conditions the payment of benefits, in whole or in part, on obtaining services or
8articles from health care providers that have contracted with the insurer to provide
9health care services or articles to covered individuals.
AB416-ASA1,11,1310 (h) "Small employer" means an employer that employs in this state not fewer
11than 2 nor more than 25 eligible employes. In determining the number of eligible
12employes, employers that are affiliated, or that are eligible to file a combined tax
13return for purposes of state taxation, shall be considered one employer.
AB416-ASA1,11,18 14(2) Underwriting, portability and preexisting conditions. (a) A group or
15individual health benefit plan may not deny, exclude or limit benefits for a covered
16individual for losses incurred more than 12 months after the effective date of the
17individual's coverage due to a preexisting condition. A health benefit plan may not
18define a preexisting condition more restrictively than any of the following:
AB416-ASA1,11,2319 1. a. With respect to a group health benefit plan, a condition that would have
20caused an ordinarily prudent person to seek medical advice, diagnosis, care or
21treatment during the 6 months immediately preceding the effective date of coverage
22and for which the individual did not seek medical advice, diagnosis, care or
23treatment.
AB416-ASA1,12,324 b. With respect to an individual health benefit plan, a condition that would
25have caused an ordinarily prudent person to seek medical advice, diagnosis, care or

1treatment during the 12 months immediately preceding the effective date of
2coverage and for which the individual did not seek medical advice, diagnosis, care
3or treatment.
AB416-ASA1,12,64 2. a. With respect to a group health benefit plan, a condition for which medical
5advice, diagnosis, care or treatment was recommended or received during the 6
6months immediately preceding the effective date of coverage.
AB416-ASA1,12,97 b. With respect to an individual health benefit plan, a condition for which
8medical advice, diagnosis, care or treatment was recommended or received during
9the 12 months immediately preceding the effective date of coverage.
AB416-ASA1,12,1510 3. With respect to a group or individual health benefit plan, a pregnancy
11existing on the effective date of coverage, except that coverage may not be excluded
12for any covered prenatal care expenses related to such a pregnancy or for other
13covered expenses related to such a pregnancy that exceed the deductible amount
14prescribed by the commissioner under par. (ac). Coverage not excluded may be
15subject to any deductibles or copayments that apply generally under the policy.
AB416-ASA1,12,2216 (ac) The commissioner shall by rule prescribe a separate deductible for covered
17expenses related to a pregnancy existing on the effective date of coverage, excluding
18covered prenatal care expenses. The rule shall provide for a sliding scale deductible
19that does not exceed $5,000 and that is determined on the basis of the stage of the
20pregnancy on the effective date of the coverage, so that the deductible is lower if
21coverage is obtained early in the pregnancy and higher if coverage is obtained late
22in the pregnancy.
AB416-ASA1,13,323 (am) Notwithstanding par. (a), a group or individual health benefit plan may
24not deny, exclude or limit benefits for a covered individual who is a resident or for a
25covered employe who has satisfied any waiting period imposed by his or her employer

1or for any of the covered dependents of the individual or employe for losses due to a
2preexisting condition if the individual, employe or employe's employer applies for
3coverage:
AB416-ASA1,13,44 1. During the 45-day period beginning on October 1, 1996.
AB416-ASA1,13,55 2. Within 30 days after the later of the following:
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