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S.B. 101

             1     

UTAH COMPREHENSIVE HEALTH INSURANCE

             2     
POOL FUNDING

             3     
2008 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Chief Sponsor: Gene Davis

             6     
House Sponsor: James A. Dunnigan

             7     
             8      LONG TITLE
             9      General Description:
             10          This bill amends the Comprehensive Health Insurance Pool Act and the taxation of
             11      admitted insurers.
             12      Highlighted Provisions:
             13          This bill:
             14          .    requires a portion of the premium tax paid by admitted insurers to be deposited each
             15      year in the Comprehensive Health Insurance Pool Enterprise Fund to maintain the
             16      fund's actuarial soundness.
             17      Monies Appropriated in this Bill:
             18          None
             19      Other Special Clauses:
             20          None
             21      Utah Code Sections Affected:
             22      AMENDS:
             23          31A-29-120, as last amended by Laws of Utah 2003, Chapter 168
             24          59-9-101, as last amended by Laws of Utah 2006, Chapter 44
             25     
             26      Be it enacted by the Legislature of the state of Utah:
             27          Section 1. Section 31A-29-120 is amended to read:


             28           31A-29-120. Enterprise fund.
             29          (1) There is created an enterprise fund known as the Comprehensive Health Insurance
             30      Pool Enterprise Fund.
             31          (2) The following funds shall be credited to the pool fund:
             32          (a) appropriations from the General Fund;
             33          (b) pool policy premium payments; [and]
             34          (c) taxes deposited in the fund under Subsection 59-9-101 (1); and
             35          [(c)] (d) all interest and dividends earned on the pool fund's assets.
             36          (3) All money received by the pool fund shall be deposited in compliance with Section
             37      51-4-1 and shall be held by the state treasurer and invested in accordance with Title 51,
             38      Chapter 7, State Money Management Act.
             39          (4) The pool fund shall comply with the accounting policies, procedures, and reporting
             40      requirements established by the Division of Finance.
             41          (5) The pool fund shall comply with Title 63A, Utah Administrative Services Code.
             42          Section 2. Section 59-9-101 is amended to read:
             43           59-9-101. Tax basis -- Rates -- Exemptions -- Rate reductions.
             44          (1) (a) Except as provided in Subsection (1)(b), (1)(d), or (5), every admitted insurer
             45      shall pay to the commission on or before March 31 in each year, a tax of 2-1/4% of the total
             46      premiums received by it during the preceding calendar year from insurance covering property
             47      or risks located in this state.
             48          (b) This Subsection (1) does not apply to:
             49          (i) workers' compensation insurance, assessed under Subsection (2);
             50          (ii) title insurance premiums taxed under Subsection (3);
             51          (iii) annuity considerations;
             52          (iv) insurance premiums paid by an institution within the state system of higher
             53      education as specified in Section 53B-1-102 ; and
             54          (v) ocean marine insurance.
             55          (c) The taxable premium under this Subsection (1) shall be reduced by:
             56          (i) all premiums returned or credited to policyholders on direct business subject to tax
             57      in this state;
             58          (ii) all premiums received for reinsurance of property or risks located in this state; and


             59          (iii) the dividends, including premium reduction benefits maturing within the year:
             60          (A) paid or credited to policyholders in this state; or
             61          (B) applied in abatement or reduction of premiums due during the preceding calendar
             62      year.
             63          (d) (i) For purposes of this Subsection (1)(d):
             64          (A) "Utah variable life insurance premium" means an insurance premium paid:
             65          (I) by:
             66          (Aa) a corporation; or
             67          (Bb) a trust established or funded by a corporation; and
             68          (II) for variable life insurance covering risks located within the state.
             69          (B) "Variable life insurance" means an insurance policy that provides for life
             70      insurance, the amount or duration of which varies according to the investment experience of
             71      one or more separate accounts that are established and maintained by the insurer pursuant to
             72      Title 31A, Insurance Code.
             73          (ii) Notwithstanding Subsection (1)(a), beginning on January 1, 2006, the tax on that
             74      portion of the total premiums subject to a tax under Subsection (1)(a) that is a Utah variable
             75      life insurance premium shall be calculated as follows:
             76          (A) 2-1/4% of the first $100,000 of Utah variable life insurance premiums:
             77          (I) paid for each variable life insurance policy; and
             78          (II) received by the admitted insurer in the preceding calendar year; and
             79          (B) 0.08% of the Utah variable life insurance premiums that exceed $100,000:
             80          (I) paid for the policy described in Subsection (1)(d)(ii)(A); and
             81          (II) received by the admitted insurer in the preceding calendar year.
             82          (iii) (A) On or before October 1, 2009, and every three years after October 1, 2009, the
             83      Revenue and Taxation Interim Committee shall study the rate reduction contained in this
             84      Subsection (1)(d).
             85          (B) As part of the study required by Subsection (1)(d)(iii)(A) the Revenue and
             86      Taxation Interim Committee shall:
             87          (I) hear testimony from the commission and industry representatives;
             88          (II) make recommendations concerning whether the rate reduction should be continued,
             89      modified, or repealed; and


             90          (III) make findings regarding:
             91          (Aa) the cost of the rate reduction;
             92          (Bb) the purpose and effectiveness of the rate reduction; and
             93          (Cc) any benefits of the rate reduction to the state.
             94          (e) (i) For each fiscal year beginning on or after July 1, 2007, the amount of the tax
             95      collected under Subsection (1)(a) necessary to maintain the actuarial soundness of the
             96      Comprehensive Health Insurance Pool Enterprise Fund, as provided in Subsection (1)(e)(ii),
             97      shall be transferred to the Comprehensive Health Insurance Pool Enterprise Fund created under
             98      Section 31A-29-120 .
             99          (ii) The amount transferred under Subsection (1)(e)(i) is limited to the amount of
             100      premium tax revenue:
             101          (A) available after the allocation of the premium taxes required by Sections 49-16-301
             102      and 53-7-204.2 ; and
             103          (B) certified by the Commissioner of Insurance to the Division of Finance at the
             104      beginning of each fiscal year as necessary to maintain the actuarial soundness of the fund,
             105      based on actuarial data and projections prepared for the board of the Utah Comprehensive
             106      Health Insurance Pool.
             107          (2) (a) Every admitted insurer writing workers' compensation insurance in this state,
             108      including the Workers' Compensation Fund created under Title 31A, Chapter 33, Workers'
             109      Compensation Fund, shall pay to the tax commission, on or before March 31 in each year, a
             110      premium assessment of between 1% and 8% of the total workers' compensation premium
             111      income received by the insurer from workers' compensation insurance in this state during the
             112      preceding calendar year.
             113          (b) Total workers' compensation premium income means the net written premium as
             114      calculated before any premium reduction for any insured employer's deductible, retention, or
             115      reimbursement amounts and also those amounts equivalent to premiums as provided in Section
             116      34A-2-202 .
             117          (c) The percentage of premium assessment applicable for a calendar year shall be
             118      determined by the Labor Commission under Subsection (2)(d). The total premium income
             119      shall be reduced in the same manner as provided in Subsections (1)(c)(i) and (1)(c)(ii), but not
             120      as provided in Subsection (1)(c)(iii). The tax commission shall promptly remit from the


             121      premium assessment collected under this Subsection (2):
             122          (i) an amount of up to 7.25% of the premium income to the state treasurer for credit to
             123      the Employers' Reinsurance Fund created under Subsection 34A-2-702 (1);
             124          (ii) an amount equal to 0.25% of the premium income to the state treasurer for credit to
             125      the restricted account in the General Fund, created by Section 34A-2-701 ; and
             126          (iii) an amount of up to 0.50% and any remaining assessed percentage of the premium
             127      income to the state treasurer for credit to the Uninsured Employers' Fund created under Section
             128      34A-2-704 .
             129          (d) (i) The Labor Commission shall determine the amount of the premium assessment
             130      for each year on or before each October 15 of the preceding year. The Labor Commission shall
             131      make this determination following a public hearing. The determination shall be based upon the
             132      recommendations of a qualified actuary.
             133          (ii) The actuary shall recommend a premium assessment rate sufficient to provide
             134      payments of benefits and expenses from the Employers' Reinsurance Fund and to project a
             135      funded condition with assets greater than liabilities by no later than June 30, 2025.
             136          (iii) The actuary shall recommend a premium assessment rate sufficient to provide
             137      payments of benefits and expenses from the Uninsured Employers' Fund and to maintain it at a
             138      funded condition with assets equal to or greater than liabilities.
             139          (iv) At the end of each fiscal year the minimum approximate assets in the Employers'
             140      Reinsurance Fund shall be $5,000,000 which amount shall be adjusted each year beginning in
             141      1990 by multiplying by the ratio that the total workers' compensation premium income for the
             142      preceding calendar year bears to the total workers' compensation premium income for the
             143      calendar year 1988.
             144          (v) The requirements of Subsection (2)(d)(iv) cease when the future annual
             145      disbursements from the Employers' Reinsurance Fund are projected to be less than the
             146      calculations of the corresponding future minimum required assets. The Labor Commission
             147      shall, after a public hearing, determine if the future annual disbursements are less than the
             148      corresponding future minimum required assets from projections provided by the actuary.
             149          (vi) At the end of each fiscal year the minimum approximate assets in the Uninsured
             150      Employers' Fund shall be $2,000,000, which amount shall be adjusted each year beginning in
             151      1990 by multiplying by the ratio that the total workers' compensation premium income for the


             152      preceding calendar year bears to the total workers' compensation premium income for the
             153      calendar year 1988.
             154          (e) A premium assessment that is to be transferred into the General Fund may be
             155      collected on premiums received from Utah public agencies.
             156          (3) Every admitted insurer writing title insurance in this state shall pay to the
             157      commission, on or before March 31 in each year, a tax of .45% of the total premium received
             158      by either the insurer or by its agents during the preceding calendar year from title insurance
             159      concerning property located in this state. In calculating this tax, "premium" includes the
             160      charges made to an insured under or to an applicant for a policy or contract of title insurance
             161      for:
             162          (a) the assumption by the title insurer of the risks assumed by the issuance of the policy
             163      or contract of title insurance; and
             164          (b) abstracting title, title searching, examining title, or determining the insurability of
             165      title, and every other activity, exclusive of escrow, settlement, or closing charges, whether
             166      denominated premium or otherwise, made by a title insurer, an agent of a title insurer, a title
             167      insurance producer, or any of them.
             168          (4) Beginning July 1, 1986, former county mutuals and former mutual benefit
             169      associations shall pay the premium tax or assessment due under this chapter. All premiums
             170      received after July 1, 1986, shall be considered in determining the tax or assessment.
             171          (5) The following insurers are not subject to the premium tax on health care insurance
             172      that would otherwise be applicable under Subsection (1):
             173          (a) insurers licensed under Title 31A, Chapter 5, Domestic Stock and Mutual Insurance
             174      Corporations;
             175          (b) insurers licensed under Title 31A, Chapter 7, Nonprofit Health Service Insurance
             176      Corporations;
             177          (c) insurers licensed under Title 31A, Chapter 8, Health Maintenance Organizations
             178      and Limited Health Plans;
             179          (d) insurers licensed under Title 31A, Chapter 9, Insurance Fraternals;
             180          (e) insurers licensed under Title 31A, Chapter 11, Motor Clubs;
             181          (f) insurers licensed under Title 31A, Chapter 13, Employee Welfare Funds and Plans;
             182      and


             183          (g) insurers licensed under Title 31A, Chapter 14, Foreign Insurers.
             184          (6) An insurer issuing multiple policies to an insured may not artificially allocate the
             185      premiums among the policies for purposes of reducing the aggregate premium tax or
             186      assessment applicable to the policies.
             187          (7) The retaliatory provisions of Title 31A, Chapter 3, Department Funding, Fees, and
             188      Taxes, apply to the tax or assessment imposed under this chapter.




Legislative Review Note
    as of 12-10-07 10:08 AM


Office of Legislative Research and General Counsel


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