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First Substitute H.B. 178

Representative James A. Dunnigan proposes the following substitute bill:





Chief Sponsor: James A. Dunnigan

Senate Sponsor: Daniel R. Liljenquist

             8      LONG TITLE
             9      General Description:
             10          This bill amends the Insurance Code and the Children's Health Insurance Program.
             11      Highlighted Provisions:
             12          This bill:
             13          .    clarifies that the Children's Health Insurance Program should have access to at least
             14      two different provider networks;
             15          .    extends the COBRA premium assistance provided under Section 3001 of the
             16      American Recovery and Reinvestment Act of 2009 (Pub. S. 111-5) to state
             17      mini-COBRA benefits; and
             18          .    makes technical amendments to the health benefit plan broker disclosure
             19      requirement.
             20      Monies Appropriated in this Bill:
             21          None
             22      Other Special Clauses:
             23          This bill provides an immediate effective date.
             24          This bill coordinates with H.B. 188, Health System Reform-Insurance Market, by
             25      providing that parts of this bill supersede parts of H.B. 188.

             26      Utah Code Sections Affected:
             27      AMENDS:
             28          26-40-110, as last amended by Laws of Utah 2008, Chapters 208 and 382
             29          31A-23a-501, as renumbered and amended by Laws of Utah 2003, Chapter 298
             30      ENACTS:
             31          31A-22-722.5, Utah Code Annotated 1953
             33      Be it enacted by the Legislature of the state of Utah:
             34          Section 1. Section 26-40-110 is amended to read:
             35           26-40-110. Managed care -- Contracting for services.
             36          (1) Program benefits provided to enrollees under the program, as described in Section
             37      26-40-106 , shall be delivered in a managed care system if the department determines that
             38      adequate services are available where the enrollee lives or resides.
             39          (2) (a) The department shall use the following criteria to evaluate bids from health
             40      plans:
             41          (i) ability to manage medical expenses, including mental health costs;
             42          (ii) proven ability to handle accident and health insurance;
             43          (iii) efficiency of claim paying procedures;
             44          (iv) proven ability for managed care and quality assurance;
             45          (v) provider contracting and discounts;
             46          (vi) pharmacy benefit management;
             47          (vii) an estimate of total charges for administering the pool;
             48          (viii) ability to administer the pool in a cost-efficient manner;
             49          (ix) the ability to provide adequate providers and services in the state; and
             50          (x) other criteria established by the department.
             51          (b) The dental benefits required by Section 26-40-106 may be bid out separately from
             52      other program benefits.
             53          (c) Except for dental benefits, the department shall request bids for the program's
             54      benefits in 2008. The department shall request bids for the program's dental benefits in 2009.
             55      The department shall request bids for the program's benefits at least once every five years
             56      thereafter.

             57          (d) The department's contract with health plans for the program's benefits shall include
             58      risk sharing provisions in which the health plan must accept at least 75% of the risk for any
             59      difference between the department's premium payments per client and actual medical
             60      expenditures.
             61          (3) The executive director shall report to and seek recommendations from the Health
             62      Advisory Council created in Section 26-1-7.5 :
             63          (a) if the division receives less than two bids or proposals under Subsection (1) that are
             64      acceptable to the division or responsive to the bid; and
             65          (b) before awarding a contract to a managed care system.
             66          (4) (a) The department shall award contracts to [at least two] responsive bidders:
             67          (i) if the department determines that [two or more bids are] a bid is acceptable and
             68      [meet] meets the criteria of Subsections (2)(a) and (d)[.]; and
             69          (ii) (A) the responsive bidder is able to offer the program access to two different
             70      provider networks; or
             71          (B) the selection of two different responsive bidders will provide the program with
             72      access to two different provider networks.
             73          (b) The department may contract with the Group Insurance Division within the Utah
             74      State Retirement Office to provide services under Subsection (1) if:
             75          (i) the department is not able to contract with [at least two private carriers] private
             76      carriers that under Subsection (4)(a) are able to provide the program access to two different
             77      provider networks;
             78          (ii) the executive director seeks the recommendation of the Health Advisory Council
             79      under Subsection (3); and
             80          (iii) the executive director determines that either:
             81          (A) [at least two] responsive bids that could provide the program with access to two
             82      different provider networks were not received by the department; or
             83          (B) [less than two] the bids were not acceptable to the department.
             84          (c) In accordance with Section 49-20-201 , a contract awarded under Subsection (4)(b)
             85      is not subject to the risk sharing required by Subsection (2)(d).
             86          (5) Title 63G, Chapter 6, Utah Procurement Code, shall apply to this section.
             87          Section 2. Section 31A-22-722.5 is enacted to read:

             88          31A-22-722.5. Mini-COBRA election -- American Recovery and Reinvestment
             89      Act.
             90          (1) An individual has a right, until April 18, 2009, to contact the individual's employer
             91      or the insurer for the employer to participate in a second election period for mini-COBRA
             92      benefits under Section 31A-22-722 in accordance with Section 3001 of the American
             93      Recovery and Reinvestment Act of 2009 (Pub. S. 111-5) if the individual:
             94          (a) was involuntarily terminated from employment between September 1, 2008 and
             95      February 17, 2009, as defined in Section 3001 of the American Recovery and Reinvestment
             96      Act of 2009 (Pub. S. 111-5);
             97          (b) is eligible for COBRA premium assistance under Section 3001 of the American
             98      Recovery and Reinvestment Act of 2009 (Pub. S. 111-5); and
             99          (c) was eligible for Utah mini-COBRA as provided in Section 31A-22-722 at the time
             100      of termination.
             101          (2) (a) An individual or the employer of the individual shall contact the insurer and
             102      inform the insurer that the individual wants to take advantage of the second election period for
             103      mini-COBRA coverage under the provisions of Section 3001 of the American Recovery and
             104      Reinvestment Act of 2009 (Pub. S. 111-5).
             105          (b) An individual or an employer on behalf of an eligible individual must submit the
             106      enrollment forms for coverage under Subsection (1) to the insurer prior to May 1, 2009.
             107          (3) The provision regarding the application of pre-existing condition waivers to the
             108      extended second election period for federal COBRA under Section 3001 of the American
             109      Recovery and Reinvestment Act of 2009 (Pub. S. 111-5) shall apply to the extended second
             110      election for state mini-COBRA under this section.
             111          (4) An insurer that violates this section is subject to penalties in accordance with
             112      Section 31A-2-308 .
             113          Section 3. Section 31A-23a-501 is amended to read:
             114           31A-23a-501. Licensee compensation.
             115          (1) As used in this section:
             116          (a) "Commission compensation" includes funds paid to or credited for the benefit of a
             117      licensee from:
             118          (i) commission amounts deducted from insurance premiums on insurance sold by or

             119      placed through the licensee; or
             120          (ii) commission amounts received from an insurer or another licensee as a result of the
             121      sale or placement of insurance.
             122          (b) (i) "Compensation from an insurer or third party administrator" means
             123      commissions, fees, awards, overrides, bonuses, contingent commissions, loans, stock options,
             124      gifts, prizes, or any other form of valuable consideration:
             125          (A) whether or not payable pursuant to a written agreement; and
             126          (B) received from:
             127          (I) an insurer; or
             128          (II) a third party to the transaction for the sale or placement of insurance.
             129          (ii) "Compensation from an insurer or third party administrator" does not mean
             130      compensation from a customer that is:
             131          (A) a fee or pass-through costs as provided in Subsection (1)(e); or
             132          (B) a fee or amount collected by or paid to the producer that does not exceed an
             133      amount established by the commissioner by administrative rule.
             134          (c) (i) "Customer" means:
             135          (A) the person signing the application or submission for insurance; or
             136          (B) the authorized representative of the insured actually negotiating the placement of
             137      insurance with the producer.
             138          (ii) "Customer" does not mean a person who is a participant or beneficiary of:
             139          (A) an employee benefit plan; or
             140          (B) a group or blanket insurance policy or group annuity contract sold, solicited, or
             141      negotiated by the producer or affiliate.
             142          [(b)] (d) (i) "Noncommission compensation" includes all funds paid to or credited for
             143      the benefit of a licensee other than commission compensation.
             144          (ii) "Noncommission compensation" does not include charges for pass-through costs
             145      incurred by the licensee in connection with obtaining, placing, or servicing an insurance policy.
             146          [(c)] (e) "Pass-through costs" include:
             147          (i) costs for copying documents to be submitted to the insurer; and
             148          (ii) bank costs for processing cash or credit card payments.
             149          (2) A licensee may receive from an insured or from a person purchasing an insurance

             150      policy, noncommission compensation if the noncommission compensation is stated on a
             151      separate, written disclosure.
             152          (a) The disclosure required by this Subsection (2) shall:
             153          (i) include the signature of the insured or prospective insured acknowledging the
             154      noncommission compensation;
             155          (ii) clearly specify the amount or extent of the noncommission compensation; and
             156          (iii) be provided to the insured or prospective insured before the performance of the
             157      service.
             158          (b) Noncommission compensation shall be:
             159          (i) limited to actual or reasonable expenses incurred for services; and
             160          (ii) uniformly applied to all insureds or prospective insureds in a class or classes of
             161      business or for a specific service or services.
             162          (c) A copy of the signed disclosure required by this Subsection (2) must be maintained
             163      by any licensee who collects or receives the noncommission compensation or any portion
             164      [thereof] of the noncommission compensation.
             165          (d) All accounting records relating to noncommission compensation shall be
             166      maintained by the person described in Subsection (2)(c) in a manner that facilitates an audit.
             167          (3) (a) A licensee may receive noncommission compensation when acting as a producer
             168      for the insured in connection with the actual sale or placement of insurance if:
             169          (i) the producer and the insured have agreed on the producer's noncommission
             170      compensation; and
             171          (ii) the producer has disclosed to the insured the existence and source of any other
             172      compensation that accrues to the producer as a result of the transaction.
             173          (b) The disclosure required by this Subsection (3) shall:
             174          (i) include the signature of the insured or prospective insured acknowledging the
             175      noncommission compensation;
             176          (ii) clearly specify the amount or extent of the noncommission compensation and the
             177      existence and source of any other compensation; and
             178          (iii) be provided to the insured or prospective insured before the performance of the
             179      service.
             180          (c) The following additional noncommission compensation is authorized:

             181          (i) compensation received by a producer of a compensated corporate surety who under
             182      procedures approved by a rule or order of the commissioner is paid by surety bond principal
             183      debtors for extra services;
             184          (ii) compensation received by an insurance producer who is also licensed as a public
             185      adjuster under Section 31A-26-203 , for services performed for an insured in connection with a
             186      claim adjustment, so long as the producer does not receive or is not promised compensation for
             187      aiding in the claim adjustment prior to the occurrence of the claim;
             188          (iii) compensation received by a consultant as a consulting fee, provided the consultant
             189      complies with the requirements of Section 31A-23a-401 ; or
             190          (iv) other compensation arrangements approved by the commissioner after a finding
             191      that they do not violate Section 31A-23a-401 and are not harmful to the public.
             192          (4) (a) For purposes of this Subsection (4), "producer" includes:
             193          (i) a producer;
             194          (ii) an affiliate of a producer; or
             195          (iii) a consultant.
             196          (b) Beginning January 1, 2010, in addition to any other disclosures required by this
             197      section, a producer may not accept or receive any compensation from an insurer or third party
             198      administrator for the placement of a health benefit plan, other than a hospital confinement
             199      indemnity policy, unless prior to the customer's purchase of the health benefit plan the
             200      producer:
             201          (i) except as provided in Subsection (4)(c), discloses in writing to the customer that the
             202      producer will receive compensation from the insurer or third party administrator for the
             203      placement of insurance, including the amount or type of compensation known to the producer
             204      at the time of the disclosure; and
             205          (ii) except as provided in Subsection (4)(c):
             206          (A) obtains the customer's signed acknowledgment that the disclosure under
             207      Subsection (4)(b)(i) was made to the customer; or
             208          (B) certifies to the insurer that the disclosure required by Subsection (4)(b)(i) was made
             209      to the customer.
             210          (c) If the compensation to the producer from an insurer or third party administrator is
             211      for the renewal of a health benefit plan, once the producer has made an initial disclosure that

             212      complies with Subsection (4)(b), the producer does not have to disclose compensation received
             213      for the subsequent yearly renewals in accordance with Subsection (4)(b) until the renewal
             214      period immediately following 36 months after the initial disclosure.
             215          (d) (i) A copy of the signed acknowledgment required by Subsection (4)(b) must be
             216      maintained by the licensee who collects or receives any part of the compensation from an
             217      insurer or third party administrator in a manner that facilitates an audit.
             218          (ii) The standard application developed in accordance with Section 31A-22-635 shall
             219      include a place for a producer to provide the disclosure required by this Subsection (4), and if
             220      completed, shall satisfy the requirement of Subsection (4)(d)(i).
             221          (e) Subsection (4)(b)(ii) does not apply to:
             222          (i) a person licensed as a producer who acts only as an intermediary between an insurer
             223      and the customer's producer, including a managing general agent; or
             224          (ii) the placement of insurance in a secondary or residual market.
             225          [(4)] (5) This section does not alter the right of any licensee to recover from an insured
             226      the amount of any premium due for insurance effected by or through that licensee or to charge
             227      a reasonable rate of interest upon past-due accounts.
             228          [(5)] (6) This section does not apply to bail bond producers or bail enforcement agents
             229      as defined in Section 31A-35-102 .
             230          Section 4. Effective date.
             231          If approved by two-thirds of all the members elected to each house, this bill takes effect
             232      upon approval by the governor, or the day following the constitutional time limit of Utah
             233      Constitution Article VII, Section 8, without the governor's signature, or in the case of a veto,
             234      the date of veto override.
             235          Section 5. Coordinating H.B. 178 with H.B. 188 -- Substantively superseding
             236      amendments.
             237          If this H.B. 178 and H.B. 188, Health System Reform - Insurance Market, both pass, it
             238      is the intent of the Legislature that Section 31A-23a-501 in this H.B. 178 supersede the
             239      provisions of Section 31A-23a-501 in H.B. 188, when the Office of Legislative Research and
             240      General Counsel prepares the Utah Code database for publication.

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