Bill Text: NJ A1015 | 2024-2025 | Regular Session | Introduced
Bill Title: Requires annual assessment paid by mutual holding company to solely fund health care initiatives; establishes Healthcare Rate Stabilization and Improvements Organization.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced) 2024-01-09 - Introduced, Referred to Assembly Financial Institutions and Insurance Committee [A1015 Detail]
Download: New_Jersey-2024-A1015-Introduced.html
STATE OF NEW JERSEY
221st LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2024 SESSION
Sponsored by:
Assemblywoman NANCY F. MUNOZ
District 21 (Middlesex, Morris, Somerset and Union)
SYNOPSIS
Requires annual assessment paid by mutual holding company to solely fund health care initiatives; establishes Healthcare Rate Stabilization and Improvements Organization.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel.
An Act concerning annual assessments paid by a reorganized mutual holding company and certain affiliates of the mutual holding company and amending and supplementing P.L.2020, c.145.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 13 of P.L.2020, c.145 (C.17:48E-46.13) is amended to read as follows:
13. a. Following regulatory approval pursuant to section 5 of P.L.2020, c.145 (C.17:48E-46.5) and the establishment of a mutual holding company, the mutual holding company, or any affiliates benefiting from the establishment of a mutual holding company, shall pay an initial assessment to the State Treasury in the amount of $600,000,000 by June 1, 2022 if the effective time precedes June 1, 2022. If the effective time is later than June 1, 2022, the initial assessment shall be due by June 1 of the calendar year following the effective time. The initial assessment shall be a one-time, nonrecurring State business tax on the mutual holding company and its affiliates.
b. Following the initial assessment, and subject to subsections c. and d. of this section, the mutual holding company, or any affiliates benefiting from the establishment of a mutual holding company, shall pay a limited duration business tax by June 1 of each calendar year beginning with the calendar year following the initial assessment, and for a period of seventeen years. The total assessment, including both the initial and annual assessments, shall not exceed $1,250,000,000. The annual assessments represent a limited duration state business tax on the mutual holding company and its affiliates' business payable by the mutual holding company or any affiliates benefiting from the establishment of a mutual holding company, and shall be based on the following schedule with earned premiums defined consistent with 45 C.F.R. 158.130:
(1) For annual assessment 1, 20 percent of the reorganized insurer's earned premiums for the calendar year preceding that assessment, with the assessment not to exceed $100,000,000.
(2) For annual assessments 2 through 11, 5 percent of the reorganized insurer's earned premiums for the calendar year preceding a given year's assessment, with each year's assessment not to exceed $25,000,000.
(3) For annual assessments 12 through 17, 10 percent of the reorganized insurer's earned premiums for the calendar year preceding a given year's assessment, with each year's assessment not to exceed $50,000,000.
c. The mutual holding company shall not pay any portion of the annual assessment for a given calendar year if the mutual holding company's system-wide health risk-based capital authorized control level would fall below 550 percent based on the standards for risk based capital for health organizations as adopted by the National Association of Insurance Commissioners following the payment as applied against the prior calendar year's risk based capital, or if in the opinion of any nationally recognized statistical rating organization, the group credit rating of the mutual holding company would not be considered investment grade. The commissioner shall determine that the mutual holding company's system-wide health risk-based capital authorized control level would fall below 550 percent before payments shall be deferred pursuant to this subsection and paragraph (1) of subsection d. of this section. Neither the insurance company subsidiaries nor the reorganized insurer shall make dividends or distributions to the mutual holding company or any subsidiaries thereof until such time as the annual assessment deferred pursuant to paragraph (1) of subsection d. of this section is satisfied.
d. (1) If the mutual holding company does not pay the annual assessment for a given calendar year pursuant to subsection c. of this section, the annual assessment that was not paid shall be deferred to the subsequent calendar year, which shall be the deferral date for the deferred annual assessment, with all subsequent annual assessments pursuant to subsection b. of this section also deferred by another calendar year so that no two annual assessments are due in the same calendar year. If an annual assessment is deferred, that annual assessment shall not be required by law to be paid until the deferral date.
(2) Notwithstanding the provisions of paragraph (1) of this subsection to the contrary, the assessment years pursuant to subsection b. of this section shall not be extended beyond, and the payment obligation pursuant to this section shall cease to exist after, the date that is 25 years from the effective time.
e. The initial assessment is a one-time business tax imposed on the mutual holding company system and the annual assessment is a limited duration business tax imposed on the mutual holding company system based on the reorganized insurer's business. The assessment of additional taxes, penalties and interest shall be as provided by the "State Uniform Tax Procedure Law," R.S.54:48-1 et seq.; provided that no interest shall accrue or penalty shall be levied on a deferred annual assessment.
f. The funds collected through the annual assessments paid pursuant to this section shall only be used to fund health care initiatives to benefit policyholders.
(cf: P.L.2020, c.145, s.13)
2. (New section) a. Following regulatory approval pursuant to section 5 of P.L.2020, c.145 (C.17:48E-46.5) and the establishment of a mutual holding company, the commissioner shall establish a nonprofit, healthcare improvement corporation to be known as the "Healthcare Rate Stabilization and Improvements Organization."
b. The board of the organization shall consist of 12 members, and shall include:
(1) four members to be appointed by the Governor, with no more than two members from any one political party;
(2) one member appointed by the President of the Senate;
(3) one member appointed by the Minority Leader of the Senate;
(4) one member appointed by the Speaker of the Assembly;
(5) one member appointed by the Minority Leader of the Assembly; and
(6) four members appointed by the board of the mutual holding company established pursuant to section 15 of P.L.2020, c.145 (C. ).
c. (1) The initial assessment paid pursuant to subsection a. of section 13 of P.L.2020, c.145 (C.17:48E-46.13) shall be paid to the organization, and not to the State of New Jersey. No more than 25 percent of the initial assessment shall be expended within a fiscal year. The board shall establish a plan for use of the funds for rate stabilization or other purposes that would improve the quality or efficiency of healthcare in the State of New Jersey, including, but not limited to, improving outcomes in infant mortality, maternal mortality, diabetes, heart disease and veteran's health.
(2) The board shall establish subaccounts within the account established pursuant to this subsection. Each subaccount shall be allocated to the portion of the initial allocation that approximates the share of total covered lives within the various segments of the health service corporation's covered lives prior to reorganization.
The subaccounts shall include, but shall not be limited to, subaccounts on behalf of: small group employers and covered lives; local government employers and covered lives; individual policies; large group employers and covered lives; Medicaid and Medicare payers and covered lives; and school employers and covered lives.
d. As used in this section, "organization" means the "Healthcare Rate Stabilization and Improvements Organization" established as a nonprofit, healthcare improvement corporation pursuant to this section.
3. This act shall take effect upon the enactment of P.L.2020, c.145 (C.17:48E-46-1 et al.).
STATEMENT
This bill requires the annual assessment paid by a reorganized mutual holding company and certain affiliates be used to fund health care initiatives. Current law permits a health care service corporation to reorganize as a mutual holding company. Pursuant to current law, the mutual holding company or any affiliate benefiting from the establishment of a mutual holding company is to pay 17 annual assessments. Through this legislation, it is the sponsor's intent that the funds generated by the assessment, having originally been collected from policyholders, be used to benefit those policyholders rather than to meet the needs of government.
This bill requires that the funds collected pursuant to the annual assessments required of a mutual holding company are only to be used to fund health care initiatives to benefit policyholders.
The bill also requires the Commissioner to establish a nonprofit, healthcare improvement corporation to be known as the "Healthcare Rate Stabilization and Improvements Organization."
The bill provides that the initial assessment paid pursuant to current law is to be paid to the organization, and not to the State of New Jersey. The board of the organization is to establish a plan for use of the funds for rate stabilization or other purposes that would improve the quality or efficiency of healthcare in the State of New Jersey, including, but not limited to, improving outcomes in infant mortality, maternal mortality, diabetes, heart disease and veteran's health.
The board is to establish subaccounts within the account established pursuant to the bill. Each subaccount is to be allocated to the portion of the initial allocation that approximates the share of total covered lives within the various segments of the health service corporation's covered lives prior to reorganization.
The subaccounts are to include, but not be limited to, subaccounts on behalf of: small group employers and covered lives; local government employers and covered lives; individual policies; large group employers and covered lives; Medicaid and Medicare payers and covered lives; and school employers and covered lives.
