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H.713

Introduced by Representatives Koch of Barre Town and Mazur of South Burlington

Referred to Committee on

Date:

Subject:  Health care; health insurance; Medicaid; long-term care; prescription drugs

Statement of purpose:  This bill proposes to:  (1) authorize the small market access reinvestment trust plan; (2) establish the small business health care tax incentive program; (3) create the health care cost containment council;

(4) permit health insurance policies to offer healthy choice discounts to members or subscribers; (5) clarify the authority of the department of banking, insurance, securities, and health care administration to assist consumers in the prompt, fair, and equitable settlement of health insurance claims; (6) direct the commissioner of banking, insurance, securities, and health care administration to create a health care price and quality information system for health care consumers; (7) require pharmaceutical marketers to make prescription drug price disclosures; and (8) require pharmacy benefit managers to provide supplemental financial quotations which identify sources of revenue and profit, and to enable health benefit plan sponsors to conduct meaningful audits of such pricing arrangements. 

AN ACT RELATING TO AN AFFORDABLE PARTNERSHIP FOR HEALTH CARE

It is hereby enacted by the General Assembly of the State of Vermont:

* * * Small Market Access Reinvestment Trust * * *

Sec. 1.  8 V.S.A. § 4062d is added to read:

§ 4062d.  SMALL MARKET ACCESS REINVESTMENT TRUST

(a)  The commissioner shall establish the small market access reinvestment trust plan for the purpose of lowering the cost of and thereby increasing access to health care coverage in health insurance markets in which the commissioner determines, in his or her discretion, that access to coverage is threatened because of high costs or other market conditions.

(b)  The small market access reinvestment trust plan shall include a reinsurance mechanism permitting small group carriers and nongroup carriers to transfer all or a portion of the expenses and risk associated with certain individuals, based on the actual or anticipated expenses of such individuals, in accordance with rules adopted by the commissioner.  Such individuals shall remain enrolled policyholders, members, or subscribers of the carrier’s plan, and shall be subject to the same terms and conditions of coverage, premiums, and cost sharing as any other policyholder, member, or subscriber.

(c)  The commissioner may develop the small market access reinvestment trust plan in a manner that permits the plan to be eligible for a federal grant to administer the plan, including a grant under the federal Trade Adjustment Act.

(d)  All of the revenues raised by the premium tax on health insurers imposed by subchapter 7 of chapter 211 of Title 32 shall be deposited into the small market access reinvestment trust special fund to be administered by the commissioner for the sole purpose of providing financial support for the small market access reinvestment trust plan authorized by this section.  The fund shall be administered in accordance with subchapter 5 of chapter 7 of Title 32, except that interest earned shall remain in the special fund.

(e)  The commissioner may adopt rules for the small market access reinvestment trust plan relating to:

(1)  The creation of a private, nonprofit business organization to operate the plan and the appointment of individuals to govern the organization.

(2)  Criteria governing the circumstances under which a small group carrier or a nongroup carrier may transfer all or a portion of the expense and risk associated with individuals insured by the carrier to the reinsurance mechanism.

(3)  Eligibility criteria for providing financial support to carriers under the reinsurance mechanism, including carrier expenses eligible for financial support, standards and procedures for the treatment and management of chronic conditions, and any other eligibility criteria established by the commissioner.

(4)  Rules for operation of the reinsurance mechanism and the plan.

(5)  Standards and procedures for the assessment of all health insurers pro rata in accordance with the number of covered lives of each health insurer in this state, for such amounts, in excess of the revenue deposited into the small market access reinvestment trust fund under subsection (d) of this section, sufficient and necessary to pay for the cost of the reinsurance claims associated with the plan, including such retentions as the commissioner determines are needed to account for administrative costs and other costs of the plan.  The per capita assessment authorized by this subdivision shall be imposed only if the commissioner determines, in his or her sole discretion, that revenue from the premium tax imposed by subchapter 7 of chapter 211 of Title 32 and deposited into the small market access reinvestment trust fund established by subsection (d) of this section may be insufficient to provide adequate financial support for the reinsurance mechanism.

(6)  Any other standards or procedures necessary or desirable to carry out the purposes of this section.

(f)  As used in this section:

(1)  “Health insurer” means a health insurance company, a hospital or medical service corporation, a health maintenance organization, or an insurance company of stop loss and excess loss coverage in connection with insured or self-insured health benefit plans in this state.  “Health insurer” does not include the state of Vermont or any agency or instrumentality of the state.

(2)  “Nongroup carrier” means a nongroup carrier registered under section 4080b of this title.

(3)  “Plan” means the small market access reinvestment trust plan established by this section.

(4)  “Small group carrier” means a small group carrier registered under section 4080a of this title.

(g)  The commissioner may adopt the initial rules required or permitted by this section by emergency rule.

Sec. 2.  32 V.S.A. § 8551 is amended to read:

§ 8551.  IMPOSITION; RATE AND BASIS OF TAX

A domestic or foreign insurance company, association, or society, or a hospital or medical service corporation, or a health maintenance organization, other than life, or a surety or guaranty company, doing business in this state, shall pay a tax to the state, which is hereby assessed at the rate of two percent per annum on the gross amount of premiums and assessments written on its business in this state, but not including premiums received for reinsurance.  A domestic or foreign life insurance company, doing business in this state, shall pay a tax to the state, which is hereby assessed at the rate of two percent per annum on the gross amount of premiums and assessments collected on its business in this state, but not including premiums received for reinsurance.


Sec. 3.  32 V.S.A. § 8552 is amended to read:

§ 8552.  RETURNS

A domestic insurance company, association, or society, or a hospital or medical service corporation, a health maintenance organization, other than life, or surety or guaranty company shall pay a tax to the state on the gross amount of premiums and assessments written and not taxed in other states and shall pay a tax to the state on the gross amount of premiums and assessments collected and not taxed in other states and shall include such business in its returns.  A domestic life insurance company shall pay a tax to the state on the gross amount of premiums and assessments collected and not taxed in other states and shall include such business in its returns.  The term "taxed in other states" means:

(1)(A)  A tax imposed by another state on premiums and paid directly by the company, association, society, surety, guaranty, or life insurance company to such other state under an insurance premiums tax of the same general kind as found in subchapter 7 of chapter 211 of this title; or

(B)  A corporate income or franchise tax in which the premiums taxed under paragraph subdivision (A) of this subdivision (1) are a factor in the computation thereof; or

(2)  A tax of the same general kind as found in section 5035 of Title 8, imposed by another state upon surplus lines premiums which is paid directly or indirectly to that state by agents or brokers of the Vermont domestic insurer which is not itself authorized to do business in that state.

Sec. 4.  32 V.S.A. § 8553 is amended to read:

§ 8553.  TIME OF PAYMENT

Such tax shall be based upon the business of such company, association or , society, hospital or medical service corporation, or a health maintenance organization during the year terminating with December 31 preceding.  It shall be paid quarterly on or before the last day of the second calendar month following the quarter ending the last day of March, June, September, and December of each calendar year and shall be computed either upon the business of such company, association or society, hospital or medical service corporation, or a health maintenance organization during the quarter for which the payment is made, or upon an estimated basis predicated upon prior years business, upon forms to be prescribed by the commissioner of taxes.  Where the aggregate tax imposed upon a company, association, or, society, hospital or medical service corporation, or health maintenance organization is reasonably expected to be less than $500.00 for the calendar year it may be paid on an annual basis not later than the last day of February following the close of the year. Such company, association or, society, hospital or medical service corporation, or health maintenance organization shall annually make a final reconciliation return on or before the last day of February in the manner provided in section 8123 of this title.

Sec. 5.  8 V.S.A. § 4513(c) is amended to read:

(c)  In connection with a rate decision, the commissioner may also make reasonable supplemental orders to the corporation and may attach reasonable conditions and limitations to such orders as he the commissioner finds, on the basis of competent and substantial evidence, necessary to insure that benefits and services are provided at minimum cost under efficient and economical management of the corporation, and to insure that the hospital service corporation operates on a nonprofit basis for the purpose of providing an adequate hospital service plan to all individuals of the state, both groups and nongroups, and in all insurance markets, and without discrimination based on age, gender, geographic area, industry, and medical history.  The commissioner shall not set the rate of payment or reimbursement made by the corporation to any physician, hospital, or other health care provider.

Sec. 6.  8 V.S.A. § 4584(c) is amended to read:

(c)  In connection with a rate decision, the commissioner may also make reasonable supplemental orders to the corporation and may attach reasonable conditions and limitations to such orders as he finds, on the basis of competent and substantial evidence, necessary to insure that benefits and services are provided at minimum cost under efficient and economical management of the corporation, and to insure that the medical service corporation operates on a nonprofit basis for the purpose of providing an adequate medical service plan to all individuals of the state, both groups and nongroups, and in all insurance markets, and without discrimination based on age, gender, geographic area, industry, and medical history.  The commissioner shall not set the rate of payment or reimbursement made by the corporation to any physician, hospital, or other health care provider.

Sec. 7.  8 V.S.A. § 4518 is amended to read:

§ 4518.  TAX EXEMPTION; RECORDING FEE

A hospital service corporation shall be exempt from all forms of taxation, except as provided under subchapter 7 of chapter 211 of Title 32 but a recording fee of $3.00 shall be paid to the secretary of state at the time of filing the articles of association.

Sec. 8.  8 V.S.A. § 4590 is amended to read:

§ 4590.  TAX EXEMPTION; RECORDING FEE

A medical service corporation shall be exempt from all forms of taxation, except as provided under subchapter 7 of chapter 211 of Title 32 but a recording fee of $3.00 shall be paid to the secretary of state at the time of filing the articles of association.


* * * Small Business Health Care Tax Incentive Program * * *

Sec. 9.  32 V.S.A. § 5830e is added to read:

§ 5830e.  TAX CREDITS; SMALL BUSINESS HEALTH INSURANCE

                CREDIT

     (a)  An eligible employer shall be entitled, for tax years beginning on and after January 1, 2005, to a refundable health insurance credit against the tax imposed by section 5822 or 5832 of this title in an amount equal to 25 percent of the employer’s cost of approved health benefit plan premiums in the taxable year, up to a maximum credit amount of $40.00 per month of employment per qualified employee policy.  This credit shall be allocated on a prorata basis among the members of a pass-through entity.

(b)  For purposes of this section:

(1)  “Eligible employer” means an employer which:

(A)  employs 25 or fewer qualified employees; and

(B)  pays in the taxable year at least 50 percent of the annual premium cost of health insurance, per qualified employee, for a high deductible health insurance plan with a health savings account which meets the requirements of Section 223 of the Internal Revenue Code, as amended; and

(C)  contributes in the taxable year at least 50 percent of each qualified employee’s deductible and other cost sharing; and

(D)  for claims for credits pertaining to taxable years before 2007, has not paid for any portion of employee health insurance premium costs in the past 24 months.

(2)  “Qualified employee” means a person employed in Vermont by the employer at least 17.5 hours per week for at least 13 weeks during the employer’s taxable year.

(c)  The commissioner of taxes and the commissioner of banking, insurance, securities, and health care administration may adopt by rule standards and procedures necessary to carry out the purposes of this section. 

Sec. 10.  Adjustment of Percent and Limitations

     By January 1, 2007, the commissioner of taxes and the commissioner of banking, insurance, securities, and health care administration shall establish limitations to the small business employee health insurance credit under 32 V.S.A. § 5830e necessary to limit the cost of that credit to approximately $4 million per year, in light of the expanded eligibility under 32  V.S.A. § 5830e (b)(1)(D) in 2007.

* * * Health Care Cost Containment Council * * *

Sec. 11.  18 V.S.A. § 9409a is added to read:

§ 9409a.  HEALTH CARE COST CONTAINMENT COUNCIL

(a)  The commissioner shall establish the health care cost containment council, for the purpose of permitting public and private health benefit plans offered or administered in this state to collaborate and engage in such cost containment activities which the commissioner determines, in his or her discretion, will promote the general good of the state.

(b)  The health care cost containment council shall consist of:

(1)  the commissioner of the department of prevention, assistance, transition, and health, on behalf of the Medicaid program, the VScript program, and any other element of the Vermont health access plan administered by the department;

(2)  the commissioner of the department of personnel, on behalf of the Vermont state employees’ health benefit plan administered by the department;

(3)  representatives of any organization offering or administering a health benefit plan to or on behalf of an agency or instrumentality of the state designated by the commissioner;

(4)  representatives of health insurers offering insured health benefit plans designated by the commissioner;

(5)  representatives of workers’ compensation insurance companies doing business in this state designated by the commissioner;

(6)  representatives of health insurers offering self-insured health benefit plans at the discretion of such plans and as designated by the commissioner; and

(7)  any other person, at the discretion of the person and as designated by the commissioner.

(c)  The commissioner of prevention, assistance, transition, and health access shall be chair of the council.  The council shall be attached to the department of prevention, assistance, transition, and health access for administrative support.

(d)  The health care cost containment council, or a subcommittee of the council approved by the commissioner, is authorized to collaborate and engage in cost containment activities that promote the general good of the state, in accordance with such rules as may be adopted by the commissioner, in consultation with the attorney general’s office, and in accordance with any cost containment collaboration order which may be issued by the commissioner.  The commissioner may authorize, when necessary for the effective operation of the council, activities and meetings to be conducted in executive session.  Cost containment activities authorized by this section may include:

(1)  the development of a common prescription drug formulary or other prescription drug cost containment strategies;

(2)  participation in hospital budget reviews conducted under subchapter 7 of chapter 221 of this title;

(3)  participation in certificate of need proceedings conducted under subchapter 5 of chapter 221 of this title;

(4)  negotiations with health care facilities and health care providers relating to charges, utilization, and quality; and

(5)  any other cost containment activity authorized by the commissioner.

* * * Healthy Choices Insurance Discount * * *

Sec. 12.  8 V.S.A. § 4080a(h) is amended to read:

(h)(1)  A registered small group carrier shall use a community rating method acceptable to the commissioner for determining premiums for small group plans.  Except as provided in subdivision (2) of this subsection, the following risk classification factors are prohibited from use in rating small groups, employees or members of such groups, and dependents of such employees or members:

(A)  demographic rating, including age and gender rating;

(B)  geographic area rating;

(C)  industry rating;

(D)  medical underwriting and screening;

(E)  experience rating;

(F)  tier rating; or

(G)  durational rating.

(2)  The commissioner shall, by rule, adopt standards and a process for permitting registered small group carriers to use one or more risk classifications in their community rating method, provided that the premium charged shall not deviate above or below the community rate filed by the carrier by more than 20 percent (20%), and provided further that the commissioner’s rules may not permit any medical underwriting and screening, except that the commissioner’s rules may permit a carrier to establish premium discounts or rebates or modify otherwise applicable co-payments or deductibles in return for adherence to programs of health promotion and disease prevention, such as smoking cessation and nonsmoking, which reflect the personal choice of the member or subscriber.

(3)  The commissioner may exempt from the requirements of this section an association as defined in section subdivision 4079(2) of this title which:

(A)  offers a small group plan to a member small employer which is community rated in accordance with the provisions of subdivisions (1) and (2) of this subsection.  The plan may include risk classifications in accordance with subdivision (2) of this subsection;

(B)  offers a small group plan that guarantees acceptance of all persons within the association and their dependents; and

(C)  offers one or more of the common health care plans approved by the commissioner under subsection (e) of this section.

(4)  The commissioner may revoke or deny the exemption set forth in subdivision (3) of this subsection if the commissioner determines that:

(A)  because of the nature, size or other characteristics of the association and its members, the employees or members are in need of the protections provided by this section; or

(B)  the association exemption has or would have a substantial adverse effect on the small group market.

Sec. 13.  8 V.S.A. § 4080b(h) is amended to read:

(h)(1)  A registered nongroup carrier shall use a community rating method acceptable to the commissioner for determining premiums for nongroup plans. Except as provided in subdivision (2) of this subsection, the following risk classification factors are prohibited from use in rating individuals and their dependents:

(A)  demographic rating, including age and gender rating;

(B)  geographic area rating;

(C)  industry rating;

(D)  medical underwriting and screening;

(E)  experience rating;

(F)  tier rating; or

(G)  durational rating.

(2)  The commissioner shall, by rule, adopt standards and a process for permitting registered nongroup carriers to use one or more risk classifications in their community rating method.  After July 1, 1993, provided that the premium charged shall not deviate above or below the community rate filed by the carrier by more than 40 percent (40%) for two years, and thereafter 20 percent (20%).  Such rules may not permit, and provided further that the commissioner’s rules may not permit any medical underwriting and screening and shall give due consideration to the need for affordability and accessibility of health insurance, except that the commissioner’s rules may permit a carrier to establish premium discounts or rebates or modify otherwise applicable

co-payments or deductibles in return for adherence by a member or subscriber to programs or decisions relating to health promotion and disease prevention, such as smoking cessation and nonsmoking, which reflect the personal choice of the member or subscriber.

* * * Consumer Access to Health Care Price and Quality Information * * *

Sec. 14.  18 V.S.A. § 9410a is added to read:

§ 9410a.  HEALTH CARE PRICE AND QUALITY INFORMATION

(a)  The commissioner’s health care information system established and maintained under section 9410 of this title shall include a mechanism to make available to consumers health care price information, quality information, and such other health care information as the commissioner determines is necessary or desirable to empower an individual to make economically sound and appropriate health care purchasing decisions.

(b)  The commissioner’s consumer health care price and quality information system may require a health insurer, health care facility, health care provider, or other person providing health care products, such as pharmaceutical products and durable medical equipment, to residents of this state to file with the commissioner a consumer health care price and quality information plan, in accordance with rules adopted by the commissioner.  Such rules shall permit a hospital to satisfy the requirements of this section in a manner consistent with the hospital’s community report published pursuant to section 9405b of this title.  The commissioner may approve, disapprove, or conditionally approve such plans as the commissioner deems necessary or desirable to carry out the purposes of this section.  Approved plans may include the publication, including internet publication, of the charges established by health care facilities and health care providers, and the reimbursable amounts negotiated with health insurers and payable by the individual in connection with the individual’s deductible or other cost sharing obligations.  In adopting consumer health care price and quality rules, the commissioner shall consider:

(1)  the consumer’s need for the information;

(2)  the cost of the collection and publication of the information;

(3)  the capacity of the health care facility, health care provider, or health insurer to collect or publish the information; and

(4)  any other relevant consideration.       

(c)  As used in this section, “health insurer” means a health insurance policy or health benefit plan offered or issued by a health insurance company, a hospital or medical services corporation, a health maintenance organization, or any health benefit plan offered or administered by or on behalf of the state or any instrumentality of the state.

* * * Consumer Access to Covered Health Care Benefits * * *

Sec. 15.  8 V.S.A. § 4724(23) is added to read:

(23)  Health care benefits claims.  In the case of a claim by a member or subscriber for coverage under a health benefit plan of a health insurer, failing to effectuate settlement of the claim in a prompt, fair, and equitable manner, in conformance with the terms and conditions of coverage of the health benefit plan.  As used in this section, “health insurer” includes a health insurance company, a hospital or medical services corporation, a health maintenance organization, or a health benefit plan offered or administered by the state or an instrumentality of the state.

* * * Prescription Drugs * * *

Sec. 16.  18 V.S.A. § 9410b is added to read:

§ 9410b.  PRESCRIPTION DRUG PRICE DISCLOSURE

(a)  The commissioner’s health care information system established and maintained under section 9410 of this title shall include a requirement that when a pharmaceutical marketer engages in any form of prescription drug marketing directly to a physician or other person authorized to prescribe prescription drugs, he or she shall disclose to the physician or other authorized person the average wholesale price of the drugs being marketed in both a verbal and written manner, in accordance with rules adopted by the commissioner.  The written disclosure shall be in such a format as to be easily distributed to and understood by the average customer.   The disclosure shall include the price per pill, the price per course of therapy, and the relationship between the average wholesale price of the specific drug being marketed and competing drugs within the same therapeutic class.  The disclosure shall be intended for use by both physicians and patients.

(b)  As used in this section:

(1)  “Pharmaceutical manufacturing company” is defined by subdivision 2005(c)(1) of Title 33.

(2)  “Pharmaceutical marketer” is defined by subdivision 2005(c)(1) of Title 33.

Sec. 17.  18 V.S.A. § 9420 is added to read:

§ 9420.  PHARMACY BENEFIT MANAGEMENT

(a)  As used in this section:

(1)  “Health insurance plan” means a health benefit plan offered, administered, or issued by a health insurer doing business in Vermont.

(2)  “Health insurer” is defined by subdivision 9402(7) of this title.  The term includes:

(A)  The state of Vermont and any agency or instrumentality of the state that offers or administers a health benefit plan for public employees; and

(B)  Medicaid, the Vermont health access plan, the VScript pharmaceutical assistance program, and any other public health care assistance program.

(3)  “Pharmacy benefit management” means the procurement of prescription drugs at a negotiated rate for dispensing within this state to covered individuals, the administration or management of prescription drug benefits provided by a covered entity for the benefit of covered individuals, or any of the following services provided with regard to the administration of pharmacy benefits:

(A)  mail service pharmacy;

(B)  claims processing, retail network management, and payment of claims to pharmacies for prescription drugs dispensed to covered individuals;

(C)  clinical formulary development and management services;

(D)  rebate contracting and administration;

(E)  certain patient compliance, therapeutic intervention, and generic substitution programs;

(F)  disease management programs; and

(G)  any other service or program relating to the administration or management of prescription drug benefits.

(4)  “Pharmacy benefit manager” means an entity that performs pharmacy benefit management.  The term includes a person or entity acting for a pharmacy benefit manager in a contractual or employment relationship in the performance of pharmacy benefit management for a covered entity and includes mail service pharmacy.

(b)  Pharmacy benefit managers operating in the state of Vermont shall provide supplemental “transparent” quotations which disclose to the health insurance plan all external sources of revenue and profit.  Such quotations shall include a reasonable fee payable by the plan sponsor which represents a competitive pharmacy benefit profit. 

(c)  In order to enable periodic verification of transparent pricing arrangements, pharmacy benefit managers shall allow access by the public or private health insurance plan to financial and contractual information necessary to conduct a complete and independent audit designed to verify the following:

(1)  full pass through of negotiated drug prices and fees associated with all drugs dispensed to plan sponsor members in both retail and mail order settings or resulting from any of the pharmacy benefit management functions defined in this section;

(2)  full pass through of all financial remuneration associated with all drugs dispensed to plan sponsor members in both retail and mail order settings or resulting from any of the pharmacy benefit management functions defined in this section; and

(3)  any other verifications relating to the activities of the pharmacy benefit manager required by the commissioner.

(d)  The commissioner shall adopt such rules as are necessary or desirable in carrying out the purposes of this section.



Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont


www.leg.state.vt.us