Hawaii-2014-HB2529-Amended

SECTION 1. The legislature finds that health insurance exchanges are a central component of the federal Patient Protection and Affordable Care Act of 2010 (Affordable Care Act). The Affordable Care Act also gives states broad discretion in establishing the structure and governance of their own exchanges. The legislature further finds and declares that the Hawaii health connector, codified under chapter 435H, Hawaii Revised Statutes, is the designated health insurance exchange for the State of Hawaii and is charged with the responsibility of implementing applicable parts of the Affordable Care Act.

The successful and efficient operation of the Hawaii health connector is essential for the State, health insurers, and insured persons in Hawaii to comply with the new requirements of the Affordable Care Act. The legislature also finds that the Hawaii health connector was established as a private nonprofit entity, rather than a state agency, to provide the connector with a certain degree of freedom and autonomy in establishing and operating the State's health insurance exchange.

However, the legislature believes that evolving federal health care regulations and the need for greater transparency and oversight over Hawaii's health insurance exchange necessitate that the State revise the structure of the Hawaii health connector's board of directors. The legislature also believes that it should take a proactive oversight role to monitor the connector and review its financial and operational plans.

The Affordable Care Act mandates health insurance exchanges to be self-sustaining beginning in January 2015. The legislature recognizes that the financial sustainability of the Hawaii health connector must be facilitated in a way that promotes competition and ensures equity among the competitors. The legislature finds that a sustainability fee on insurers is an appropriate financing method that will strike a proper balance by promoting competition, facilitating a self-sustaining health insurance exchange market, and maintaining reasonable health insurance rates.

The legislature further finds that the financial support of the Hawaii health connector is in the public interest and for the public health, safety, and general welfare of the State.

Therefore, the purpose of this Act is to clarify the status of the Hawaii health connector as the official health insurance exchange for the State, provide for greater transparency and legislative oversight in the Hawaii health connector, ensure the sustainability of the Hawaii health connector, and ensure competition amongst health plans by:

(1) Establishing the connector legislative oversight committee to review the financial and operational plans of the connector;

(2) Establishing the Hawaii health insurance exchange special fund, to be administered by the department of commerce and consumer affairs;

(3) Beginning January 1, 2015, assessing a Hawaii health insurance exchange sustainability fee of no more than .345 per cent of the premiums derived from the sale of comprehensive medical insurance plans, including dental plans, in the State, to be deposited into the Hawaii health insurance exchange special fund;

(4) Noting that the current two percent surcharge authorized by the connector on plans sold through the connector shall cease to be collected once the Hawaii health insurance exchange sustainability fee is instituted;

(5) Requiring the board of directors of the Hawaii health connector to prepare and submit to the connector legislative oversight committee a fully documented biennial sustainability plan budget request for the connector;

(6) Requiring the connector legislative oversight committee to recommend the amount of the Hawaii health insurance exchange sustainability fee;

(7) Annually appropriating the funds collected from the Hawaii health insurance exchange sustainability fee to the Hawaii health insurance exchange, pursuant to a documented budget request demonstrating the need for and use of the sustainability fee;

(8) Clarifying that the Hawaii health connector must submit the results of the connector's annual audit to the legislature;

(9) Amending the composition and procedures of the board of directors of the Hawaii health connector; and

(10) Appropriating funds from the general fund to the Hawaii health insurance exchange special fund, but requiring the Hawaii health insurance exchange special fund to reimburse the general fund over a five-year period once the sustainability fees are instituted and collected and the sustainability plan is adopted.

SECTION 2. Chapter 435H, Hawaii Revised Statutes, is amended by adding four new sections to be appropriately designated and to read as follows:

§435H-A Connector legislative oversight committee. (a) There is established the connector legislative oversight committee. The committee shall promote and protect the interests of the residents of Hawaii by reviewing the financial and operational plans of the connector and providing input and recommendations to the board.

(b) The oversight committee shall consist of eight members who shall include:

(1) The chair of the house standing committee on consumer protection and commerce;

(2) The chair of the house standing committee on health;

(3) The chair of the house standing committee on finance;

(4) The chair of the senate standing committee on commerce and consumer protection;

(5) The chair of the senate standing committee on health;

(6) The chair of the senate standing committee on ways and means;

(7) One member of the minority party of the house, to be selected by the minority party leader; and

(8) One member of the minority party of the senate, to be selected by the minority party leader.

(c) The chairs of the house committee on consumer protection and commerce and the senate committee on commerce and consumer affairs shall serve as the co-chairs of the committee.

(d) The committee shall meet annually as agreed upon by the co-chairs; provided that the committee shall meet no later than December 1 of each year.

(e) The committee shall annually review the sustainability plan budget request that is submitted by the board pursuant to section 435H-D and shall make a recommendation to the house committee on finance and the senate committee on ways and means of the amount of the Hawaii health insurance exchange sustainability fee. The legislative appropriation authorized under section 435H-D(b) shall be based on the information received and recommendations made pursuant to this section.

§435H-B Hawaii health insurance exchange special fund; establishment; budget request; appropriation. (a) There is established, as a separate account within the compliance resolution fund, the Hawaii health insurance exchange special fund, into which shall be deposited:

(1) All revenues from the assessment of the Hawaii health insurance exchange sustainability fee established pursuant to section 435H-C; and

(2) Appropriations made by the legislature to the special fund.

(b) Moneys in the Hawaii health insurance exchange special fund shall be used for the following purposes:

(1) Financial support to the Hawaii health insurance exchange, also known as the Hawaii health connector, to ensure the sustainability of the Hawaii health insurance exchange; and

(2) Central service expenses and administrative expenses of the special fund.

§435H-C Hawaii health insurance exchange sustainability fee; establishment. (a) Beginning January 1, 2015, and each January 1 thereafter, the commissioner shall assess a Hawaii health insurance exchange sustainability fee of no greater than .345 per cent of the premiums derived from the sale of comprehensive medical insurance plans, including dental plans, in the State; provided that the final amount of the Hawaii health insurance exchange sustainability fee shall be based on the sustainability plan budget request submitted to the connector legislative oversight committee pursuant to section 435H-D.

(b) Every insurer shall remit to the commissioner the Hawaii health insurance exchange sustainability fee in such form as the commissioner prescribes.

(c) The commissioner shall deposit the sustainability fees received into the Hawaii health insurance exchange special fund.

(d) The commissioner shall transfer the accumulated sustainability fees deposited into the Hawaii health insurance exchange special fund to the Hawaii health insurance exchange pursuant to the legislative appropriation authorized under section 435H-D(b).

(e) No more than $15,000,000 shall be allocated to the Hawaii health insurance exchange in any calendar year. This ceiling may be increased by action of the legislature through adoption of a subsequent sustainability plan budget request from the connector.

§435H-D Budget requests; annual appropriations. (a) The board shall prepare a fully documented biennial sustainability plan budget request for the connector, detailing the amount of funding required to be appropriated to the connector to finance the operations and ensure the sustainability of the connector. The board shall submit the sustainability plan budget request to the connector legislative oversight committee no later than ninety days prior to the start of each fiscal year of the connector.

(b) The legislature shall authorize an appropriation, based on the recommendations of the connector legislative oversight committee pursuant to section 435H-A, to the connector out of the proceeds of the Hawaii health insurance exchange special fund."

SECTION 3. Section 435H-1, Hawaii Revised Statutes, is amended by amending the definition of "insurer" to read as follows:

""Insurer" means any person or entity that issues a policy of accident and health or sickness insurance subject to article 10A of chapter 431, or chapters 432 or 432D[.] other than an accident-only, specified disease, hospital indemnity, medicare supplement, disability income, or other limited benefit health insurance policies."

SECTION 4. Section 435H-2, Hawaii Revised Statutes, is amended as follows:

1. By amending subsections (a) and (b) to read:

"(a) There is established the Hawaii health insurance exchange to be known as the Hawaii health connector. The connector shall be the designated health insurance exchange for the State. The qualifying standards and conditions relating to the receipt of funds contained in chapter 42F shall apply to the funds received by the Hawaii health insurance exchange. The connector shall be a nonprofit incorporated entity. The connector shall not be an agency of the State and shall not be subject to laws or rules regulating rulemaking, public employment, or public procurement. [~~The connector shall be a Hawaii nonprofit corporation organized and governed pursuant to chapter 414D, the Hawaii nonprofit corporations act.~~] The debts and liabilities of the connector shall not constitute the debts and liabilities of the State.

(b) The purposes of the connector shall include:

(1) Facilitating the purchase and sale of qualified plans and qualified dental plans;

(2) Connecting consumers to the information necessary to make informed health care choices; [~~and~~]

(3) Enabling consumers to purchase coverage and manage health and dental plans electronically[.]; and

(4) Performing any and all other duties required of a health insurance exchange pursuant to the federal act."

2. By amending subsection (d) to read:

"(d) The connector shall be audited annually by the state auditor who shall submit the results of each annual audit to the commissioner and the legislature no later than thirty days after the connector receives the results. The connector shall retain all annual audits on file, along with any documents, papers, books, records, and other evidence that is pertinent to its budget and operations for a period of ten years and shall permit the state auditor, the commissioner, the state legislature, or their authorized representatives to have access to, inspect, and make copies of any documents retained pursuant to this subsection."

SECTION 5. Section 435H-3, Hawaii Revised Statutes, is amended to read as follows:

"[[]§435H-3[]] Funding. (a) The connector may receive contributions, grants, endowments, fees, or gifts in cash or otherwise from public and private sources including corporations, businesses, foundations, governments, individuals, and other sources subject to rules adopted by the board. The State may appropriate moneys to the connector[.] via the sustainability fee collected pursuant to section 435H-C. As required by section 1311(d)(5)(A) of the Federal Act, the connector shall be self-sustaining by January 1, 2015, and may charge assessments or user fees to participating health and dental carriers, or may otherwise generate funding to support its operations. Moneys received by or under the supervision of the connector shall not be placed into the state treasury and the State shall not administer any moneys of the connector nor be responsible for the financial operations or solvency of the connector. The existing surcharge authorized by the connector on plans sold through the connector shall cease to be collected once the sustainability fee authorized pursuant to section 435H-C is instituted.

(b) In addition to any other means of generating revenue pursuant to subsection (a), the connector may charge fees for displaying advertisements for ancillary services on the connector's website.

SECTION 6. Section 435H-4, Hawaii Revised Statutes, is amended to read as follows:

"§435H-4 Board of directors; composition; operation. (a) The Hawaii health connector shall be a nonprofit entity governed by a board of directors that shall comprise [fifteen members appointed by the governor and with the advice and consent of the senate pursuant to section 26‑34; provided that the governor shall submit nominations to the senate for advice and consent no later than February 1, 2012; and provided further that the senate shall timely advise and consent to nominations for terms to begin July 1, 2012. Members of the interim board shall be eligible for appointment to the board.] twelve members. The total number of voting members on the board shall not exceed nine members. There shall be no board members representing insurers or dental benefit providers; provided that the board may establish a subcommittee of representatives from all providers of health care insurance and dental benefits to provide technical assistance and other information to the connector on macro insurance matters.

(b) Appointments to fill vacancies on the board shall be as follows:

(1) The board shall recommend to the governor the skill sets that are needed on the board to facilitate implementation of the connector;

(2) The board shall submit to the governor a list of qualified nominees that meet the required skill sets; and

(3) The governor shall appoint members of the board, subject to the advice and consent of the senate and pursuant to section 26‑34, from this list of qualified nominees provided by the board.

[~~(b)~~] (c) The membership of the board shall reflect geographic diversity and the diverse interests of stakeholders including consumers[,] and employers[~~, insurers, and dental benefit providers~~].

(d) The governor shall designate one representative to serve as the State's official representative on the board from among the following state representatives: the director of commerce and consumer affairs or the director's designee, the director of health or the director's designee, the director of human services or the director's designee, [~~and~~] the director of labor and industrial relations or the director's designee, a representative from the office of healthcare transformation, or a representative from the office of information management and technology.

The governor's designated state representative shall be an ex officio voting member of the board. The remaining state representatives shall be ex officio[~~, voting~~] nonvoting members of the board. The governor shall notify the chair of the connector regarding the selection of the designated voting and nonvoting state representative members of the board.

The director of commerce and consumer affairs, the director of health, the director of human services, and the director of labor and industrial relations may select a designee for a specified meeting or meetings. Such selection of the designee shall be submitted in writing to the board of directors prior to or at the meeting in which the designee will serve.

No state agency shall impede the efficient operation of the connector.

[~~(c)~~] (e) Board members shall serve staggered terms and the interim board shall recommend an appropriate schedule for staggered terms; provided that this subsection shall not apply to ex officio members, who shall serve during their entire term of office[.] or until the governor names a replacement.

[~~(d)~~] (f) The board shall adopt policies prohibiting conflicts of interest and procedures for recusal of a member in the case of an actual or potential conflict of interest, including policies prohibiting a member from taking part in official action on any matter in which the member had any financial involvement or interest prior to the commencement of service on the board. Members of the board may retain private counsel for matters relating to service on the board according to rules recommended by the board.

[~~(e)~~] (g) The board shall manage the budget of the connector according to generally accepted accounting principles and a plan for financial organization adopted by the legislature based on recommendations of the interim board.

[~~(f)~~] (h) The board shall maintain transparency of board actions, including public disclosure and posting of board minutes on the connector's website according to provisions adopted by the legislature based on recommendations of the interim board."

SECTION 7. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2014-2015 to be deposited into the Hawaii health insurance exchange special fund.

SECTION 8. There is appropriated out of the Hawaii health insurance exchange special fund the sum of $ or so much thereof as may be necessary for fiscal year 2014-2015 for the Hawaii health connector; provided that once the Hawaii health insurance exchange sustainability fee authorized pursuant to section 435H-C, Hawaii Revised Statutes, is instituted and collected and the sustainability plan is adopted, the general fund shall be reimbursed over a five-year period for the amount originally expended in section 7 of this Act.

The sum appropriated shall be expended by the department of commerce and consumer affairs for the purposes of this Act.

SECTION 9. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 10. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 11. This Act shall take effect on July 1, 2112.

HOUSE OF REPRESENTATIVES	H.B. NO.	2529
TWENTY-SEVENTH LEGISLATURE, 2014		H.D. 3
STATE OF HAWAII		S.D. 1