BP BHEAD INT S [atlas:bill]

AN ACT Relating to the conversion of health care service contractors and health maintenance organizations from nonprofit or not-for-profit corporate to for-profit corporate status; adding new sections to chapter 48.44 RCW; and adding new sections to chapter 48.46 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. A new section is added to chapter 48.44 RCW to read as follows:

The legislature finds that, because of their public purpose, nonprofit or not-for-profit entities operating as health care service contractors have enjoyed certain benefits in the nature of reduced taxes. Those entities have accomplished accumulations of surplus because of their reduced tax burden. Those entities have enjoyed a competitive advantage because of the reduced tax burden.

The legislature declares that any competitive advantage or surplus accumulation attributable, even in part, to nonprofit or not-for-profit status should not be freely transferred to any entity.

NEW SECTION. Sec. 2. A new section is added to chapter 48.44 RCW to read as follows:

(1) A health care service contractor operated as a nonprofit or not-for-profit entity under any of the laws of this state may not convert its corporate status to that of a for-profit entity, or transfer to any one or more persons or groups more than ten percent of its assets or in-force contracts, unless it:

(a) Files with the commissioner an application for approval of the conversion or transfer that establishes by substantial evidence that the conversion or transfer is in the best interest of the health care service contractor's current subscribers; and

(b) Establishes, subject to the approval of the commissioner, a trust for the benefit of residents of this state, that will be used to fund health care services for indigent residents of this state residing in the health care service contractor's service area. The health care service contractor:

(i) Will transfer the amount of the trust irrevocably to the trustees, who may not be current or former officers or directors of the health care service contractor or other persons with an intimate relationship to the health care service contractor;

(ii) Shall transfer the amount of the trust to the trustees as cash or securities eligible for investment pursuant to chapter 48.13 RCW; and

(iii) Shall calculate the amount of the trust as of the date of application to the insurance commissioner for approval of the conversion or transfer. The health care service contractor shall calculate the amount of the trust as all capital and surplus of the health care service contractor at the date of application, less:

(A) If the transferee is a for-profit entity, the minimum capital and surplus requirements of the for-profit entity, at the date of application, for the in-force contracts to be transferred; or

(B) If the transferee is a nonprofit entity, the minimum capital and surplus requirements for the in-force contracts transferred.

(2) With prior notice to the applicant, the commissioner shall within sixty days of receipt of the application required by subsection (1) of this section, either approve the application or deny it if the applicant has not presented substantial evidence that the conversion or transfer is in the best interest of the current subscribers of the applicant.

(3) For the purposes of this section, all transfers of assets or in-force contracts within twenty-four months before and twelve months after the date of approval of an application to the insurance commissioner for approval of the conversion to for-profit status or transfer of contracts, will be aggregated to determine whether the health care service contractor has transferred ten percent of its assets or in-force contracts. If it files no application with the commissioner, for the purposes of this section, the commissioner will assume that the health care service contractor has filed an application on the date that a transfer of assets or in-force contracts, when aggregated with all prior transfers within the last five years, equals or exceeds ten percent of the health care service contractor's assets or in-force contracts at the time of the transfer.

(4) For the purposes of this section, the commissioner may retain at the health care service contractor's expense such attorneys, actuaries, accountants, and other experts not otherwise part of the commissioner's staff as are reasonably necessary to assist in the evaluation of the health care service contractor's application for conversion or transfer. Persons so retained are under the direction and control of the commissioner and shall act in a purely advisory capacity.

NEW SECTION. Sec. 3. A new section is added to chapter 48.46 RCW to read as follows:

The legislature declares that any competitive advantage or surplus accumulation attributable, even in part, to nonprofit or not-for-profit status should not be freely transferred to any entity.

NEW SECTION. Sec. 4. A new section is added to chapter 48.46 RCW to read as follows:

(1) A health maintenance organization operated as a nonprofit or not-for-profit entity under any of the laws of this state may not convert its corporate status to that of a for-profit entity, or transfer to any one or more persons or groups more than ten percent of its assets or in-force agreements, unless it:

(b) Establishes, subject to the approval of the commissioner, a trust for the benefit of residents of this state, that will be used to fund health care services for indigent residents of this state residing in the health maintenance organization's service area. The health maintenance organization:

(i) Will transfer the amount of the trust irrevocably to the trustees, who may not be current or former officers or directors of the health maintenance organization or other persons with an intimate relationship to the health maintenance organization;

(ii) Shall transfer the amount of the trust to the trustees as cash or securities eligible for investment pursuant to chapter 48.13 RCW; and

(iii) Shall calculate the amount of the trust as of the date of application to the insurance commissioner for approval of the conversion or transfer. The health maintenance organization shall calculate the amount of the trust as all capital and surplus of the health maintenance organization at the date of application, less:

(A) If the transferee is a for-profit entity, the minimum capital and surplus requirements of the for-profit entity, at the date of application, for the in-force agreements to be transferred; or

(B) If the transferee is a nonprofit entity, the minimum capital and surplus requirements for the in-force agreements transferred.

(3) For the purposes of this section, all transfers of assets or in-force agreements within twenty-four months before and twelve months after the date of approval of an application to the insurance commissioner for approval of the conversion to for-profit status or transfer, will be aggregated to determine whether the health maintenance organization has transferred ten percent of its assets or in-force agreements. If they file no application with the commissioner, for the purposes of this section, the commissioner will assume that the health maintenance organization has filed an application on the date that a transfer of assets or in-force agreements, when aggregated with all prior transfers within the last five years equals or exceeds ten percent of the health maintenance organization's assets or in-force agreements at the time of the transfer.

(4) For the purposes of this section, the commissioner may retain at the health maintenance organization's expense such attorneys, actuaries, accountants, and other experts not otherwise part of the commissioner's staff as are reasonably necessary to assist in the evaluation of the health maintenance organization's application for conversion or transfer. Persons so retained are under the direction and control of the commissioner and shall act in a purely advisory capacity.