House File 2476 - Introduced
HOUSE FILE
BY STRUYK and DANDEKAR
Passed House, Date Passed Senate, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act allowing for small employer association health benefit
2 plans, a small business and school district health care
3 reinsurance program, and a small employer income tax credit
4 for the cost of purchasing health insurance coverage, and
5 providing effective and retroactive applicability dates.
6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
7 TLSB 5938YH 81
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PAG LIN
1 1 DIVISION I
1 2 ASSOCIATION GROUP HEALTH BENEFIT PLANS
1 3 Section 1. NEW SECTION. 513B.13A ASSOCIATION GROUP
1 4 HEALTH BENEFIT PLANS.
1 5 1. DEFINITIONS.
1 6 As used in this section, unless the context otherwise
1 7 requires:
1 8 a. "Association" means an organization established by a
1 9 trade, industry, or professional association of employers that
1 10 has been formed for purposes other than obtaining insurance,
1 11 has a constitution or bylaws, and has been organized and
1 12 maintained in good faith for at least ten continuous years
1 13 prior to July 1, 2006, or is a successor to such an
1 14 association.
1 15 b. "Eligible member" means a small employer as defined in
1 16 section 513B.2.
1 17 2. PREMIUM RATES == BENEFITS.
1 18 a. Notwithstanding section 513B.4, a small employer
1 19 carrier that offers health insurance coverage in the small
1 20 group market may offer health benefit plans to eligible
1 21 members of an association with premium rates determined by the
1 22 total number of lives insured by the plan, not the number of
1 23 lives of each eligible member of the association, with the
1 24 following options:
1 25 (1) A small employer carrier may offer a single plan to
1 26 all eligible members of an association.
1 27 (2) A small employer carrier may offer a plan that
1 28 provides a basic level of benefits and offers eligible members
1 29 of an association the option to choose additional coverage
1 30 pursuant to a schedule of predetermined rates.
1 31 (3) A small employer carrier may offer a high deductible
1 32 plan to eligible members of an association who request such a
1 33 plan.
1 34 b. A small employer carrier that offers a plan pursuant to
1 35 this section may require that eligible members of the
2 1 association participating in the plan continue to participate
2 2 for up to three years.
2 3 3. PARTICIPATION.
2 4 a. An association may enter into one or more agreements
2 5 with eligible members of the association for the purpose of
2 6 jointly procuring a group health insurance plan pursuant to
2 7 this section.
2 8 b. Participation in a plan offered pursuant to this
2 9 section by an eligible member of an association shall be
2 10 voluntary and shall not be made a condition of membership in
2 11 the association.
2 12 4. EFFECT OF AGREEMENT. An agreement entered into
2 13 pursuant to this section shall not be construed to establish a
2 14 multiple employer welfare arrangement as defined in section 3
2 15 of the federal Employee Retirement Income Security Act of
2 16 1974, 29 U.S.C. } 1002, paragraph 40.
2 17 DIVISION II
2 18 SMALL BUSINESS AND SCHOOL DISTRICT
2 19 HEALTH CARE RESINSURANCE PROGRAM
2 20 Sec. 2. NEW SECTION. 513B.13B SMALL BUSINESS AND SCHOOL
2 21 DISTRICT HEALTH CARE REINSURANCE PROGRAM.
2 22 1. DEFINITIONS.
2 23 As used in this section, unless the context otherwise
2 24 requires:
2 25 a. "Fund" means the small business and school district
2 26 health care reinsurance fund.
2 27 b. "Qualified carrier" means a carrier, as defined in
2 28 section 513B.2, or a self=insurance plan for accident and
2 29 health insurance for a school corporation as provided in
2 30 section 509A.14, that meets the requirements contained in
2 31 subsection 4.
2 32 c. "School district group health insurance plan" means a
2 33 group health insurance plan that provides health insurance
2 34 coverage for employees of a school district, including plans
2 35 authorized under chapter 509A.
3 1 d. "Small business" means a person actively engaged in
3 2 business who, on at least fifty percent of the business's
3 3 working days during the preceding year, employed not less than
3 4 two and not more than twenty=five full=time equivalent
3 5 eligible employees. In determining the number of eligible
3 6 employees, businesses which are affiliated businesses or which
3 7 are eligible to file a combined tax return for purposes of
3 8 state taxation are considered one business employer.
3 9 e. "Small business group health insurance plan" means a
3 10 group health insurance plan that provides health insurance
3 11 coverage for employees of a small business.
3 12 2. REINSURANCE FUND.
3 13 a. A small business and school district health care
3 14 reinsurance fund is created as a separate fund in the state
3 15 treasury under the control of the commissioner of insurance.
3 16 b. The treasurer of state shall act as custodian of the
3 17 fund and shall disburse amounts contained in the fund as
3 18 directed by the commissioner.
3 19 c. The commissioner shall keep accounts in relation to the
3 20 appropriation of moneys to the fund and all amounts of
3 21 approved vouchers for reimbursements to qualified carriers
3 22 chargeable to the fund.
3 23 3. REINSURANCE PROGRAM.
3 24 a. A reinsurance program is created in the insurance
3 25 division of the department of commerce to administer the fund
3 26 and to make expenditures from the fund pursuant to this
3 27 section.
3 28 b. Moneys in the fund shall be used to reimburse a
3 29 qualified carrier that offers a small business group health
3 30 insurance plan or a school district group health insurance
3 31 plan in which at least eighty=five percent of the eligible
3 32 employees of the small business or the school district
3 33 participate, for certain claims paid by the qualified carrier.
3 34 The amount of reimbursement shall be fifty percent of the cost
3 35 of each claim that amounts to at least twenty=five thousand
4 1 dollars but not more than one hundred thousand dollars and
4 2 that is paid by a qualified carrier under such a plan in a
4 3 year.
4 4 c. The commissioner shall submit an annual report not
4 5 later than January 1 to the governor, the general assembly,
4 6 and the legislative services agency evaluating the fund and
4 7 reinsurance program, including but not limited to
4 8 consideration of the factors contained in subsection 5,
4 9 paragraph "b", summarizing the status of the fund and
4 10 reinsurance program, and proposing modifications to or
4 11 suspension of the operation of the fund and reinsurance
4 12 program as deemed necessary by the commissioner.
4 13 4. QUALIFIED CARRIERS.
4 14 a. In order to qualify for participation in the
4 15 reinsurance program for the first time, a carrier shall
4 16 certify to the commissioner that the carrier will immediately
4 17 reduce its base premium rates or otherwise demonstrate to the
4 18 commissioner that the carrier will immediately effectively
4 19 reduce premiums, according to accepted actuarial guidelines
4 20 adopted by the commissioner by rule under chapter 17A, for all
4 21 small business group health insurance plans or school district
4 22 group health insurance plans offered by the carrier for the
4 23 plan benefit year in an amount that reflects the estimated
4 24 reimbursement the carrier will receive from participating in
4 25 the reinsurance program during that plan benefit year, as
4 26 determined by the commissioner according to accepted actuarial
4 27 guidelines adopted by rule under chapter 17A.
4 28 b. In order to qualify for continued participation in the
4 29 reinsurance program, a carrier shall certify to the
4 30 commissioner that for the plan benefit year for which
4 31 reimbursement from the fund is claimed, the carrier reduced
4 32 its base premium rates or otherwise demonstrate to the
4 33 commissioner that the carrier effectively reduced premiums,
4 34 according to accepted actuarial guidelines adopted by the
4 35 commissioner by rule under chapter 17A, for all small business
5 1 group health insurance plans or school district group health
5 2 insurance plans offered by the carrier for that plan benefit
5 3 year.
5 4 c. A qualified carrier may claim reimbursement from the
5 5 fund for the cost of eligible claims annually, by filing, with
5 6 the commissioner, a claim in a form prescribed by the
5 7 commissioner by rule.
5 8 5. MONITORING AND EVALUATION.
5 9 a. The commissioner shall develop and implement criteria
5 10 to monitor and evaluate the fund and reinsurance program on an
5 11 ongoing basis and may make recommendations to the general
5 12 assembly, including proposed modifications to or suspension of
5 13 the operation of the fund and reinsurance program.
5 14 b. In monitoring and evaluating the reinsurance program,
5 15 the commissioner shall consider such factors as the population
5 16 whose claims are being reimbursed by the reinsurance program,
5 17 the number and percentage of qualified carriers electing to
5 18 utilize the reinsurance program, health care reform measures
5 19 implemented in the state, premium costs of small business
5 20 group health insurance or school district group health
5 21 insurance plans offered by qualified carriers that participate
5 22 in the reinsurance program compared to carriers that do not,
5 23 and other factors deemed relevant by the commissioner.
5 24 DIVISION III
5 25 SMALL EMPLOYER HEALTH INSURANCE
5 26 COVERAGE TAX CREDIT
5 27 Sec. 3. NEW SECTION. 422.11M SMALL EMPLOYER HEALTH
5 28 INSURANCE COVERAGE TAX CREDIT.
5 29 1. The taxes imposed under this division, less the credits
5 30 allowed under sections 422.12 and 422.12B, shall be reduced by
5 31 a small employer health insurance coverage tax credit. The
5 32 tax credit may be claimed by a small employer that purchases
5 33 health insurance coverage, as defined in section 513B.2, for
5 34 the small employer's employees and their dependents for the
5 35 first time. The amount of the tax credit equals one hundred
6 1 percent of the cost to the small employer of purchasing the
6 2 first year of the health insurance coverage. The tax credit
6 3 shall be taken over five tax years as provided in subsection
6 4 2.
6 5 2. a. A small employer is entitled to claim twenty
6 6 percent of the amount of the small employer health insurance
6 7 coverage tax credit for the first tax year for which the
6 8 health insurance coverage is purchased and twenty percent of
6 9 the amount of the credit for each consecutive year thereafter
6 10 that the small employer continues to purchase health insurance
6 11 coverage for a total of five tax years. However, any credit
6 12 in excess of the tax liability for the tax year is
6 13 nonrefundable but may be credited to the tax liability for the
6 14 following seven years or until depleted, whichever is the
6 15 earlier.
6 16 b. If a small employer elects to take the small employer
6 17 health insurance coverage tax credit, the small employer shall
6 18 reduce, by the amount used in the computation of the credit,
6 19 the deduction for Iowa income tax purposes of the cost of
6 20 health insurance premiums paid by the employer during the tax
6 21 year in which the tax credit is computed, that is deductible
6 22 for federal tax purposes.
6 23 c. If a small employer that has claimed the small employer
6 24 health insurance coverage tax credit is merged with another
6 25 business or is divided into separate businesses, any resulting
6 26 business which is at least fifteen percent directly or
6 27 indirectly owned or controlled by the owners or controllers of
6 28 the original small employer, is entitled to claim any amounts
6 29 of the small employer health insurance coverage credit that
6 30 remain so long as the resulting business continues to purchase
6 31 the health insurance coverage during each tax year for which
6 32 the credit is claimed.
6 33 3. An individual may claim a small employer health
6 34 insurance coverage tax credit allowed a partnership, limited
6 35 liability company, S corporation, estate, or trust electing to
7 1 have the income taxed directly to the individual. The amount
7 2 claimed by the individual shall be based on the pro rata share
7 3 of the individual's earnings of the partnership, limited
7 4 liability company, S corporation, estate, or trust.
7 5 4. a. For the purposes of this section "small employer"
7 6 means a person actively engaged in business, to which all of
7 7 the following apply:
7 8 (1) On at least fifty percent of the employer's working
7 9 days during the preceding year, employed not less than two and
7 10 not more than twenty full=time equivalent eligible employees.
7 11 In determining the number of eligible employees, companies
7 12 which are affiliated companies or which are eligible to file a
7 13 combined tax return for purposes of state taxation are
7 14 considered one employer.
7 15 (2) The annualized, average hourly wage paid by the
7 16 employer is equal to or greater than one hundred percent of
7 17 the average county wage.
7 18 b. For purposes of this definition, "average county wage"
7 19 means the annualized, average hourly wage calculated by the
7 20 department of workforce development which equals the least of
7 21 the following:
7 22 (1) The annualized, average hourly wage paid by all
7 23 businesses in the entire county.
7 24 (2) The annualized, average hourly wage paid by all
7 25 businesses in the county located outside the largest city of
7 26 the county.
7 27 (3) The annualized, average hourly wage paid by all
7 28 businesses other than the largest employer in the entire
7 29 county.
7 30 Sec. 4. Section 422.33, Code Supplement 2005, is amended
7 31 by adding the following new subsection:
7 32 NEW SUBSECTION. 20. a. The taxes imposed under this
7 33 division shall be reduced by a small employer health insurance
7 34 coverage tax credit. The tax credit may be claimed by a small
7 35 employer that purchases health insurance coverage, as defined
8 1 in section 513B.2, for the small employer's employees and
8 2 their dependents for the first time. The amount of the tax
8 3 credit equals one hundred percent of the cost to the small
8 4 employer of purchasing the first year of such health insurance
8 5 coverage. The credit shall be taken over five tax years as
8 6 provided in paragraph "b".
8 7 b. (1) A small employer is entitled to claim twenty
8 8 percent of the amount of the small employer health insurance
8 9 coverage tax credit for the first tax year for which the
8 10 health insurance coverage is purchased and twenty percent of
8 11 the amount of the credit for each consecutive year thereafter
8 12 that the small employer continues to purchase the health
8 13 insurance coverage for a total of five tax years. However,
8 14 any credit in excess of the tax liability for the tax year is
8 15 nonrefundable but may be credited to the tax liability for the
8 16 following seven years or until depleted, whichever is the
8 17 earlier.
8 18 (2) If a small employer elects to take the small employer
8 19 health insurance coverage tax credit, the small employer shall
8 20 reduce, by the amount used in the computation of the credit,
8 21 the deduction for Iowa income tax purposes of the cost of
8 22 health insurance premiums paid by the employer during the tax
8 23 year in which the tax credit is computed, that is deductible
8 24 for federal tax purposes.
8 25 (3) If a small employer that has claimed the small
8 26 employer health insurance coverage tax credit is merged with
8 27 another business or is divided into separate businesses, any
8 28 resulting business which is at least fifteen percent directly
8 29 or indirectly owned or controlled by the owners or controllers
8 30 of the original small employer, is entitled to claim any
8 31 amounts of the small employer health insurance coverage credit
8 32 that remain so long as the resulting business continues to
8 33 purchase the health insurance coverage during each tax year
8 34 for which the credit is claimed.
8 35 c. (1) For the purposes of this subsection "small
9 1 employer" means a person actively engaged in business, to
9 2 which all of the following apply:
9 3 (a) On at least fifty percent of the employer's working
9 4 days during the preceding year, employed not less than two and
9 5 not more than twenty full=time equivalent eligible employees.
9 6 In determining the number of eligible employees, companies
9 7 which are affiliated companies or which are eligible to file a
9 8 combined tax return for purposes of state taxation are
9 9 considered one employer.
9 10 (b) The annualized, average hourly wage paid by the
9 11 employer is equal to or greater than one hundred percent of
9 12 the average county wage.
9 13 (2) For purposes of this definition, "average county wage"
9 14 means the annualized, average hourly wage calculated by the
9 15 department of workforce development which equals the least of
9 16 the following:
9 17 (a) The annualized, average hourly wage paid by all
9 18 businesses in the entire county.
9 19 (b) The annualized, average hourly wage paid by all
9 20 businesses in the county located outside the largest city of
9 21 the county.
9 22 (c) The annualized, average hourly wage paid by all
9 23 businesses other than the largest employer in the entire
9 24 county.
9 25 Sec. 5. EFFECTIVE AND RETROACTIVE APPLICABILITY DATES.
9 26 This division of this Act, being deemed of immediate
9 27 importance, takes effect upon enactment and applies
9 28 retroactively to January 1, 2006, for tax years beginning on
9 29 or after that date.
9 30 EXPLANATION
9 31 This bill authorizes small employer association health
9 32 benefit plans, a small business and school district health
9 33 care reinsurance program, and a small employer income tax
9 34 credit for the cost of purchasing health insurance coverage,
9 35 and provides effective and retroactive applicability dates for
10 1 the tax credit.
10 2 DIVISION I == ASSOCIATION GROUP HEALTH BENEFIT PLANS. The
10 3 bill provides that notwithstanding the premium rate
10 4 restrictions contained in Code section 513B.4, a small
10 5 employer carrier that offers health insurance coverage in the
10 6 small group market may offer health benefit plans to eligible
10 7 members of an association with premium rates determined by the
10 8 total number of lives insured by the plan, not the number of
10 9 lives of each eligible member of the association.
10 10 The bill allows such a small employer carrier to offer a
10 11 single plan, a basic plan with options to purchase additional
10 12 coverage pursuant to a schedule of predetermined rates, or a
10 13 high deductible to eligible members of an association. A
10 14 small employer carrier that offers such a plan may require
10 15 that participating eligible members of an association continue
10 16 to participate for up to three years.
10 17 An association may enter into agreements with eligible
10 18 members of the association for the purpose of procuring a
10 19 group health insurance plan but such an agreement shall not be
10 20 construed to establish a multiple employer welfare arrangement
10 21 as defined in the federal Employee Retirement Income Security
10 22 Act of 1974 (ERISA). Participation in an association health
10 23 benefit plan is voluntary and cannot be made a condition of
10 24 membership in an association.
10 25 For purposes of the bill, an "association" is an
10 26 organization established by a trade, industry, or professional
10 27 association of employers that has been formed for purposes
10 28 other than obtaining insurance, has a constitution or bylaws,
10 29 and has been organized and maintained in good faith for at
10 30 least 10 continuous years prior to July 1, 2006, or is a
10 31 successor to such an association. An "eligible member" of an
10 32 association is a small employer who is actively engaged in
10 33 business and on at least 50 percent of the employer's working
10 34 days during the preceding year, employed not less than two and
10 35 not more than 50 full=time equivalent eligible employees.
11 1 DIVISION II == SMALL BUSINESS AND SCHOOL DISTRICT HEALTH
11 2 CARE REINSURANCE PROGRAM. The bill creates a small business
11 3 and school district health care reinsurance program for health
11 4 care claims made under small business or school district group
11 5 health insurance plans.
11 6 The bill provides reimbursement of certain claims paid by
11 7 qualified insurance carriers under group health insurance
11 8 plans that provide health insurance to a small business, which
11 9 employs two to 25 full=time equivalent employees, or to a
11 10 school district.
11 11 The reinsurance fund is created as a separate fund in the
11 12 state treasury under the control of the commissioner of
11 13 insurance.
11 14 The reinsurance program is created in the insurance
11 15 division of the department of commerce to administer the
11 16 reinsurance fund and to make expenditures from the fund.
11 17 The reinsurance program is required to reimburse a
11 18 qualified carrier that offers a small business or school
11 19 district group health insurance plan, in which at least 85
11 20 percent of the eligible employees of the small business or the
11 21 school district participate, for certain claims paid. The
11 22 reimbursement amount is 50 percent of the cost of each claim,
11 23 of at least $25,000 but not more than $100,000, which is paid
11 24 by a qualified carrier under such a plan each year.
11 25 For the purposes of the bill, a "qualified carrier" means a
11 26 carrier under Code section 513B.2, which is an entity subject
11 27 to the insurance laws and regulations of this state, or
11 28 subject to the jurisdiction of the commissioner, that
11 29 contracts or offers to contract to provide, deliver, arrange
11 30 for, pay for, or reimburse any of the costs of health care
11 31 services, including an insurance company offering sickness and
11 32 accident plans, a health maintenance organization, a nonprofit
11 33 health service corporation, or any other entity providing a
11 34 plan of health insurance, health benefits, or health services,
11 35 or means a self=insurance plan for accident and health
12 1 insurance for a school corporation as provided in section
12 2 509A.14, that meets the requirements of the bill.
12 3 In order to qualify for participation in the reinsurance
12 4 program for the first time, a carrier is required to certify
12 5 to the commissioner that the carrier will immediately reduce
12 6 its base premium rates or otherwise demonstrate to the
12 7 commissioner that the carrier will immediately effectively
12 8 reduce premiums, according to accepted actuarial guidelines
12 9 adopted by the commissioner by rule under Code chapter 17A,
12 10 for all small business or school district group health
12 11 insurance plans offered by the carrier for the plan benefit
12 12 year in an amount that reflects the estimated reimbursement
12 13 the carrier will receive from participating in the reinsurance
12 14 program during that plan benefit year, as determined by the
12 15 commissioner according to accepted actuarial guidelines
12 16 adopted by rule under Code chapter 17A.
12 17 In order to qualify for continued participation in the
12 18 reinsurance program, a carrier shall certify to the
12 19 commissioner that for the plan benefit year for which
12 20 reimbursement from the fund is claimed, the carrier reduced
12 21 its base premium rates or otherwise demonstrate to the
12 22 commissioner that the carrier effectively reduced premiums,
12 23 according to accepted actuarial guidelines adopted by the
12 24 commissioner by rule under Code chapter 17A, for all small
12 25 business or school district group health insurance plans
12 26 offered by the carrier for that plan benefit year.
12 27 The commissioner is required to develop and implement
12 28 criteria to monitor and evaluate the reinsurance program and
12 29 may make recommendations to the general assembly, including
12 30 proposed modifications to or suspension of the operation of
12 31 the reinsurance fund and program. The criteria shall include
12 32 consideration of factors such as the population whose claims
12 33 are being reimbursed by the program, the number and percentage
12 34 of qualified carriers electing to utilize the program, health
12 35 care reform measures implemented in the state, premium costs
13 1 of small business or school district group health insurance
13 2 plans offered by qualified carriers that participate in the
13 3 program compared to carriers that do not, and other factors
13 4 deemed relevant by the commissioner.
13 5 The commissioner is required to submit an annual report by
13 6 January 1 to the governor, general assembly, and legislative
13 7 services agency evaluating the reinsurance fund and program,
13 8 including but not limited to consideration of the factors
13 9 involved in developing and implementing the reinsurance
13 10 program and fund, summarizing the status of the program and
13 11 fund, and proposing modifications to or suspension of the
13 12 operation of the fund and program as deemed necessary by the
13 13 commissioner.
13 14 DIVISION III == SMALL EMPLOYER HEALTH INSURANCE COVERAGE
13 15 TAX CREDIT. The bill provides an individual and corporate
13 16 income tax credit for a small employer that purchases health
13 17 insurance coverage for its employees and their dependents for
13 18 the first time.
13 19 A small employer is defined as a person actively engaged in
13 20 business who on at least 50 percent of the employer's working
13 21 days during the preceding year, employed not less than two and
13 22 not more than 20 full=time equivalent eligible employees and
13 23 paid those employees an annualized, average hourly wage that
13 24 is equal to or greater than 100 percent of the average county
13 25 wage. "Average county wage" is defined to mean the
13 26 annualized, average hourly wage, calculated by the department
13 27 of workforce development, which equals the least of the
13 28 annualized, average hourly wage paid by all businesses in the
13 29 entire county, the annualized, average hourly wage paid by all
13 30 businesses in the county located outside the largest city of
13 31 the county, or the annualized, average hourly wage paid by all
13 32 businesses other than the largest employer in the county.
13 33 "Health insurance coverage" is defined to mean benefits
13 34 consisting of health care provided directly through insurance
13 35 or reimbursement, or otherwise, and including items and
14 1 services paid for as health care under a hospital or health
14 2 service policy or certificate, hospital or health service plan
14 3 contract, or health maintenance organization contract offered
14 4 by a carrier.
14 5 The amount of the credit equals 100 percent of the first
14 6 year's cost to a small employer of purchasing health insurance
14 7 coverage for its employees and their dependents for the first
14 8 time. A small employer is entitled to claim 20 percent of the
14 9 amount of the small employer health insurance coverage credit
14 10 for the first tax year for which the health insurance coverage
14 11 is purchased and 20 percent of the amount of the credit for
14 12 each consecutive year thereafter that the small employer
14 13 continues to purchase the health insurance coverage for a
14 14 total of five tax years.
14 15 If a small employer elects to take the small employer
14 16 health insurance coverage tax credit, the small employer is
14 17 required to reduce, by the amount used in the computation of
14 18 the credit, the deduction for Iowa income tax purposes of the
14 19 cost of health insurance premiums paid by the employer during
14 20 the tax year in which the tax credit is computed, that is
14 21 deductible for federal tax purposes.
14 22 This division of the bill takes effect upon enactment and
14 23 applies retroactively to January 1, 2006, for tax years
14 24 beginning on or after that date.
14 25 LSB 5938YH 81
14 26 av:rj/sh/8.1