2007 -- S 0924 STATE OF RHODE ISLAND

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					                                             2007 -- S 0924
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     LC02502
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                     STATE               OF        RHODE                 ISLAND

                                         IN GENERAL ASSEMBLY

                                      JANUARY SESSION, A.D. 2007
                                            ____________


                                                 AN ACT

       RELATING TO CORPORATIONS, ASSOCIATIONS AND PARTNERSHIPS -- SMALL
                                   BUSINESS



               Introduced By: Senators Walaska, Cote, Blais, and Bates

               Date Introduced: April 10, 2007

               Referred To: Senate Finance




     It is enacted by the General Assembly as follows:

1            SECTION 1. Section 7-16-67 of the General Laws in Chapter 7-16 entitled "The Rhode

2    Island Limited Liability Company Act" is hereby amended to read as follows:

3            7-16-67. Filing of returns with the tax administrator -- annual charge. -- (a) A return

4    in the form and containing the information as the tax administrator may prescribe shall be filed

5    with the tax administrator by the limited liability company:

6             (1) In case the fiscal year of the limited liability company is the calendar year, on or

7    before the fifteenth day of March in the year following the close of the fiscal year; and

8             (2) In case the fiscal year of the limited liability company is not a calendar year, on or

9    before the fifteenth day of the third month following the close of the fiscal year.

10            (b) An annual charge shall be due on the filing of the limited liability company's return

11   filed with the tax administrator and shall be paid to the Division of Taxation as follows:

12            (1) If the limited liability company is treated as a corporation for purposes of federal

13   income taxation, it shall pay the taxes as provided in chapters 11 and 12 of this title; or

14            (2) If the limited liability company is treated as a partnership for purposes of federal

15   income taxation, it shall pay a fee in an amount equal to the minimum tax imposed upon a

16   corporation under section 44-11-2(e). The provisions allowing for a reduction in the amount of

17   the minimum tax imposed based upon the number of employees in the corporation shall also be

18   applicable to limited liability companies that employ at least one full-time employee and not more
1    than four (4) full-time employees. As used herein, the term "full-time employee" shall mean an

2    employee who is employed at least thirty (30) hours a week for a twenty (20) or more calendar

3    weeks in the preceding year and is paid at a rate which is at least equal to the rate required under

4    the state minimum wage act (Chapter 28-12).

5               (c) The annual charge is delinquent if not paid by the due date for the filing of the return

6    and an addition of one hundred dollars ($100.00) to the charge is then due.

7            SECTION 2. Sections 27-50-3 and 27-50-5 of the General Laws in Chapter 27-50

8    entitled "Small Employer Health Insurance Availability Act" are hereby amended to read as

9    follows:

10           27-50-3. Definitions. [Effective July 1, 2007.] -- (a) "Actuarial certification" means a

11   written statement signed by a member of the American Academy of Actuaries or other individual

12   acceptable to the director that a small employer carrier is in compliance with the provisions of

13   section 27-50-5, based upon the person's examination and including a review of the appropriate

14   records and the actuarial assumptions and methods used by the small employer carrier in

15   establishing premium rates for applicable health benefit plans.

16              (b) "Adjusted community rating" means a method used to develop a carrier's premium

17   which spreads financial risk across the carrier's entire small group population in accordance with

18   the requirements in section 27-50-5.

19              (c) "Affiliate" or "affiliated" means any entity or person who directly or indirectly

20   through one or more intermediaries controls or is controlled by, or is under common control with,

21   a specified entity or person.

22              (d) "Affiliation period" means a period of time that must expire before health insurance

23   coverage provided by a carrier becomes effective, and during which the carrier is not required to

24   provide benefits.

25              (e) "Bona fide association" means, with respect to health benefit plans offered in this

26   state, an association which:

27              (1) Has been actively in existence for at least five (5) years;

28              (2) Has been formed and maintained in good faith for purposes other than obtaining

29   insurance;

30              (3) Does not condition membership in the association on any health-status related factor

31   relating to an individual (including an employee of an employer or a dependent of an employee);

32              (4) Makes health insurance coverage offered through the association available to all

33   members regardless of any health status-related factor relating to those members (or individuals

34   eligible for coverage through a member);



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1             (5) Does not make health insurance coverage offered through the association available

2    other than in connection with a member of the association;

3             (6) Is composed of persons having a common interest or calling;

4             (7) Has a constitution and bylaws; and

5             (8) Meets any additional requirements that the director may prescribe by regulation.

6             (f) "Carrier" or "small employer carrier" means all entities licensed, or required to be

7    licensed, in this state that offer health benefit plans covering eligible employees of one or more

8    small employers pursuant to this chapter. For the purposes of this chapter, carrier includes an

9    insurance company, a nonprofit hospital or medical service corporation, a fraternal benefit

10   society, a health maintenance organization as defined in chapter 41 of this title or as defined in

11   chapter 62 of title 42, or any other entity providing a plan of health insurance or health benefits

12   subject to state insurance regulation.

13            (g) "Church plan" has the meaning given this term under section 3(33) of the Employee

14   Retirement Income Security Act of 1974 [29 U.S.C. section 1002(33)].

15            (h) "Control" is defined in the same manner as in chapter 35 of this title.

16            (i) (1) "Creditable coverage" means, with respect to an individual, health benefits or

17   coverage provided under any of the following:

18            (i) A group health plan;

19            (ii) A health benefit plan;

20            (iii) Part A or part B of Title XVIII of the Social Security Act, 42 U.S.C. section 1395c

21   et seq., or 42 U.S.C. section 1395j et seq., (Medicare);

22            (iv) Title XIX of the Social Security Act, 42 U.S.C. section 1396 et seq., (Medicaid),

23   other than coverage consisting solely of benefits under 42 U.S.C. section 1396s (the program for

24   distribution of pediatric vaccines);

25            (v) 10 U.S.C. section 1071 et seq., (medical and dental care for members and certain

26   former members of the uniformed services, and for their dependents)(Civilian Health and

27   Medical Program of the Uniformed Services)(CHAMPUS). For purposes of 10 U.S.C. section

28   1071 et seq., "uniformed services" means the armed forces and the commissioned corps of the

29   national oceanic and atmospheric administration and of the public health service;

30            (vi) A medical care program of the Indian Health Service or of a tribal organization;

31            (vii) A state health benefits risk pool;

32            (viii) A health plan offered under 5 U.S.C. section 8901 et seq., (Federal Employees

33   Health Benefits Program (FEHBP));

34            (ix) A public health plan, which for purposes of this chapter, means a plan established or



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1    maintained by a state, county, or other political subdivision of a state that provides health

2    insurance coverage to individuals enrolled in the plan; or

3             (x) A health benefit plan under section 5(e) of the Peace Corps Act (22 U.S.C. section

4    2504(e)).

5             (2) A period of creditable coverage shall not be counted, with respect to enrollment of an

6    individua l under a group health plan, if, after the period and before the enrollment date, the

7    individual experiences a significant break in coverage.

8             (j) "Dependent" means a spouse, an unmarried child under the age of nineteen (19) years,

9                           s
     an unmarried child who i a student under the age of twenty-five (25) years, and an unmarried

10   child of any age who is financially dependent upon, the parent and is medically determined to

11   have a physical or mental impairment which can be expected to result in death or which has

12   lasted or can be expected to last for a continuous period of not less than twelve (12) months.

13            (k) "Director" means the director of the department of business regulation.

14            (l) [Deleted by P.L. 2006, ch. 258, section 2, and P.L. 2006, ch. 296, section 2.]

15            (m) "Eligible employee" means an employee who works on a full-time basis with a

16   normal work week of thirty (30) or more hours, except that at the employer's sole discretion, the

17   term shall also include an employee who works on a full-time basis with a normal work week of

18   anywhere between at least seventeen and one-half (17.5) and thirty (30) hours, so long as this

19   eligibility criterion is applied uniformly among all of the employer's employees and without

20   regard to any health status-related factor. The term includes a self-employed individual, a sole

21   proprietor, a partner of a partnership, and may include an independent contractor, if the self-

22   employed individual, sole proprietor, partner, or independent contractor is included as an

23   employee under a health benefit plan of a small employer, but does not include an employee who

24   works on a temporary or substitute basis or who works less than seventeen and one-half (17.5)

25   hours per week. Any retiree under contract with any independently incorporated fire district is

26   also included in the definition of eligible employee. Persons covered under a health benefit plan

27   pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1986 shall not be considered

28   "eligible employees" for purposes of minimum participation requirements pursuant to section 27-

29   50-7(d)(9).

30            (n) "Enrollment date" means the first day of coverage or, if there is a waiting period, the

31   first day of the waiting period, whichever is earlier.

32            (o) "Established geographic service area" means a geographic area, as approved by the

33   director and based on the carrier's certificate of authority to transact insurance in this state, within

34   which the carrier is authorized to provide coverage.



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1             (p) "Family composition" means:

2             (1) Enrollee;

3             (2) Enrollee, spouse and children;

4             (3) Enrollee and spouse; or

5             (4) Enrollee and children.

6             (q) "Genetic information" means information about genes, gene products, and inherited

7    characteristics that may derive from the individual or a family member. This includes information

8    regarding carrier status and information derived from laboratory tests that identify mutations in

9    specific genes or chromosomes, physical medical examinations, family histories, and direct

10   analysis of genes or chromosomes.

11            (r) "Governmental plan" has the meaning given the term under section 3(32) of the

12   Employee Retirement Income Security Act of 1974, 29 U.S.C. section 1002(32), and any federal

13   governmental plan.

14            (s) (1) "Group health plan" means an employee welfare benefit plan as defined in section

15   3(1) of the Employee Retirement Income Security Act of 1974, 29 U.S.C. section 1002(1), to the

16   extent that the plan provides medical care, as defined in subsection (y) of this section, and

17   including items and services paid for as medical care to employees or their dependents as defined

18   under the terms of the plan directly or through insurance, reimbursement, or otherwise.

19            (2) For purposes of this chapter:

20            (i) Any plan, fund, or program that would not be, but for PHSA Section 2721(e), 42

21   U.S.C. section 300gg(e), as added by P.L. 104-191, an employee welfare benefit plan and that is

22   established or maintained by a partnership, to the extent that the plan, fund or program provides

23   medical care, including items and services paid for as medical care, to present or former partners

24   in the partnership, or to their dependents, as defined under the terms of the plan, fund or program,

25   directly or through insurance, reimbursement or otherwise, shall be treated, subject to paragraph

26   (ii) of this subdivision, as an employee welfare benefit plan that is a group health plan;

27            (ii) In the case of a group health plan, the term "employer" also includes the partnership

28   in relation to any partner; and

29            (iii) In the case of a group health plan, the term "participant" also includes an individual

30   who is, or may become, eligible to receive a benefit under the plan, or the individual's beneficiary

31   who is, or may become, eligible to receive a benefit under the plan, if:

32            (A) In connection with a group health plan maintained by a partnership, the individual is

33   a partner in relation to the partnership; or

34            (B) In connection with a group health plan maintained by a self-employed individual,



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1    under which one or more employees are participants, the individual is the self-employed

2    individual.

3             (t) (1) "Health benefit plan" means any hospital or medical policy or certificate, major

4    medical expense insurance, hospital or medical service corporation subscriber contract, or health

5    maintenance organization subscriber contract. Health benefit plan includes short-term and

6    catastrophic health insurance policies, and a policy that pays on a cost-incurred basis, except as

7    otherwise specifically exempted in this definition.

8             (2) "Health benefit plan" does not include one or more, or any combination of, the

9    following:

10            (i) Coverage only for accident or disability income insurance, or any combination of

11   those;

12            (ii) Coverage issued as a supplement to liability insurance;

13            (iii) Liability insurance, including general liability insurance and automobile liability

14   insurance;

15            (iv) Workers' compensation or similar insurance;

16            (v) Automobile medical payment insurance;

17            (vi) Credit-only insurance;

18            (vii) Coverage for on-site medical clinics; and

19                                                                                      s
              (viii) Other similar insurance coverage, specified in federal regulations i sued pursuant

20   to Pub. L. No. 104-191, under which benefits for medical care are secondary or incidental to other

21   insurance benefits.

22            (3) "Health benefit plan" does not include the following benefits if they are provided

23   under a separate policy, certificate, or contract of insurance or are otherwise not an integral part

24   of the plan:

25            (i) Limited scope dental or vision benefits;

26            (ii) Benefits for long-term care, nursing home care, home health care, community-based

27   care, or any combination of those; or

28            (iii) Other similar, limited benefits specified in federal regulations issued pursuant to

29   Pub. L. No. 104-191.

30            (4) "Health benefit plan" does not include the following benefits if the benefits are

31   provided under a separate policy, certificate or contract of insurance, there is no coordination

32   between the provision of the benefits and any exclusion of benefits under any group health plan

33   maintained by the same plan sponsor, and the benefits are paid with respect to an event without

34   regard to whether benefits are provided with respect to such an event under any group health plan



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1    maintained by the same plan sponsor:

2               (i) Coverage only for a specified disease or illness; or

3               (ii) Hospital indemnity or other fixed indemnity insurance.

4               (5) "Health benefit plan" does not include the following if offered as a separate policy,

5    certificate, or contract of insurance:

6               (i) Medicare supplemental health insurance as defined under section 1882(g)(1) of the

7    Social Security Act, 42 U.S.C. section 1395ss(g)(1);

8               (ii) Coverage supplemental to the coverage provided under 10 U.S.C. section 1071 et

9    seq.; or

10              (iii) Similar supplemental coverage provided to coverage under a group health plan.

11              (6) A carrier offering policies or certificates of specified disease, hospital confinement

12   indemnity, or limited benefit health insurance shall comply with the following:

13              (i) The carrier files on or before March 1 of each year a certification with the director

14   that contains the statement and information described in paragraph (ii) of this subdiv ision;

15              (ii) The certification required in paragraph (i) of this subdivision shall contain the

16   following:

17              (A) A statement from the carrier certifying that policies or certificates described in this

18   paragraph are being offered and marketed as supplemental health insurance and not as a substitute

19   for hospital or medical expense insurance or major medical expense insurance; and

20              (B) A summary description of each policy or certificate described in this paragraph,

21   including the average annual premium rates (or range of premium rates in cases where premiums

22   vary by age or other factors) charged for those policies and certificates in this state; and

23              (iii) In the case of a policy or certificate that is described in this paragraph and that is

24   offered for the first time in this state on or after July 13, 2000, the carrier shall file with the

25   director the information and statement required in paragraph (ii) of this subdivision at least thirty

26   (30) days prior to the date the policy or certificate is issued or delivered in this state.

27              (u) "Health maintenance organization" or "HMO" means a health maintenance

28   organization licensed under chapter 41 of this title.

29              (v) "Health status-related factor" means any of the following factors:

30              (1) Health status;

31              (2) Medical condit ion, including both physical and mental illnesses;

32              (3) Claims experience;

33              (4) Receipt of health care;

34              (5) Medical history;



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1               (6) Genetic information;

2               (7) Evidence of insurability, including conditions arising out of acts of domestic

3    violence; or

4               (8) Disability.

5               (w) (1) "Late enrollee" means an eligible employee or dependent who requests

6    enrollment in a health benefit plan of a small employer following the initial enrollment period

7    during which the individual is entitled to enroll under the terms of the health benefit plan,

8    provided that the initial enrollment period is a period of at least thirty (30) days.

9               (2) "Late enrollee" does not mean an eligible employee or dependent:

10              (i) Who meets each of the following provisions:

11              (A) The individual was covered under creditable coverage at the time of the initial

12   enrollment;

13              (B) The individual lost creditable coverage as a result of cessation of employer

14   contribution, termination of employment or eligibility, reduction in the number of hours of

15   employment, involuntary termination of creditable coverage, or death of a spouse, divorce or

16   legal separation, or the individual and/or dependents are determined to be eligible for RIteCare

17   under chapter 5.1 of title 40 or chapter 12.3 of title 42 or for RIteShare under chapter 8.4 of title

18   40; and

19              (C) The individual requests enrollment within thirty (30) days after termination of the

20   creditable coverage or the change in conditions that gave rise to the termination of coverage;

21                                                      r
                (ii) If, where provided for in contract o where otherwise provided in state law, the

22   individual enrolls during the specified bona fide open enrollment period;

23              (iii) If the individual is employed by an employer which offers multiple health benefit

24   plans and the individual elects a different plan during an open enrollment period;

25              (iv) If a court has ordered coverage be provided for a spouse or minor or dependent child

26   under a covered employee's health benefit plan and a request for enrollment is made within thirty

27   (30) days after issuance of the court order;

28              (v) If the individual changes status from not being an eligible employee to becoming an

29   eligible employee and requests enrollment within thirty (30) days after the change in status;

30              (vi) If the individual had coverage under a COBRA continuation provision and the

31   coverage under that provision has been exhausted; or

32              (vii) Who meets the requirements for special enrollment pursuant to section 27-50-7 or

33   27-50-8.

34              (x) "Limited benefit health insurance" means that form of coverage that pays stated



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1    predetermined amounts for specific services or treatments or pays a stated predetermined amount

2    per day or confinement for one or more named conditions, named diseases or accidental injury.

3               (y) "Medical care" means amounts paid for:

4               (1) The diagnosis, care, mitigation, treatment, or prevention of disease, or amounts paid

5    for the purpose of affecting any structure or function of the body;

6               (2) Transportation primarily for and essential to medical care referred to in subdivision

7    (1); and

8               (3) Insurance covering medical care referred to in subdivisions (1) and (2) of this

9    subsection.

10              (z) "Network plan" means a health benefit plan issued by a carrier under which the

11   financing and delivery of medical care, including items and services paid for as medical care, are

12   provided, in whole or in part, through a defined set of providers under contract with the carrier.

13              (aa) "Person" means an individual, a corporation, a partnership, an association, a joint

14   venture, a joint stock company, a trust, an unincorporated or ganization, any similar entity, or any

15   combination of the foregoing.

16              (bb) "Plan sponsor" has the meaning given this term under section 3(16)(B) of the

17   Employee Retirement Income Security Act of 1974, 29 U.S.C. section 1002(16)(B).

18              (cc) (1) "Preexisting condition" means a condition, regardless of the cause of the

19   condition, for which medical advice, diagnosis, care, or treatment was recommended or received

20   during the six (6) months immediately preceding the enrollment date of the coverage.

21              (2) "Preexisting condition" does not mean a condition for which medical advice,

22   diagnosis, care, or treatment was recommended or received for the first time while the covered

23   person held creditable coverage and that was a covered benefit under the health benefit plan,

24   provided that the prior creditable coverage was continuous to a date not more than ninety (90)

25   days prior to the enrollment date of the new coverage.

26              (3) Genetic information shall not be treated as a condition under subdivision (1) of this

27   subsection for which a preexisting condition exclusion may be imposed in the absence of a

28   diagnosis of the condition related to the information.

29              (dd) "Premium" means all moneys paid by a small employer and eligible employees as a

30   condition of receiving coverage from a small employer carrier, including any fees or other

31   contributions associated with the health benefit plan.

32              (ee) "Producer" means any insurance producer licensed under chapter 2.4 of this title.

33              (ff) "Rating period" means the calendar period for which premiu m rates established by a

34   small employer carrier are assumed to be in effect.



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1             (gg) "Restricted network provision" means any provision of a health benefit plan that

2    conditions the payment of benefits, in whole or in part, on the use of health care providers that

3    have entered into a contractual arrangement with the carrier pursuant to provide health care

4    services to covered individuals.

5             (hh) "Risk adjustment mechanism" means the mechanism established pursuant to section

6    27-50-16.

7             (ii) "Self-employed individual" means an individual or sole proprietor who derives a

8    substantial portion of his or her income from a trade or business through which the individual or

9    sole proprietor has attempted to earn taxable income and for which he or she has filed the

10   appropria te Internal Revenue Service Form 1040, Schedule C or F, for the previous taxable year.

11            (jj) "Significant break in coverage" means a period of ninety (90) consecutive days

12   during all of which the individual does not have any creditable coverage, except that neither a

13   waiting period nor an affiliation period is taken into account in determining a significant break in

14   coverage.

15            (kk) "Small employer" means, except for its use in section 27-50-7, any person, firm,

16   corporation, partnership, association, politic al subdivision, or self-employed individual that is

17   actively engaged in business including, but not limited to, a business or a corporation organized

18   under the Rhode Island Non-Profit Corporation Act, chapter 6 of title 7, or a similar act of

19   another state that, on at least fifty percent (50%) of its working days during the preceding

20   calendar quarter, employed no more than fifty (50) eligible employees, with a normal work week

21   of thirty (30) or more hours, the majority of whom were employed within this state, and is not

22   formed primarily for purposes of buying health insurance and in which a bona fide employer-

23   employee relationship exists. In determining the number of eligible employees, companies that

24   are affiliated companies, or that are eligible to file a combined tax return for purposes of taxation

25   by this state, shall be considered one employer. Subsequent to the issuance of a health benefit

26   plan to a small employer and for the purpose of determining continued eligibility, the size of a

27   small employer sha ll be determined annually. Except as otherwise specifically provided,

28   provisions of this chapter that apply to a small employer shall continue to apply at least until the

29   plan anniversary following the date the small employer no longer meets the requirements of this

30   definition. The term small employer includes a self-employed individual.

31            ( ll ) "Waiting period" means, with respect to a group health plan and an individual who

32   is a potential enrollee in the plan, the period that must pass with respect to the individual before

33   the individual is eligible to be covered for benefits under the terms of the plan. For purposes of

34   calculating periods of creditable coverage pursuant to subsection (j)(2) of this section, a waiting



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1    period shall not be considered a gap in coverage.

2             (mm) "Wellness health benefit plan" means a plan developed pursuant to section 27-50-

3    10.

4             (nn) "Health insurance commissioner" or "commissioner" means that individual

5    appointed pursuant to section 42-14.5-1 of the general laws and afforded those powers and duties

6    as set forth in sections 42-14.5-2 and 42-14.5-3 of title 42.

7             (oo) "Low-wage firm" means those with average wages that fall within the bottom

8    quartile of all Rhode Island employers.

9             (pp) "Wellness health benefit plan" means the health benefit plan offered by each small

10   employer carrier pursuant to section 27-50-7.

11            (qq) "Commissioner" means the health insurance commissioner.

12           (rr) "Basic benefit health plan" means a lower cost health benefit plan developed pursuant

13   to section 27-50-10.1.

14           27-50-5. Restrictions relating to premium rates. -- (a) Premium rates for health benefit

15   plans subject to this chapter are subject to the following provisions:

16            (1) Subject to subdivision (2) of this subsection, a small employer carrier shall develop

17   its rates based on an adjusted community rate and may only vary the adjusted community rate for:

18            (i) Age;

19            (ii) Gender; and

20            (iii) Family composition.

21            (2) A small employer carrier who as of June 1, 2000, varied rates by health status may

22   vary the adjusted community rates for health status by ten twenty-five percent (10%) (25%),

23   provided that the resulting rates comply with the other requirements of this section, including

24   subdivision (5) of this subsection.

25                                                           f
              (3) The adjustment for age in paragraph (1)(i) o this subsection may not use age

26   brackets smaller than five (5) year increments and these shall begin with age thirty (30) and end

27   with age sixty-five (65).

28            (4) The small employer carriers are permitted to develop separate rates for individuals

29   age sixty-five (65) or older for coverage for which Medicare is the primary payer and coverage

30   for which Medicare is not the primary payer. Both rates are subject to the requirements of this

31   subsection.

32            (5) For each health benefit plan offered by a carrier, the highest premium rate for each

33   family composition type shall not exceed four six (4) (6) times the premium rate that could be

34   charged to a small employer with the lowest premium rate for that family composition.



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1               (6) Premium rates for bona fide associations except for the Rhode Island Builders'

2    Association whose membership is limited to those who are actively involved in supporting the

3    construction industry in Rhode Island shall not be required to comply with the requirements of

4    section 27-50-5.

5               (b) The premium charged for a health benefit plan may not be adjusted more frequently

6    than annually except that the rates may be changed to reflect:

7               (1) Changes to the enrollment of the small employer;

8               (2) Changes to the family composition of the employee; or

9               (3) Changes to the health benefit plan requested by the small employer.

10              (c) Premium rates for health benefit plans shall comply with the requirements of this

11   section.

12              (d) Small employer carriers shall apply rating factors consistently with respect to all

13   small employers. Rating factors shall produce premiums for identical groups that differ only by

14   the amounts attributable to plan design and do not reflect differences due to the nature of the

15   groups assumed to select particular health benefit plans. Nothing in this section shall be construed

16   to prevent a group health plan and a health insurance carrier offering health insurance coverage

17   from establishing premium discounts or rebates or modifying otherwise applicable copayments or

18   deductibles in return for adherence to programs of health promotion and disease prevention,

19   including those included in affordable health benefit plans, provided that the resulting rates

20   comply with the other requirements of this section, including subdivision (a)(5) of this section.

21              The calculation of premium discounts, rebates, or modifications to otherwise applicable

22   copayments or deductibles for affordable health benefit plans shall be made in a manner

23   consistent with accepted actuarial standards and based on actual or reasonably anticipated small

24   employer claims experience. As used in the preceding sentence, "accepted actuarial standards"

25   includes actuarially appropriate use of relevant data from outside the claims experience of small

26   employers covered by affordable health plans, including, but not limited to, experience derived

27   from the large group market, as this term is defined in section 27-18.6-2(20).

28              (e) For the purposes of this section, a health benefit plan that contains a restricted

29   network provision shall not be considered similar coverage to a health benefit plan that does not

30   contain such a provision, provided that the restriction of benefits to network providers results in

31   substantial differences in claim costs.

32              (f) The director may establish regulations to implement the provisions of this section and

33   to assure that rating practices used by small employer carriers are consistent with the purposes of

34   this chapter, including regulations that assure that differences in rates charged for health benefit



                                                       12
1    plans by small employer carriers are reasonable and reflect objective differences in plan design or

2    coverage (not including differences due to the nature of the groups assumed to select particular

3    health benefit plans or separate claim experience for individual health benefit plans).

4              (g) In connection with the offering for sale of any health benefit plan to a small

5    employer, a small employer carrier shall make a reasonable disclosure, as part of its solicitation

6    and sales materials, of all of the following:

7                                f
              (1) The provisions o the health benefit plan concerning the small employer carrier's

8    right to change premium rates and the factors, other than claim experience, that affect changes in

9    premium rates;

10            (2) The provisions relating to renewability of policies and contracts;

11            (3) The provisions relating to any preexisting condition provision; and

12            (4) A listing of and descriptive information, including benefits and premiums, about all

13   benefit plans for which the small employer is qualified.

14            (h) (1) Each small employer carrier shall maintain at its principal place of business a

15   complete and detailed description of its rating practices and renewal underwriting practices,

16   including information and documentation that demonstrate that its rating methods and practices

17   are based upon commonly accepted actuarial assumptions and are in accordance with sound

18   actuarial principles.

19            (2) Each small employer carrier shall file with the director commissioner annually on or

20   before March 15 an actuarial certification certifying that the carrier is in compliance with this

21   chapter and that the rating methods of the small employer carrier are actuarially sound. The

22   certification shall be in a form and manner, and shall contain the information, specified by the

23   director. A copy of the certification shall be retained by the small employer carrier at its principal

24   place of business.

25            (3) A small employer carrier shall make the information and documentation described in

26   subdivision (1) of this subsection available to the director commissioner upon request. Except in

27   cases of violations of this chapter, the information shall be considered proprietary and trade secret

28   information and shall not be subject to disclosure by the director commissioner to persons outside

29   of the department except as agreed to by the small employer carrier or as ordered by a court of

30   competent jurisdiction.

31            (4) For the wellness health benefit plan described in section 27-50-10, the rates proposed

32   to be charged and the plan design to be offered by any carrier shall be filed by the carrier at the

33   office of the health insurance commissioner no less than thirty (30) days prior to their proposed

34   date of use. The carrier shall be required to establish that the rates proposed to be charged and the



                                                      13
1    plan design to be offered are consistent with the proper conduct of its business and with the

2    interest of the public. The health insurance commissioner may approve, disapprove, or modify the

3    rates and/or approve or disapprove the plan design proposed to be offered by the carrier. Any

4    disapproval by the health insurance commissioner of a plan design proposed to be offered shall be

5    based upon a determination that the plan design is not consistent with the criteria established

6    pursuant to subsection 27-50-10(b).

7             (i) The requirements of this section apply to all health benefit plans issued or renewed on

8    or after October 1, 2000.

9            SECTION 3. Chapter 27-50 of the General Laws entitled "Small Employer Health

10   Insurance Availability Act" is hereby amended by adding thereto the following section:

11           27-50-10.1. Bas ic Benefit Health Plan. – (a) Small employer carriers are hereby

12   authorized, subject to the approval of the health insurance commissioner, to actively market and

13   sell basic benefit health plans developed pursuant to this section on and after July 1, 2007. Basic

14   benefit health plans authorized under this section shall be exempt from the mandated benefits as

15   provided for in section 27-50-13.

16           (b) Basic benefit health plans shall provide affordable health care coverage through

17   flexible products that provide access to basic health services. Any basic benefit health plan

18   offered by a small employer carrier shall be less costly than any other product offered by the

19   small employer carrier pursuant to this chapter, including the standard and economy health

20   benefit plans. Basic benefit health plans shall provide limited, flexible coverage for the following

21   services:

22           (i) Inpatient hospitalization;

23           (ii) Outpatient surgery and diagnostics;

24           (iii) Outpatient physician coverage, including preventive office visits;

25           (iv) Accidental injury and emergency coverage; and

26           (v) Prescription drug coverage.

27           (c) Small employer carriers may utilize cost containment mechanisms to control the cost

28   of such services including, but not limited to, the following:

29           (i) Primary care gatekeepers;

30           (ii) Preadmission certification;

31           (iii) Mandatory second opinion prior to elective surgery;

32           (iv) Preauthorization for specified services;

33           (v) Concurrent utilization review and management;

34           (vi) Discharge planning for hospital care;



                                                        14
1            (vii) Deductibles and copayments;

2            (viii) Less costly alternatives to inpatient care;

3            (ix) Annual limits or maximums for each category of service; and

4            (x) Restricted networks with limited coverage for out of network services.

5            (d) The health insurance commissioner shall approve all rates and forms applicable to the

6    basic benefit health plans.

7            (e) The health insurance commissioner shall issue a report to the general assembly as to

8    the status and market impact of the basic benefit health plan program and shall make

9    recommendations to the general assembly regarding the expansion, continuation, or termination

10   of the program on or before March 1, 2010.

11           (f) The authority provided to small employer carriers to sell basic benefit health plans

12   pursuant to this section shall take effect on July 1, 2007 and shall expire on December 31, 2010

13   unless specifically reauthorized by the general assembly.

14           SECTION 4. Section 35-4-27 of the General Laws in Chapter 35-4 entitled "State Funds"

15   is hereby amended to read as follows:

16           35-4-27. Indirect cost recoveries on restricted receipt accounts. -- Indirect cost

17   recoveries of ten percent (10%) of cash receipts shall be transferred from all restricted receipt

18   accounts, to be recorded as general revenues in the general fund. However, there shall be no

19   transfer from cash receipts with restrictions received exclusively: (1) from contributions from

20   non-profit charitable organizations; (2) from the assessment of indirect cost recovery rates on

21   federal grant funds; or (3) through transfers from state agencies to the department of

22   administration for the payment of debt service. These indirect cost recoveries shall be applied to

23   all accounts, unless prohibited by federal law or regulation, court order, or court settlement. The

24   following restricted receipt accounts shall not be subject to the provisions of this section:

25            Department of Human Services

26            Veterans' home -- Restricted account

27            Veterans' home -- Resident benefits

28            Organ transplant fund

29            Veteran's Cemetary Memorial Fund

30            Department of Environmental Management

31            National heritage revolving fund

32            Environmental response fund II

33            Underground storage tanks

34            Rhode Island Council on the Arts



                                                       15
1            Art for public facilities fund

2            Rhode Island Historical Preservation and Heritage Commission

3            Historic preservation revolving loan fund

4            Historic Preservation loan fund -- Interest revenue

5            State Police

6            Forfeited property -- Retained

7            Forfeitures -- Federal

8            Forfeited property -- Gambling

9            Attorney General

10           Forfeiture of property

11           Federal forfeitures

12           Attorney General multi-state account

13           Department of Administration

14           Restore and replacement -- Insurance coverage

15           Convention Center Authority rental payments

16           Investment Receipts -- TANS

17           Car Rental Tax/Surcharge-Warwick Share

18           Legislature

19           Audit of federal assisted programs

20           Department of Elderly Affairs

21           Pharmaceutical Rebates Account

22           Affordable Energy fund

23           Department of Children Youth and Families

24           Children's Trust Accounts -- SSI

25           Military Staff

26           RI Military Family Relief Fund

27           Treasury

28           Admin. Expenses -- State Retirement System

29           Retirement -- Treasury Investment Options

30           Unemployment Insurance Fund

31           SECTION 5. Sections 44-11-2 of the General Laws in Chapter 44-11 entitled "Business

32   Corporation Tax" are hereby amended to read as follows:

33           44-11-2. Imposition of tax. -- (a) Each corporation shall annually pay to the state a tax

34   equal to nine percent (9%) of net income, as defined in section 44-11-11, qualified in section 44-



                                                    16
1    11-12, and apportioned to this state as provided in sections 44-11-13 -- 44-11-15, for the taxable

2    year.

3              (b) A corporation shall pay the amount of any tax as computed in accordance with

4    subsection (a) of this section after deducting from "net income," as used in this section, fifty

5    percent (50%) of the excess of capital gains over capital losses realized during the taxable year, if

6    for the taxable year:

7              (1) The corporation is engaged in buying, selling, dealing in, or holding securities on its

8    own behalf and not as a broker, underwriter, or distributor;

9              (2) Its gross receipts derived from these activities during the taxable year amounted to at

10   least ninety percent (90%) of its total gross receipts derived from all of its activities during the

11   year. "Gross receipts" means all receipts, whether in the form of money, credits, or other valuable

12   consideration, received during the taxable year in connection with the conduct of the taxpayer's

13   activities.

14             (c) A corporation shall not pay the amount of the tax computed on the basis of its net

15   income under subsection (a) of this section, but shall annually pay to the state a tax equal to ten

16   cents ($.10) for each one hundred dollars ($100) of gross income for the taxable year or a tax of

17   one hundred dollars ($100), whichever tax shall be the greater, if for the taxable year the

18   corporation is either a "personal holding company" registered under the federal Investment

19   Company Act of 1940, 15 U.S.C. section 80a-1 et seq., "regulated investment company", or a

20   "real estate investment trust" as defined in the federal income tax law applicable to the taxable

21   year. "Gross income" means gross income as defined in the federal income tax law applicable to

22   the taxable year, plus:

23             (1) Any interest not included in the federal gross income; minus

24             (2) Interest on obligations of the United States or its possessions, and other interest

25   exempt from taxation by this state; and minus

26             (3) Fifty percent (50%) of the excess of capital gains over capital losses realized during

27   the taxable year.

28             (d) (1) A small business corporation having an election in effect under subchapter S, 26

29   U.S.C. section 1361 et seq., shall not be subject to the Rhode Island income tax on corporations,

30   except that the corporation shall be subject to the provisions of subsection (a), to the extent of the

31   income that is subjected to federal tax under subchapter S.

32             (2) The shareholders of the corporation who are residents of Rhode Island shall include

33   in their income their proportionate share of the corporation's federal taxable income.

34             (3) [Deleted by P.L. 2004, ch. 595. art. 29, section 1.]



                                                       17
1             (4) [Deleted by P.L. 2004, ch. 595, art. 29, section 1.]

2             (e) Minimum tax. The tax imposed upon any corporation under this section shall not be

3    less than five hundred dollars ($500). ; provided, however, the following exceptions shall apply:

4            (1) Commencing on January 1, 2008, that for any corporation that has at least one full-

5    time employee and not more than four (4) full-time employees, the tax imposed under this section

6    shall be not less than four hundred dollars ($400);

7            (2) Commencing on January 1, 2009, and for all years thereafter, that for any corporation

8    that has at least one full-time employee and not more than four (4) full-time employees, the tax

9    imposed under this section shall be not less than three hundred dollars ($300);

10           (3) As used herein, the term "full-time employee" shall mean an employee who is

11   employed at least thirty (30) hours a week for twenty (20) or more calendar weeks in the

12   preceding year and is paid at a rate which is at least equal to the rate required under the state

13   minimum wage act (Chapter 28-12).

14           SECTION 6. Section 44-12-1 of the General Laws in Chapter 44-12 entitled "Franchise

15   Tax" is hereby amended to read as follows:

16           44-12-1. Tax imposed -- Corporations liable -- Credit for tax on income -- Reduced

17   rate where no business done. -- (a) Every corporation, joint-stock company, or association

18   incorporated in this state or qualified to do business in this state, whether or not doing business

19   for profit, all referred to in this section under the term "corporation", except those enumerated in

20   section 44-12-11, shall pay an annual franchise tax to the state upon its authorized capital stock of

21   two dollars fifty cents ($2.50) for each ten thousand dollars ($10,000) or fractional part, or the

22   sum of five hundred dollars ($500) minimum tax imposed under subsection 44-11-2(e),

23   whichever is greater.

24            (b) In the case of corporations liable to a tax under chapter 11 of this title, only the

25   amount by which the franchise tax exceeds the tax payable under that chapter shall be assessed.

26            (c) If a corporation shall show by supplemental affidavit attached to the prescribed return

27   and signed in the manner provided for each return that it has not, at any time during its preceding

28   taxable year, been engaged within the state in any business activities, it shall only pay an annual

29   franchise tax upon its authorized capital stock at the following rates: five hundred dollars ($500)

30   rate of the minimum tax imposed under subsection 44-11-2(e) where the stock does not exceed

31   one million dollars ($1,000,000); and the further sum of twelve dollars fifty cents ($12.50) for

32   each additional one million dollars ($1,000,000) or fractional part of the stock.

33           SECTION 7. Title 44 of the General Laws entitled "TAXATION" is hereby amended by

34   adding thereto the following chapter:



                                                      18
1                                             CHAPTER 43.2

2                                   SMALL BUSINESS TAX CREDIT

3            44-43.2-1. Small business tax credit. – (a) For the purposes of this section, a "small

4    business" means any corporation, partnership, sole proprietorship or other business entity

5    qualifying as "small" under the standards contained in 13 C.F.R. section 121.

6            (b) Every small business formed under the laws of the state of Rhode Island and

7    operating within the state of Rhode Island is entitled to claim as a credit against the tax imposed

8    by chapters 11, 17, and 30 of this title any amount paid to the U.S. small business administration

9    as a guaranty fee pursuant to the obtaining of SBA guaranteed financing. This credit may be

10   applied to the tax year in which the guaranty fee was paid and any unused credit may be carried

11   forward and applied by the taxpayer for a maximum of four (4) subsequent tax years; provided,

12   that the credit shall not reduce the tax in any tax year below the minimum tax where a minimum

13   tax is provided under this title, and shall be claimable only by the small business which is the

14   primary obligor in the financing transaction and which actually paid the guaranty fee.

15           SECTION 8. Sections 1, 2, 4, 5, 6 and 7 of this act shall take effect upon passage.

16   Section 3 of this act shall take effect on July 1, 2007 and shall sunset on December 31, 2010.


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     LC02502
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                                                     19
                                             EXPLANATION

                                   BY THE LEGISLATIVE COUNCIL

                                                    OF


                                               AN ACT

       RELATING TO CORPORATIONS, ASSOCIATIONS AND PARTNERSHIPS -- SMALL
                                   BUSINESS



                                                    ***

1            This act would: (1) reduce the minimum amount of the corporation or franchise tax

2    imposed on corporations and limited liability companies which employ at least one and not more

3    than four (4) full-time employees and pay at least the minimum wage to said employees; (2)

4    reinstate the small business tax credit; and (3) exempt the Unemployment Insurance Fund from

5    assessments made in accordance with section 35-4-27 of the general laws. This act would also

6    allow small employer health insurers to: (1) increase the permissible health status rate adjustment

7    from 10% to 25%; (2) increase the small employer rate bands from 4:1 to 6:1; (3) separately rate

8    bona fide associations; and (4) authorize small employer carriers to sell low cost, basic benefit

9    health plans to small employers on a pilot program basis, subject to the approval of the health

10   insurance commissioner.

11           Sections 1, 2, 4, 5, 6 and 7 of this act would take effect upon passage. Section 3 of this

12   act would take effect on July 1, 2007 and would sunset on December 31, 2010.


     =======
     LC02502
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