2012 -- S 2362

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LC01333

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO HEALTH AND SAFETY -- TAXATION OF HEALTHCARE SERVICES

     Introduced By: Senator Walter S. Felag

     Date Introduced: February 14, 2012

     Referred To: Senate Health & Human Services

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 23-1-46 of the General Laws in Chapter 23-1 entitled "Department

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of Health" is hereby amended to read as follows:

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     23-1-46. Insurers Surcharge. -- (a) Beginning in the fiscal year 2007, each insurer

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licensed or regulated pursuant to the provisions of chapters 18, 19, 20, and 41 of title 27 shall be

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assessed a child immunization assessment and an adult immunization assessment for the purposes

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set forth in this section. The department of health shall make available to each insurer, upon its

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request, information regarding the department of health's immunization programs and the costs

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related to the program. Further, the department of health shall submit to the general assembly an

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annual report on the immunization programs and cost related to the programs, on or before

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February 1 of each year. Annual assessments shall be based on direct premiums written in the

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year prior to the assessment and for the child immunization program shall not include any

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Medicare Supplement Policy (as defined in section 27-18.2-1(g)), Medicaid or Medicare

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premiums. Adult influenza immunization program annual assessments shall include contributions

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related to the program costs from Medicare, Medicaid and Medicare Managed Care. As to

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accident and sickness insurance, the direct premium written shall include, but is not limited to,

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group, blanket, and individual policies. Those insurers assessed greater than ten thousand dollars

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($10,000) for the year shall be assessed four (4) quarterly payments of twenty-five percent (25%)

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of their total assessment. Beginning July 1, 2001, the annual rate of assessment shall be

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determined by the director of health in concurrence with the primary payors, those being insurers

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assessed at greater than ten thousand dollars ($10,000) for the previous year. This rate shall be

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calculated by the projected costs for the Advisory Committee on Immunization Practices (ACIP)

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recommended and state mandated vaccines after the federal share has been determined by the

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Centers for Disease Control and Prevention. The primary payors shall be informed of any

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recommended change in rates at least six (6) months in advance, and rates shall be adjusted no

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more frequently than one time annually. For the childhood vaccine program the director of the

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department of health shall deposit these amounts in Beginning in fiscal year 2012, a portion of the

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amount collected from the surcharge described in section 44-65.1-1 et seq., up to the actual

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amount expended by the state for vaccines for children that are recommended by the Advisory

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Committee on Immunization Practices (ACIP), the American Academy of Pediatrics (AAP),

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and/or mandated by state law, less the federal share determined by the Centers for Disease

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Control and Prevention, shall be deposited into the "childhood immunization account" described

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in subsection 23-1-45(a). These assessments funds shall be used solely for the purposes of the

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"childhood immunization programs" described in section 23-1-44 and no other. For the adult

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immunization program the director of the department of health shall deposit these amounts in the

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"adult immunization account". Beginning in fiscal year 2012, a portion of the amount collected

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from the surcharge described in section 44-65.1-1 et seq., up to the actual amount expended by

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the state for adult immunizations recommended by ACIP and/or mandated by state law, less the

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federal share determined by the centers for disease control and prevention, shall be deposited into

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the “adult immunization account” described in subsection 23-1-45(c). These funds shall be used

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solely for the purposes of the “adult immunization programs” described in section 23-1-44 and no

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other.

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      (b) The department of health shall submit to the general assembly an annual report on the

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immunization programs and cost related to the programs, on or before February 1 of each year.

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The department of health shall make available to each payer of the surcharge, upon its request,

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detailed information regarding the department of health’s immunization programs and the costs

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related to those programs. Any funds collected in excess of funds needed to carry-out ACIP

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recommendations shall be deducted from the subsequent year's assessments surcharge.

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     SECTION 2. Section 42-12-29 of the General Laws in Chapter 42-12 entitled

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"Department of Human Services" is hereby amended to read as follows:

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     42-12-29. Children's health account. -- (a) There is created within the general fund a

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restricted receipt account to be known as the "children's health account". All money in the

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account shall be utilized by the department of human services to effectuate coverage for the

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following service categories: (1) home health services, which include pediatric private duty

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nursing and certified nursing assistant services; (2) comprehensive, evaluation, diagnosis,

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assessment, referral and evaluation (CEDARR) services, which include CEDARR family center

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services, home based therapeutic services, personal assistance services and supports (PASS) and

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kids connect services and (3) child and adolescent treatment services (CAITS). All money

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received pursuant to this section shall be deposited in the children's health account. The general

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treasurer is authorized and directed to draw his or her orders on the account upon receipt of

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properly authenticated vouchers from the department of human services.

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      (b) Beginning in the fiscal year 2007, each insurer licensed or regulated pursuant to the

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provisions of chapters 18, 19, 20, and 41 of title 27 shall be assessed for the purposes set forth in

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this section. The department of human services shall make available to each insurer, upon its

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request, information regarding the department of human services child health program and the

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costs related to the program. Further, the department of human services shall submit to the

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general assembly an annual report on the program and cost related to the program, on or before

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February 1 of each year. Annual assessments shall be based on direct premiums written in the

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year prior to the assessment and shall not include any Medicare Supplement Policy (as defined in

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section 27-18-2.1(g)), Medicare managed care, Medicare, Federal Employees Health Plan,

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Medicaid/RIte Care or dental premiums. As to accident and sickness insurance, the direct

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premium written shall include, but is not limited to, group, blanket, and individual policies. Those

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insurers assessed greater than five hundred thousand dollars ($500,000) for the year shall be

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assessed four (4) quarterly payments of twenty-five percent (25%) of their total assessment.

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Beginning July 1, 2006, the annual rate of assessment shall be determined by the director of

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human services in concurrence with the primary payors, those being insurers likely to be assessed

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at greater than five hundred thousand dollars ($500,000). The director of the department of

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human services shall deposit that amount Beginning in fiscal year 2012, a portion of the amount

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collected from the surcharge described in section 44-65.1-1 et seq., up to the actual amount

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expended by the state for the services described in subsection 42-12-29(a), but not more than the

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limit set forth in subsection 42-12-29(d), shall be deposited in the "children's health account". The

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assessment funds shall be used solely for the purposes of the "children's health account" and no

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other.

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      (c) The department of human services shall submit to the general assembly an annual

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report on the program and cost related to the program, on or before February 1 of each year. The

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department of health shall make available to each payer of the surcharge, upon its request,

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detailed information regarding the department of health’s children’s health programs described in

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subsection (a) and the costs related to those programs. Any funds collected in excess of funds

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needed to carry out the programs shall be deducted from the subsequent year's assessment

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surcharge.

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      (d) The total annual assessment on all insurers share of the surcharge shall be equivalent

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to the amount paid by the department of human services for all services, as listed in subsection

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(a), but not to exceed seven thousand five hundred dollars ($7,500) six thousand dollars ($6,000)

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per child per service per year.

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      (e) The children's health account shall be exempt from the indirect cost recovery

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provisions of section 35-4-27 of the general laws.

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     SECTION 3. Section 44-17-1 of the General Laws in Chapter 44-17 entitled "Taxation of

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Insurance Companies" is hereby amended to read as follows:

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     44-17-1. Companies required to file -- Payment of tax -- Retaliatory rates. -- Every

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domestic, foreign, or alien insurance company, mutual association, organization, or other insurer,

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including any health maintenance organization, as defined in section 27-41-1, any medical

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malpractice insurance joint underwriters association as defined in section 42-14.1-1, any

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nonprofit dental service corporation as defined in section 27-20.1-2 and any nonprofit hospital or

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medical service corporation, as defined in chapters 27-19 and 27-20, except companies mentioned

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in section 44-17-6, health maintenance organizations as defined in section 27-41-1, nonprofit

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hospital or medical service corporations as defined in chapters 27-19 and 27-20, insurers as

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defined in subdivision 42-62-4(7) and organizations defined in section 27-25-1, transacting

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business in this state, shall, on or before March 1 in each year, file with the tax administrator, in

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the form that he or she may prescribe, a return under oath or affirmation signed by a duly

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authorized officer or agent of the company, containing information that may be deemed necessary

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for the determination of the tax imposed by this chapter, and shall at the same time pay an annual

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tax to the tax administrator of two percent (2%) of the gross premiums on contracts of insurance,

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except for ocean marine insurance, as referred to in section 44-17-6, covering property and risks

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within the state, written during the calendar year ending December 31st next preceding, but in the

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case of foreign or alien companies, except as provided in section 27-2-17(d) the tax is not less in

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amount than is imposed by the laws of the state or country under which the companies are

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organized upon like companies incorporated in this state or upon its agents, if doing business to

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the same extent in the state or country.

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     SECTION 4. Title 44 of the General Laws entitled "TAXATION" is hereby amended by

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adding thereto the following chapter:

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     CHAPTER 65.1

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HEALTHCARE SERVICES SURCHARGE

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     44-65.1-1. Short title. – This chapter shall be known and may be cited as “The

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Healthcare Services Surcharge Act.”

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     44-65.1-2. Definitions. – The following words and phrases as used in this chapter have

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the following meaning:

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     (1) “Administrator” means the tax administrator within the department of administration.

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     (2) “Healthcare services” means and includes all the professional and technical

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components of an admission, diagnostic procedure, therapeutic procedure, assessment, treatment,

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ordering and/or filling of medications, and such other services, activities, or supplies provided by

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or through a provider (as defined below) on an inpatient or outpatient basis for the diagnosis,

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treatment, or management of an injury, disease, or medical, mental health, substance abuse, or

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other condition.

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     (3) “Insurer” means all persons (as defined below) offering, administering, and/or

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insuring healthcare services, including, but not limited to, policies of accident and sickness

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insurance, as defined by chapter 18 of title 27; nonprofit hospital or medical service plans, as

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defined by chapters 19 and 20 of title 27; any other person whose primary function is to provide

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diagnostic, therapeutic, or preventive services to a defined population on the basis of a periodic

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premium; all domestic, foreign, or alien insurance companies, mutual associations and

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organizations; health maintenance organizations, as defined by chapter 41 of title 27; all persons

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providing health benefits coverage on a self-insurance basis; and all third party administrators

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described in chapter 20.7 of title 17.

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     (4) “Net claims charge” means either: (i) The amount paid on a cash basis by an insurer

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to a provider for healthcare services for a patient or, in the case of global payment arrangements,

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paid by an insurer to a provider for health care services rendered to the insurer’s members: or (ii)

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The gross amount received on a cash basis by a provider from all income derived from the

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provision of health care services to patients whose health care services are not paid or reimbursed

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by an insurer, less: (A) Charges attributable to charity care; (B) Bad debt expenses; and (C)

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Contractual allowances.

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     (5) “Patient” means any individual receiving health care services from a provider, other

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than a patient whose healthcare services are paid or reimbursed by Part A or Part B of the

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Medicare program, a Medicare Supplemental policy (as defined in subsection 27-18-2.1(g)) or

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Medicare Managed Care policy, Medicaid and RIte Care programs, the Federal Employees

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Health Benefit program, Tricare, CHAMPUS, the Veterans Healthcare program, the Indian

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Health Service program, or the Rhode Island state employee benefits program under chapter 36-

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12; provided, however, that an individual who is not enrolled in any such benefit plan or program,

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but who is eligible for Medicaid or RIte Care, or whose household income does not exceed four

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hundred percent (400%) of the federal poverty level for a family of the size involved, shall not be

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considered a “patient” for purposes of this chapter.

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     (6) “Person” means any individual, corporation, company. association, partnership,

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limited liability company, firm, state and local governmental corporations, districts, and agencies,

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joint stock associations, and the legal successor thereof.

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     (7) “Provider” means any person who furnishes health care services to patients as a

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hospital, rehabilitation center, free-standing emergency care facility, or facility providing surgical

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treatment to patients not requiring hospitalization (surgi-center) required to be licensed under

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chapter 17 of title 23 of the Rhode Island general laws, as it may hereafter be amended.

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     (8) “Surcharge” means the assessment imposed on net claims charges pursuant to this

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chapter.

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     44-65.1-3. Imposition of surcharge. – (a) A surcharge shall be imposed upon the net

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claims charge in each month at the rate provided in this subsection. Beginning July 1, 2011, the

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surcharge shall be imposed at a rate of four and eight tenths percent (4.8%): from and after July 1,

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2012, the surcharge shall be imposed at a rate of two and eight tenths percent (2.8%) plus a rate

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determined in accordance with subsection (c). This surcharge shall be in addition to any other

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fees or assessments upon the insurer or provider allowable by law.

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     (b) The surcharge shall be paid by or on behalf of the provider of healthcare services as

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follows: (1) For all net claims charges paid or reimbursed by an insurer, the surcharge shall be

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paid by the insurer; and (2) For all net claims charges for patients (as defined herein) that are not

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paid or reimbursed by an insurer, attributable to charity care or bad debt expense, or subject to

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contractual allowances, the surcharge shall be paid by the provider.

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     (c) The administrator, with the advice of the directors of the department of health and the

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department of human services, will calculate the surcharge percentage for each fiscal year based

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on the projected funding needs for the childhood and adult immunization vaccine programs

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described in section 23-1-46, the children’s health services programs described in section 42-12-

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29, and the projected net claims charge of all persons subject to the surcharge. The administrator

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will establish and publish the surcharge percentage for the year beginning July 1, 2012 before

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May 1, 2012, and annually by May 1 thereafter.

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     44-65.1-4. Returns and payment. – (a) Subject to subsection (b), every person required

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to pay a surcharge shall on or before the twenty-fifty (25th) day of the month following the month

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of receipt of net claims charge make a return to the administrator together with payment of the

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monthly surcharge.

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     (b) Any person required to pay the surcharge that can substantiate that the person’s

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surcharge liability has averaged less than twenty-five thousand dollars ($25,000) per month may

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file returns and remit payment on or before the last day of July, October, January and April of

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each year for the preceding three (3) months’ period; provided, however, that the person will be

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required to make monthly payments if the administrator determines that: (1) The person has

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become delinquent in either the filing of the return or the payment of the surcharge due thereon;

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or (2) The liability of the person exceeds seventy-five thousand dollars ($75,000) in surcharge per

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quarter for any two (2) subsequent quarters.

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     (c) The administrator is authorized to adopt rules, pursuant to this chapter, relative to the

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form of the return and the data that it must contain for the correct computation of net claims

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charge or the surcharge. All returns shall be signed by the person required to pay the surcharge, or

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by its authorized representative, subject to the pains and penalties of perjury. If a return shows an

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overpayment of the surcharge due, the administrator shall refund or credit the overpayment to the

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person required to pay the surcharge.

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     (d) The administrator, for good cause shown, may extend the time within which a person

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is required to file a return, and if the return is filed during the period of extension no penalty or

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late filing charge may be imposed for failure to file the return at the time required by this chapter,

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but the person shall be liable for interest as prescribed in this chapter. Failure to file the return

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during the period for the extension shall void the extension.

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     44-65.1-5. Set-off for delinquent payment of surcharge. – If a person required to pay a

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surcharge shall fail to pay a surcharge within thirty (30) days of its due date, the administrator

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may request any agency of state government making payments to the person to set-off the amount

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of the delinquency against any payment due the person from the agency of state government and

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remit the sum to the administrator. Upon receipt of the set-off request from the administrator, any

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agency of state government is authorized and empowered to set-off the amount of the

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delinquency against any payment or amounts due the person. The amount of set-off shall be

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credited against the surcharge due from the person.

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     44-65.1-6. Surcharge on available information –Interest on delinquencies – Penalties

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– Collection powers. – If any person shall fail to file a return within the time required by this

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chapter, or shall file an insufficient or incorrect return, or shall not pay the surcharge imposed by

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this chapter when it is due, the administrator shall assess upon the information as may be

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available, which shall be payable upon demand and shall bear interest at the annual rate provided

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by section 44-1-7 of the Rhode Island general laws, as amended, from the date when the

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surcharge should have been paid. If any part of the surcharge made is due to negligence or

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intentional disregard of the provisions of this chapter, a penalty of ten percent (10%) of the

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amount of the determination shall be added to the tax. The administrator shall collect the

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surcharge with interest in the same manner and with the same powers as are prescribed for

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collection of taxes in this title.

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     44-65.1-7. Claims for refund –Hearing upon denial. – (a) Any person required to pay

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the surcharge may file a claim for refund with the administrator at any time within two (2) years

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after the surcharge has been paid. If the administrator shall determine that the surcharge has been

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overpaid, he or she shall make a refund with interest from the date of overpayment.

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     (b) Any person whose claim for refund has been denied may, within thirty (30) days from

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the date of the mailing by the administrator of the notice of the decision, request a hearing and the

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administrator shall, as soon as practicable, set a time and place for the hearing and shall notify the

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insurer or provider.

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     44-65.1-8. Hearing by administrator on application. – Any person aggrieved by the

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action of the administrator in determining the amount of any surcharge or penalty imposed under

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the provisions of this chapter may apply to the administrator, within thirty (30) days after the

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notice of the action is mailed to it, for a hearing relative to the surcharge or penalty. The

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administrator shall fix a time and place for the hearing and shall so notify the person. Upon the

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hearing the administrator shall correct manifest errors, if any, disclosed at the hearing and

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thereupon assess and collect the amount lawfully due together with any penalty or interest

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thereon.

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     44-65.1-9. Appeals. – Appeals from administrative orders or decisions made pursuant to

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any provisions of this chapter shall be to the sixth (6th) division district court pursuant to chapter 8

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of title 8 of the Rhode Island general laws, as amended. The right to appeal under this section

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shall be expressly made conditional upon prepayment of all surcharges, interest, and penalties

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unless the person moves for and is granted an exemption from the prepayment requirement

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pursuant to section 8-8-26 of the Rhode Island general laws, as amended. If the court, after

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appeal, holds that the person is entitled to a refund, the insurer or provider shall also be paid

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interest on the amount at the rate provided in section 44-1-7.1 of the Rhode Island general laws,

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as amended.

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     44-65.1-10. Records. – Every person required to pay the surcharge shall: (1) Keep

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records as may be necessary to determine the amount of its liability under this chapter.

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     (2) Preserve those records for the period of three (3) years following the date of filing of

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any return required by this chapter, or until any litigation or prosecution under this chapter is

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finally determined.

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     (3) Make those records available for inspection by the administrator or his/her authorized

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agents, upon demand, at reasonable times during regular business hours.

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     44-65.1-11. Method of payment and deposit of surcharge. – (a) The payments required

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by this chapter may be made by electronic transfer of monies to the general treasurer.

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     (b) The general treasurer is authorized to establish an account or accounts and to take all

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steps necessary to facilitate the electronic transfer of monies to the “childhood immunization

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account” described in subsection 23-1-45(a) in the amount described in subsection 23-1-46(a); To

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the “adult immunization account” described in subsection 23-1-45(c) in the amount described in

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subsection 23-1-46(a); To the “children’s health account” described in subsection 42-12-29(a) in

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the amount described in subsection 42-12-29(b); With any excess deposited to the genera1 fund.

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The general treasurer shall provide the administrator a record of any monies transferred and

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deposited.

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     44-65.1-12. Rules and regulations. – The administrator is authorized to make and

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promulgate rules, regulations, and procedures not inconsistent with state law and fiscal

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procedures as he or she deems necessary for the proper administration of this chapter and to carry

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out the provisions, policies, and purposes of this chapter.

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     44-65.1-13. Surcharge allocation. – A person required to pay a surcharge may pass on

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the cost of that surcharge in the cost of its services, such as the charges for healthcare services to

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patients (for providers) or its premium rates (for insurers), without being required to specifically

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allocate those costs to individuals or populations that actually incurred the surcharge.

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     44-65.1-14. Severability. – If any provision of this chapter or the application of this

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chapter to any person or circumstances is held invalid, that invalidity shall not affect other

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provisions or applications of the chapter that can be given effect without the invalid provision or

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application, and to this end the provisions of this chapter are declared to be severable.

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     SECTION 5. This act shall take effect on July 1, 2012.

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LC01333

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO HEALTH AND SAFETY -- TAXATION OF HEALTHCARE SERVICES

***

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     This act would replace the current immunization/children health services assessments and

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premium taxes imposed on health insurance companies with a health care services surcharge

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calculated to generate the same amount of revenue as the assessments and taxes.

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     This act would take effect on July 1, 2012.

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LC01333

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