2013 -- S 0798

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LC02202

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

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A N A C T

RELATING TO HEALTH AND SAFETY -- TAXATION RELIEF FROM PREMIUM-BASED

TAXATION OF HEALTHCARE SERVICES

     Introduced By: Senator Walter S. Felag

     Date Introduced: March 27, 2013

     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 2015, 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 or projected to be expended by the state for vaccines for children that are

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recommended by the Advisory Committee on Immunization Practices (ACIP), the American

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Academy of Pediatrics (AAP), and/or mandated by state law, less the federal share determined by

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the Centers for Disease Control and Prevention, shall be deposited into the "childhood

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immunization account" described in subsection 23-1-45(a). These assessments funds shall be

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used solely for the purposes of the "childhood immunization programs" described in section 23-1-

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44, and no other. For the adult immunization program the director of the department of health

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shall deposit these amounts in the "adult immunization account". Beginning in fiscal year 2015, a

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

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the actual amount expended or projected to be expended by the state for adult immunizations

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recommended by ACIP and/or mandated by state law, less the federal share determined by the

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centers for disease control and prevention, shall be deposited into the "adult immunization

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account" described in subsection 23-1-45(c). These funds shall be used solely for the purposes of

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the "adult immunization programs" described in section 23-1-44 and no 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 costs 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 2015, 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 or projected to be expended by the state for the services described in subsection 42-12-

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29(a), but not more than the limit set forth in subsection 42-12-29(d), shall be deposited in the

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"children's health account". The assessment funds shall be used solely for the purposes of the

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"children's health account" and no 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 costs related to the program, on or before February 1 of each year. The

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

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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) 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, transacting business in this

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state except companies mentioned in section 44-17-6, and organizations defined in section 27-25-

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1, transacting business in this state health maintenance organizations as defined in section 27-41-

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

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insurers as defined in subdivision 42-62-4(7), shall, on or before March 1 in each year, file with

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the tax administrator, in the form that he or she may prescribe, a return under oath or affirmation

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signed by a duly authorized officer or agent of the company, containing information that may be

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deemed necessary for the determination of the tax imposed by this chapter, and shall at the same

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time pay an annual tax to the tax administrator of two percent (2%) of the gross premiums on

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contracts of insurance, except for ocean marine insurance, as referred to in section 44-17-6,

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covering property and risks within the state, written during the calendar year ending December

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31st next preceding, but in the case of foreign or alien companies, except as provided in section

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27-2-17(d) the tax is not less in amount than is imposed by the laws of the state or country under

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which the companies are organized upon like companies incorporated in this state or upon its

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agents, if doing business to 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 of the following when provided by a

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provider (as defined below) to a patient in this state:

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     (i) Inpatient hospital services;

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     (ii) Outpatient hospital services;

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     (iii) Nursing facility services (other than services of intermediate care facilities for

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individuals with intellectual disabilities);

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     (iv) Physician services;

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     (v) Home healthcare services;

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     (vi) Outpatient prescription drugs;

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     (vii) Services of managed care organizations (including health maintenance organizations

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and preferred provider organizations);

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     (viii) Ambulatory surgical center services;

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     (ix) Podiatric services;

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     (x) Chiropractic services;

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     (xi) Psychological services;

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     (xii) Therapist services, meaning physical therapy, speech therapy, occupational therapy,

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respiratory therapy, audiological services, and rehabilitative specialist services;

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     (xiii) Nursing services, including services of nurse midwives, nurse practitioners, and

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private duty nurses;

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     (xiv) Laboratory and imaging services, including x-ray, ultrasound, echocardiography,

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computed tomography (CT), magnetic resonance imaging (MRI), positron emission tomography

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(PET), positron emission tomography/computed tomography (PET/CT), general nuclear

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medicine, and bone densitometry procedures;

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     (xv) Emergency ambulance services; and

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     (xvi) Any other healthcare items or services not listed above when provided by a

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provider, as defined below, in this state.

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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:

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     (i) Nonprofit hospital or medical service plans, as defined by chapters 19 and 20 of title

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27;

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     (ii) Any other person whose primary function is to provide diagnostic, therapeutic, or

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preventive services to a defined population on the basis of a periodic premium;

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     (iii) 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;

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     (iv) All persons providing health benefits coverage on a self-insurance basis;

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     (v) All third-party administrators described in chapter 20.7 of title 17;

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     (vi) All pharmacy benefits managers; and

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     (vii) All persons providing health benefit coverage under Title XIX of the Social Security

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Act (Medicaid), including the state's Medicaid plan and Medicaid managed care organizations

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offering managed Medicaid.

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     (4) "Net claims charge" means either:

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     (i) The amount paid on a cash basis by an insurer to a provider for healthcare services for

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a patient or, in the case of global payment arrangements, paid by an insurer to a provider for

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healthcare services rendered to the insurer's members; or

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     (ii) The gross amount received on a cash basis by a provider from patients (or their

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authorized representative) for healthcare services that are not paid or reimbursed by an insurer,

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including, by way of illustration but not of limitation, healthcare services provided to patients

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who are not enrolled in healthcare coverage, and healthcare services provided to patients that are

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excluded from the healthcare coverage in which they are enrolled; provided, however, that the

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term "net-claims charge" for the purposes of paragraph (ii) explicitly excludes:

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     (A) Amounts that a patient is required to pay to the provider as a copayment, deductible,

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or coinsurance; and

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     (B) De minimis amounts. - For purposes of this exclusion, an amount is "de minimis" if

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the liability to the provider for all healthcare services provided by the provider to the patient (for

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non-hospital services), provided by the provider to the patient per discharge (for inpatient hospital

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services), or provided by the provider to the patient within a twenty-four (24) hour period (for

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outpatient hospital services) after adjustments, if any, for the provider's reasonable discount

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policy or refunds on a cash basis, does not exceed ten thousand dollars ($10,000). The

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administrator, by regulation, may exclude from the term "net-claims charge" additional amounts

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for which billing or enforcing collection of the surcharge would not be cost effective.

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     (5) "Patient" means any individual receiving healthcare 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, the federal employees' health benefit program, Tricare,

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CHAMPUS, the Veterans' healthcare program, or the Indian health service program; provided,

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

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eligible for Medicaid or RIte Care, or whose household income does not exceed four hundred

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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 healthcare services to patients that is

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required to be licensed under title 23; provided, however, that with respect to x-ray and imaging

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services, the term "provider" shall mean only those persons who furnish imaging services as a

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hospital, rehabilitation hospital center, or not-for-profit organization ambulatory care facility that

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is required to be licensed under title 23; and provided, further, that during fiscal year 2014, the

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term "provider" shall only include a hospital.

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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 section. Beginning July 1, 2014, the

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surcharge shall be imposed at a rate of one and twenty-five hundredths percent (1.25%) for fiscal

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year 2014 and one and five tenths percent (1.5%) for fiscal year 2015. For fiscal year 2016 and

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after, the surcharge shall be imposed at a rate of eighty-five hundredths of a percent (.85%) plus a

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rate 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:

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

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paid by the insurer; provided, however a person providing health benefits coverage on a self-

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insurance basis that uses the services of a third-party administrator or pharmacy benefits manager

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shall not be required to pay an assessment for a claim where the assessment on that claim has

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been paid by the third-party administrator or pharmacy benefit manager;

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     (2) For all net claims charges for patients (as defined herein) that are not paid or

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reimbursed by an insurer, the surcharge shall be paid by the provider that provided the healthcare

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services to the patient.

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     (c) The administrator, will calculate the surcharge percentage for fiscal year 2016 and

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each subsequent fiscal year based on the funding needs as determined by the director of the

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department of health for the childhood and adult immunization vaccine programs described in

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section 23-1-46, the funding needs as determined by the director of the department of human

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services for the children's health services program described in section 42-12-29, and the

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projected net claims charge of all persons subject to the surcharge. The administrator will

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establish and publish the surcharge percentage for the fiscal year beginning July 1, 2016 on or

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before April 15, 2015, and annually by April 15 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-fifth (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)(1) Upon request of the director of the department of health, the administrator shall

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develop a process whereby any insurer required to pay the surcharge may be directed to pre-pay a

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fraction of the next year's estimated surcharge, equal to one-half (1/2) of the portion of the

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surcharge relating to the immunization programs described in title 23, and the administrator shall

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make the pre-paid amount collected by the administrator available to the department of health for

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the administration of the child and adult immunization programs.

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     (2) 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:

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     (i) The person has become delinquent in either the filing of the return or the payment of

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the surcharge due thereon; or

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     (ii) The liability of the person exceeds seventy-five thousand dollars ($75,000) in

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surcharge per 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 --

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Penalties -- Collection powers. -- If any person shall fail to file a return within the time required

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

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

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

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provided 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:

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     (1) Keep records as may be necessary to determine the amount of its liability under this

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chapter;

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     (2) Preserve those records for a 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

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

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     (b) The general treasurer shall take all steps necessary to facilitate the electronic transfer

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of monies to the "childhood immunization account" described in subsection 23-1-45(a) in the

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amount described in subsection 23-1-46(a); to the "adult immunization account" described in

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subsection 23-1-45(c) in the amount described in subsection 23-1-46(a); to the "children's health

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account" described in subsection 42-12-29(a) in the amount described in subsection 42-12-29(b);

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and the remainder of the payments not allocated to those programs shall be deposited to the

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genera1 fund. The general treasurer shall provide the administrator a record of any monies

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transferred and 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 upon passage.

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LC02202

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO HEALTH AND SAFETY -- TAXATION RELIEF FROM PREMIUM-BASED

TAXATION OF HEALTHCARE SERVICES

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     This act would replace the current immunization/children healthcare services assessments

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and premium taxes imposed on health insurance companies with a healthcare 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 upon passage.

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LC02202

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