Report Title:

Mutual Benefit Societies

Description:

Maintains competition and consumer choice by deleting requirements that pose obstacles to smaller health plans.  Deletes requirement that health plans must maintain a fund equal to "one half of twenty times the maximum benefits paid in 30 days" and caps the deposit requirement at $20 million. Requires the Legislative Auditor to conduct a financial audit of all health plans offered by mutual benefit societies, health maintenance organizations, and insurers.  (SB3016 HD2)

THE SENATE	S.B. NO.	3016
TWENTY-FOURTH LEGISLATURE, 2008		S.D. 1
STATE OF HAWAII		H.D. 2

A BILL FOR AN ACT

RELATING TO MUTUAL BENEFIT SOCIETIES.

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

     SECTION 1.  Section 432:1-303, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

     "(c)  If the society does not offer or promise to pay any death benefits in excess of $25 upon the death of a member, but merely offers or promises to pay disability benefits by reason of sickness or injury, or to pay any other benefits, with or without provision of death benefit in excess of $25, the society [shall], before receiving a certificate of compliance with law from the commissioner, shall prove to the commissioner that at least one hundred members have each paid [in], in cash, in at least six regular monthly payments to the disability fund[.  Such]; provided that payments in the aggregate shall:

     (1)  Amount to at least twenty times the maximum amount of disability or other benefits offered or promised to be paid to any one member during or within a period of thirty days[,];

     (2)  Be credited to [the] disability, sick, or other [benefit fund,] benefits; and

     (3)  During the period of organization of the society, be held in trust to be returned to the applicants or members who have made payment of the same, if and in case the organization of the society is not completed within one year."

     SECTION 2.  Section 432:1-304, Hawaii Revised Statutes, is amended to read as follows:

     "§432:1-304  Authority to offer death, sick, disability, or other benefits; special deposit and control of certain funds.  Except as provided in this section and section 432:1-305, all regular payments received for account of death benefit, accident and health or sickness, or other [benefit funds,] benefits, during the period of organization of a society, shall not be used for the payment of any expenses of the society, but shall be placed on deposit or in trust in [some] a bank or trust company approved by the commissioner, payable to the society, but under the joint control with the commissioner.  In case the organization of the society is not completed within one year, the funds shall be returned to the applicants or members who made payments of the respective amounts.  If, however, the organization is completed and the commissioner issues a certificate of compliance with the law, the funds [so] deposited in trust, together with interest, if any, shall be released by the commissioner in favor of the society."

     SECTION 3.  Section 432:1-305, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  At no time shall the society, except as provided in subsection (c), use more than twenty-five per cent of the payments up to $100,000 and seven per cent of the payments in excess of $100,000, received from its members or applicants in the form of admission fees, dues, contributions, or assessments of any nature for expenses other than taxes, in connection with the management or operation of the death benefit, sick, disability, or other [benefit funds.] benefits."

     SECTION 4.  Section 432:1-306, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  [After the organization of the society is completed, and before a certificate of compliance is granted by the commissioner, the] The society shall deposit with the commissioner [one-half the maximum amount required to be maintained in its death benefit and disability, or sick, or other benefit fund, as provided in section 432:1-401,] fifty per cent of the minimum net worth requirement as provided in section 432:1-407(a)(2), either in cash or in securities approved by the commissioner[.]; provided that the deposit shall be not less than $1,000,000 and shall not exceed $20,000,000."

     SECTION 5.  Section 432:1-401, Hawaii Revised Statutes, is repealed.

     ["§432:1-401  Benefit funds.  Each society shall at all times maintain:

(1) In its death benefit fund, at least five times the maximum amount of death benefit offered or promised to be paid to any one member, and

(2) In its sick, disability or other benefit fund, at least twenty times the maximum amount of sick, disability or other benefits, whichever maximum amount is greater, offered or promised to be paid to any one member during or within a period of thirty days."]

SECTION 6.  (a)  The legislative auditor shall conduct a comprehensive financial audit of all health plans offered by each domestic mutual benefit society formed under article 1 of chapter 432, Hawaii Revised Statutes, health maintenance organization formed under chapter 432D, Hawaii Revised Statutes, and insurer formed under chapter 431, Hawaii Revised Statutes.  The audit shall determine the impact of insurance reimbursements on the supply of physicians in the state.

     (b)  The audit shall be submitted to the legislature and the governor no later than twenty days prior to the convening the regular session of 2011.

     SECTION 7.  There is appropriated out of the general revenues of the State of Hawaii the sum of $       or so much thereof as may be necessary for fiscal year 2008-2009 for a comprehensive financial audit of all health plans offered by domestic mutual benefit societies, health maintenance organizations, and insurers.

     The sum appropriated shall be expended by the office of the legislative auditor for the purposes of this Act.

     SECTION 8.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 9.  This Act shall take effect upon its approval; provided that section 7 shall take effect on July 1, 2008.