Minnesota Session Laws - 1998, Regular Session

                            CHAPTER 339-S.F.No. 2267 
                  An act relating to insurance; regulating terminations 
                  of workers' compensation self-insurance authority and 
                  commercial workers' compensation self-insurance 
                  groups; providing investment, funding, reporting, and 
                  transfer requirements; providing permanent health plan 
                  coverage for prostate cancer screenings; requiring a 
                  notice; amending Minnesota Statutes 1996, sections 
                  79A.06, subdivision 5; 79A.22, subdivision 7, and by 
                  adding a subdivision; 79A.23, subdivisions 1 and 2; 
                  79A.24, subdivisions 1, 2, and 4; 79A.26, subdivision 
                  2; and 79A.31, subdivision 1; Minnesota Statutes 1997 
                  Supplement, section 62J.65; Laws 1996, chapter 446, 
                  article 1, section 72. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  Minnesota Statutes 1997 Supplement, section 
        62J.25, is amended to read: 
           62J.25 [MANDATORY MEDICARE ASSIGNMENT.] 
           (a) Effective January 1, 1993, a health care provider shall 
        not charge to or collect from a Medicare beneficiary who is a 
        Minnesota resident any amount in excess of 115 percent of the 
        Medicare-approved amount for any Medicare-covered service 
        provided. 
           (b) Effective January 1, 1994, a health care provider shall 
        not charge to or collect from a Medicare beneficiary who is a 
        Minnesota resident any amount in excess of 110 percent of the 
        Medicare-approved amount for any Medicare-covered service 
        provided. 
           (c) Effective January 1, 1995, a health care provider shall 
        not charge to or collect from a Medicare beneficiary who is a 
        Minnesota resident any amount in excess of 105 percent of the 
        Medicare-approved amount for any Medicare-covered service 
        provided. 
           (d) Effective January 1, 1996, a health care provider shall 
        not charge to or collect from a Medicare beneficiary who is a 
        Minnesota resident any amount in excess of the Medicare-approved 
        amount for any Medicare-covered service provided. 
           (e) This section does not apply to ambulance services as 
        defined in section 144E.001, subdivision 3, or medical supplies 
        and equipment.  A vendor of medical supplies and equipment that 
        does not accept assignment under the federal Medicare program 
        with respect to a purchase or lease of Medicare-covered supplies 
        or equipment shall notify any purchaser who is a Medicare 
        beneficiary and Minnesota resident, prior to the purchase, or at 
        any time upon the request of the purchaser, that the vendor 
        charges an amount in excess of the Medicare-approved amount. 
           Sec. 2.  Minnesota Statutes 1996, section 79A.06, 
        subdivision 5, is amended to read: 
           Subd. 5.  [PRIVATE EMPLOYERS WHO HAVE CEASED TO BE 
        SELF-INSURED.] (a) Private employers who have ceased to be 
        private self-insurers shall discharge their continuing 
        obligations to secure the payment of compensation which is 
        accrued during the period of self-insurance, for purposes of 
        Laws 1988, chapter 674, sections 1 to 21, by compliance with all 
        of the following obligations of current certificate holders: 
           (1) Filing reports with the commissioner to carry out the 
        requirements of this chapter; 
           (2) Depositing and maintaining a security deposit for 
        accrued liability for the payment of any compensation which may 
        become due, pursuant to chapter 176.  However, if a private 
        employer who has ceased to be a private self-insurer purchases 
        an insurance policy from an insurer authorized to transact 
        workers' compensation insurance in this state which provides 
        coverage of all claims for compensation arising out of injuries 
        occurring during the period the employer was self-insured, 
        whether or not reported during that period, the policy will 
        discharge the obligation of the employer to maintain a security 
        deposit for the payment of the claims covered under the policy.  
        The policy may not be issued by an insurer unless it has 
        previously been approved as to form and substance by the 
        commissioner; and 
           (3) Paying within 30 days all assessments of which notice 
        is sent by the security fund, for a period of seven years from 
        the last day its certificate of self-insurance was in effect.  
        Thereafter, the private employer who has ceased to be a private 
        self-insurer may either:  (a)(i) continue to pay within 30 days 
        all assessments of which notice is sent by the security fund 
        until it has no incurred liabilities for the payment of 
        compensation arising out of injuries during the period of 
        self-insurance; or (b)(ii) pay the security fund a cash payment 
        equal to four percent of the net present value of all remaining 
        incurred liabilities for the payment of compensation under 
        sections 176.101 and 176.111 as certified by a member of the 
        casualty actuarial society.  Assessments shall be based on the 
        benefits paid by the employer during the calendar year 
        immediately preceding the calendar year in which the employer's 
        right to self-insure is terminated or withdrawn. 
           (b) With respect to a self-insurer who terminates its 
        self-insurance authority after the effective date of this 
        clause, that member shall obtain and file with the commissioner 
        an actuarial opinion of its outstanding liabilities as 
        determined by an associate or fellow of the Casualty Actuarial 
        Society.  The opinion must separate liability for indemnity 
        benefits from liability from medical benefits, and must discount 
        each up to four percent per annum to net present value.  Within 
        30 days after notification of approval of the actuarial opinion 
        by the commissioner, the member shall pay to the security fund 
        an amount equal to 120 percent of that discounted outstanding 
        indemnity liability, multiplied by the greater of the average 
        annualized assessment rate since inception of the security fund 
        or the annual rate at the time of the most recent assessment 
        before termination. 
           (c) A former member who terminated its self-insurance 
        authority before the effective date of this clause who has paid 
        assessments to the self-insurers' security fund for seven years, 
        and whose annualized assessment is $500 or less, may buy out of 
        its outstanding liabilities to the self-insurers' security fund 
        by an amount calculated as follows:  1.35 multiplied by the 
        indemnity case reserves at the time of the calculation, 
        multiplied by the then current self-insurers' security fund 
        annualized assessment rate. 
           (d) A former member who terminated its self-insurance 
        authority before the effective date of this clause, and who is 
        paying assessments within the first seven years after ceasing to 
        be self-insured under paragraph (a), clause (3), may elect to 
        buy out its outstanding liabilities to the self-insurers' 
        security fund by obtaining and filing with the commissioner an 
        actuarial opinion of its outstanding liabilities as determined 
        by an associate or fellow of the Casualty Actuarial Society.  
        The opinion must separate liability for indemnity benefits from 
        liability from medical benefits, and must discount each up to 
        four percent per annum to net present value.  Within 30 days 
        after notification of approval of the actuarial opinion by the 
        commissioner, the member shall pay to the security fund an 
        amount equal to 120 percent of that discounted outstanding 
        indemnity liability, multiplied by the greater of the average 
        annualized assessment rate since inception of the security fund 
        or the annual rate at the time of the most recent assessment. 
           (e) A former member who has paid the security fund 
        according to paragraphs (b) to (d) and subsequently receives 
        authority from the commissioner to again self-insure shall be 
        assessed under section 79A.12, subdivision 2, only on indemnity 
        benefits paid on injuries that occurred after the former member 
        received authority to self-insure again; provided that the 
        member furnishes verified data regarding those benefits to the 
        security fund. 
           (f) In addition to proceedings to establish liabilities and 
        penalties otherwise provided, a failure to comply may be the 
        subject of a proceeding before the commissioner.  An appeal from 
        the commissioner's determination may be taken pursuant to the 
        contested case procedures of chapter 14 within 30 days of the 
        commissioner's written determination. 
           Any current or past member of the self-insurers' security 
        fund is subject to service of process on any claim arising out 
        of chapter 176 or this chapter in the manner provided by section 
        5.25, or as otherwise provided by law.  The issuance of a 
        certificate to self-insure to the private self-insured employer 
        shall be deemed to be the agreement that any process which is 
        served in accordance with this section shall be of the same 
        legal force and effect as if served personally within this state.
           Sec. 3.  Minnesota Statutes 1996, section 79A.22, 
        subdivision 7, is amended to read: 
           Subd. 7.  [INVESTMENTS.] (a) Any securities purchased by 
        the common claims fund shall be in such denominations and with 
        dates of maturity to ensure securities may be redeemable at 
        sufficient time and in sufficient amounts to meet the fund's 
        current and long-term liabilities. 
           (b) Cash assets of the common claims fund may be invested 
        in the following securities: 
           (1) direct obligations of the United States government, 
        except mortgage-backed securities of the Government National 
        Mortgage Association; 
           (2) bonds, notes, debentures, and other instruments which 
        are obligations of agencies and instrumentalities of the United 
        States including, but not limited to, the federal National 
        Mortgage Association, the federal Home Loan Mortgage 
        Corporation, the federal Home Loan Bank, the Student Loan 
        Marketing Association, and the Farm Credit System, and their 
        successors, but not including collateralized mortgage 
        obligations or mortgage pass-through instruments; 
           (3) bonds or securities that are issued by the state of 
        Minnesota and that are secured by the full faith and credit of 
        the state; 
           (4) certificates of deposit which are insured by the 
        federal Deposit Insurance Corporation and are issued by a 
        Minnesota depository institution; 
           (5) obligations of, or instruments unconditionally 
        guaranteed by, Minnesota depository institutions whose long-term 
        debt rating is at least AA-, or Aa3, or their equivalent by at 
        least two nationally recognized rating agencies. 
           (b) Cash assets of the self-insurer's fund may be invested 
        as provided in section 60A.11 for a casualty insurance company, 
        provided that investment in real estate of or indebtedness from 
        a member company or affiliates is prohibited.  In addition, 
        investment in the following is allowed: 
           (1) savings accounts or certificates of deposit in a duly 
        chartered commercial bank located within the state of Minnesota 
        and insured through the Federal Deposit Insurance Corporation; 
           (2) share accounts or savings certificates in a duly 
        chartered savings association or savings bank located within the 
        state of Minnesota and insured through the Federal Deposit 
        Insurance Corporation; 
           (3) direct obligations of the United States Treasury, such 
        as notes, bonds, or bills; 
           (4) a bond or security issued by the state of Minnesota and 
        backed by the full faith and credit of the state; 
           (5) a credit union where the employees of the self-insurer 
        are members if the credit union is located in Minnesota and 
        insured through the National Credit Union Administration; or 
           (6) real estate, common stock, preferred stock, or 
        corporate bonds listed on the New York, American Stock Exchange 
        or NASDAQ Stock Market, so long as these investments are not 
        issued by any member company or affiliate and the total in all 
        other allowable categories make up at least 75 percent of the 
        total required in the common claims fund. 
           Sec. 4.  Minnesota Statutes 1996, section 79A.22, is 
        amended by adding a subdivision to read: 
           Subd. 13.  [COMMON CLAIMS FUND; FIVE-YEAR EXCEPTION.] For 
        commercial group self-insurers who have been in existence for 
        five years or more, a level of funding in the common claims fund 
        must be maintained at not less than the greater of either: 
           (1) one year's claim losses paid in the most recent year; 
        or 
           (2) one-third of the security deposit posted with the 
        department of commerce according to section 79A.24, subdivision 
        2.  
           This provision supersedes any requirements under 
        subdivisions 11 and 12 and Minnesota Rules, part 2780.5000. 
           Sec. 5.  Minnesota Statutes 1996, section 79A.23, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [REQUIRED REPORTS TO COMMISSIONER.] Each 
        commercial self-insurance group shall submit the following 
        documents to the commissioner.  
           (a) An annual report shall be submitted by April 1 showing 
        the incurred losses, paid and unpaid, specifying indemnity and 
        medical losses by classification, payroll by classification, and 
        current estimated outstanding liability for workers' 
        compensation on a calendar year basis, in a manner and on forms 
        available from the commissioner.  In addition each group will 
        submit a quarterly interim loss report showing incurred losses 
        for all its membership. 
           (b) Each commercial self-insurance group shall submit 
        within 45 days of the end of each quarter:  
           (1) a schedule showing all the members who participate in 
        the group, their date of inception, and date of withdrawal, if 
        applicable; 
           (2) a separate section identifying which members were added 
        or withdrawn during that quarter; and 
           (3) an internal financial statement and copies of the 
        fiscal agent's statements supporting the balances in the common 
        claims fund. 
           (c) The commercial self-insurance group shall submit an 
        annual certified financial audit report of the commercial 
        self-insurance group fund by April 1 of the following year.  The 
        report must be accompanied by an expense schedule showing the 
        commercial self-insurance group's operational costs for the same 
        year including service company charges, accounting and actuarial 
        fees, fund administration charges, reinsurance premiums, 
        commissions, and any other costs associated with the 
        administration of the group program. 
           (d) An officer of the commercial self-insurance group 
        shall, under oath, attest to the accuracy of each report 
        submitted under paragraphs (a), (b), and (c).  Upon sufficient 
        cause, the commissioner shall require the commercial 
        self-insurance group to submit a certified audit of payroll and 
        claim records conducted by an independent auditor approved by 
        the commissioner, based on generally accepted accounting 
        principles and generally accepted auditing standards, and 
        supported by an actuarial review and opinion of the future 
        contingent liabilities.  The basis for sufficient cause shall 
        include the following factors: 
           (1) where the losses reported appear significantly 
        different from similar types of groups; 
           (2) where major changes in the reports exist from year to 
        year, which are not solely attributable to economic factors; or 
           (3) where the commissioner has reason to believe that the 
        losses and payroll in the report do not accurately reflect the 
        losses and payroll of the commercial self-insurance group.  
        If any discrepancy is found, the commissioner shall require 
        changes in the commercial self-insurance group's business plan 
        or service company recordkeeping practices. 
           (e) Each commercial self-insurance group shall submit by 
        August September 15 a copy of the group's annual federal and 
        state income tax returns or provide proof that it has received 
        an exemption from these filings. 
           (f) With the annual loss report each commercial 
        self-insurance group shall report to the commissioner any 
        worker's compensation claim where the full, undiscounted value 
        is estimated to exceed $50,000, in a manner and on forms 
        prescribed by the commissioner. 
           (g) Each commercial self-insurance group shall submit by 
        May 1 a list of all members and the percentage of premium each 
        represents to the total group's premium for the previous 
        calendar year.  
           (h) Each commercial self-insurance group shall submit by 
        May 1 the following documents prepared by the group's certified 
        public accountant:  
           (1) a compiled combined financial statement of group 
        members and a list of members included in this statement; and 
           (2) a report that the statements which were combined have 
        met the requirements of subdivision 2.  
           (i) If any group member comprises over 25 percent of total 
        group premium, that member's financial statement must be 
        reviewed or audited, and must be submitted to the commissioner, 
        at the commissioner's option, must be filed with the department 
        of commerce by May 1 of the following year. 
           (j) Each commercial self-insurance group shall submit a 
        copy of each member's accountant's report letter from the 
        reports used in compiling the combined financial statements.  
           Sec. 6.  Minnesota Statutes 1996, section 79A.23, 
        subdivision 2, is amended to read: 
           Subd. 2.  [REQUIRED REPORTS FROM MEMBERS TO GROUP.] Each 
        member of the commercial self-insurance group shall, by April 1, 
        submit to the group its most recent annual financial statement, 
        together with other financial information the group may 
        require.  These financial statements submitted must not have a 
        fiscal year end date older than January 15 of the group's 
        calendar year end.  Individual group members constituting at 
        least 75 50 percent of the group's annual premium shall submit 
        to the group reviewed or audited financial statements.  The 
        remaining members may submit compilation level statements. 
           Sec. 7.  Minnesota Statutes 1996, section 79A.24, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [ANNUAL SECURING OF LIABILITY.] Each year 
        every commercial self-insurance group shall secure its estimated 
        future incurred liabilities liability for the payment of 
        compensation and the performance of the obligations of its 
        membership imposed under chapter 176.  A new deposit must be 
        posted within 30 days of the filing of the commercial 
        self-insurance group's annual actuarial report with the 
        commissioner. 
           Sec. 8.  Minnesota Statutes 1996, section 79A.24, 
        subdivision 2, is amended to read: 
           Subd. 2.  [MINIMUM DEPOSIT.] The minimum deposit is 150 
        percent of the commercial self-insurance group's estimated 
        future incurred liabilities liability for the payment of 
        compensation as determined by an actuary.  If all the members of 
        the commercial self-insurance group have submitted reviewed or 
        audited financial statements to the group's accountant, this 
        minimum deposit shall be 110 percent of the commercial 
        self-insurance group's estimated future incurred 
        liabilities liability for the payment of workers' compensation 
        as determined by an actuary.  The group must file a letter with 
        the commissioner from the group's accountant which confirms that 
        the compiled combined financial statements were prepared from 
        members reviewed or audited financial statements only before the 
        lower security deposit is allowed.  Each actuarial study shall 
        include a projection of future losses during a one-year period 
        until the next scheduled actuarial study, less payments 
        anticipated to be made during that time.  Deduction should be 
        made for the total amount which is estimated to be returned to 
        the commercial self-insurance group from any specific excess 
        insurance coverage, aggregate excess insurance coverage, and any 
        supplementary benefits which are estimated to be reimbursed by 
        the special compensation fund.  Supplementary benefits will not 
        be reimbursed by the special compensation fund unless the 
        special compensation fund assessment pursuant to section 176.129 
        is paid and the required reports are filed with the special 
        compensation fund.  In the case of surety bonds, bonds shall 
        secure administrative and legal costs in addition to the 
        liability for payment of compensation reflected on the face of 
        the bond.  In no event shall the security be less than the 
        group's selected retention limit of the workers' compensation 
        reinsurance association.  The posting or depositing of security 
        under this section shall release all previously posted or 
        deposited security from any obligations under the posting or 
        depositing and any surety bond so released shall be returned to 
        the surety.  Any other security shall be returned to the 
        depositor or the person posting the bond. 
           Sec. 9.  Minnesota Statutes 1996, section 79A.24, 
        subdivision 4, is amended to read: 
           Subd. 4.  [CUSTODIAL ACCOUNTS.] (a) All surety bonds, 
        irrevocable letters of credit, and documents showing issuance of 
        any irrevocable letter of credit shall be deposited in 
        accordance with the provisions of section 79A.071.  
           (b) Upon the commissioner sending a request to renew, 
        request to post, or request to increase a security deposit, a 
        perfected security interest is created in the commercial 
        self-insurance group's and member's assets in favor of the 
        commissioner to the extent of any then unsecured portion of the 
        commercial self-insurance group's incurred liabilities.  The 
        perfected security interest is transferred to any cash or 
        securities thereafter posted by the commercial self-insurance 
        group with the state treasurer and is released only upon either 
        of the following: 
           (1) the acceptance by the commissioner of a surety bond or 
        irrevocable letter of credit for the full amount of the incurred 
        liabilities for the payment of compensation; or 
           (2) the return of cash or securities by the commissioner.  
        The commercial self-insurance group loses all right, title, and 
        interest in and any right to control all assets or obligations 
        posted or left on deposit as security.  In the event of a 
        declaration of bankruptcy or insolvency by a court of competent 
        jurisdiction, or in the event of the issuance of a certificate 
        of default by the commissioner, the commissioner shall liquidate 
        the deposit as provided in this chapter, and transfer it to the 
        commercial self-insurance group security fund for application to 
        the commercial self-insurance group's incurred liability. 
           (c) No securities in physical form on deposit with the 
        state treasurer or the commissioner or custodial accounts 
        assigned to the state shall be released or exchanged without an 
        order from the commissioner.  No security can be exchanged more 
        than once every 90 days. 
           (d) Any securities deposited with the state treasurer or 
        with a custodial account assigned to the state treasurer or 
        letters of credit or surety bonds held by the commissioner may 
        be exchanged or replaced by the depositor with any other 
        acceptable securities or letters of credit or surety bond of 
        like amount so long as the market value of the securities or 
        amount of the surety bonds or letter of credit equals or exceeds 
        the amount of the deposit required.  If securities are replaced 
        by surety bond, the commercial self-insurance group must 
        maintain securities on deposit in an amount sufficient to meet 
        all outstanding workers' compensation liability arising during 
        the period covered by the deposit of the replaced securities. 
           (e) The commissioner shall return on an annual basis to the 
        commercial self-insurance group all amounts of security 
        determined by the commissioner to be in excess of the statutory 
        requirements for the group to self-insure, including that 
        necessary for administrative costs, legal fees, and the payment 
        of any future workers' compensation claims. 
           Sec. 10.  Minnesota Statutes 1996, section 79A.26, 
        subdivision 2, is amended to read: 
           Subd. 2.  [BOARD OF TRUSTEES.] The commercial security fund 
        shall be governed by a board consisting of a minimum of three 
        and maximum of five trustees.  The trustees shall be 
        representatives of commercial self-insurance groups who shall be 
        elected by the participants of the commercial security fund, 
        each group having one vote.  The trustees initially elected by 
        the participants shall serve staggered terms of either two or 
        three years.  Thereafter, trustees shall be elected to 
        three-year terms and shall serve until their successors are 
        elected and assume office pursuant to the bylaws of the 
        commercial security fund.  Two additional trustees shall be 
        appointed by the commissioner.  These trustees shall serve 
        four-year terms.  Initially, one of these trustees shall serve a 
        two-year term.  Thereafter, the trustees shall be appointed to 
        four-year terms, and shall serve until their successors are 
        appointed and assume office according to the bylaws of the 
        commercial security fund.  In addition to the trustees elected 
        by the participants or appointed by the commissioner, the 
        commissioner of labor and industry or the commissioner's 
        designee shall be an ex officio, nonvoting member of the board 
        of trustees.  A member of the board of trustees may designate 
        another person to act in the member's place as though the member 
        were acting and the designee's actions shall be deemed those of 
        the member. 
           Sec. 11.  Minnesota Statutes 1996, section 79A.31, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [WITHDRAWAL.] Any group self-insurer that 
        is a member as of August 1, 1995, of the self-insurers' security 
        fund established under section 79A.09, may until January 1, 
        1996, elect to withdraw from that fund and become a member of 
        the commercial self-insurance group security fund established 
        under section 79A.26.  The transferring group shall be subject 
        to the provisions and requirements of sections 79A.19 to 79A.32 
        as of the date of transfer.  Additional security may be required 
        pursuant to section 79A.24.  Group self-insurers electing to 
        transfer to the commercial self-insurance group fund shall not 
        be subject to the provisions of section 79A.06, subdivision 5, 
        including, but not limited to, assessments by the self-insurers' 
        security fund.  Notice of transfer must be filed by November 1 
        for all transfers that must be effective at midnight on December 
        31. 
           Sec. 12.  Laws 1996, chapter 446, article 1, section 72, is 
        amended to read: 
           Sec. 72.  [REPEALER.] 
           (a) Minnesota Statutes 1994, sections 60A.40; 60B.27; 
        62I.20; 65A.25; and 72A.205, are repealed. 
           (b) Laws 1995, chapter 140, section 1, is repealed. 
           (c) Section 51 is repealed effective August 1, 1998. 
           Sec. 13.  [EFFECTIVE DATE.] 
           Sections 2 to 12 are effective the day following final 
        enactment. 
           Presented to the governor March 27, 1998 
           Signed by the governor March 31, 1998, 10:55 a.m.