A1930

An Act concerning health benefits plans and supplementing Titles 17B and 54A of the New Jersey Statutes and amending P.L.1992, c.162.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. (New section) This act shall be known and may be cited as the “New Jersey Health Insurance Connector Act.”

2. (New section) As used in this act:

“Board” means the board of directors of the New Jersey Small Employer Health Benefits Program established pursuant to section 13 of P.L.1992, c.162 (C.17B:27A-29).

“Carrier” means any entity subject to the insurance laws and regulations of this State, or subject to the jurisdiction of the commissioner, that contracts or offers to contract to provide, deliver, arrange for, pay for, or reimburse any of the costs of health care services, including an insurance company authorized to issue health insurance, a health maintenance organization, a hospital service corporation, medical service corporation and health service corporation, or any other entity providing a health benefits plan. The term "carrier" shall not include a joint insurance fund established pursuant to State law. For purposes of this act, carriers that are affiliated companies shall be treated as one carrier, except that any insurance company, health service corporation, hospital service corporation, or medical service corporation that is an affiliate of a health maintenance organization located in New Jersey or any health maintenance organization located in New Jersey that is affiliated with an insurance company, health service corporation, hospital service corporation, or medical service corporation shall treat the health maintenance organization as a separate carrier.

“Commissioner” means the Commissioner of Banking and Insurance.

“Connector” means the New Jersey Health Insurance Connector.

“Connector certification” means the approval given by the board of the connector to indicate that a health benefits plan meets certain standards regarding quality and value.

“Eligible employee” means an individual who performs services for and under the direction of a participating employer for wages or other remuneration.

“Health benefits plan” means any hospital and medical expense insurance policy or certificate; health, hospital, or medical service corporation contract or certificate; or health maintenance organization subscriber contract or certificate delivered or issued for delivery in this State. For purposes of this act, "health benefits plan" shall not include one or more, or any combination of, the following: coverage only for accident or disability income insurance, or any combination thereof; coverage issued as a supplement to liability insurance; liability insurance, including general liability insurance and automobile liability insurance; workers' compensation or similar insurance; automobile medical payment insurance; credit-only insurance; coverage for on-site medical clinics; and other similar insurance coverage, as specified in federal regulations, under which benefits for medical care are secondary or incidental to other insurance benefits. Health benefits plans shall not include the following benefits if they are provided under a separate policy, certificate or contract of insurance or are otherwise not an integral part of the plan: limited scope dental or vision benefits; benefits for long-term care, nursing home care, home health care, community-based care, or any combination thereof; and such other similar, limited benefits as are specified in federal regulations. Health benefits plan shall not include hospital confinement indemnity coverage if the benefits are provided under a separate policy, certificate or contract of insurance, there is no coordination between the provision of the benefits and any exclusion of benefits under any group health benefits plan maintained by the same plan sponsor, and those benefits are paid with respect to an event without regard to whether benefits are provided with respect to such an event under any group health plan maintained by the same plan sponsor. Health benefits plan shall not include the following if it is offered as a separate policy, certificate or contract of insurance: Medicare supplemental health insurance as defined under section 1882(g)(1) of the federal “Social Security Act” (42 U.S.C. s.1395ss(g)(1)); and coverage supplemental to the coverage provided under chapter 55 of Title 10, United States Code (10 U.S.C. s.1071 et seq.); and similar supplemental coverage provided to coverage under a group health plan.

“Participating employer” means a small employer that enters into an agreement with the connector to facilitate the offering of health benefits plans through the connector to its employees.

“Small employer” means any person, firm, corporation, or partnership that is actively engaged in business that employed an average of at least two but not more than 50 employees on business days during the preceding calendar year and who employs at least two employees on the first day of the current calendar year, and the majority of the employees are employed in New Jersey. All persons treated as a single employer under subsection (b), (c), (m) or (o) of section 414 of the federal Internal Revenue Code (26 U.S.C. s.414) shall be treated as one employer. For the purpose of determining continued eligibility, the size of a small employer shall be determined annually. In the case of an employer that was not in existence during the preceding calendar year, the determination of whether the employer is a small employer shall be based on the average number of employees that it is reasonably expected that the employer will employ on business days in the current calendar year. Any reference in this act to a small employer shall include a reference to any predecessor of the small employer.

3. (New section) There is created a body politic and corporate, to be known as the New Jersey Health Insurance Connector. For the purposes of complying with the provisions of Article V, Section IV, paragraph 1 of the New Jersey Constitution, the connector is allocated in, but not of, the Department of Banking and Insurance; but, notwithstanding this allocation, the connector shall be independent of any supervision or control by the department or by any other board or officer thereof. The connector shall submit its budget request directly to the Division of Budget and Accounting in the Department of the Treasury. The purpose of the connector is to facilitate the availability and choice of health benefits plans offered by carriers to eligible employees of small employers, pursuant to this act. The connector shall be governed by the board of directors of the New Jersey Small Employer Health Benefits Program established pursuant to section 13 of P.L.1992, c.162 (C.17B:27A-29), with duties and powers established by this act.

4. (New section) The executive director of the Small Employer Health Benefits Program shall also act as the executive director of the connector and shall supervise the administrative affairs and general management and operations of the connector. The executive director shall, with the approval of the board:

a. plan, direct, coordinate, and execute administrative functions in conformity with the policies and directives of the board;

b. employ professional and clerical staff as necessary to implement the provisions of this act;

c. report to the board on all operations under his control and supervision;

d. prepare an annual budget and manage the administrative expenses of the connector; and

e. undertake any other activities necessary to implement the powers and duties set forth in this act.

5. (New section) The board shall implement the New Jersey Health Insurance Connector pursuant to the provisions of this act. The board shall facilitate the purchase of coverage under health benefits plans through the connector at affordable prices by eligible employees. For these purposes, the board is authorized and empowered as follows:

a. to develop a plan of operation for the connector, which shall include, but not be limited to, the following:

(1) procedures for operations of the connector;

(2) procedures and minimum requirements for the selection and certification of health benefits plans to be offered through the connector;

(3) criteria for determining that certain health benefits plans shall no longer be made available through the connector and establish a procedure to decertify these plans;

(4) procedures, criteria, and a standard application form for the enrollment of small employers as participating employers;

(5) procedures, criteria, and a standard application form for prospective eligible employees seeking to obtain coverage under health benefits plans offered through the connector;

(6) establishment and management of a system for collecting all premium payments made by, or on behalf of, eligible employees obtaining coverage from health benefits plans offered through the connector, including any premium payments made by participating employers on behalf of eligible employees and any premium payments made by eligible employees through a payroll deduction process maintained by a participating employer, and remitting the premium payments to carriers;

(7) a plan for operating a service center to manage connector enrollment, provide small employers and eligible employees with information about the connector, provide carriers with information about criteria for health benefits plans eligible to be offered through the connector, and provide participating employers with information about and services for establishing and maintaining cafeteria plans for its employees pursuant to section 125 of the federal Internal Revenue Code (26 U.S.C. s.125) and health reimbursement arrangements for its employees pursuant to section 105 of the federal Internal Revenue Code (26 U.S.C. s.105);

(8) a plan for publicizing the connector’s services, eligibility requirements, and enrollment procedures; and

(9) procedures for communications with the executive director.

b. to seek and receive grant funding from the federal government, departments or agencies of the State, and private foundations.

c. to contract with professional service firms as may be necessary in its judgment, and to fix their compensation;

d. to contract with companies which provide third-party administrative and billing services for health benefits plans;

e. to charge and equitably apportion among participating employers its administrative costs and expenses incurred in the exercise of the powers and duties granted by this act;

f. to adopt by-laws for the regulation of its affairs and the conduct of its business;

g. to adopt an official seal for the connector and alter the same;

h. to maintain an office in the State;

i. to sue and be sued in its own name;

j. to establish lines of credit, and establish one or more cash and investment accounts to receive payments for services rendered, appropriations from the State and for all other business activity permitted by this act, except to the extent otherwise limited by any applicable provision of the “Employee Retirement Income Security Act of 1974,” Pub.L.93-406 (29 U.S.C. s.1001 et seq.); and

k. to approve the use of its trademarks, brand names, seals, logos, and similar instruments by carriers, participating employers and other organizations.

6. (New section) a. The connector may offer to eligible employees only health benefits plans that have been certified by the connector, authorized by the commissioner, and underwritten by a carrier.

b. A health benefits plan offered by a carrier through the connector shall contain a detailed description of the benefits offered, including maximums, limitations, exclusions, and other benefit limits.

c. The connector certification shall be assigned to health benefits plans that the board determines provide good value and offer high quality coverage to eligible employees.

d. The connector shall begin offering health benefits plans as of January 1, 2011.

7. (New section) The connector shall provide assistance to an employer, upon the employer’s request, in the establishment and ongoing administration of a cafeteria plan for its employees pursuant to section 125 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.125) or a health reimbursement arrangement for its employees pursuant to section 105 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.105), in accordance with the plan developed by the board pursuant to paragraph (7) of subsection a. of section 5 of this act and as prescribed by regulation of the board, including, but not limited to, the provision of: ongoing training for an employer that administers its own cafeteria plan or health reimbursement arrangement; and claims and account administration by the connector for an employer that arranges with the connector to provide those services.

8. (New section) A small employer seeking to be a participating employer shall, as a condition of participation, enter into a written agreement with the connector which, at a minimum, shall stipulate the following:

a. that the small employer reserves the right to determine the amounts of contributions, if any, which the small employer agrees to make to any connector certified health benefits plan, provided that, for the term of the agreement with the connector, the small employer agrees not to change contribution amounts at any time other than during a period designated by the connector;

b. that the small employer agrees to participate in a payroll deduction program to facilitate the payment of health benefit plan premium payments by eligible employees in order for eligible employees to obtain cafeteria plan benefits pursuant to section 125 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.125); and

c. that the small employer agrees to make available, in a timely manner, for confidential review by the executive director, any of the small employer’s documents, records or information that the connector reasonably determines are necessary for the executive director to verify:

(1) that the small employer is in compliance with this act and other applicable federal and State laws relating to the offering of health benefits plans, particularly those provisions of laws relating to non-discrimination in coverage; and

(2) the eligibility of the small employer’s employees to obtain coverage under a health benefits plan pursuant to this act.

9. (New section) a. The connector may apply a surcharge to all health benefits plans offered by a carrier through the connector which surcharge shall be used only to pay for administrative and operational expenses that the connector incurs in order to carry out its responsibilities pursuant to this act; provided, however, that the surcharge shall be applied uniformly to all health benefits plans offered through the connector.

b. A carrier participating in the connector shall provide to the board those reports which the board reasonably determines to be necessary to enable the executive director to carry out his duties under this act.

c. The board may withdraw a health benefits plan from the connector only after notice to the carrier.

10. (New sections) a. The connector shall be liable for all claims for activities, whether ministerial or discretionary, of any board member, officer, or employee of the connector acting as such, except for willful dishonesty or intentional violation of the law, in the same manner and to the same extent as a private person under like circumstances; provided, however, that the connector shall not be liable to levy or execution on any real or personal property to satisfy judgment, for interest prior to judgment, for punitive damages or for any amount in excess of $100,000.

b. A person shall not be liable to the State, to the connector or to any other person as a result of his activities, whether ministerial or discretionary, as a board member, officer or employee of the connector except for willful dishonesty or intentional violation of the law; provided, however, that the person shall provide reasonable cooperation to the connector in the defense of any claim. Failure of the person to provide reasonable cooperation shall cause him to be jointly liable with the connector, to the extent that the failure prejudiced the defense of the action.

c. The connector may indemnify or reimburse any person, or his personal representative, for losses or expenses, including legal fees and costs, arising from any claim, action, proceeding, award, compromise, settlement or judgment resulting from the person’s activities, whether ministerial or discretionary, as a member, officer or employee of the connector; provided that the defense or settlement thereof shall have been made by counsel approved by the connector. The connector may procure insurance for itself and for its board members, officers and employees against liabilities, losses, and expenses which may be incurred by virtue of this section or otherwise.

d. A civil action under this section shall not be brought more than three years after the date upon which the cause thereof accrued.

e. Upon dissolution, liquidation, or other termination of the connector, all rights, funds, assets, and properties of the connector shall be vested in the State.

11. (New section) The connector shall keep an accurate account of all its activities and of all its receipts and expenditures and shall annually make a report thereof as of the end of the State fiscal year to its board, to the Governor, to the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), and to the State Auditor, which shall be in a form prescribed by the board, with the written approval of the State Auditor. The State Auditor may investigate the affairs of the connector, severally examine the properties and records of the connector, and prescribe methods of accounting and the rendering of periodical reports in relation to projects undertaken by the connector. The State Auditor shall conduct a biennial audit of the connector.

12. (New section) No later than two years after the connector begins operation and every year thereafter, the connector shall conduct a study of the connector and the eligible employees enrolled in the connector and shall submit a written report to the Governor, and to the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), on the status and activities of the connector, based on the data collected in the study. The report shall also be available to the general public upon request. The study shall review the operation and administration of the connector, including surveys and reports of health benefits plans available to eligible employees and on the experience of the plans. The experience of the plans shall include data on eligible employees who obtained coverage through the connector, participating employers enrolled in the connector, expenses, claims statistics, complaints data, how the connector met its goals, significant observations regarding utilization and adoption of the connector, and other information deemed pertinent by the connector.

13. (New section) The connector, in consultation with the Commissioner of the Department of Banking and Insurance and the Commissioner of Health and Senior Services, shall adopt, pursuant to the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.), rules and regulations to effectuate the purposes of this act.

14. (New section) Gross income shall not include amounts paid by an employer on behalf, and at the election, of an employee for a qualified benefit of a cafeteria plan that meets the requirements of section 125 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.125), if the amount paid is excludable from federal taxable income.

15. Section 13 of P.L.1992, c.162 (C.17B:27A-29) is amended to read as follows:

13. a. Within 60 days of the effective date of this act, the commissioner shall give notice to all members of the time and place for the initial organizational meeting, which shall take place within 90 days of the effective date. The members shall elect the initial board, subject to the approval of the commissioner. The board shall consist of 10 elected public members and two ex officio members who include the Commissioner of Health and Senior Services and the commissioner or their designees. Initially, three of the public members of the board shall be elected for a three-year term, three shall be elected for a two-year term, and three shall be elected for a one-year term. Thereafter, all elected board members shall serve for a term of three years.

Notwithstanding the foregoing provisions to the contrary, following the enactment of P.L. , c. (pending before the Legislature as this bill), the board shall consist of the two ex officio members and 12 elected public members. The following categories shall be represented among the elected public members:

(1) Three carriers whose principal health insurance business is in the small employer market;

(2) [One carrier whose principal health insurance business is in the large employer market;] (Deleted by amendment, P.L. , c. ) (pending before the Legislature as this bill).

(3) [A health service corporation or a domestic stock insurer which converted from a health service corporation pursuant to the provisions of P.L.2001, c.131 (C.17:48E-49 et al.) and is primarily engaged in the business of issuing health benefit plans in this State;] (Deleted by amendment, P.L. , c. ) (pending before the Legislature as this bill).

(4) [Two health maintenance organizations;] (Deleted by amendment, P.L. , c. ) (pending before the Legislature as this bill).

(5) (Deleted by amendment, P.L.1995, c.298).

(6) (Deleted by amendment, P.L.1995, c.298).

(7) Three persons representing small employers, at least one of whom represents minority small employers;

(8) Three representatives of consumer health organizations;

(9) A member in good standing in the American Academy of Actuaries;

(10) A health economist; and

(11) An employee health benefits specialist.

No carrier shall have more than one representative on the board.

The board shall hold an election for the two members added pursuant to P.L.1995, c.298 within 90 days of the date of enactment of that act. Initially, one of the two new members shall serve for a term of one year and one of the two new members shall serve for a term of two years. Thereafter, the new members shall serve for a term of three years. The terms of the risk-assuming carrier and reinsuring carrier shall terminate upon the election of the two new members added pursuant to P.L.1995, c.298, notwithstanding the provisions of this section to the contrary.

The board shall hold an election for the six members added pursuant to P.L. , c. (pending before the Legislature as this bill) within 90 days of the date of enactment of that act. Initially, two of the six new members shall serve for a term of one year, two shall serve for a term of two years, and two shall serve for a term of three years. Thereafter, the new members shall serve for a term of three years. The terms of the carrier whose principal health insurance business is in the large employer market, the health service corporation or domestic stock insurer, and the health maintenance organizations, shall terminate upon the election of the six new members added pursuant to P.L. , c. (pending before the Legislature as this bill), notwithstanding the provisions of this section to the contrary.

In addition to the [10] 12 elected public members, the board shall include [six] five public members appointed by the Governor with the advice and consent of the Senate who shall include:

[Two] One insurance [producers] producer licensed to sell health insurance pursuant to P.L.1987, c.293 (C.17:22A-1 et seq.);

One representative of organized labor;

One physician licensed to practice medicine and surgery in this State; and

Two persons who represent the general public and are not employees of a health benefits plan provider.

The public members shall be appointed for a term of three years, except that of the members first appointed, two shall be appointed for a term of one year, two for a term of two years and two for a term of three years.

A vacancy in the membership of the board shall be filled for an unexpired term in the manner provided for the original election or appointment, as appropriate.

The reduction in the number of appointed public members who are insurance producers, from two members to one member, pursuant to P.L. , c. (pending before the Legislature as this bill) shall take effect on the expiration of an insurance producer’s current term, next following the effective date of that act, notwithstanding the provisions of this section to the contrary.

b. If the initial board is not elected at the organizational meeting, the commissioner shall appoint the public members within 15 days of the organizational meeting, in accordance with the provisions of paragraphs (1) through (7) of subsection a. of this section.

c. (Deleted by amendment, P.L.1995, c.298).

d. All meetings of the board shall be subject to the requirements of the "Open Public Meetings Act," P.L.1975, c.231 (C.10:4-6 et seq.).

e. At least two copies of the minutes of every meeting of the board shall be delivered forthwith to the commissioner.

(c.f. P.L.2001, c.131, s.22)

16. (New section) This act shall take effect immediately, and section 14 shall apply to taxable years beginning after its enactment.

STATEMENT

This bill, which is designated as the “New Jersey Health Insurance Connector Act,” establishes the New Jersey Health Insurance Connector as an independent public entity, in but not of the Department of Banking and Insurance (DOBI), with certain authority to facilitate the availability and choice of health benefits plans offered to employees of small employers that employ between two and 50 employees.

The bill provides specifically as follows:

· The connector is authorized to develop certain systems and procedures to:

(1) select and certify health benefits plans to be offered through the connector;

(2) recruit and enroll small employers to facilitate the offering of health benefits plans to their eligible employees, as defined in the bill;

(3) allow participating employers to collect premium payments from eligible employees, and remit such payments to the carrier, as well as permit eligible employee to remit premium payments directly to the carrier through a payroll deduction process.

(4) operate a service center to manage connector enrollment and provide certain information to small employers, carriers, and eligible employees, including information regarding establishing and maintaining cafeteria plans for their employees pursuant to section 125 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.125) and health reimbursement arrangements pursuant to section 105 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.105); and

(5) publicize the connector’s services, eligibility requirements, and enrollment procedures.

· The connector is further authorized to maintain an office in the State and perform certain other administrative functions, and to apply a surcharge to all health benefits plans offered by the connector on behalf of the insurance carrier, which is to be used only to pay for the administrative and operational expenses of the connector.

· To implement the functions of the connector, the connector shall be governed by the board of directors of the New Jersey Small Employer Health Benefits Program, established pursuant to section 13 of P.L.1992. c.162 (C.17B:27A-29). The bill revises the membership of the board of directors so that the board will consist of: the Commissioner of Banking and Insurance and the Commissioner of Health and Senior Services as ex officio members; 12 elected public members; and five public members appointed by the Governor with the advice and consent of the Senate; with certain categories of member representation as detailed in the bill. The bill provides that the executive director of the New Jersey Small Employer Health Benefits Program shall act as the executive director of the connector.

· The connector is directed to begin offering health benefits plans as of January 1, 2011. The connector is to offer to eligible employees only health benefits plans that are: certified by the connector as providing good value and high quality coverage to eligible employees; authorized by the Commissioner of Banking and Insurance; and underwritten by a carrier.

· Upon the employer’s request, the connector is to provide assistance to an employer, in the establishment and ongoing administration of a cafeteria plan for its employees pursuant to section 125 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.125) or a health reimbursement arrangement for its employees pursuant to section 105 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.105), in accordance with the plan developed by the board pursuant to the bill and as prescribed by regulation of the board, including, but not limited to, the provision of: ongoing training for an employer that administers its own cafeteria plan or health reimbursement arrangement; and claims and account administration by the connector for an employer that arranges with the connector to provide those services.

· To participate in the connector to offer health benefits plans to its eligible employees, a small employer must enter into a written agreement with the connector. The agreement must contain certain stipulations as set forth in the bill, including a requirement that the small employer agree to participate in a payroll deduction program to facilitate the payment of health benefit plan premium payments by eligible employees so that they can obtain cafeteria plan benefits pursuant to section 125 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.125).

· The bill provides immunity from liability, in certain circumstances, for board members, officers, and employees of the connector, except in instances of willful dishonesty or intentional violation of the law, and limits the liability of the connector in certain respects.

· The connector must keep an accurate account of all its activities and its receipts and expenditures and annually make a report to its board, the Governor, the Legislature, and the State Auditor, which is to be in a form prescribed by the board, with the written approval of the State Auditor.

· The connector is authorized, in consultation with the Commissioner of Banking and Insurance and the Commissioner of Health and Senior Services, to adopt rules and regulations to effectuate the purposes of the bill.

· Finally, the value of non-cash employee benefit elections under employer-provided cafeteria benefit plans, authorized under section 125 of the federal Internal Revenue Code of 1986, is to be excluded from New Jersey taxable income.