An Act to create the medical reinsurance program and to make an appropriation therefor.

Be it enacted by the Legislature of the State of South Dakota:

Section 1. That a NEW SECTION be added:

58-48-1. Medical reinsurance program--Establishment.

The medical reinsurance program is hereby established in the Division of Insurance.

Section 2. That a NEW SECTION be added:

58-48-2. Definitions.

Terms used in this chapter mean:

(1) "Attachment point," the threshold dollar amount for cost of claims incurred by a reinsurance eligible health benefit plan for an insured individual's covered benefits in a benefit year after which additional cost of claims are eligible for reinsurance payments;

(2) "Annual assessment," the assessment percentage multiplied by the assessment base;

(3) "Assessment base," the gross amount of premium earned by an insurer during a benefit year that was derived from a health benefit plan delivered or issued for delivery in the state;

(4) "Assessment percentage," the percentage established by the department that is used for the purpose of computing the annual assessment;

(5) "Benefit year," the calendar year for which a health insurer provides coverage through an individual health insurance policy;

(6) "Coinsurance rate," the rate established by the department that is used for the purpose of computing the reinsurance payment;

(7) "Department," the Department of Labor and Regulation;

(8) "Grandfathered health plan," an individual health plan governed by the provisions of 42 U.S.C. § 18011;

(9) "Health benefit plan," as defined in § 58-17-66;

(10) "Reinsurance cap," the maximum dollar amount of each claim incurred for an insured individual's covered benefits in a benefit year that is established by the department after which additional cost of claims are not eligible for a reinsurance payment;

(11) "Reinsurance eligible health benefit plan," a health benefit plan providing individual coverage that:

(a) Is delivered or issued for delivery in this state; and

(b) Is not a grandfathered health plan;

(12) "Reinsurance eligible individual," an individual who is insured by a reinsurance eligible health benefit plan before January 2, 2022;

(13) "Reinsurance payment," an amount paid by the medical reinsurance program to a health insurer under a reinsurance eligible health benefit plan;

(14) "Secretary," the secretary of the department.

Section 3. That a NEW SECTION be added:

58-48-3. Actuarial review--Medical reinsurance program--Funding for actuarial review.

The secretary shall, before January 1, 2021, complete an actuarial review of the medical reinsurance program established under this chapter to confirm that the program satisfies the following requirements:

(1) Provides access to quality health care that is at least as comprehensive and affordable as would be provided in the absence of the program;

(2) Provides coverage to a comparable number of state residents as would be provided coverage in the absence of the program;

(3) Does not increase the federal deficit; and

(4) Is projected to generate revenue that is no less than the projected expenditure of the program.

The secretary shall receive up to three hundred thousand dollars of the health care trust funds distributed to the general fund pursuant to § 4-5-29.1 as an interest-free loan for the purpose of completing the actuarial review required under this section. The secretary shall approve vouchers and the state auditor shall draw warrants to pay expenditures authorized by this Act. The secretary shall repay the loan before January 1, 2023 through annual assessments collected under § 58-48-6.

Section 4. That a NEW SECTION be added:

58-48-4. State innovation waiver--Federal pass-through funding--Application.

If the medical reinsurance program satisfies the requirements of § 58-48-3, the secretary shall, before July 1, 2021, apply to the United States secretary of health and human services under 42 U.S.C. § 18052, for a state innovation waiver and federal pass through funding to implement the medical reinsurance program for benefit years beginning January 1, 2022.

Section 5. That a NEW SECTION be added:

58-48-5. Reinsurance payment--Eligibility--Amount.

The secretary shall make a reinsurance payment to an insurer of a reinsurance eligible health benefit plan if the insurer's cost of claims for a reinsurance eligible individual’s covered benefits in a calendar year exceeds the attachment point. The amount of the payment is the product of the coinsurance rate and the insurer's cost of claims for the reinsurance eligible individual that exceeds the attachment point. A reinsurance payment may not exceed the reinsurance cap.

Section 6. That a NEW SECTION be added:

58-48-6. Annual assessment--Requirements.

For benefit years beginning January 1, 2022, the annual assessment is imposed on each insurer authorized to deliver or issue for delivery a health benefit plan in the state. Each insurer shall compute, report, and pay the annual assessment in the time and manner established by the department.

Section 7. That a NEW SECTION be added:

58-48-7. Promulgation of rules--Restrictions.

The department shall promulgate rules, pursuant to chapter 1-26, to establish:

(1) The attachment point, assessment percentage, coinsurance rate, and reinsurance cap;

(2) The application procedures, requirements, and timing for requesting and processing a reinsurance payment;

(3) Time and manner for reporting and paying the assessment;

(4) Penalties for the failure to timely report or timely pay the assessment; and

(5) Reporting requirements for a reinsurer of a reinsurance eligible health benefit plan.

The department may not change the attachment point, reinsurance cap, or coinsurance rate for a benefit year after the benefit year begins.

Section 8. That § 4-5-29.1 be AMENDED:

4-5-29.1. Health care trust fund--Investment officer to calculate amount eligible for distribution--Transfer to state general fund.

Pursuant to S.D. Const., Art. XII, § 5, the state investment officer shall determine the market value of the health care trust fund as of December 31, 2003, and each calendar year thereafter less the investment expenses transferred pursuant to § 4-5-30. The state investment officer shall calculate an amount equal to four percent of that market value, without invading principal, as eligible for distribution, except for fiscal year 2021 the state investment officer shall calculate an amount equal to the sum of four percent of the market value plus the maximum amount authorized to be loaned under chapter 58-48.

For the purpose of this section, the term, principal, means the sum of all contributions to the fund. Beginning with the distribution in fiscal year 2008, the market value shall be determined by adding the market value of the trust fund at the end of the sixteen most recent calendar quarters as of December thirty-first, and dividing the sum by sixteen. Upon notice of that amount by the state investment officer, the state treasurer shall transfer the amount from the health care trust fund to the state general fund as soon as practicable after July first of the next fiscal year.