This Fiscal Note is not an official copy and should not be quoted or cited.
Fiscal Note - SB 0851 - Allows HMO's & HSO's to Restructure, With Assessments
L.R. NO. 3052-05
BILL NO. SCS SB 851
SUBJECT: Health, Insurance-Medical
TYPE: Original
DATE: March 8, 1996
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
None
Total Estimated
Net Effect on All
State Funds $0 $0 $0
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
None
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
Local Government $0 $0 $0
FISCAL ANALYSIS
ASSUMPTION
Officials from the Department of Insurance (INS) stated that this proposal
would reduce revenue to the state by an undetermined amount. Under current
Missouri law, a public benefit not-for-profit health service corporation,
health maintenance organization, or pre-paid dental plan is required to
compensate the public upon conversion to a for-profit entity under the theory
that the public is the owner of a public benefit not-for-profit. The amount
of the public compensation is potentially the entire fair market value of the
converting entity. In this case, revenue would be reduced to the state by
the difference between the fair market value of the entity and HSC's net
worth less enumerated credits. Assuming the fair market value of the
converting entity is not the appropriate amount of compensation to the public
upon conversion, the public should be compensated for at least the present
value of the total premium taxes the entity would have paid since its
inception.
Oversight assumes that it would be difficult to determine if and when
entities covered by this proposal would choose to convert from not-for-profit
to for-profit status. Therefore, Oversight assumes this proposal would have
no fiscal impact.
FISCAL IMPACT - State Government FY 1997 FY 1998 FY 1999
(10 Mo.)
$0 $0 $0
FISCAL IMPACT - Local Government FY 1997 FY 1998 FY 1999
(10 Mo.)
$0 $0 $0
DESCRIPTION
Health Maintenance Organizations and Health Service Organizations regulated
under Chapter 354, RSMo, may restructure as a nonprofit corporation owning a
restructured entity or convert to a for-profit corporation or limited
liability company. The nonprofit status of a restructuring corporation shall
not be affected by the restructuring or by any dividends received from the
for-profit subsidiary. For-profit subsidiaries of restructured entities and
for-profit corporations which have fully converted may issue stock and raise
capital in other ways. The board of directors of the for-profit subsidiaries
must be independent from the board of the parent corporation with the
exception of one director who may serve on both boards. Restructuring
corporations shall be assessed an amount equal to the entity's net worth at
the end of the fiscal year prior to the year in which the restructuring
occurs. This assessment shall be paid without interest in twenty equal
annual installments. The amount assessed shall be reduced by the net worth:
(a) attributable to for-profit subsidiaries; (b) attributable to non-Missouri
business (c) remaining in the entity; (d) as of December 31, 1986. The
assessment will be transferred to a charitable foundation and spent in a
manner agreed upon between the Department of Insurance and the entity with
the advice of a newly created advisory committee. This committee's members
consist of two senators and two representatives of different political
parties.
This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements or rental
space.
SOURCES OF INFORMATION
Department of Insurance