This Fiscal Note is not an official copy and should not be quoted or cited.
Fiscal Note - SB 0977 - Imposes Conditions On Restructuring of Nonprofit Hlth. Plans
L.R. NO. 3542-01
BILL NO. SB 977
SUBJECT: Department of Insurance, Health, Charitable Organizations
TYPE: Original
DATE: March 22, 1996
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
General Revenue (Unknown) (Unknown) (Unknown)
Total Estimated
Net Effect on All
State Funds (UNKNOWN) (UNKNOWN) (UNKNOWN)
*not expected to exceed ($100,000) per fiscal year
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 passage of this
legislation would have no fiscal impact on their agency. However, the
passage of more than one similar proposal could require the INS to request
increased appropriations to cover cumulative administrative cost.
Officials from the Department of Revenue (DOR) reported that this proposal
would provide for the annual analysis of the financial and asset structure
of every nonprofit organization in the state. This would likely require a
sizeable staff with broad powers of investigation and regulation. DOR would
have to make subjective estimates of the cost of charitable services
performed and lost taxation. A new system, including the creation of forms
and schedules, would have to be created for the filing and registration of
nonprofit organizations. The Information Systems Division would develop a
new system for this proposal utilizing existing staff but request one
Programmer II for ongoing system maintenance and related state data center
cost. The Division of Taxation reflects unknown costs due to the inability to
determine the number of organizations that would be subject to this
legislation and whether existing staff could handle the increased workload.
Additional staff and/or overtime may be needed to implement this proposal.
Oversight assumes that this proposal can be implemented with existing
resources by the Division of Information Systems but unknown costs will be
incurred by the Division of Taxation. Oversight assumes costs would not
exceed $100,000 per fiscal year.
Officials from the Office of the Attorney General (AGO) reported that costs
associated with this proposal can be absorbed within the AGO's existing
budget.
FISCAL IMPACT-State Government FY 1997 FY 1998 FY 1999
(10 Months)
GENERAL REVENUE FUND
Cost - Department of Revenue-
Division of Taxation
Personal Services, Fringe Benefits, and
Expense and Equipment (Unknown) (Unknown) (Unknown)
Estimated Net Effect on General
Revenue Fund* (Unknown) (Unknown) (Unknown)
*not expected to exceed ($100,000) per fiscal year
FISCAL IMPACT - Local Government FY 1997 FY 1998 FY 1999
(10 Mo.)
$0 $0 $0
DESCRIPTION
Any nonprofit health care service plan transferring a substantial amount of
its assets to a for-profit business shall obtain approval from the Director
of the Department of Insurance before the restructuring. "Restructuring"
shall not include transactions in the ordinary course of business, certain
investments in subsidiaries or joint ventures, and certain sales or purchases
of plan assets. APPROVAL PROCEDURE - Before gaining approval, the health plan
must submit a report to the Director summarizing its charitable activities,
its procedures for avoiding conflicts, and its future charitable activities.
Every applicant for restructuring shall submit for approval a public benefit
program identifying activities to meet its nonprofit public benefit
obligations. Material modifications are also subject to approval. The
Director may seek public review and comment before a final determination.
CONVERSION - Any health care plan transforming from nonprofit to for-profit
status shall apply for approval from the Director of the Department of
Insurance. The conversion may only be approved if the fair market value of
the health plan is set aside for charitable purposes. The set-aside shall be
transferred to tax-exempt charitable organizations dedicated to health care
services. 80% shall be spent for the uninsured and underinsured. Each
organization receiving a set-aside shall be independent of influence or
control by the health care plan. They shall provide the Director of
Insurance and the Attorney General with an annual report which includes a
description of charitable activities. FEES - Applicants for restructuring or
conversion shall pay a filing fee equal to the cost of processing the
application, including overhead costs. Contract costs for experts and
consultants shall be paid by the applicants promptly. PUBLIC NOTICE, RECORDS
- The Director shall publish notice of an application to restructure or
convert in newspapers of general circulation in the plan's service area. A
public hearing shall be held. Applications, reports and plans shall be
public records. MUTUAL BENEFIT PLANS - These sections shall apply to
nonprofit mutual benefit plans to the extent those plans hold assets subject
to charitable trust obligations, as determined by the Director of Insurance.
ANNUAL REPORT - The Director of Revenue shall prepare an annual report
describing nonprofit organizations in Missouri. The report shall compare the
cost to the public of charitable services performed by nonprofit
organizations compared to lost taxation.
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
Department of Revenue
Office of the Attorney General