SB1347 - 551R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 38-651.05, Arizona Revised Statutes, is amended to read:

START_STATUTE38-651.05. Flexible or cafeteria employee benefit plan; fund

A. The department of administration is authorized to establish a flexible or cafeteria employee benefit plan which that may provide for deductions or salary reductions for group life insurance, disability insurance, group accidental death and dismemberment insurance, long‑term care coverage, health and accident insurance or other authorized employee benefits, which meet the requirements of the United States internal revenue code of 1986 and regulations thereunder and to adopt rules for its administration.

B. The department of administration shall determine the frequency of payroll deductions for purposes of this section for those state officers or employees under payroll systems under the direction of the department of administration. For all other state officers or employees under other state payroll systems, the appropriate state agency, board, commission or institution shall determine the frequency of payroll deductions for purposes of this section.

C. A The flexible or cafeteria employee benefit plan fund is established. Monies received by the department of administration from employee contributions to the flexible or cafeteria employee benefit plan established pursuant to subsection A of this section shall be deposited in the fund or deposited directly with a third party under contract with the department of administration to administer the plan. Investment earnings shall be deposited to the credit of the fund.

D. The department of administration shall use any monies remaining in the fund or on deposit with a third party under contract to administer the plan at the end of each fiscal year in the following priority:

1. To cover the costs to this state of administering the flexible or cafeteria employee benefit plan under subsection A of this section.

2. After payment of the administrative costs, the remainder shall be used to reduce in a uniform manner the employee and employer contributions to benefits included under a flexible or cafeteria employee benefit plan.

E. Notwithstanding the provisions of subsection A, the flexible or cafeteria employee benefit plan shall not provide cash as an employee benefit. Monies used in accordance with subsection D to establish, fund and administer dependent care accounts or similar accounts, shall not be considered providing cash as an employee benefit. END_STATUTE

Sec. 2. Repeal

Section 38-651.06, Arizona Revised Statutes, is repealed.

Sec. 3. Section 38-652, Arizona Revised Statutes, is amended to read:

START_STATUTE38-652. Experience rating dividends and unused claim reserves; deposit; trust account

A. Monies that are to be paid by any insurance carrier, other than a carrier that is being discontinued, as experience rating dividends or unused claim reserves resulting from health and accident coverage provided pursuant to this article shall be paid to the department of administration. All such monies received by the department from such carriers shall be deposited, pursuant to sections 35‑146 and 35‑147, by the department within five days after receipt, in a trust account to be administered by the department of administration. All such monies that are to be paid by an insurance carrier that will no longer continue as a carrier providing coverage pursuant to this article shall be paid to the department of administration. The department shall deposit, pursuant to sections 35‑146 and 35‑147, all such monies received from such discontinued carriers in the state general fund.

C. Monies deposited in the trust account, together with all monies derived from investment of such funds monies, shall be used by the department of administration as provided in this subsection for the benefit of participating officers and employees who select a health and accident insurance benefit plan pursuant to this article which that produces cash experience dividends and requires payroll deductions. Such monies shall be used as determined by the department of administration only for either or both of the following purposes:

1. To apply against premiums to be paid.

2. To purchase additional health and accident benefits for officers and employees and for the dependents of such officers and employees participating in the plan.

D. The provisions of Subsection C of this section shall not be construed to does not require that all monies in the trust fund shall be used within any one or more fiscal years. Any person who is no longer an employee of the state or an employee who is no longer a participant in a plan of the insurance carrier from which such monies were derived shall forfeit his the person's right to any such premium reduction or plan improvement.

E. Monies deposited in or credited to the trust account shall be exempt from the provisions of section 35‑190 relating to the reversion of monies to the state general fund.

F. No monies may be withdrawn from the trust account except upon on the warrant of the department of administration.

G. The department of administration shall annually report the financial status of the trust account to officers and employees who have paid premiums under one of the insurance plans from which monies were received for deposit in the trust account since the inception of the health and accident coverage program or since submission of the last such report, whichever is later. END_STATUTE

Sec. 4. Section 38-654, Arizona Revised Statutes, is amended to read:

START_STATUTE38-654. Special employee health insurance trust fund; purpose; investment of monies; use of monies; exemption from lapsing; annual report

A. There is established a The special employee health insurance trust fund for the purpose of administering is established to administer the state employee health insurance benefit plans. The fund shall consist of legislative appropriations, monies collected from the employer and employees for the health insurance benefit plans and investment earnings on monies collected from employees. The fund shall be administered by the director of the department of administration. Monies in the fund that are determined by the legislature to be for administrative expenses of the department of administration, including monies authorized by subsection C, paragraph 4 of this section, are subject to legislative appropriation.

B. On notice from the department of administration, the state treasurer shall invest and divest monies in the fund as provided by section 35‑313, and monies earned from investment shall be credited to the fund. There shall be a separate accounting of monies contributed by the employer, monies collected from state employees and investment earnings on monies collected from employees. Monies collected from state employees for health insurance benefit plans shall be expended before expenditure of monies contributed by the employer.

C. Monies in the fund shall be used by the department of administration for the following purposes for the benefit of officers and employees who participate in a health insurance benefit plan pursuant to this article:

1. To administer a health insurance benefit program for state officers and employees.

2. To pay health insurance premiums, claims costs and related administrative expenses.

3. To apply against future premiums, claims costs and related administrative expenses.

4. To apply the equivalent of not more than one dollar fifty cents $1.50 for each employee for each month to administer applicable federal and state laws relating to health insurance benefit programs and to design, implement and administer improvements to the employee health insurance or benefit program.

D. Subsection C of this section shall not be construed to does not require that all monies in the special employee health insurance trust fund shall be used within any one or more fiscal years. Any person who is no longer a state employee or an employee who is no longer a participant in a health insurance plan under contract with the department of administration shall have no claim on monies in the fund.

E. Monies deposited in or credited to the fund are exempt from the provisions of section 35‑190 relating to lapsing of appropriations.

F. Claims for services rendered before July 1, 1989 shall not be paid from the special employee health insurance trust fund.

G. F. The department of administration shall submit an annual report on the financial status of the special employee insurance trust fund to the governor, the president of the senate, the speaker of the house of representatives, the chairpersons of the house and senate appropriations committees and the joint legislative budget committee staff by July 1. The department shall make the report available to officers and employees who have paid premiums under one of the insurance plans from which monies were received for deposit in the trust account since the inception of the health and accident coverage program or since the department submitted the last report, whichever is later. The report shall include:

1. The actuarial assumptions and a description of the methodology used to set premiums and reserve balance targets for the health insurance benefit program for the current plan year.

2. An analysis of the actuarial soundness of the health insurance benefit program for the previous plan year.

3. An analysis of the actuarial soundness of the health insurance benefit program for the current plan year, based on both year-to-date experience and total expected experience.

4. A preliminary estimate of the premiums and reserve balance targets for the next plan year, including the actuarial assumptions and a description of the methodology used.

5. The required and actual performance standards for the prior plan year for the contracted health plans, including indemnity health insurance, hospital and medical service plans, dental plans and health maintenance organizations.

H. G. The department shall submit a report to the joint legislative budget committee detailing any changes to the type of benefits offered under the plan and associated costs at least forty‑five days before making the change. The report shall include:

1. An estimate of the cost or saving associated with the change.

2. An explanation of why the change was implemented before the next plan year. END_STATUTE

Sec. 5. Section 38-658, Arizona Revised Statutes, is amended to read:

START_STATUTE38-658. Report to joint legislative budget committee

A. At least ten days before the department of administration enters into or renews contracts for medical and dental insurance coverage, the director of the department of administration shall meet with and review for the joint legislative budget committee in executive session the planned contribution strategy for each health plan, including indemnity health insurance, hospital and medical service plans, dental plans and health maintenance organizations. Information provided in executive session shall remain confidential until the contract award is made in compliance with title 41, chapter 23.

B. On or before October 1 of each year, the director of the department of administration shall report to the joint legislative budget committee on the performance standards for health plans, including indemnity health insurance, hospital and medical service plans, dental plans and health maintenance organizations. END_STATUTE