HEALTH INSURANCE EXCHANGE S.B. 633-638:
SUMMARY OF BILL
ON THIRD READING
Senate Bill 633 (Substitute S-3 as reported by the Committee of the Whole)
Senate Bills 634 and 638 (as reported by the Committee of the Whole)
Senate Bills 635 and 636 (Substitute S-1 as reported by the Committee of the Whole)
Senate Bill 637 (Substitute S-2 as reported by the Committee of the Whole)
Sponsor: Senator Kevin Hertel (S.B. 633 & 636)
Senator Sylvia Santana (S.B. 634)
Senator Erika Geiss (S.B. 635)
Senator Darrin Camilleri (S.B. 637)
Senator Veronica Klinefelt (S.B. 638)
Committee: Health Policy
CONTENT
Senate Bill 633 (S-3) would enact the "Michigan Health Insurance Exchange Act" to do the
following:
-- Create a 12-member Board to govern the Exchange.
-- Require the initial Exchange Board to organize a nonprofit corporation within 60 days of
the Board's first meeting to provide an individual marketplace for qualified health plans in
the State.
-- Allow the Board to create committees for recommendations concerning the operation and
implementation of the Exchange.
-- Prescribe the powers of the Exchange.
-- Require the Exchange to make qualified health plans available through its website and
hotline beginning on or before January 1, 2026.
-- Require the Director of the Department of Insurance and Financial Services (DIFS) to
certify a health benefit plan if the plan met the requirements of Federal law, State law,
and the provisions of the Act.
-- Require the Exchange to implement an enhanced direct enrollment by the first open
enrollment period in which the exchange's state-based platform is operational.
-- Require the Exchange to allow health insurance carriers or web brokers to provide for
automatic re-enrollment in a qualified health plan.
-- Prohibit the Exchange or a carrier offering health benefit plans through the marketplace
from charging an individual a fee or penalty for termination of coverage.
-- Require the Board to establish an audit committee to contract an external auditor to
provide at least one audit of the financial statements of the Exchange in each fiscal year,
among other things.
-- Require the Exchange to charge assessment or user fees to health carriers to cover its
operational costs.
-- Require the Exchange to keep an accurate accounting of all activities, receipts, and
expenditures and annually submit a report concerning those accountings to the Governor,
Director, and the Senate and the House of Representatives.
-- Create the Exchange Fund within the State Treasury.
-- Specify that provisions of the Act that were applicable to qualified health plans also would
apply to dental plans unless the dental plan were specifically modified otherwise.
Senate Bill 634 would amend Section 1261 of the Insurance Code to modify definitions in
accordance with provisions of Senate Bill 633 (S-3).
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Senate Bill 635 (S-1) would add Section 3406mm to the Insurance Code to require the DIFS
Director to contract with the Exchange to certify qualified health and dental plans.
Senate Bill 636 (S-1) would amend Section 2212a of the Insurance Code to specify that a
health insurer would have to provide to insureds upon enrollment in clear, complete, and
accurate manner, as directed by DIFS, any information required by the Exchange created
under Senate Bill 633 (S-3).
Senate Bill 637 (S-2) would add Section 3406nn to the Insurance Code to require DIFS to
apply for a State Insurance Waiver to implement a State-Based Reinsurance Program and
report to the Senate and House appropriations committees on money necessary to fund the
Program.
Senate Bill 638 would repeal Section 3406w, which generally allows an insurer that delivers
or renews a health insurance policy that provides coverage for prescription drugs to provide
coverage for emergency and early refills that meet specified requirements until March 31,
2021.
Every bill except Senate Bill 638 is tie-barred to Senate Bill 633. Senate Bill 633 is tie-barred
to Senate Bill 637.
MCL 500.1261 et al. (S.B. 634)
Proposed MCL 500.3406mm (S.B. 635)
MCL 500.2212a (S.B. 636)
Proposed MCL 500.3406nn (S.B. 637)
MCL 500.3406o (S.B. 638)
BRIEF RATIONALE
The Affordable Care Act introduced health insurance marketplaces, also known as exchanges,
that are designed to allow individuals and families to shop for private health insurance plans
or dental insurance coverage. According to testimony, switching to the state-based Exchange
from the current Federal exchange that the State participates in would improve Michigan
residents' access to healthcare and generate money for the State to reinvest into its own
Exchange.
Legislative Analyst: Alex Krabill
FISCAL IMPACT
Senate Bills 633 (S-3) & 637 (S-2)
The bills would have an indeterminate but significant fiscal impact on State government and
an indeterminate fiscal impact on local units of government.
Senate Bill 633 (S-3) would require DIFS to implement a reinsurance program upon approval
of a State Innovation Waiver. The impact to the State would include start-up costs and
ongoing operational costs. In addition to DIFS, it is likely that other State departments would
incur costs due to responsibilities associated with launching and operating the Exchange
system. These responsibilities could include legal assistance and representation, information
technology, and administrative assistance.
Estimates of annual costs of a reinsurance program in Michigan included in a 2022 actuarial
study ranged from $71.0 million to $232.3 million, depending on the exact parameters of the
program and the number of claims submitted. If the program successfully resulted in savings
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compared to the Federal exchange, Michigan would receive a significant amount of Federal
pass-through dollars each year. Based on the experience of other states in operating
reinsurance programs, it is likely that these Federal funds would be sufficient to cover a
substantial portion of the costs of running the program. The 2022 study suggested that
approximately 65% to 70% of reinsurance costs would be paid through Federal pass-through
funds. The State-based portion of any reinsurance program likely would be funded in part by
assessments on the group health insurance market, user fees, and/or by a specific tax on
providers or businesses. Based on the figures above, the State-based portion of the program
likely would range from about $30.0 to $40.0 million over the first few years. This figure is
similar to current costs for the State of Pennsylvania's exchange.
The exact costs of running a program would be significant but highly dependent on the details
of the program. Start-up costs could potentially be amortized over a period of several fiscal
years. Additionally, due to the non-profit structure and independent authority granted under
the bill, it is possible that some funding would not be reflected in annual State appropriations.
Under Senate Bill 633 (S-3), members of the Board would not receive a salary, benefits, or
other compensation but could be reimbursed for actual and necessary expenses. Current
appropriations to DIFS likely would be sufficient to cover certification duties.
A one-time appropriation of $250,000 General Fund/General Purpose was included in the Fiscal
Year 2020-21 budget to contract with a third-party for the actuarial cited above. The analyses
included in the study would form part of the application for a waiver and likely would not need
to be repeated. Other costs of completing an application likely would be sufficiently funded by
existing appropriations; however, it is possible that data collection for the application and start-
up period could require a contract with a third-party entity.
The Board would be required to contract with an external audit each fiscal year. While an exact
estimate is unavailable at this time, the 2022 actuarial study estimated the cost of an annual
audit of claim submissions and assessments by an external vendor at $10,000 per audit. The
cost of auditing the financial statements of the exchange could be higher in initial years.
Senate Bills 634 & 636 (S-1)
The bills would have no fiscal impact on State or local government.
Senate Bill 635 (S-1)
The bill likely would not have a significant fiscal impact on State or local units of government.
The costs of contracting with the exchange for certification likely would be covered by existing
appropriations to DIFS. Additional costs likely would be paid from the overall appropriations
made for the establishment of the State exchange.
Senate Bill 638
The bill would have no fiscal impact on the Department of Health and Human Services. The
expiration of the temporary requirement for health insurers to allow early and emergency refills
of prescriptions under the Insurance Code expired on March 31, 2021. Any indeterminate cost
increase resulting from the expiration of allowing early and emergency refills that lasted longer
than the original scripts (60 to 90 days) would have been incurred at that time.
Date Completed: 6-26-24 Fiscal Analyst: John P. Maxwell; Elizabeth Raczkowski
SAS\Floors2324\sb633a
This analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official
statement of legislative intent.
Page 3 of 3 Bill Analysis @ www.senate.michigan.gov/sfa sb633-638/2324


Statutes affected:
Substitute (S-2): 500.100, 500.8302
Senate Introduced Bill: 500.100, 500.8302
As Passed by the Senate: 500.100, 500.8302