HEALTH INSURANCE EXCHANGE S.B. 633-638:
ANALYSIS AS PASSED BY THE SENATE
Senate Bill 633 (Substitute S-7 as passed by the Senate)
Senate Bills 634 and 638 (as passed by the Senate)
Senate Bills 635 and 636 (Substitute S-1 as passed by the Senate)
Senate Bill 637 (Substitute S-2 as passed by the Senate)
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
Date Completed: 9-4-24
RATIONALE
The Federal Affordable Care Act (ACA) 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. The ACA established a federally-facilitated
exchange (FFE) that Michigan and 28 other states use but allows states to establish their own
exchanges, known as a state-based insurance exchange (SBE).1 According to testimony
before the Senate Committee on Health Policy, switching to an SBE from the FFE would offer
Michigan residents the same healthcare plan options while improving the exchange’s outreach
to and function for Michigan residents. Accordingly, it has been suggested that the State
establish an SBE.
CONTENT
Senate Bill 633 (S-7) 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 was
operational.
-- Require the Exchange to allow health insurance carriers or web brokers to
provide for automatic re-enrollment in a qualified health plan.
1
“State-based Exchanges”, cms.gov. Retrieved 8-27-24.
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-- 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, DIFS 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-7).
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, any information required by the Exchange created
under Senate Bill 633 (S-7), as directed by DIFS.
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.
Senate Bill 633 (S-7)
Exchange Board
The Michigan Health Insurance Exchange Act would create a 12-member Board to organize
and govern the Exchange. The Board would be the incorporator of the Exchange for the
purposes of the Nonprofit Corporation Act. The Director of DIFS (Director) and the Director of
the DHHS would serve as voting ex officio members of the Board. The Governor would appoint
the remaining 10 members, subject to advice and consent of the Senate, as follows:
-- One member from among the insurers that offered health insurance policies through the
Exchange that were a hospital plan corporation, a professional health service plan
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 corporation, or a parent affiliate, subsidiary, or other associated entity or successor of a
hospital plan corporation or a professional health services plan.
-- One member from among the carriers that offered health insurance policy through the
Exchange that were not a hospital plan corporation, a professional health service plan
corporation, or a parent, affiliate, subsidiary, or other associated entity or successor of a
hospital plan corporation, or a professional health services plan.
-- One member with experience in health care public education and consumer assistance
activities.
-- Two members who were consumer representatives.
-- One member from a list of three candidates provided by the Senate Majority Leader who
had relevant experience in health benefits administration, health care finance, health plan
purchasing, health care delivery system administration, public health, or health policy
issues related to the small group and individual markets and the uninsured.
-- One member from a list of three candidates provided by the Senate Minority Leader who
had relevant experience in health benefits administration, health care finance, health plan
purchasing, health care delivery system administration, public health, or health policy
issues related to the small group and individual markets and the uninsured.
-- One member appointed from a list of three candidates provided by the Speaker of the
House of Representatives who had relevant experience in health benefits administration,
health care finance, health plan purchasing, health care delivery system administration,
public health, or health policy issues related to the small group and individual markets
and the uninsured.
-- One member appointed from a list of three candidates provided by the Minority Leader
of the House of Representatives, who had relevant experience in health benefits
administration, health care finance, health plan purchasing, health care delivery system
administration, public health, or health policy issues related to the small group and
individual markets and the uninsured.
-- One member, subject to advice and consent of the Senate, representing a nonprofit
mutual disability insurer formed under Chapter 58 (General Mutual Insurers (Domestic))
of the Insurance Code.
"Health insurance policy" would mean an expense-incurred hospital, medical, or surgical
policy, certificate, or contract. The term would not include a policy that provided coverage
only for excepted benefits as described in 42 USC 300gg-91. Generally, "Excepted Benefits
under 42 USC 300gg-91 specifies benefits subject to certain requirements, not subject to
requirements if offered separately, or benefits not subject to requirements if offered as
independent nonacoordinate benefits.
(Generally, the Nonprofit Corporation Act governs the formation, operation, and dissolution
of nonprofit corporations. The Act specifies the requirements for incorporating a nonprofit,
including specifying the corporate structure, purpose and activities, duties and
responsibilities, membership, and record keeping of a nonprofit in the State.)
The Governor would have to consider the cultural, ethnic, economic, and geographical
diversity of the State so that the Board's composition reflected the communities of the State.
Except as otherwise provided, an appointed Board member would serve for a term of four
years or until a successor was appointed, whichever were later. Of the initial appointed
members, five members would be appointed for three-year terms and two members would
be appointed for four-year terms. The length of the initial term of each initial member would
be determined by the Governor at the time of appointment.
Exchange Board Conflict of Interest
A majority of the voting members of the Board would be prohibited from having a conflict of
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interest as set forth in Section 1321 of the Federal Patient Protection and Affordable Care Act
(ACA) and the regulations promulgated under Section 1321. Excluding the Director, the
Director of the DHHS, and the nonprofit mutual disability insurer, voting members would be
prohibited from having a conflict of interest.
(Generally, Section 1321 provides authority for the establishment of standards and
regulations to implement statutory standards for Exchanges, qualified health plans and other
identified standards.)
"Conflict of Interest" would mean that by taking any action or making any decision or
recommendation on a matter within the authority of the board, or an immediate family
member, or entity with which the member, or immediate family member, would receive a
pecuniary benefit or detriment unless the pecuniary benefit or detriment would apply to the
same degree to a class consisting of all persons within the particular class in the State.
"Immediate family" would mean any relation by blood or affinity to the third degree.
Each member of the Board would have to meet the requirements of the proposed Act, the
ACA, and all applicable State and Federal laws and regulations, to serve the public interest as
well as interests of the individuals and small businesses seeking health care coverage through
the Exchange, and to ensure the operational well-being and fiscal solvency of the Exchange.
The Governor would have to appoint an Executive Director to manage the Exchange. The
Executive Director would have to be independent and have no material relationship with the
Exchange.
Exchange Board Meetings
Under the Act, the Executive Director would attend meetings of the Board but could not be a
member, vote, or be counted for purposes of establishing a quorum. The Director would call
the first meeting of the Board. Additionally, the Director or Director's designee would serve
as the chairperson of the Board. After the first meeting, the Board would have to meet at
least quarterly, or more frequently at the call of the chairperson, or if requested by four or
more members. Six members of the Board would constitute a quorum for the transaction of
business at a meeting of the Board. An affirmative vote of six board members would be
necessary for official action of the Board. Meetings of the Board would be subject to the Open
Meetings Act. If there were a conflict between the provisions of the Act and the Open Meetings
Act, the provisions of the Open Meetings Act would control.
Board members would have to serve without compensation. Members could be reimbursed
for their actual and necessary expenses incurred in the performance of their official duties as
board members. The Exchange would have to pay for the reimbursements of the Board
Members.
The Board would have to adopt a code of ethics for its members and for the officers and
employees of the Exchange that included policies and procedures that required the disclosure
of relationships that could give rise to a conflict of interest. A Board member would have to
comply with the code of ethics and declare any conflict of interest. The Board would have to
require that any Board member with a direct conflict of interest in any matter before the
Exchange disclose the member's interests to the Board prior to Board taking any action on
the matter. If a Board member or member of the Board member's immediate family,
organizationally or individually, would derive direct and specific benefit from a decision of the
Board, that member would have to recuse himself or herself from the discussion and vote on
the issue.
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The Board could establish committees to obtain recommendations concerning the operation
and implementation the Exchange in the State. The committees would have to be given
specific charge and could include individuals who were not Board members, including
representatives of health care consumers, carriers, and health care providers and other health
industry representatives.
The bill would specify that there would be no liability on the part of, and no cause of action
could arise against, any Board member for any lawful action taken by the member in
performance of the member's powers and duties of the Act.
Nonprofit Corporation
The initial Board would have to organize a nonprofit corporation, on a nonstock directorship
basis, under the Nonprofit Corporation Act. The nonprofit corporation would have to be
organized within 60 days after the first Board meeting to provide an individual marketplace
for qualified health plans in the State. Before formation of the Exchange, the Director could
take any action necessary to affect a timely transition from a Federally administered Exchange
to the Exchange established under the Act, including taking steps that were necessary to
facilitate an SBE on the Federal platform that would operate until the Director determined
that the Exchange was adequately prepared to operate on the marketplace.
"Marketplace" would mean the platform operated by the Exchange. "Qualified health plan"
would mean a health benefit plant that had been certified by the Exchange.
Exchange Duties and Powers
The Exchange would have to exercise all the powers and duties necessary and appropriate to
provide a marketplace for qualified health plans in the State including, without limitation, the
following:
-- To contract with others, public or private, for the provision of all or portion of services
necessary for the management and operation of the Exchange.
-- To enter contracts, give guarantees, incur liabilities, borrow money at rates of interest as
the Exchange could determine, issue its notes, bonds, and other obligations, and secure
any of its obligations by mortgage or pledge of any if its property or an interest in the
property, wherever situated.
-- To sue and be sued in all courts and participate in actions and proceedings judicial,
administrative, arbitrative, or otherwise, in the same manner as a natural person.
-- To have a corporate seal, to alter the seal, and to use the seal by causing it or a facsimile
to be affixed, impressed, or reproduced in any other manner.
-- To adopt, amend, or repeal bylaws, including emergency bylaws, relating to the purposes
of the Exchange, the conduct of its affairs, its rights and powers, and the rights and powers
its board members, corporate directors, or officers.
-- To elect or appoint officers, employees, and other agents of the Exchange, to prescribe
their duties, to fix their compensation and the compensation of the corporate directors
and to indemnify corporate directors, officers, employees, and agents.
-- To apply for, solicit, purchase, receive, take by grant, gift, devise, bequest, or otherwise,
lease, or otherwise acquire, and to own, hold, improve, employ, use, and otherwise deal
in and with, real or personal property, or an interest in real or personal property, wherever
situated, either absolutely or in trust and without limitation as to amount or value.
-- To sell, convey, lease, Exchange, transfer, or otherwise dispose of, or to mortgage, pledge,
or create a security interest in, any of its property, or an interest in the property, wherever
situated.
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-- To invest and reinvest its money, and take and hold real personal property as security for
the payment of money loaned or invested.
-- To purchase, receive, take, or otherwise acquire, to own, hold, sell, lend, exchange,
transfer, and otherwise dispose of, and to pledge, use, and otherwise deal in and with its
bonds and other securities.
-- To conduct its affairs, carry on its operations, and have offices and exercise the powers
granted by the Act in any jurisdiction of business, the receipt and payment of money, to
transact business, receive, collect, and disburse money, and to engage in other incidental
business matters as were naturally or properly within the scope of its articles of
incorporation.
Additionally, the Exchange would have the power to purchase, take, receive, subscribe for, or
otherwise acquire, to own, hold, vote, or employ, to sell, lend, lease, exchange, transfer, or
otherwise dispose of, and to mortgage, pledge, use, and otherwise deal in and with bonds
and other obligations and share or other securities, interests, memberships issued by others,
whether engaged in similar or different businesses,