HOUSE BILL No. 4819


     May 24, 2001, Introduced by Rep. Julian and referred to the Committee on Insurance and Financial Services.


        A bill to amend 1956 PA 218, entitled

   "The insurance code of 1956,"

   by amending section 224 (MCL 500.224), as amended by 2000 PA 252;

   and to repeal acts and parts of acts.

               THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

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           Sec. 224.  (1) All actual and necessary expenses incurred in

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      connection with the examination or other investigation of an

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      insurer or other person regulated under the commissioner's

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      authority shall be certified by the commissioner, together with a

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      statement of the work performed including the number of days

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      spent by the commissioner and each of the commissioner's depu-

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      ties, assistants, employees, and others acting under the

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      commissioner's authority.  If correct, the expenses shall be paid

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      to the persons by whom they were incurred, upon the warrant of




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      the state treasurer payable from appropriations made by the

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      legislature for this purpose.

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           (2) Except as otherwise provided in subsection (4), the com-

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      missioner shall prepare and present to the insurer or other

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      person examined or investigated a statement of the expenses and

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      reasonable cost incurred for each person engaged upon the exami-

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      nation or investigation, including amounts necessary to cover the

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      pay and allowances granted to the persons by the Michigan civil

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      service commission, and the administration and supervisory

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      expense including an amount necessary to cover fringe benefits in

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      conjunction with the examination or investigation.  Except as

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      otherwise provided in subsection (4), the insurer or other

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      person, upon receiving the statement, shall pay to the commis-

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      sioner the stated amount.  The commissioner shall deposit the

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      funds with the state treasurer as provided in section 225.

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           (3) The commissioner may employ attorneys, actuaries,

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      accountants, investment advisers, and other expert personnel not

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      otherwise employees of this state reasonably necessary to assist

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      in the conduct of the examination or investigation or proceeding

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      with respect to an insurer or other person regulated under the

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      commissioner's authority at the insurer's or other person's

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      expense except as otherwise provided in subsection (4).  Except

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      as otherwise provided in subsection (4), upon certification by

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      the commissioner of the reasonable expenses incurred under this

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      section, the insurer or other person examined or investigated

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      shall pay those expenses directly to the person or firm rendering

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      assistance to the commissioner.  Expenses paid directly to such



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      person or firm and the regulatory fees imposed by this section

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      shall be examination expenses under section 22e of the single

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      business tax act, 1975 PA 228, MCL 208.22e.

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           (4) An insurer is subject to a regulatory fee instead of the

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      costs and expenses provided for in subsections (2) and (3).  By

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      June 30 of each year or within 30 days after the enactment into

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      law of any appropriation for the insurance bureau's operation,

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      the commissioner shall impose upon all insurers authorized to do

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      business in this state a regulatory fee calculated as follows:

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           (a) As used in this subsection:

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           (i) "A" means total annuity considerations written in this

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      state in the immediately preceding year.

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           (ii) "B" means base assessment rate.  The base assessment

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      rate shall not exceed .00038 and shall be a fraction the numera-

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      tor of which is the total regulatory fee and the denominator of

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      which is the total amount of direct underwritten premiums written

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      in this state by all insurers for the immediately preceding cal-

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      endar year as reported to the commissioner on the insurer's

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      annual statements filed with the commissioner.

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           (iii) "I" means all direct underwritten premiums other than

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      life insurance premiums and annuity considerations written in

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      this state in the immediately preceding year by all insurers.

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           (iv) "L" means all direct underwritten life insurance premi-

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      ums written in this state in the immediately preceding year by

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      all life insurers.

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           (v) Total regulatory fee shall not exceed 80% of the gross

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      appropriations for the insurance bureau's operation for a fiscal



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      year and shall be the difference between the gross appropriations

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      for the insurance bureau's operation for that current fiscal year

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      and any restricted revenues, other than the regulatory fee

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      itself, as identified in the gross appropriation for the insur-

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      ance bureau's operation.

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           (vi) Direct premiums written in this state do not include

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      any amounts that represent claims payments that are made on

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      behalf of, or administrative fees that are paid in connection

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      with, any administrative service contract, cost-plus arrangement,

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      or any other noninsured or self-insured business.

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           (b) Two actual assessment rates shall be calculated so as to

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      distribute 75% of the burden of the regulatory fee shortfall cre-

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      ated by the exclusion of annuity considerations from the assess-

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      ment base to life insurance and 25% to all other insurance.  The

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      2 actual assessment rates shall be determined as follows:



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        (i) L x B + .75 x B x A = assessment rate for life

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                     L            insurance.



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        (ii) I x B + .25 x B x A = assessment rate for insurance

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                      I            other than life insurance.

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           (c) Each insurer's regulatory fee shall be a minimum fee of

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      $250.00 and shall be determined by multiplying the actual assess-

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      ment rate by the assessment base of that insurer as determined by

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      the commissioner from the insurer's annual statement for the

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      immediately preceding calendar year filed with the commissioner.





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           (5) Not less than 67% of the revenue derived from the

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      regulatory fee under subsection (4) shall be used for the

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      regulation of financial conduct of persons regulated under the

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      commissioner's authority and for the regulation of persons regu-

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      lated under the commissioner's authority engaged in the business

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      of health care and health insurance in this state.

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           (6) The amount, if any, by which amounts credited to the

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      commissioner pursuant to section 225 exceed actual expenditures

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      pursuant to appropriations for the insurance bureau's operation

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      for a fiscal year shall be credited toward the appropriation for

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      the insurance bureau in the next fiscal year.

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           (7) All money paid into the state treasury by an insurer

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      under this section shall be credited as provided under section

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      225.

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           (8) A regulatory fee under this section shall not be treated

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      by an insurer as a levy or excise upon premium but as a regula-

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      tory burden that is apportioned in relation to insurance activity

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      in this state and reflects the insurance regulatory burden on

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      this state as a result of this insurance activity.  A foreign or

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      alien insurer authorized to do business in this state may con-

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      sider the liability required under this section as a burden

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      imposed by  the state of Michigan  THIS STATE in the calculation

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      of the insurer's liability required under section 476a.

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           (9) An insurer may file with the commissioner a protest to

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      the regulatory fee imposed not later than 15 days after receipt

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      of the regulatory fee.  The commissioner shall review the grounds

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      for the protest and shall hold a conference with the insurer at



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      the insurer's request.  The commissioner shall transmit his or

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      her findings to the insurer with a restatement of the regulatory

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      fee based upon the findings.  Statements of regulatory fees to

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      which protests have not been made and restatements of regulatory

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      fees are due and shall be paid not later than 30 days after their

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      receipt.  Regulatory fees that are not paid when due bear inter-

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      est on the unpaid fee which shall be calculated at 6-month inter-

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      vals from the date the fee was due at a rate of interest equal to

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      1% plus the average interest rate paid at auctions of 5-year

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      United States treasury notes during the 6 months immediately pre-

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      ceding July 1 and January 1, as certified by the state treasurer,

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      and compounded annually, until the assessment is paid in full.

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      An insurer who fails to pay its regulatory fee within the pre-

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      scribed time limits may have its certificate of authority or

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      license suspended, limited, or revoked as the commissioner con-

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      siders warranted until the regulatory fee is paid.  If the com-

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      missioner determines that a regulatory fee or a part of a regula-

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      tory fee paid by an insurer is in excess of the amount legally

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      due and payable, the amount of the excess shall be refunded or,

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      at the insurer's option, be applied as a credit against the regu-

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      latory fee for the next fiscal year.  An overpayment of $100.00

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      or less shall be applied as a credit against the insurer's regu-

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      latory fee for the next fiscal year unless the insurer had a

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      $100.00 or less overpayment in the immediately preceding fiscal

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      year.  If the insurer had a $100.00 or less overpayment in the

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      immediately preceding fiscal year, at the insurer's option, the





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      current fiscal year overpayment of $100.00 or less shall be

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      refunded.

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           (10) Any amounts stated and presented to or certified,

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      assessed, or imposed upon an insurer as provided in

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      subsections (2), (3), and (4) that are unpaid as of the date that

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      the insurer is subjected to a delinquency proceeding pursuant to

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      chapter 81 shall be regarded as an expense of administering the

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      delinquency proceeding and shall be payable as such from the gen-

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      eral assets of the insurer.

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           (11) In addition to the regulatory fee provided in subsec-

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      tion (4), each insurer that locates records or personnel knowl-

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      edgeable about those records outside this state pursuant to sec-

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      tion 476a(3) or section 5256 shall reimburse the insurance bureau

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      for expenses and reasonable costs incurred by the insurance

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      bureau as a result of travel and other costs related to examina-

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      tions or investigations of those records or personnel.  The reim-

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      bursement shall not include any costs that the insurance bureau

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      would have incurred if the examination had taken place in this

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      state.

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           (12) As used in this section:

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           (a) "Annuity considerations" means receipts on the sale of

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      annuities as used in section 22a of the single business tax act,

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      1975 PA 228, MCL 208.22a.

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           (b) "Insurer" means an insurer authorized to do business in

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      this state and includes nonprofit health care corporations,

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      dental care corporations, and health maintenance organizations.





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            (13) All fees added by 1994 PA 228 shall not apply on and

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      after January 1, 1996, unless by September 1, 1995, and annually

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      thereafter, the commissioner submits a report to the senate and

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      house of representatives standing committees on insurance issues

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      and to the senate and house of representatives appropriations

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      regulatory subcommittees on all receivership activities of the

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      commissioner and the insurance bureau pertaining to the liquida-

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      tion of insolvent insurers for the immediately preceding calendar

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      year.  The report shall include all of the following:

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           (a) A summary schedule of all insurance bureau expenditures

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      for legal, accounting, and administrative expenditures made or

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      incurred for the liquidation of all insurers in receivership,

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      including, but not limited to, alien insurers described in

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      section 431a, and paid for out of the insurer's assets during the

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      calendar year being reported on.

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           (b) A detailed schedule of all insurance bureau contractual

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      expenditures for legal, accounting, and administrative expendi-

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      tures made or incurred for the liquidation of all insurers in

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      receivership, including, but not limited to, alien insurers

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      described in section 431a, and paid for out of the insurer's

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      assets during the calendar year being reported on including, but

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      not limited to, itemization of legal billings, criminal investi-

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      gation expenses, travel, meals, and general office expenses.

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           (c) A statement of the net changes in assets and liabilities

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      of each insurer in receivership, including, but not limited to,

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      an alien insurer described in section 431a.  This statement shall

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      include changes due to interest rate changes, real estate values,



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      and other investment activities, including a detailed statement

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      of the sale of assets and the net loss or gain on those assets

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      and a statement of the amount of assets preserved, gained, or

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      recovered by the receiver.

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           Enacting section 1.  Section 8160 of the insurance code of

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      1956, 1956 PA 218, MCL 500.8160, is repealed.












































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