A949 1R

An Act concerning the conversion of a health service corporation to a domestic stock insurer, and amending P.L.2001, c.131 ¹[and P.L.2005, c.155]¹.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 3 of P.L.2001, c.131 (C.17:48E-51) is amended to read as follows:

3. a. The health service corporation shall file with the commissioner an application pursuant to subsection b. of this section for approval of, and permission to convert pursuant to, a plan of conversion. Concurrent with the filing of the application with the commissioner, the health service corporation shall submit a petition to the Attorney General pursuant to section 19 of this act and submit a copy of the petition to the commissioner. The health service corporation shall file a copy of the application with the Attorney General at the time the health service corporation files the application with the commissioner.

b. The application shall include the following:

(1) The plan of conversion and exhibits thereto.

(2) A business plan of the converted insurer and any parent corporation, including five-year financial projections and the number of shares of capital stock that the converted insurer and any parent corporation is authorized to issue, together with estimates of the capital which might be raised by the sales of the capital stock or securities convertible into capital stock.

(3) A certification by the secretary of the health service corporation that the plan of conversion has been duly adopted by action of not less than two-thirds of the total number of directors of the board of the health service corporation. Subscribers of the health service corporation shall not have the right to vote on or approve the plan of conversion, any amendments to the health service corporation's certificate of incorporation or bylaws, or the certificate of incorporation or bylaws of the converted insurer or parent corporation, notwithstanding any provision to the contrary in the certificate of incorporation or bylaws of the health service corporation.

(4) The proposed forms of the notice of [hearing] hearings required by subsection e. of this section and any other notices required by the plan of conversion or by the commissioner.

(5) Any information provided to the board of directors of the health service corporation in connection with its review and approval of the plan of conversion, except materials that are protected by attorney-client privilege.

(6) A comparative premium rate analysis of all the policies of the health service corporation, comparing actual premium rates for the three-year period preceding the filing of the plan of conversion and projected premium rates for the three-year period following the proposed conversion. The rate analysis shall address the projected impact, if any, of the proposed conversion upon the cost to subscribers as well as the projected impact, if any, of the proposed conversion upon the health service corporation's underwriting profit, investment income, tax liability and loss and claim reserves, including the effect, if any, of adverse market or risk selection on reserves.

(7) Any conditions, other than approval of the plan of conversion by the commissioner, to be fulfilled on or before the effective time.

(8) Any proposed agreement between or among the foundation and the converted insurer or its parent corporation, if applicable, including, but not limited to, any agreement relating to the voting or registration for sale of any capital stock issued to the foundation by the converted insurer or any parent corporation.

(9) Any other additional information that the health service corporation believes is necessary.

(10) Any other additional information that the commissioner in his sole discretion deems appropriate.

c. If required pursuant to section 6 of this act, the plan of conversion shall include an appraisal of the fair market value, or range of values, of the aggregate equity of the converted insurer to be outstanding upon completion of the plan of conversion and, if a range of values, the methodology for fixing a final value coincident with the completion of the transactions provided for in the plan of conversion.

(1) The appraisal shall enable determinations of value of:

(a) the amount of cash or other assets that the foundation will be entitled to receive, without consideration, under the provisions of the plan of conversion; and

(b) the price of any shares to be issued pursuant to the optional provisions of a plan of conversion permitted by subsection e. of section 6 of this act;

(2) The appraisal required by this subsection c. shall be prepared by persons independent of the health service corporation, experienced and expert in the area of corporate appraisals and acceptable to the commissioner. The appraisal shall be in a form and content acceptable to the commissioner and contain a complete and detailed description of the elements that make up the appraisal, justification for the methodology employed and sufficient support for the conclusions reached in the appraisal. The commissioner may also require the appraisal to include an analysis of fair market value based on actuarial considerations, as well as other methods for determining fair market value.

(3) To the extent that the appraisal is based on a capitalization of the pro forma income of the converted insurer, the appraisal shall indicate the basis for determination of the income to be derived from any proceeds of the sale of stock and demonstrate the appropriateness of the earnings-multiple used, including assumptions made regarding future earnings growth.

(4) To the extent that the appraisal is based on the comparison of the capital stock of the converted insurer with outstanding capital stock of existing stock entities offering comparable insurance products, the existing stock entities shall be reasonably comparable to the converted insurer in terms of factors such as size, market area, competitive conditions, profit history and expected future earnings.

(5) In those instances in which the commissioner determines that the appraisal is materially deficient or substantially incomplete, the commissioner may declare the entire application materially deficient or substantially incomplete and decline to further process or may reject the application.

(6) The health service corporation shall submit to the commissioner information demonstrating to the satisfaction of the commissioner the independence and expertise of any person preparing the appraisal or related materials under this subsection.

(7) The appraiser shall not serve as an underwriter or selling agent under the plan of conversion. With the prior written approval of the commissioner, an affiliate of the appraiser may act as an underwriter or selling agent if procedures are followed and representations and warranties are made to ensure that the appraiser is separate from the underwriter or selling agent affiliate and the underwriter or selling agent affiliate does not make recommendations or in any way have an impact on the appraisal.

(8) An appraiser may not receive any other fee except the fee for services rendered in connection with the appraisal.

d. The commissioner in his sole discretion: (1) shall determine, within 60 days of submission of the application, whether the application is complete and, if not, shall specify what additional information is required; and (2) shall further determine when an application is complete. The commissioner may request additional information from the health service corporation which the commissioner determines is necessary to review the application and plan of conversion. The commissioner may also conduct an examination under section 37 of P.L.1985, c.236 (C.17:48E-37) to obtain any information the commissioner determines necessary in connection with the application or transaction or series of transactions, that the commissioner determines constitute, or may constitute, a material change in form. The failure of the health service corporation to provide the information or cooperate in the examination, in addition to other applicable penalties, constitutes grounds for denial of the application.

e. (1) Upon determining that the application is complete and the forms of notice are adequate, the commissioner shall designate [a date] dates for [a] at least four public [hearing] hearings on the plan of conversion, with at least one hearing each in the northern and southern regions of the State, and at least two in the central region of the State. Additionally, at least two public hearings shall be held before the commissioner has received and made public the health impact study prepared for the commissioner pursuant to the provisions of subsection g. of this section, and at least one public hearing shall be held after the commissioner’s receipt and public release of all written reports obtained from his advisors and consultants, including the health impact study, focusing exclusively on these written reports, but with an emphasis on the health impact study. The public [hearing] hearings may be held on one or more days, the first commencing within 90 days after the date on which the commissioner determines the application is complete, unless the health service corporation requests, and the commissioner agrees to, a longer period for the purpose of preparing and distributing the notices required by this subsection. The public [hearing] hearings may, if the commissioner and Attorney General so agree, be conducted jointly as part of the public [hearing] hearings required under subsection e. of section 19 of this act.

[The] (2) Each hearing shall be in the nature of a legislative hearing and shall not constitute or be considered a contested case under the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). The health service corporation shall provide the public with at least [45] 75 days' notice of the [hearing] schedule of hearings, the notice to be in the form, and provided in the manner, that the commissioner approves. The health service corporation shall cause notice of the time and place of [the] each public hearing to be published at least two times at intervals of not less than one week, the first publication to be not more than [45] 75 days and the last publication not less than 15 days prior to the first scheduled public hearing in at least two newspapers of general circulation in New Jersey. The notice of the [hearing] hearings shall state the purpose thereof and the time and the place where [the] each hearing will occur. The purpose of the [hearing] hearings shall be to receive comments and information for the purpose of aiding the commissioner in making a decision as to whether to approve the plan of conversion. Persons wishing to make comments and submit information may submit written statements to the commissioner prior to [the] any public hearing and may appear and be heard at [the] any hearing.

¹[(3) Notwithstanding the nature of the public hearings as legislative hearings, the Public Advocate, through the Division of Rate Counsel in the Department of the Public Advocate, shall act as an intervenor at each hearing, in representation of and to protect the public interest as defined in section 12 of P.L.2005, c.155 (C.52:27EE-12).

(a) As an intervenor for the public interest, the Public Advocate shall participate in the review of the plan of conversion by first, independently reviewing the plan and any additional information obtained by the commissioner pursuant to subsection d. of this section, as well as any information provided to the commissioner by any advisor or consultant whose services the commissioner engages pursuant to subsection g. of this section, and only thereafter by requesting and accessing additional information directly from the health service corporation or other sources, for use at the public hearings and for aiding the commissioner in making the decision as to whether to approve the plan of conversion.

The Public Advocatemay request access to information that has been designated as confidential and not a public record pursuant to section 10 of P.L.2001, c.131 (C.17:48E-58), subject to an executed non-disclosure agreement.

(b) As an intervenor for the public interest, the Public Advocate shall have the duty to consult with, and provide periodic updates to, representatives of interested organizations to the proposed plan of conversion, that are advocating for the health care interests of underserved individuals, or the health care interests of current subscribers of the health service corporation, or the interests of hospitals, physicians, or other health care providers in the State, or the promotion of fundamental improvements in the health status of all New Jerseyans. The Public Advocate may require that interested organizations advocating for identical or substantially similar individuals or interests designate one representative for those individuals or interests with whom the Public Advocate shall consult and provide updates.

(c)Status as an intervenor shall provide the Public Advocatestanding to appeal the commissioner’s decision as to whether to approve the plan of conversion consistent with the provisions of subsection b. of section 4 of P.L.2001, c.131 (C.17:48E-52).]¹

f. [The] Each hearing shall be conducted by the commissioner or, at the commissioner's discretion, his designee, who shall report to and advise the commissioner on the matter, in which case the determination or order issued by the commissioner shall have the same force and effect as if the commissioner had conducted [the] each hearing personally. The commissioner's order or determination on the application pursuant to section 4 of this act shall be issued within 45 days after the closing of the record of the last scheduled hearing by the commissioner or his designee, as applicable. The commissioner shall issue a written decision detailing the reasons for the approval or disapproval of the plan of conversion. The commissioner may, for good cause, extend the time within which he shall issue an order or determination on the application.

g. (1) The commissioner shall engage the services of a consultant to prepare a health impact study examining the direct and indirect health impact of the proposed conversion, which shall be completed for the commissioner and released to the public prior to conducting the final one or more public hearings as required by subsection e. of this section, and shall be used by the commissioner in making the final decision on the approval or disapproval of the plan of conversion pursuant to subsection f. of this section and section 4 of P.L.2001, c.131 (C.17:48E-52). The health impact study shall incorporate information and testimony presented at any public hearings already conducted and as otherwise obtained by the consultant, under the direction of the commissioner. The study shall examine all of the factors required to be considered by the commissioner in making the final decision on the approval or disapproval of the plan of conversion pursuant to subsection f. of this section and section 4 of P.L.2001, c.131 (C.17:48E-52), and shall additionally include, but not be limited to:

(a) assessing the impact of the conversion on the health care needs of subscribers;

(b) analyzing the business plan and comparative premium rate analysis submitted with the application pursuant to paragraphs (2) and (6) of subsection b. of this section, to determine whether the business plan and projections set forth in the rate analysis adequately address concerns of the health care costs of subscribers;

(c) assessing the impact of the conversion on accessible, available, affordable, and quality health care for underserved and vulnerable individuals, including children, seniors, low income or disabled individuals, and individuals with chronic illnesses;

(d) assessing the impact of the conversion on particular health insurance markets;

(e) assessing the impact of the conversion on provider contracts, current provider networks, and the development of additional provider networks;

(f) assessing the impact of the conversion on provider compensation;

(g) assessing the impact of the conversion on claims processing and payment; and

(h) assessing the impact of the conversion on the health care needs of all New Jerseyans and the promotion of the public interest.

(2) The commissioner may additionally engage the services of other advisors and consultants, which may include, but are not limited to, lawyers, actuaries, accountants, investment bankers, compensation and employee benefit plan consultants or any combination thereof, to advise him on any matters related to the conversion. Any consultant engaged by the commissioner shall be subject to all applicable statutes, regulations, and rules of professional conduct governing conflicts of interest.

(3) All reasonable costs related to the development and examination of, and deliberations concerning, a plan of conversion and other related matters, including, but not limited to, those reasonable costs attributable to the consultant’s completion of the health impact study and the use by the commissioner of other advisors and consultants, shall be ¹[paid by] submitted by the commissioner to¹ the health service corporation that makes the filing or initiates the discussions about a plan of conversion ¹and paid by that health service corporation¹, both for services prior to the effective time ¹of the conversion¹ and for services after the effective time. ¹[However, with respect to the Public Advocate as intervenor, the health service corporation shall only pay for those reasonable costs directly and solely attributable to the Public Advocate that are not duplicative of any costsattributable to the commissioner, and shall total no more than $350,000, which total amount includes any amount attributable to the Public Advocate as intervenor regarding the foundation plan petition pursuant to section 19 of P.L.2001, c.131 (C.17:48E-67).]¹

(cf: P.L.2001, c.131, s.3)

2. Section 4 of P.L.2001, c.131 (C.17:48E-52) is amended to read as follows:

4. a. The commissioner shall approve the plan of conversion and issue a certificate of authority to the converted insurer to transact business in this State as a domestic stock insurer only if the commissioner finds, using the health impact study required to be completed pursuant to subsection g. of section 3 of P.L.2001, c.131 (C.17:48E-51) and information otherwise obtained pursuant to P.L.2001, c.131 (C.17:48E-49 et al.), all of the following:

(1) The plan of conversion meets the requirements of sections 2 and 3 of this act.

(2) Upon conversion, the converted insurer will meet the applicable standards and conditions under this section, including applicable minimum capital and surplus requirements.

(3) The plan of conversion adequately protects the existing contractual rights of subscribers.

(4) The plan of conversion will promote the best interests of the health service corporation.

(5) The health service corporation has complied with all requirements of sections 2 and 3 of this act.

(6) The plan of conversion is fair and equitable.

(7) The plan provides for the enhancement of the operations of the converted insurer.

(8) The plan provides for the transfer at or before the effective time of the entire fair market value of the health service corporation to the foundation in accordance with section 6 of this act.

(9) The plan is consistent with the foundation plan.

(10) The plan does not adversely affect the distribution of the health service corporation's value to the foundation.

(11) The plan is not contrary to law.

(12) The plan promotes the public interest.

(13) The Attorney General has concurred:

(a) with any findings of the commissioner pursuant to paragraph (8) of this subsection and section 6 of this act; and

(b) with the actions of the commissioner under subsection c. of section 3 of this act.

b. The commissioner's order approving or disapproving a plan of conversion under this section shall be a final agency decision subject to appeal in accordance with, and within the time periods specified by, the Rules Governing the Courts of the State of New Jersey.

(cf: P.L.2001, c.131, s.4)

3. Section 19 of P.L.2001, c.131 (C.17:48E-67) is amended to read as follows:

19. a. (1) A health service corporation shall submit to the Attorney General a petition for review of a foundation plan at the same time that it submits a plan of conversion to the commissioner. The petition shall include the foundation plan and any other information that the Attorney General requests.

(2) Within 60 days of the health service corporation's submission of the petition to the Attorney General, the Attorney General shall advise the health service corporation in writing whether the petition is complete, and, if not, shall specify what additional information is required.

(3) The Attorney General shall, upon receipt of the information requested, notify the health service corporation in writing of the date of completion of the petition.

b. The Attorney General¹[, and the Public Advocate, through the Division of Rate Counsel in the Department of the Public Advocate, acting as an intervenor as set forth in subsection g. of this section,]¹ shall review the petition and may either support the proposed foundation plan, with or without any specific modifications, or, if the Attorney General ¹[or the Public Advocate]¹ finds that it is not in the public interest, oppose the foundation plan in the Superior Court proceeding commenced pursuant to subsection f. of this section.

c. When reviewing the petition, in addition to considering whether the foundation plan meets the requirements of subsection d. of this section, the Attorney General shall consider whether:

(1) the health service corporation exercised due diligence in deciding to effectuate the conversion, selecting any other party to the conversion or related transactions, and negotiating the terms and conditions of the conversion;

(2) the procedures used by the health service corporation in approving the conversion, including whether expert assistance was used, were appropriate;

(3) a conflict of interest was disclosed, including, but not limited to, conflicts of interest related to board members of, employees of, and experts retained by, the health service corporation or any other parties to the conversion;

(4) any management contract under the conversion or any related transaction is for reasonable fair value;

(5) (a) any proceeds of the conversion will be used solely for purposes of expanding access to affordable, quality health care for underserved ¹and vulnerable¹ individuals and similarly promoting fundamental improvements in the health status of New Jerseyans through accessible, available, affordable, and quality health care, including public health ¹and disease prevention¹related activities; and

(b) any proceeds will not be used to replace any current government appropriations and any other spending on health care;

(6) the health service corporation established appropriate criteria in deciding to pursue a conversion and considered the proposed conversion as the only alternative or as the best alternative in relation to carrying out its mission and purposes; and

(7) officers, directors, board members or senior management of the health service corporation will receive contracts in any existing, new or affiliated health service corporation, foundation, the converted insurer, any parent corporation or any affiliate of any of the foregoing.

d. The foundation plan¹[, subject to review by the Attorney General and the Public Advocate,] reviewed by the Attorney General¹ shall meet the following requirements:

(1) The foundation plan shall provide for the establishment of one or more foundations that will receive the fair market value of the health service corporation following its conversion to a domestic stock insurer and that meets the following requirements:

(a) The foundation shall be a trust or nonprofit corporation formed under the laws of this State, but shall not include the health service corporation or any person controlled by the health service corporation.

(b) The foundation shall be a charitable entity that qualifies for federal income tax exemption under [paragraph (3) of subsection (c) of] section 501(c)(3) of the federal Internal Revenue Code [of 1986,] (26 U.S.C. s.501(c)(3)).

(c) The foundation shall have the sole purposes of expanding access to affordable, quality health care for underserved ¹and vulnerable¹individuals and similarly promoting fundamental improvements in the health status of all New Jerseyans through accessible, available, affordable, and quality health care, including public health ¹and disease prevention¹ related activities.

(d) The foundation, its directors, officers and trustees and the assets of the foundation, including any stock of the converted insurer or a parent corporation, shall be independent of any influence or control by the converted insurer, its parent corporation, any of their subsidiaries or affiliates, any of their respective directors, officers, trustees or employees, except with the prior approval of the Attorney General and the commissioner.

(e) The foundation shall not have more than one of its directors serve as a director of the converted insurer or its parent corporation.

(f) The foundation shall not have as a director, officer or senior management any person who has been a director, officer, agent, trustee or employee of the health service corporation, the converted insurer, its parent corporation or any affiliate of any of them during the three-year period preceding the date of appointment as a director, officer or senior manager of the foundation.

(g) The foundation shall have a board of directors that when appointed will comply with section 20 of this act.

(2) The foundation shall provide the Attorney General with an annual report which shall include an audited financial statement and a detailed description of its grant-making and other charitable activities related to its use of the charitable assets received pursuant to the conversion. The annual report shall be made available to the public at both the Attorney General's office and the office of the foundation. Nothing contained in this act shall affect the obligations of an entity possessing endowment funds under the ¹["Uniform Management of Institutional Funds Act," P.L.1975, c.26 (C.15:18-15 et seq.)] “Uniform Prudent Management of Institutional Funds Act,” P.L.2009, c.64 (C.15:18-25 et seq.)¹.

(3) The governing body of the foundation shall establish or demonstrate that it has in place, as the case may be, a mechanism to avoid conflicts of interest, including those associated with grant-making activities that may benefit the converted insurer, its affiliates, any person who owns or controls any ownership interest in either the converted insurer or any of its affiliates, and any director or officer of the converted insurer or its affiliates.

e. The Attorney General shall, during the course of the review of the foundation plan pursuant to this section, hold at least [one] four public [hearing] hearings, with at least one hearing each in the northern and southern regions of the State, and at least two in the central region of the State, in which any person may file written comments and exhibits or appear and make a statement. The public [hearing] hearings may, if the Attorney General and the commissioner so agree, be conducted jointly as part of the public [hearing] hearings on the conversion required pursuant to subsection e. of section 3 of this act. The Attorney General ¹[or the Public Advocate]¹ may subpoena additional information or witnesses, including, but not limited to, information about any transaction that is collateral to the proposed conversion and any related documents, require and administer oaths, require sworn statements, take depositions and use related discovery procedures for purposes of the [hearing] hearings and at any time prior to completing the review of the proposed conversion ¹[; however, the Attorney General shall make available, and the Public Advocate shall review, any additional information subpoenaed or otherwise obtained by the Attorney General before exercising the Public Advocate’s additional investigative authority provided by this subsection]¹. [The] Each hearing shall be in the nature of a legislative hearing and shall not constitute or be considered a contested case under the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). The first public hearing shall be held no later than 90 days after the date that the petition is declared complete by the Attorney General. Public notice of [the] each hearing shall be provided by the health service corporation not more than [45] 75 days and not less than 15 days prior to the first scheduled public hearing in at least two newspapers of general circulation in New Jersey.

f. Upon completion by the Attorney General of the review of the petition, ¹[and completion by the Public Advocate of the review of the petition no later than one month next following the completion of the Attorney General’s review,]¹ the health service corporation shall apply to the Superior Court for approval of the establishment of the foundation. In that action, which shall proceed in a summary manner, the Attorney General ¹[and the Public Advocate]¹ shall advise the court as to whether [he] ¹[that party] the Attorney General¹ supports or opposes the foundation plan, with or without any specific modifications, and the basis for that position. In considering whether the foundation plan is in the public interest, the court shall consider whether the requirements of paragraph (1) of subsection d. of this section have been satisfied and may consider the criteria established in subsection c. of this section, as applicable. If the health service corporation fails to comply with this subsection, the Attorney General ¹[or the Public Advocate]¹ may seek appropriate relief in Superior Court.

¹[g. In addition to the Attorney General, the Public Advocate shall, through the Division of Rate Counsel in the Department of the Public Advocate, act as an intervenor in representation of and to protect the public interest as defined in section 12 of P.L.2005, c.155 (C.52:27EE-12), and participate in the review of the foundation plan petition as set forth in this section by first independently reviewing the foundation plan petition and any additional information obtained by the Attorney General pursuant to subsection e. of this section, section 14 of P.L.2001, c.131 (C.17:48E-62), as well as any information provided to the Attorney General by any advisor or consultant whose services the Attorney General engages pursuant to section 16 of P.L.2001, c.131 (C.17:48E-64), and only thereafter by requesting and accessing further information and witnesses directly as permitted by subsection e. of this section, for use at the public hearings and the Superior Court proceeding seeking approval of the foundation plan.

(1) As an intervenor for the public interest, the Public Advocate may request access to information that has been designated as confidential and not a public record pursuant to section 10 of P.L.2001, c.131 (C.17:48E-58), subject to an executed non-disclosure agreement.

(2) As an intervenor for the public interest, the Public Advocate shall have the duty to consult with, and provide periodic updates to, representatives of interested organizations to the foundation plan petition, that are advocating forthe health care interests of underserved individuals, or the health care interests of current subscribers of the health service corporation, or the interests of hospitals, physicians, or other health care providers in the State, or the promotion of fundamental improvements in the health status of all New Jerseyans.

The Public Advocate may require that interested organizations advocating for identical or substantially similar individuals or interests designate one representative for those individuals or interests with whom the Public Advocate shall consult and provide updates.

(3) All reasonable costs related to the review of the foundation plan petition and related matters by the Public Advocate, that are directly and solely attributable to the Public Advocate and not duplicative of any costs attributable to the Attorney General pursuant to subsection b. of section 16 of P.L.2001, c.131 (C.17:48E-64) or otherwise pursuant to P.L.2001, c.131 (C.17:48E-49 et al.), including in connection with any matter before any court or any administrative agency in which the health service corporation that files the petition is a party, shall be paid by that health service corporation, both for services prior to the effective time of the foundation plan and for services after the effective time; except that the reasonable costs of the Public Advocate paid by the health service corporation pursuant to this paragraph, combined with the reasonable costs of the Public Advocate paid by the health service corporation concerning the plan of conversion pursuant to subsection g. of section 3 of P.L.2001, c.131 (C.17:48E-51), shall be no more than $350,000.]¹

(cf: P.L.2001, c.131, s.19)

¹[4. Section 48 of P.L.2005, c.155 (C.52:27EE-48) shall be amended to read as follows:

48. Division of Rate Counsel; jurisdiction.

The Division of the Rate Counsel shall have the authority to conduct investigations, initiate studies, conduct research, present comments and testimony before governmental bodies, issue reports, and produce and disseminate consumer guides on any matters that fall within the Rate Counsel's jurisdiction. The Rate Counsel shall also have the authority to represent the public interest as set forth below.

a. Utilities. The Division of Rate Counsel may represent and protect the public interest as defined in section 12 of this act in proceedings before and appeals from any State department, commission, authority, council, agency, or board charged with the regulation or control of any business, industry, or utility regarding a requirement that the business, industry, or utility provide a service or regarding the fixing of a rate, toll, fare, or charge for a product or service. The Division of Rate Counsel may initiate any such proceedings when the director determines that a discontinuance or change in a required service or a rate, toll, fare, or charge for a product or service is in the public interest.

b. Insurance; limited jurisdiction. The Department of the Public Advocate shall represent and protect the public interest with respect to insurance matters through the Division of Rate Counsel, which may represent and protect the public interest as defined in section 12 of this act in significant proceedings that pertain solely to prior approval rate increases for personal lines property casualty coverages or Medicare supplemental coverages. The Division of Rate Counsel shall have no jurisdiction or authority to participate or intervene in (1) expedited prior approval rate filings made by an insurer or affiliated group of insurers pursuant to section 34 of P.L.1997, c.151 (C.17:29A-46.6) or section 3 of P.L.2001, c.409 (C.17:36-5.35), or (2) prior approval rate filings of seven percent or less, or (3) rule or form filings for any other form of insurance.

In determining, in his or her discretion, whether a proceeding is significant, the Director of the Division of Rate Counsel shall consider the following factors:

(1) the overall dollar impact of the requested increase, considering the filer's market share and the magnitude of the requested rate change;

(2) whether the increase, if granted, will increase the filer's rates significantly above market norms;

(3) whether the filer is advancing a significantly different alternate ratemaking methodology to the standard methodology established pursuant to section 8 of P.L.1988, c.119 (C.17:29A-36.2);

(4) whether the insurer is experiencing financial difficulties at its present rate level, as evidenced by the filing of rehabilitation proceedings, recent downgrading by insurance rating services, or significant losses reported on the filer's public financial statement.

Upon the effective date of this act, the Director of the Division of Rate Counsel in the Department of the Public Advocate shall, in addition to the powers set forth in this act, have the express authority to intervene in public hearings pursuant to section 66 of P.L.1998, c.21 (C.17:29A-46.8).

c. Health insurance; health service corporation conversion. The Department of the Public Advocate, through the Division of Rate Counsel, shall represent and protect the public interest with respect to the conversion of a health service corporation to a domestic stock insurer by serving as an intervenor in that process as set forth under the provisions of P.L.2001, c.131 (C.17:48E-49 et al.).

(cf: P.L.2005, c.155, s.48)]¹

¹[5. Section 53 of P.L.2005, c.155 (C.52:27EE-53) is amended to read as follows:

53. Division of Rate Counsel; payment of expenses of division; annual insurance assessment.

a. Annual insurance assessment. The Director of the Division of Budget and Accounting in the Department of the Treasury shall, on or before August 15 in each year, ascertain and certify to the Commissioner of Banking and Insurance by category the total amount of expenses incurred by the State in connection with the administration of the special functions of the Division of Rate Counsel in the Department of the Public Advocate relative to the expenses of the Division of Rate Counsel in connection with the administration of insurance rate cases during the preceding fiscal year. The Department of Banking and Insurance shall make a separate special assessment on lines of insurance subject to the jurisdiction of the Rate Counsel pursuant to subsection b. of section 48 of this act, on an annual basis, in accordance with the formula set forth in P.L.1995 c.156 (C.17:1C-19 et seq.).

b. Calculation of annual insurance assessment. (1) The annual assessment shall be no more than a specified aggregate amount adjusted annually for inflation, which shall be calculated and applied separately from the maximum total assessment set forth in section 13 of P.L.1995, c.156 (C.17:1C-31). The amount collected for expenses pursuant subsection a. of this section, shall not exceed the amount appropriated by the Legislature for those expenses.

(2) The calculation of the annual insurance assessment provided in subsection a. of this section shall not include any assessment for expenses incurred by the Department of the Public Advocate, through the Division of Rate Counsel, with respect to its jurisdiction concerning the conversion of a health service corporation to a domestic stock insurer pursuant to subsection c. of section 48 of P.L.2005, c.155 (C.52:27EE-48).

(cf: P.L.2005, c.155, s.53)]¹

¹4. Section 20 of P.L.2001, c.131 (C.17:48E-68) is amended to read as follows:

20. a. (1) There is established in, but not of, the Department of the Treasury a Health Service Corporation Conversion Temporary Advisory Commission. The advisory commission shall consist of 15 members. Seven members shall be appointed by the Governor, including two public members, one physician licensed to practice medicine in New Jersey, one licensed health care provider other than a physician, one representative of the dental community, one representative of a community based organization that provides or assists in providing health care or health care services to New Jersey residents and one representative of the AFL-CIO. Three members shall be appointed by the President of the Senate, including one public member, one representative of the hospital community and one physician licensed to practice medicine in New Jersey. One public member shall be appointed by the Minority Leader of the Senate. Three members shall be appointed by the Speaker of the General Assembly, including one public member, one representative of the hospital community and one representative of a community based organization that provides or assists in providing health care or health care services to New Jersey residents. One public member shall be appointed by the Minority Leader of the General Assembly. A vacancy in the membership of the advisory commission shall be filled in the same manner provided for the original appointment. Members shall serve without fee or compensation. The advisory commission shall commence its activities upon appointment of at least a majority of its initial members.

The advisory commission shall, in anticipation of a conversion of a health service corporation as authorized under this act, examine issues related to access to affordable, quality health care for underserved individuals and promoting fundamental improvements in the health status of New Jerseyans, and may review experiences in other states related to the establishment of foundations in connection with the conversion of non-profit health insurers similar to health care service corporations licensed to do business in New Jersey. The advisory commission shall advise the Attorney General and Commissioner of Banking and Insurance as to its findings on these issues. The Department of the Treasury shall provide the advisory commission with such assistance as the advisory commission may require in order to perform its duties under this act. The advisory commission may engage the services of advisors and consultants in order to assist in the performance of its duties under this act.

(2) On the effective date of P.L. , c. (pending before the Legislature as this bill), the Health Service Corporation Conversion Temporary Advisory Commission established by this subsection shall be dissolved, and the terms of all members of this advisory commission shall expire.

b. [Upon the creation of a] (1) Any foundation provided for in the foundation plan submitted to the Attorney General and approved by a court of competent jurisdiction pursuant to section 19 of P.L.2001, c.131 (C.17:48E-67) [and the approval of the foundation by a court of competent jurisdiction, the advisory commission created pursuant to subsection a. of this section shall be dissolved. The foundation] shall have a board of directors consisting of 15 members. Seven members shall be appointed by the Governor, including [two] one public [members] member, one physician licensed to practice medicine in New Jersey, one dentist licensed to practice dentistry in New Jersey, one nurse licensed [health care provider other than a physician] to engage in the practice of nursing in New Jersey, [one representative of the dental community] one public health policy educator from an accredited public or private institution of higher education located in New Jersey, one representative of a community based organization that provides or assists in providing health care or health care services to New Jersey residents, and one representative of the [AFL-CIO] labor community who represents employees in New Jersey. Three members shall be appointed by the President of the Senate, including one public member, one representative of the hospital community, and one physician licensed to practice medicine in New Jersey. One public member shall be appointed by the Minority Leader of the Senate. Three members shall be appointed by the Speaker of the General Assembly, including one public member, one representative of the hospital community, and one representative of a community based organization that provides or assists in providing health care or health care services to New Jersey residents. One public member shall be appointed by the Minority Leader of the General Assembly. [Initially, the members of the advisory commission shall constitute the board of the foundation, and shall serve for a term of three years. Thereafter, the]

(2) The members of the board of the foundation shall be appointed for a term of [three] four years ; except that, with respect to the initial appointments to the foundation board made in accordance with paragraph (1) of this subsection: the Governor shall appoint one public member, one physician and one public health policy educator for a term of four years, one dentist and one nurse for a term of three years, and one representative of a community based organization and one representative of the labor community for a term of two years; the President of the Senate shall appoint one physician for a term of four years, one representative of the hospital community for a term of three years, and one public member for a term of two years; the Minority Leader of the Senate shall appoint one public member for a term of three years; the Speaker of the General Assembly shall appoint one representative of a community based organization for a term of four years, one representative of the hospital community for a term of three years, and one public member for a term of two years; and the Minority Leader of the General Assembly shall appoint one public member for a term of three years. The terms shall commence upon both the creation of the foundation pursuant to section 19 of P.L.2001, c.131 (C.17:48E-67) and approval of the foundation by the court of competent jurisdiction pursuant to that section . Each member shall hold office until reappointed or a successor is appointed and qualified. A vacancy in the membership of the board shall be filled for an unexpired term in the same manner provided for the original appointment. Members shall serve without fee or compensation.

(3) The foundation shall commence its activities upon the appointment of at least a majority of its initial board of directors.

(4) In the event more than one foundation is established pursuant to this act, the board of directors of any such additional foundations shall be appointed in compliance with the requirements of this subsection.¹

(cf: P.L.2001, c.387, s.1)

¹[6. This] 5. Section 4 of this act shall take effect immediately, and the remainder of this¹ act shall ¹also¹ take effect immediately ¹[,]¹ and ¹[shall]¹ apply to any conversion application and foundation petition filed on or after the effective date, and any conversion application and foundation petition filed, but not deemed complete, on or before the effective date.