AN ACT relating to large group health insurance.

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AN ACT relating to large group health insurance. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
Section 1. KRS 91A.080 is amended to read as follows: 3
(1) The legislative body of each local government which elects to impose and collect 4
license fees or taxes upon insurance companies for the privilege of engaging in the 5
business of insurance m ay, except as provided in subsection (10) of this section, 6
enact or change its license fee or rate of tax to be effective July 1 of each year on a 7
prospective basis only and shall file with the commissioner of insurance at least one 8
hundred (100) days prio r to the effective date, a copy of all ordinances and 9
amendments which impose a license fee or tax. No less than eighty -five (85) days 10
prior to the effective date, the commissioner of insurance shall promptly notify each 11
insurance company engaged in the bu siness of insurance in the Commonwealth of 12
those local governments which have elected to impose the license fees or taxes and 13
the current amount of the license fee or rate of tax. 14
(2) Any license fee or tax imposed by a local government upon an insurance c ompany 15
with respect to life insurance policies may be based upon the first year's premiums, 16
and, if so based, shall be applied to the amount of the premiums actually collected 17
within each calendar quarter upon the lives of persons residing within the corpo rate 18
limits of the local government. 19
(3) Any license fee or tax imposed by a local government upon any insurance company 20
with respect to any policy which is not a life insurance policy shall be based upon 21
the premiums actually collected by the insurance co mpany within each calendar 22
quarter on risks located within the corporate limits of the local government on those 23
classes of business which the insurance company is authorized to transact, less all 24
premiums returned to policyholders. In determining the amount of license fee or tax 25
to be collected and to be paid to the local government, the insurance company shall 26
use the tax rate effective on the first day of the policy term. When an insurance 27
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company collects a premium as a result of a change in the policy during the policy 1
term, the tax rate used shall be the rate in effect on the effective date of the policy 2
change. With respect to premiums returned to policyholders, the license fee or tax 3
shall be returned by the insurance company to the policyholder pro rata on the 4
unexpired amount of the premium at the same rate at which it was collected and 5
shall be taken as a credit by the insurance company on its next quarterly report to 6
the local government. 7
(4) The Department of Insurance shall, by administrative re gulation, provide for a 8
reasonable collection fee to be retained by the insurance company or its agent as 9
compensation for collecting the tax, except that the collection fee shall not be more 10
than fifteen percent (15%) of the fee or tax collected and remit ted to the local 11
government or two percent (2%) of the premiums subject to the tax, whichever is 12
less. To facilitate computation, collection, and remittance of the fee or tax and 13
collection fee provided in this section, the fees or taxes set out in subsection (1), (2), 14
or (3) of this section, together with the collection fee in this section, may be 15
rounded off to the nearest dollar amount. 16
(5) Pursuant to KRS 304.3 -270, if any other s tate retaliates against any Kentucky 17
domiciliary insurer because of the requirements of this section, the commissioner of 18
insurance shall impose an equal tax upon the premiums written in this state by 19
insurers domiciled in the other state. 20
(6) Accounting a nd reporting procedures for collection and reporting of the fees or 21
taxes and the collection fee herein provided shall be determined by administrative 22
regulations promulgated by the Department of Insurance. 23
(7) (a) Upon written request of the legislative b ody of any local government, at the 24
expense of the requesting local government, which shall be paid in advance 25
by the local government to the Department of Insurance, the Department of 26
Insurance shall audit, or cause to be audited by contract with qualifie d 27
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auditors, the books or records of the insurance companies or agents subject to 1
the fee or tax to determine whether the fee or tax is being properly collected 2
and remitted, and the findings of the audit shall be reported to the local 3
government and the in surance company subject to the audit. An insurance 4
company may appeal the findings of the audit conducted under this subsection 5
and any assessment issued pursuant to the audit findings in accordance with 6
the provisions of KRS 91A.0804(5). 7
(b) Willful failure to properly collect and remit the fee or tax imposed by a local 8
government pursuant to the authority granted by this section shall constitute 9
grounds for the revocation of the license issued to an insurance company or 10
agent under the provisions of KRS Chapter 304. 11
(c) If the Department of Insurance finds that an insurance company has willfully 12
engaged in a pattern of business conduct that fails to properly collect and 13
remit the fee or tax imposed by a local government pursuant to the authority 14
granted by this section, the Department of Insurance may assess the 15
responsible insurance company an appropriate penalty fee no greater than ten 16
percent (10%) of the additional license fees or taxes determined to be owed to 17
the local government. The penalty fee shal l be paid to the local government 18
owed the license fee or tax less any administrative costs of the Department of 19
Insurance in enforcing this section. Any insurance company or agent held 20
responsible for a penalty fee may request a hearing with the Departmen t of 21
Insurance to be conducted pursuant to KRS 304.2 -310 to 304.2-370 regarding 22
the finding of a willful violation and the subsequent penalty fee. 23
(8) The license fees or taxes provided for by subsections (2) and (3) of this section shall 24
be due thirty (30 ) days after the end of each calendar quarter. Annually, by March 25
31, each insurance company shall furnish each local government to which the tax or 26
fee is remitted with a breakdown of all collections in the preceding calendar year 27
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for the following categories of insurance: 1
(a) Casualty; 2
(b) Automobile; 3
(c) Inland marine; 4
(d) Fire and allied perils; 5
(e) Health; and 6
(f) Life. 7
(9) Any license fee or tax not paid on or before the due date shall bear interest at the tax 8
interest rate as defined in KRS 131.010(6 ) from the date due until paid. Such 9
interest payable to the local government is separate of penalties provided for in 10
subsection (7) of this section. In addition, the local government may assess a ten 11
percent (10%) penalty for a tax or fee not paid within thirty (30) days after the due 12
date. 13
(10) No license fee or tax imposed under this section shall apply to premiums: 14
(a) Received on policies of group health insurance provided for state employees 15
under KRS 18A.225; 16
(b) Received on policies insuring employ ers against liability for personal injuries 17
to their employees or the death of their employees caused thereby, under the 18
provisions of KRS Chapter 342; 19
(c) Received on health insurance policies issued to individuals; 20
(d) Received on large group health insurance policies newly offered in the large 21
group market on or after January 1, 2027; 22
(e) Received on policies issued through Kentucky Access created in Subtitle 17B 23
of KRS Chapter 304; 24
(f)[(e)] Received on policies for high deductible health plans as define d in 26 25
U.S.C. sec. 223(c)(2); 26
(g)[(f)] Received on multistate surplus lines, defined as non -admitted insurance 27
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as provided in Title V, Subtitle B, the Non-Admitted and Reinsurance Reform 1
Act of 2010, of the Dodd-Frank Wall Street Reform and Consumer Protection 2
Act, Pub. L. No. 111-203; 3
(h)[(g)] Paid to insurance companies or surplus lines brokers by nonprofit self -4
insurance groups or self -insurance entities whose membership consists of 5
school districts; or 6
(i)[(h)] Paid to insurance companies or surplus li nes brokers by nonprofit self -7
insurance groups or self -insurance entities whose membership consists of 8
cities, counties, charter county governments, urban -county governments, 9
consolidated local governments, unified local governments, school districts, 10
or any other political subdivisions of the Commonwealth. 11
(11) No county may impose the tax authorized by this section upon the premiums 12
received on policies issued to public service companies which pay ad valorem 13
taxes. 14
(12) Insurance companies which pay licen se fees or taxes pursuant to this section shall 15
credit city license fees or taxes against the same license fees or taxes levied by the 16
county, when the license fees or taxes are levied by the county on or after July 13, 17
1990. For purposes of this subsectio n, a consolidated local government, urban -18
county government, charter county government, or unified local government shall 19
be considered a county. 20
(13) No license fee or tax imposed under this section shall apply to premiums paid to 21
insurers of municipal bonds, leases, or other debt instruments issued by or on behalf 22
of a city, county, charter county government, urban -county government, 23
consolidated local government, special district, nonprofit corporation, or other 24
political subdivision of the Commonwealth. However, this exemption shall not 25
apply if the bonds, leases, or other debt instruments are issued for profit or on 26
behalf of for-profit or private organizations. 27
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(14) A county may impose a license fee or tax covering the entire county or may limit 1
the application of the fee or tax to the unincorporated portions of the county. 2