Bill Summary for S 808 (2019-2020)

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Summary date: 

May 20 2020

Bill Information:

View NCGA Bill Details2019-2020 Session
Senate Bill 808 (Public) Filed Tuesday, May 19, 2020
Intro. by Brown, Harrington, B. Jackson.

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Bill summary

Part I

Reenacts and incorporates by reference the State Budget Act, GS Chapter 143C.

Deems departmental receipts appropriated for the 2020-21 fiscal year to implement the act.

Provides for the continued validity of 2019 legislation appropriating funds to State entities covered by the act unless expressly repealed or amended.

Part II

Amends Section 3 of SL 2015-245, as amended, to require capitated contracts to begin no later than January 1, 2021 (was, begin eighteen months after the date that CMS approves the 1115 demonstration waiver request submitted as required by the act on June 1, 2016). Makes conforming changes.

Part III

Appropriates from the General Fund to the Department of Health and Human Services (DHHS), Division of Health Benefits (DHB), (1) an amount sufficient in recurring funds for 2020-21 to be used for the Medicaid and NC Health Choice programs rebase and (2) an amount sufficient in recurring funds for 2020-21 for contracts, personnel, and projects relating to transitioning to Medicaid managed care.

Part IV

Requires the State Controller to transfer a sufficient sum for the nonrecurring Medicaid transformation needs in the 2020-21 fiscal year from funds in the Medicaid Transformation Reserve to the Medicaid Transformation Fund (Transformation Fund).

Allows funds from the Transformation Fund to be transferred to DHB to pay claims related to services billed under the fee-for-service payment model for recipients being transferred to managed care. Allows funds to be transferred to DHB as the need arises instead of a lump sum. 

Allows nonrecurring funds for 2020-21 from the Transformation Fund to be transferred to DHB to provide the State share for nonrecurring qualifying needs directly related to Medicaid transformation. Limits qualifying need to information technology, time-limited staffing, and contracts related to the seven specified Medicaid transformation needs. Allows funds to be transferred as the need arises instead of a lump sum.

Sets out the process under which DHB is to request the transfer of funds. Requires the Office of State Budget and Management to verify that (1) the requested amount is to be used for a nonrecurring qualifying need in the 2020-21 fiscal year and (2) the requested amount provides a State share that will not result in a total requirement exceeding $140 million in nonrecurring funds for 2020-21 fiscal year.

Requires any federal funds received in any fiscal year by DHB that represents a return of State share already expended on a qualifying need be deposited into the Transformation Fund. 

Part V

Repeals Section 12H.12(b) of SL 2014-100 (which replaced the individualized base rates for hospital inpatient services under the Medicaid and NC Health Choice programs with a specified single statewide base rate for hospital inpatient services) and Section 12H.23 of SL 2015-241, as amended (which prohibited Medicaid providers from receiving reimbursement for Graduate Medical Education (GME) in addition to their DRG Unit Value rate).

Part VI

Requires DHHS to ensure that the existing DHHS Customer Service hotline is responsive to questions posed by beneficiaries, providers, or the general public related to the rollout of Medicaid Transformation.

Part VII

Allows DHHS to contract with an Indian managed care entity (IMCE) or Indian health care provider (IHCP) to assist in providing health care or related services to Medicaid or NC Health Choice beneficiaries who are members of federally recognized tribes or eligible to enroll in an IMCE. Sets out requirements for such contracts, including examples of allowable services. Allows coverage provided by the IMCE or IHCP to be more permissive, but no more restrictive, than Medicaid or NC Health Choice coverage policies adopted or amended by DHHS; however, requires coverage to be in compliance with federal law.

Amends GS 108D-40 to exclude from required coverage by capitated PHP contracts eligible recipients enrolled in a DHHS contracted Indian managed care entity. Makes conforming changes to GS 122C-115. Authorizes DHHS to seek approval from CMS and submit any necessary State Plan Amendments and waivers, or any amendments thereto, to implement this section.


Requires DHHS to revise the supplemental payment program for eligible medical providers. Effective January 1, 2021, the following two changes to the program must be implemented: (1) the program must no longer utilize a limit on the number of eligible medical professional providers that may be reimbursed through the program, and must instead use a limit on the total payments made under the program and (2) payments under the program must consist of supplemental payments that increase reimbursement to the average commercial rate under the State Plan and directed payments that increase reimbursement to the average commercial rate under the managed care system.

Requires that the limitation on total payments made under the Average Commercial Rate Supplemental and Directed Payment Program for eligible medical professional providers apply to the combined amount of payments made as supplemental payments under the State Plan and payments made as directed payments under the managed care system and must be based on the amount of supplemental payments made during the 2018-2019 fiscal year as specified depending on when services were provided. 

Requires DHHS to limit the total amount of supplemental and directed payments that may be received by the eligible providers affiliated with East Carolina University Brody School of Medicine and the University of North Carolina at Chapel Hill Health Care System. Provides that average commercial  rate supplemental payments and directed payments must not be made for services provided in Wake County. 

Prohibits DHHS from making any modifications to the supplement program except as authorized.

Repeals Section 12H.13(e) of SL 2013-360, which reduced the percentage of allowable costs for hospital payments from 80% to 70%, and Sections 12H.13(b) and 12H.13A of SL 2014-100, which set the settlement for outpatient Medicaid services performed by UNC Hospitals and Vidant Medical Center at 70% of costs. Effective January 1, 2021.

Part IX

Enacts GS 143C-4-11, establishing the Medicaid Contingency Reserve to be used for budget shortfalls in Medicaid or NC Health Choice programs. Sets forth three criteria that must be met in order for funds from the Medicaid Contingency Reserve Fund to be allocated or expended, including a legislative appropriation, verification of appropriate use of receipts by the State Controller, and immediate reporting of the shortfall by the Director of Budget to the Fiscal Research Division, as specified. Specifies that gubernatorial authority is not limited by the statute.

Part X

Repeals Article 7 of GS Chapter 108A, Hospital Provider Assessment Act, effective January 1, 2021. Provides a savings clause for the rights and liabilities of the State, a hospital subject to the equity or UPL assessment, or any other person arising under a statute repealed or the modified directives, below, regarding assessments and payments due before the effective date of its repeal.

Makes the following modifications to the specified assessments and payments required under Article 7 of GS Chapter 108A due prior to the Article'a repeal. For the annual period beginning October 1, 2020, requires calculation of the equity payment amount and the UPL payment amount required by GS 108A-124 to exclude services rendered after December 31, 2020. Authorizes the Department Secretary, in order to account for these partial-year payment amounts, to adjust the quarterly equity payments and UPL payments required by GS 108A-124, and also make necessary adjustments to the equity assessment percentage rate, the UPL assessment percentage rate, any quarterly equity assessment, and any UPL assessment required under GS 108A-122 and GS 108A-123.

Effective January 1, 2021, enacts new Article 7A, Hospital Assessment Act, in GS Chapter 108A, providing as follows. 

Provides that the assessments apply to all licensed North Carolina hospitals, except exempts from the supplemental assessment and the base assessment critical access hospitals, freestanding psychiatric hospitals, freestanding rehabilitation hospitals, long-term care hospitals, state-owned and state-operated hospitals, and the primary affiliated teaching hospital for each UNC medical school. Exempts public hospitals from the supplemental assessment.

Requires both the base and supplemental assessments to be a percentage, established by the NCGA, of total hospital costs. Requires the Department's proposed supplemental assessment rate to be based on: (1) the percentage change in aggregate payments to hospitals subject to the supplemental assessment for Medicaid and NC Health Choice enrollees, excluding hospital access payments made under 42 CFR § 438.6 and (2) any changes in the federal medical assistance percentage rate applicable to the Medicaid or NC Health Choice programs for the applicable year. Requires the proposed base assessment rate to be based on: (1) the change in the State's annual Medicaid payment for the applicable year; (2) the percentage change in aggregate payments to hospitals subject to the base assessment for Medicaid and NC Health Choice enrollees, excluding hospital access payments made under 42 CFR § 438.6, as determined by the Department; (3) any changes in the federal medical assistance percentage rate applicable to the Medicaid or NC Health Choice programs for the applicable year; and (4) any changes, as determined by the Department, in reimbursement under the Medicaid State Plan, managed care payments authorized under 42 CFR § 438.6, for which the nonfederal share is not funded by General Fund appropriations, and reimbursement under the NC Health Choice program. Provides that assessments are due quarterly. Allows a hospital to appeal a determination of the assessment amount owed through a reconsideration review. Provides that if the Centers for Medicare and Medicaid Services (CMS) determines that an assessment is impermissible or revokes approval of an assessment, then that assessment must not be imposed and the Department's authority to collect the assessment is repealed.

Provides that if a hospital exempt from both the base and supplemental assessments under this Part (1) makes an intergovernmental transfer to the Department to be used to draw down matching federal funds and (2) has acquired, merged, leased, or managed another hospital on or after March 25, 2011, then the exempt hospital must transfer an additional amount to the State. Sets out the formulas for calculating that amount, beginning October 1, 2021, and for the period beginning January 1, 2021, and ending September 30, 2021.

Requires that the proceeds of the assessments imposed under this Part, and all corresponding matching federal funds, must be used to make the State's annual Medicaid payment to the State, to fund payments to hospitals made directly by the Department, to fund a portion of capitation payments to prepaid health plans attributable to hospital care, and to fund the nonfederal share of graduate medical education payments.

Requires total hospital costs to be calculated based on the Hospital Cost Report Information System's 2016 cost report data available through CMS for the taxable year October 1, 2020, through September 30, 2021.

Sets the base and supplemental assessment percentage rates to be used pursuant to new GS 108A-142 and GS 108A-141 for the taxable year October 1, 2020, through September 30, 2021, at a base assessment rate of 1.77% and a supplemental assessment rate of 2.26%. Restricts imposition of the base assessment rate and the supplemental assessment rate to the months beginning on or after January 1, 2021, with the assessment imposed from the period January 1, 2021, through September 30, 2021, to be 3/4 of the assessment amount that would have been imposed for the full taxable year.

Directs the State Controller to transfer funds from the Medicaid Contingency Reserve to the Division of Health Benefits only upon request by the Division as needed to cover any shortfall of receipts from the supplemental or base assessments under new GS 108A-141 and GS 108A-142, and only if two conditions are met: (1) OSBM has certified that there will be a shortfall and (2) OSBM has certified that the amount requested does not exceed the shortfall in receipts certified. Requires the Division of Health Benefits to notify the specified NCGA committee and division of any request and the amount requested. Deems transferred funds appropriated. Sunsets this authority June 30, 2021.

Part XI

Makes the following changes to Article 8B of GS Chapter 105, retitling the article Taxes Upon Insurance Companies and Prepaid Health Plans.

Adds capitation payment and prepaid health plan to the defined terms set out in GS 105-228.3. Makes organizational changes.

Amends GS 105-228.5, expanding the gross premium tax to subject prepaid health plans to a 1.9% gross premium tax, measured by capitation payments received by the prepaid health plan (PHP) by the Department of Health and Human Services for services provided to enrollees in the State Medicaid program or NC Health Choice program in the preceding calendar year. Makes conforming additions concerning calculating the tax base of PHPs. Provides that capitation payments refunded by a PHP to the State are the only allowable deductions. Adds clarification to the exclusion of Medicaid premiums, providing that the exclusion includes Medicaid or NC Health Choice premiums other than capitation payments, paid by or on behalf of a Medicaid or NC Health Choice beneficiary. Requires the net proceeds of the tax to be credited to the General Fund. Makes further technical and clarifying changes. 

Amends GS 58-6-25 (concerning the insurance regulatory charge) by amending the definition of insurance company as it is used in the statute to include prepaid health plans that pay the gross premiums tax.

Amends GS 105-259 to authorize disclosure of tax information by State officers, agents, or employees in order to exchange information concerning a tax imposed upon insurance companies by Article 8B with the Department when needed to fulfill the Department of Revenue's duty.

Effective 30 days after the date the act becomes law and applies to all capitation payments received by prepaid health plans on or after that date.

Part XII

Enacts GS 143C-9-9, establishing the Hospital Uncompensated Care Fund as a nonreverting special fund in DHHS consisting of the federal disproportionate share adjustment receipts arising from certified public expenditures. Authorizes DHHS to use funds from the Fund to make the following payments, provided that the entity receiving payment has been determined to be an eligible entity under Department rules: (1) to institutions for mental diseases, as defined by federal law and (2) to eligible hospitals to reimburse inpatient services uncompensated care costs or outpatient services uncompensated care costs, or both. Requires DHHS to adopt rules for determining eligibility for, and allocations of, Hospital Uncompensated Care Fund payments. 


States the NCGA's intent to amend Section 2.3(b) of SL 2019-242 to reflect changes to the handling of nontax revenue in the NC Medicaid program in a managed care environment.

Part XIV

Effective when the act becomes law, unless otherwise provided.