Senate committee substitute makes the following changes to the 1st edition.

Amends GS 135-48.1 (General definitions concerning the State Health Plan for Teachers and State Employees) to define authorized representatives who are assisting the State Health Plan Division staff to mean staff of the Department of the State Treasurer, staff of the Department of Justice, or persons providing internal auditing assistance required under GS 143-746(b). Makes conforming organizational changes.

Enacts GS 135-48.16, Fraud detection and audit programs.

Subsection (a) establishes that the State Health Plan, or authorized representatives who are assisting the State Health Plan Division staff, in the course of conducting an investigation or an audit under GS 135-48.30(a)(9), are to have ready access to: (1) persons, books, records, reports, vouchers, correspondence, files, personnel files, investments, and any other documentation of any employing unit, with the Plan having the authority to both examine and make copies of the described information, but limiting the review of State tax returns to matters of official business, and prohibiting the Plan's report from violating the confidentiality provisions of the tax laws and (2) persons, records, papers, reports, vouchers, correspondence, books, and any other documentation that is in the possession of any individual, private corporation, institution, association, board, or other organization that pertain to any benefits received, disbursed, or otherwise handled pursuant to a grant or contract from the federal government, the State, or its political subdivisions, and requiring providers of social and medical services to a beneficiary to make copies of records they maintain for services provided to the beneficiary. 

Subsection (b) requires providers of social and medical services who provide ready access to the Plan under subdivision (2) of subsection (a) to make copies of records they maintain for services provided to a beneficiary available to the Plan or to the authorized representatives who are assisting the State Health Plan Division staff. Directs the Plan, or authorized representatives who are assisting the State Health Plan Division staff, to request records in writing by providing the name of each beneficiary from whom records are sought, the purpose of the request, the authority for the request, and a reasonable period of time for the production of record copies by the provider. Authorizes a provider to charge, and the Plan or authorized representatives who are assisting the State Health Plan Division staff must, in accordance with GS 90‑411, pay a reasonable fee to the provider for copies of the records provided.

Subsection (c) directs the Plan to maintain for 10 years a complete file of all compliance investigative reports, fraud investigative reports, and reports of other examinations, investigations, surveys, and reviews issued under the Plan's authority under GS 135-48.30(a)(9). Directs fraud or compliance investigation work papers and other evidence or related supportive material directly pertaining to the work of the State Health Plan Division of the Department of State Treasurer be retained according to an agreement between the Plan and State Archives. Provides that pertinent work papers and other supportive material relating to issued fraud or compliance investigation reports can be, at the discretion of the Executive Administrator of the Plan, and unless otherwise prohibited by law, made available for inspection by duly authorized representatives of the State and federal government who desire access to, and inspection of, those records in connection with some matter officially before them, including criminal investigations. Requires fraud investigation work papers and related supportive material to be kept confidential, including any information developed as a part of the investigation, except as provided in the statute, or upon an order issued in Wake County Superior Court upon 10 days' notice and a hearing finding that access is necessary to a proper administration of justice.

Amends GS 105-259(b) to allow specified tax information to be disclosed for the purpose of furnishing the Department of State Treasurer with information it requests related to an investigation or audit under GS 135-48.30(a)(9) or in accordance with GS 135-48.16 as enacted. Requires disclosure under this provision to be permitted by section 6103 of the Internal Revenue Code.

Directs the Department of Revenue and the Department of the State Treasurer to enter into a confidential sharing agreement settling data protocols, required security measures, audit mechanisms, and the like, so that the two can develop and implement the information exchange authorized by the act. Requires the departments to enter into the confidential information sharing agreement by June 30, 2018.

Adds a new subsection to GS 135-48.41 (Additional eligibility provisions). Provides that a retiree covered under GS 148-19 (health services for prisoners) that is serving an active sentence in the State prison system cannot be eligible for retiree coverage under GS 135-48.40(a)(1), GS 135-48.40(b)(3), GS 135-48.40(c)(2), or GS 135-48.40(d)(11).