SB2880(As Sent to Governor) - 1997 Regular Session

MISSISSIPPI LEGISLATURE

1997 Regular Session

To: Insurance

By: Senator(s) Kirby

Senate Bill 2880
(As Sent to Governor)

AN ACT TO AMEND SECTIONS 25-15-9 AND 25-15-255, MISSISSIPPI CODE OF 1972, TO DELETE THE REPEALER ON THE PROVISIONS OF LAW AUTHORIZING MEDICAL SAVINGS ACCOUNTS FOR STATE AND PUBLIC SCHOOL EMPLOYEES; TO AMEND SECTION 25-15-9, MISSISSIPPI CODE OF 1972, TO DELETE THE REQUIREMENT THAT STATE EMPLOYEE LIFE INSURANCE POLICY AMOUNTS BE ADJUSTED ON THE POLICY ANNIVERSARY DATE FOLLOWING ANY SALARY ADJUSTMENT; TO REENACT SECTIONS 71-9-1 THROUGH 71-9-9, MISSISSIPPI CODE OF 1972, WHICH PROVIDE FOR THE MEDICAL SAVINGS ACCOUNT ACT; TO AMEND SECTION 71-9-3, MISSISSIPPI CODE OF 1972, TO REVISE THE DEFINITION OF THE TERMS "HIGHER DEDUCTIBLE" AND "QUALIFIED HIGHER DEDUCTIBLE HEALTH PLAN"; TO AMEND SECTION 27-7-15, MISSISSIPPI CODE OF 1972, TO DELETE THE REPEALER ON THE EXEMPTION OF CERTAIN DEPOSITS IN A MEDICAL SAVINGS ACCOUNT FROM "GROSS INCOME" AND TO PROVIDE THAT CERTAIN AMOUNTS PAID BY THE MISSISSIPPI SOIL AND WATER CONSERVATION COMMISSION FROM THE MISSISSIPPI SOIL AND WATER COST-SHARE PROGRAM SHALL BE EXEMPT FROM "GROSS INCOME"; TO AMEND SECTION 7, CHAPTER 468, GENERAL LAWS OF 1994, TO DELETE THE REPEALER ON THE MEDICAL SAVINGS ACCOUNT ACT; TO CREATE NEW SECTION 25-15-303, MISSISSIPPI CODE OF 1972, TO CREATE A STATE AND PUBLIC SCHOOL EMPLOYEES HEALTH INSURANCE MANAGEMENT BOARD; TO DEFINE THE BOARD'S DUTIES AND MEMBERSHIP; TO PROVIDE FOR THE SELECTION OF A STATE INSURANCE ADMINISTRATOR AND DEPUTY ADMINISTRATOR; TO REQUIRE THE DEPARTMENT OF FINANCE AND ADMINISTRATION TO PROVIDE STAFFING TO THE BOARD; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. Section 25-15-9, Mississippi Code of 1972, is amended as follows:

25-15-9. (1)(a) The department shall design a plan of health insurance for state employees which provides benefits for semiprivate rooms in addition to other incidental coverages which the department deems necessary. The amount of the coverages shall be in such reasonable amount as may be determined by the department to be adequate, after due consideration of current health costs in Mississippi. The plan shall also include major medical benefits in such amounts as the department shall determine. The department is also authorized to accept bids for such alternate coverage and optional benefits as the department shall deem proper. The department may employ or contract for such consulting or actuarial services as may be necessary to formulate the State Employees Health Insurance Plan, and to assist the department in the preparation of specifications and in the process of advertising for the bids for the plan. The department is authorized to promulgate rules and regulations to implement the provisions of this subsection.

The department shall develop plans for the insurance plan authorized by this section in accordance with the provisions of Section 25-15-5.

(b) There is created an advisory council to advise the department in the formulation of the State Employees Health Insurance Plan. The council shall be composed of the State Insurance Commissioner or his designee, an employee-representative of the institutions of higher learning appointed by the board of trustees thereof, an employee-representative of the Department of Transportation appointed by the director thereof, an employee-representative of the State Tax Commission appointed by the Commissioner of Revenue, an employee-representative of the Mississippi Department of Health appointed by the State Health Officer, an employee-representative of the Mississippi Department of Corrections appointed by the Commissioner of Corrections, and an employee-representative of the Department of Human Services appointed by the Executive Director of Human Services.

The Lieutenant Governor may designate the Secretary of the Senate, the Chairman of the Senate Appropriations Committee and the Chairman of the Senate Insurance Committee, and the Speaker of the House of Representatives may designate the Clerk of the House, the Chairman of the House Appropriations Committee and the Chairman of the House Insurance Committee, to attend any meeting of the State Employees Insurance Advisory Council. The appointing authorities may designate an alternate member from their respective houses to serve when the regular designee is unable to attend such meetings of the council. Such designees shall have no jurisdiction or vote on any matter within the jurisdiction of the council. For attending meetings of the council, such legislators shall receive per diem and expenses which shall be paid from the contingent expense funds of their respective houses in the same amounts as provided for committee meetings when the Legislature is not in session; however, no per diem and expenses for attending meetings of the council will be paid while the Legislature is in session. No per diem and expenses will be paid except for attending meetings of the council without prior approval of the proper committee in their respective houses.

(c) No change in the terms of the State Employees Health Insurance Plan may be made effective unless the Executive Director of the Department of Finance and Administration, or his designee, has provided notice to the State Employees Health Insurance Advisory Council and has called a meeting of the council at least fifteen (15) days before the effective date of such change. In the event that the State Employees Health Insurance Council does not meet to advise the department on the proposed changes, the changes to the plan shall become effective at such time as the department has informed the council that the changes shall become effective.

(d) Medical benefits for retired employees and dependents under age sixty-five (65) years. The same health insurance coverage as for all other active employees and their dependents shall be available to retired employees and all dependents under age sixty-five (65) years, the level of benefits to be the same level as for all other active participants. This section will apply to those employees who retire due to one hundred percent (100%) medical disability as well as those employees electing early retirement.

(e) Medical benefits for retired employees over age sixty-five (65) years. The health insurance coverage available to retired employees over age sixty-five (65) years, and all dependents over age sixty-five (65) years, shall be the major medical coverage with the lifetime maximum of One Million Dollars ($1,000,000.00). Benefits shall be reduced by Medicare benefits as though such Medicare benefits were the base plan.

All covered individuals shall be assumed to have full Medicare coverage, Parts A and B; and any Medicare payments under both Parts A and B shall be computed to reduce benefits payable under this plan.

(2) Nonduplication of benefits--reduction of benefits by Title XIX benefits: When benefits would be payable under more than one (1) group plan, benefits under those plans will be coordinated to the extent that the total benefits under all plans will not exceed the total expenses incurred.

Benefits for hospital or surgical or medical benefits shall be reduced by any similar benefits payable in accordance with Title XIX of the Social Security Act or under any amendments thereto, or any implementing legislation.

Benefits for hospital or surgical or medical benefits shall be reduced by any similar benefits payable by workers' compensation. (3) Schedule of life insurance benefits--group term: The amount of term life insurance for each active employee shall not be in excess of One Hundred Thousand Dollars ($100,000.00), or twice the amount of the employee's annual wage to the next highest One Thousand Dollars ($1,000.00), whichever may be less, but in no case less than Thirty Thousand Dollars ($30,000.00), with a like amount for accidental death and dismemberment on a twenty-four-hour basis. * * * The plan will further contain a premium waiver provision if a covered employee becomes totally and permanently disabled prior to age sixty-five (65) years. Retired employees shall be eligible to continue life insurance coverage in an amount of Two Thousand Dollars ($2,000.00), Four Thousand Dollars ($4,000.00) or Ten Thousand Dollars ($10,000.00) into retirement. The Department of Finance and Administration shall prepare a report to the Legislative Budget Office on or before October 1, 1995, recommending any changes to the maximum group life coverages applicable to retired employees prescribed herein, and providing options as to any expected additional costs associated with increasing such benefits.

(4) Any eligible employee who on March 1, 1971, was participating in a group life insurance program which has provisions different from those included herein and for which the State of Mississippi was paying a part of the premium may, at his discretion, continue to participate in such plan. Such employee shall pay in full all additional costs, if any, above the minimum program established by this article. Under no circumstances shall any individual who begins employment with the state after March 1, 1971, be eligible for the provisions of this paragraph.

(5) Any participant of the State Employees Health Insurance Plan who otherwise would lose coverage and who would be eligible as a dependent under an existing Public School Employees Health Insurance Plan contract may transfer to the Public School Employees Health Insurance Plan as a dependent under the existing contract. Any participant of the Public School Employees Health Insurance Plan who otherwise would lose coverage and who would be eligible as a dependent under an existing State Employees Health Insurance Plan contract may transfer to the State Employees Health Insurance Plan as a dependent under the existing contract. A transfer pursuant to this subsection must occur within thirty-one (31) days of losing coverage. Credit shall be given for any deductible amount satisfied, out-of-pocket expenses and time served toward the twelve-month pre-existing waiting period.

(6) If both spouses are eligible employees who participate in the plan, the benefits shall apply individually to each spouse by virtue of his or her participation in the plan. If those spouses also have one or more eligible dependents participating in the plan, the cost of their dependents shall be calculated at a special family plan rate. The cost for participation by the dependents shall be paid by the spouse who elects to carry such dependents under his or her coverage. The special family plan rate shall also apply if the state employee's spouse is a covered eligible employee under the Public School Employees Health Insurance Plan.

(7)(a) The department may offer medical savings accounts as defined in Section 71-9-3 as a plan option. Provided, however, that prior to offering such accounts as a plan option, the Department of Finance and Administration shall prepare and present to the Senate and House Insurance Committees by December 15, 1996, a comprehensive study of medical savings accounts to include a proposed implementation timetable and potential actuarial effects of such accounts on the existing state employee health plan. The department's study shall also include, but not be limited to, recommended employer contribution levels, recommended employee contribution levels, recommendations on annual rollover of balances or withdrawals for nonmedical purposes, and recommendations on medical coverage for persons who expend their account balances. The department shall use existing staff resources and those of other agencies to conduct this study. In no case shall the department employ a consultant or contractor other than an actuary to conduct this study. No later than July 15, 1996, the Department of Finance and Administration shall meet with the staff of the PEER Committee and the Legislative Budget Office to receive recommendations on the issues and methods which the department shall consider in preparing its report. No later than October 15, 1996, the Department of Finance and Administration shall submit a copy of its draft report to the PEER Committee and the Legislative Budget Office which shall analyze the report and prepare comments for publication in the final report to be submitted to the House and Senate Insurance Committees on December 15, 1996.

(b) In no case shall the department offer medical savings accounts as an option to health plan participants prior to January 1, 1998.

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(8) Any premium differentials, differences in coverages, discounts determined by risk or by any other factors shall be uniformly applied to all active employees participating in the insurance plan. It is the intent of the Legislature that the state contribution to the plan be the same for each employee throughout the state.

SECTION 2. Section 25-15-255, Mississippi Code of 1972, is amended as follows:

25-15-255. (1)(a) The Department of Finance and Administration shall design a plan of health insurance for employees which provides benefits for semiprivate rooms in addition to other incidental coverages which the department deems necessary.

The amount of the coverages shall be in such reasonable amount as may be determined by the department to be adequate, after due consideration of current health costs in Mississippi. The plan shall also include major medical benefits in such amounts as the department shall determine. The department is also authorized to accept bids for alternate coverage and optional benefits. Any contract for alternative coverage and optional benefits shall be awarded by the department after it has carefully studied and evaluated the bids and selected the best and most cost-effective bid. The department may reject all such bids; however, the department shall notify all bidders of the rejection and shall actively solicit new bids if all bids are rejected.

It is the intent of the Legislature that coverage under this plan may be self-insured by the State of Mississippi and the same as coverage provided state employees under the Public Employees Health Insurance Plan created in Section 25-15-3 et seq. The department may contract the administration and service of the self-insured program to a third party; however, before executing any contract, the department shall actively solicit bids for the administration and service of the program.

The department shall conduct the solicitation and contracting process in strict accordance with Section 1, Ch. 554, Laws of 1995; [See Editor's note to Sections 25-15-5 and 25-15-225].

Beginning on January 1, 1996, any contract entered into between the department for the administration and/or service of the self-insured plan and a third party shall be for the calendar year that begins on the first day of January and expires on the following thirty-first day of December.

The department may employ or contract for such consulting or actuarial services as may be necessary to formulate the Public School Employees Health Insurance Plan, and to assist the department in the preparation of specifications and in the process of advertising for the bids for the plan. Such contracts shall be solicited and entered into in accordance with Section 25-15-5. The department shall keep a record of all persons, agents and corporations who contract with or assist the department in preparing and developing the plan. The department, in a timely manner, shall provide copies of this record to the members of the advisory council created in paragraph (b) of this subsection and those legislators, or their designees, who may attend meetings of the advisory council. The department shall provide copies of this record in the solicitation of bids for the administration and servicing of the self-insured program. Each person, agent or corporation which, during the previous fiscal year, has assisted in the development of the plan or employed or compensated any person who assisted in the development of the plan, and which bids on the administration or servicing of the plan, shall submit to the department a statement accompanying the bid explaining in detail its participation with the development of the plan. This statement shall include the amount of compensation paid by the bidder to any such employee during the previous fiscal year. The department shall make all such information available to the members of the advisory council and those legislators, or their designees, who may attend meetings of the advisory council before any action is taken by the department on the bids submitted. The failure of any bidder to fully and accurately comply with this paragraph shall result in the rejection of any bid submitted by that bidder or the cancellation of any contract executed when the failure is discovered after the acceptance of that bid.

The department is authorized to promulgate rules and regulations to implement the provisions of this subsection. After expiration or termination of the contract between the state and the administering corporation existing immediately before the date on which the plan becomes self-insured by the State of Mississippi, the remainder of funds in the Premium Stabilization Fund shall revert to the Public School Employees Insurance Fund and shall be used exclusively for payment of future premiums.

Any corporation, association, company or individual that contracts with the department for the third-party claims administration of the self-insured plan shall prepare and keep on file an explanation of benefits for each claim processed. The explanation of benefits shall contain such information relative to each processed claim which the department deems necessary, and at a minimum, each explanation shall provide the claimant's name, claim number, provider number, provider name, service dates, type of services, amount of charges, amount allowed to the claimant and reason codes.

The information contained in the explanation of benefits shall be available for inspection upon request by the department. The department shall have access to all claims information utilized in the issuance of payments to employees and providers. Any corporation, association, company or individual that contracts with the department for the administration and/or service of the self-insured plan shall remit one hundred percent (100%) of all savings or discounts resulting from any contract to the department and/or participant. Any corporation, association, company or individual that contracts with the department for the administration and/or service of the self-insured plan shall allow, upon notice by the department, the department or its designee to audit records of the corporation, association, company or individual relative to the corporation, association, company or individual's performance under any contract with the department. The information maintained by any corporation, association, company or individual, relating to such contracts, shall be available for inspection upon request by the department and such information shall be compiled in a manner that will provide a clear audit trail.

(b) There is created an advisory council to the department to advise the department in the formulation of the Public School Employees Health Insurance Plan. The advisory council and those legislators, or their designees, authorized to attend meetings of the advisory council pursuant to this subsection shall be informed in a timely manner concerning each aspect of the formulation and development of the plan. No change in the terms of the Public School Employees Health Insurance Plan may be made effective unless the Executive Director of the Department of Finance and Administration, or his designee, has provided notice to the Public School Employees Health Insurance Advisory Council and has called a meeting of the council at least fifteen (15) days before the effective date of such change. In the event that the Public School Employees Health Insurance Advisory Council does not meet to advise the department on the proposed changes, the changes to the plan shall become effective at such times as the department has informed the council that the changes shall become effective.

The council shall be composed of the State Insurance Commissioner or his designee, two (2) certificated public school administrators appointed by the State Board of Education, two (2) certificated classroom teachers appointed by the State Board of Education, a noncertificated school employee appointed by the State Board of Education, and a community/junior college employee appointed by the State Board for Community and Junior Colleges. Members of the council shall serve at the will and pleasure of the appointing authorities; however, no member shall serve for a period of less than one (1) year. The members of the council shall serve without compensation, per diem or expense reimbursement.

The Chairman of the Senate Insurance Committee, the Chairman of the Senate Education Committee, the Chairman of the House of Representatives Insurance Committee and the Chairman of the House of Representatives Education Committee, and/or their designees from their respective houses, may attend any meeting of the advisory council. The legislators, or their designees, shall have no jurisdiction or vote on any matter within the jurisdiction of the council. For attending meetings of the council, the legislators shall receive per diem and expenses which shall be paid from the contingent expense funds of their respective houses in the same amounts as provided for committee meetings when the Legislature is not in session; however, no per diem and expenses for attending meetings of the council will be paid while the Legislature is in session. No per diem and expenses will be paid except for attending meetings of the council without prior approval of the proper committee in their respective houses.

(c) Medical benefits for retired employees and dependents under age sixty-five (65) years. The same health insurance coverage as for all other active employees and their dependents shall be available to retired employees and all dependents under age sixty-five (65) years, the level of benefits to be the same level as for all other active participants. This section will apply to those employees who retire due to one hundred percent (100%) medical disability as well as those employees electing early retirement.

(d) Medical benefits for retired employees over age sixty-five (65). The health insurance coverage available to retired employees over age sixty-five (65) years, and all dependents over age sixty-five (65) years, shall be the major medical coverage with the lifetime maximum of One Million Dollars ($1,000,000.00). Benefits shall be reduced by Medicare benefits as though such Medicare benefits were the base plan.

(2) Nonduplication of benefits-reduction of benefits by Title XIX benefits. When benefits would be payable under more than one group plan, benefits under those plans will be coordinated to the extent that the total benefits under all plans will not exceed the total expenses incurred.

Benefits for hospital or surgical or medical benefits shall be reduced by any similar benefits payable by workers' compensation.

(3) The department is hereby authorized to determine the manner in which premiums and contributions by the state and local school districts shall be collected to provide the self-insured health insurance program for school employees and community/junior college employees as provided under this article.

(4) Any premium differentials, differences in coverages, discounts determined by risk or by any other factors shall be uniformly applied to all active employees participating in the insurance plan. It is the intent of the Legislature that the state contribution to the plan be the same for each employee throughout the state.

(6) The Department of Finance and Administration shall annually report to the Joint Legislative Budget Committee the condition of the Public School Employees Health Insurance Plan. Such report shall contain, but not be limited to, a report of the plan's financial condition at the close of the most recent complete calendar year. The report shall also include all recommendations made to the department by consultants regarding the plan and its administration, including a complete departmental response to each recommendation. The department shall also list the history of yearly claims paid and premiums received for each employee subgroup, including, but not limited to, active employees, dependents and retirees and shall also publish the loss ratios for these subgroups. For purposes of this subsection, the term "loss ratios" shall mean claims paid by the plan for each subgroup divided by premiums received by the plan for the insurance coverage of the members in that subgroup. Any plan revisions made during the previous year shall also be listed in the report and fully described in the report. The department shall also provide the Joint Legislative Budget Committee with a monthly statement of plan utilization.

In addition to the information provided for herein, the department shall provide to the Joint Legislative Budget Committee budgetary information on the Public School Employees Health Insurance Plan. All information shall be provided to the Joint Legislative Budget Committee in a format designated by the committee. The information shall be provided in September of each year, and at such times throughout the year as the committee deems necessary. The information shall include, but not be limited to:

(a) A detailed breakdown of all expenditures of the plan, administrative and otherwise, for the most recently completed fiscal year and projected expenditures for the current fiscal year;

(b) A schedule of all contracts, administrative and otherwise, executed for the benefit of the plan during the most recent completed fiscal year, and those executed and anticipated for the current fiscal year;

The department shall also provide to the Joint Legislative Committee on Performance Evaluation and Expenditure Review (PEER) all information described in paragraph (b) in this subsection. The PEER Committee shall prepare a report by January 1 of each year on all contractors utilized by the department for the health plans, excluding the third-party administrator contract. The committee's report shall address the processes by which the department procured the contractors, the contractors' work products and contract expenditures. The review provided for herein shall be supplemental to the review provided for in Section 1, Ch. 554, Laws of 1995; [See Editor's note to Sections 25-15-5 and 25-15-225].

(7)(a) The department may offer medical savings accounts as defined in Section 71-9-3 as a plan option. Provided, however, that prior to offering such accounts as a plan option, the Department of Finance and Administration shall prepare and present to the Legislature by December 15, 1996, a comprehensive study of medical savings accounts to include a proposed implementation timetable and potential actuarial effects of such accounts on the existing public school employees' health plan. The department's study shall also include, but not be limited to, recommended employer contribution levels, recommended employee contribution levels, recommendations on annual rollover of balances or withdrawals for nonmedical purposes, and, recommendations on medical coverage for persons who expend their account balances. The department shall use existing staff resources and those of other agencies to conduct this study. In no case shall the department employ a consultant or contractor other than an actuary to conduct this study. No later than July 15, 1996, the Department of Finance and Administration shall meet with the staff of the PEER Committee and the Legislative Budget Office to receive recommendations on the issues and methods which the department shall consider in preparing its report. No later than October 15, 1996, the Department of Finance and Administration shall submit a copy of its draft report to the PEER Committee and the Legislative Budget Office which shall analyze the report and prepare comments for publication in the final report to be submitted to the House and Senate Insurance Committees on December 15, 1996.

(b) In no case shall the department offer medical savings accounts as an option to health plan participants prior to January 1, 1998.

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SECTION 3. Section 71-9-1, Mississippi Code of 1972, is reenacted and amended as follows:

71-9-1. This chapter shall be known and may be cited as the "Medical Savings Account Act."

SECTION 4. Section 71-9-3, Mississippi Code of 1972, is reenacted and amended as follows:

71-9-3. As used in this chapter:

(a) "Account administrator" means a state chartered bank, savings and loan association, credit union or trust company authorized to act as a fiduciary and under the supervision of the

Department of Banking and Consumer Finance or the Department of Savings Associations, as appropriate; a national bank, national lending association or federal savings and loan association or credit union authorized to act as a fiduciary in this state; an insurer licensed and admitted to do business in this state; a third party administrator licensed by the Mississippi Commissioner of Insurance; or an employer, if the employer has a self-insured health plan meeting federal ERISA requirements.

(b) "Account holder" means a resident individual or an employee for whose benefit a medical savings account is established.

(i) Legally entitled to the provision of proper or necessary subsistence, education, medical care, or other care necessary for his or her health, guidance or well-being and not otherwise emancipated, self-supporting, married or a member of the Armed Forces of the United States; or

(ii) Mentally or physically incapacitated to the extent that he or she is not self-sufficient.

(d) "Domicile" means a place where an individual has his or her true, fixed and permanent home and principal establishment, to which, whenever absent, he or she intends to return.

(e) "Eligible medical expense" means an expense paid by a taxpayer for medical care described in Section 213(d) of the Internal Revenue Code.

(f) "Higher deductible" means a deductible of not less than One Thousand Five Hundred Dollars ($1,500.00) but not more than Two Thousand Two Hundred Fifty Dollars ($2,250.00) for individual health coverage, and not less than Three Thousand Dollars ($3,000.00) but not more than Four Thousand Five Hundred Dollars ($4,500.00) for health coverage provided to an individual and his or her dependents, in tax year 1994. Beginning after 1998, such deductible limits thereafter shall be adjusted annually in fifty-dollar increments for increases in the cost of living, as measured by the medical costs component of the Consumer Price Index.

(g) "Medical savings account" means an account established to pay eligible medical expense of the account holder and his or her dependents.

(h) "Medical savings account program" means a program that includes all of the following:

(i) The purchase by an employer of a qualified higher deductible health plan for the benefit of an employee and his or her dependents or the purchase by a resident individual of a qualified higher deductible health plan for his or her benefit or for the benefit of his or her dependents, or both;

(ii) The payment on behalf of an employee into a medical savings account by his or her employer or payment into a medical savings account by a resident individual on his or her behalf of at least sixty-six and two-thirds percent (66-2/3%) of the premium reduction realized by the purchase of a qualified higher deductible health plan; and

(iii) An account administrator to administer the medical savings account and the reimbursement of eligible medical expenses therefrom.

(i) "Qualified higher deductible health plan" means an accident and health insurance policy, certificate or contract that * * *:

(i) is purchased by an employer for the benefit of an employee or by a resident individual for his or her benefit; and

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(ii) provides for payment of covered expenses that exceed the higher deductible, but shall not exceed the maximum out-of-pocket expenses of Three Thousand Dollars ($3,000.00) for individual coverage and Five Thousand Five Hundred Dollars ($5,500.00) for family coverage.

(j) "Resident individual" means an individual who has a domicile in this state.

SECTION 5. Section 71-9-5, Mississippi Code of 1972, is reenacted as follows:

71-9-5. (1) Each employer shall be permitted to offer voluntarily the following programs:

(a) Continued coverage under the employer's existing health coverage policy, certificate or contract; or

(b) Participation in a medical savings account program.

(2) An employer that previously did not provide an accident and health insurance policy, certificate or contract for his or her employees may establish a medical savings account program. In this case, the premium reduction referred to in Section 71-9-3(h)(ii) of this chapter shall be based on the cost of similar coverage with a Five Hundred Dollar ($500.00) deductible.

(3) A resident individual may establish a medical savings account for the benefit of himself or herself and his or her dependents. Contributions to a medical savings account established by a resident individual for a tax year shall not exceed the allowable deductible for a qualified higher deductible health plan.

(4) Except as otherwise provided by law, the principal contributed and the interest earned on a medical savings account shall be excluded from the taxable gross income of the account holder under Section 27-7-15.

SECTION 6. Section 71-9-7, Mississippi Code of 1972, is reenacted as follows:

71-9-7. (1) Except as otherwise provided in Section 71-9-9 of this chapter, an account administrator shall use the funds held in a medical savings account solely for the purpose of paying eligible medical expenses of the account holder, or his or her dependent, or to pay for an accident and health insurance policy, certificate or contract if the account holder would not otherwise have accident and health insurance coverage.

(2) The account holder may submit documentation for eligible medical expenses paid by the account holder during a tax year to the account administrator, and the account administrator shall reimburse the account holder for the eligible medical expenses out of the medical savings account.

(3) Upon the death of the account holder, the account administrator shall distribute the principal and accumulated interest of the medical savings account to the estate of the account holder, unless the account holder has designated a beneficiary in writing to the account administrator, in which case the account administrator shall make such distribution to the designated beneficiary.

SECTION 7. Section 71-9-9, Mississippi Code of 1972, is reenacted as follows:

71-9-9. Unencumbered funds that have accumulated in a medical savings account that are in excess of the higher deductible may be withdrawn by the account holder for purposes other than paying eligible medical expense or procuring health coverage. Money withdrawn pursuant to this section shall be considered gross income as provided in Section 27-7-17, Mississippi Code of 1972.

SECTION 8. Section 27-7-15, Mississippi Code of 1972, is amended as follows:

27-7-15.

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(1) For the purposes of this article, except as otherwise provided, the term "gross income" means and includes the income of a taxpayer derived from salaries, wages, fees or compensation for service, of whatever kind and in whatever form paid, including income from governmental agencies and subdivisions thereof; or from professions, vocations, trades, businesses, commerce or sales, or renting or dealing in property, or reacquired property; also from annuities, interest, rents, dividends, securities, insurance premiums, reinsurance premiums, considerations for supplemental insurance contracts, or the transaction of any business carried on for gain or profit, or gains, or profits, and income derived from any source whatever and in whatever form paid. The amount of all such items of income shall be included in the gross income for the taxable year in which received by the taxpayer. The amount by which an eligible employee's salary is reduced pursuant to a salary reduction agreement authorized under Section 25-17-5 shall be excluded from the term "gross income" within the meaning of this article.

(2) In determining gross income for the purpose of this section, the following, under regulations prescribed by the commissioner, shall be applicable:

(a) Dealers in property. Federal rules, regulations and revenue procedures shall be followed with respect to installment sales.

(b) Casual sales of property. Federal rules, regulations and revenue procedures shall be followed with respect to installment sales.

(i) The term "installment sale" means a disposition of property where at least one (1) payment is to be received after the close of the taxable year in which the disposition occurs.

(ii) The term "installment method" means a method under which the income recognized for any taxable year from the disposition is that proportion of the payments received in that year which the gross profit (realized or to be realized when payment is completed) bears to the total contract price.

(c) Reserves of insurance companies. In the case of insurance companies, any amounts in excess of the legally required reserves shall be included as gross income.

(d) Affiliated companies or persons. As regards sales, exchanges or payments for services from one to another of affiliated companies or persons or under other circumstances where the relation between the buyer and seller is such that gross proceeds from the sale or the value of the exchange or the payment for services are not indicative of the true value of the subject matter of the sale, exchange or payment for services, the commissioner shall prescribe uniform and equitable rules for determining the true value of the gross income, gross sales, exchanges or payment for services, or require consolidated returns of affiliates.

(e) Alimony and separate maintenance payments. The federal rules, regulations and revenue procedures in determining the deductibility and taxability of alimony payments shall be followed in this state.

(f) Reimbursement for expenses of moving. There shall be included in gross income (as compensation for services) any amount received or accrued, directly or indirectly, by an individual as a payment for or reimbursement of expenses of moving from one residence to another residence which is attributable to employment or self-employment.

(3) In the case of taxpayers other than residents, gross income includes gross income from sources within this state.

(4) The words "gross income" do not include the following items of income which shall be exempt from taxation under this article:

(a) The proceeds of life insurance policies and contracts paid upon the death of the insured. However, the income from the proceeds of such policies or contracts shall be included in the gross income.

(b) The amount received by the insured as a return of premium or premiums paid by him under life insurance policies, endowment, or annuity contracts, either during the term or at maturity or upon surrender of the contract.

(c) The value of property acquired by gift, bequest, devise or descent, but the income from such property shall be included in the gross income.

(d) Interest upon the obligations of the United States or its possessions, or securities issued under the provisions of the Federal Farm Loan Act of July 17, 1916, or bonds issued by the War Finance Corporation, or obligations of the State of Mississippi or political subdivisions thereof.

(e) The amounts received through accident or health insurance as compensation for personal injuries or sickness, plus the amount of any damages received for such injuries or such sickness or injuries, or through the War Risk Insurance Act, or any law for the benefit or relief of injured or disabled members of the military or naval forces of the United States.

(f) Income received by any religious denomination or by any institution or trust for moral or mental improvements, religious, Bible, tract, charitable, benevolent, fraternal, missionary, hospital, infirmary, educational, scientific, literary, library, patriotic, historical or cemetery purposes or for two (2) or more of such purposes, if such income be used exclusively for carrying out one or more of such purposes.

(g) Income received by a domestic corporation which is "taxable in another state" as this term is defined in this article, derived from business activity conducted outside this state. Domestic corporations taxable both within and without the state shall determine Mississippi income on the same basis as provided for foreign corporations under the provisions of this article.

(h) In case of insurance companies, there shall be excluded from gross income such portion of actual premiums received from an individual policyholder as is paid back or credited to or treated as an abatement of premiums of such policyholder within the taxable year.

(i) Income from dividends that has already borne a tax as dividend income under the provisions of this article, when such dividends may be specifically identified in the possession of the recipient.

(j) Amounts paid by the United States to a person as added compensation for hazardous duty pay as a member of the Armed Forces of the United States in a combat zone designated by Executive Order of the President of the United States.

(k) Amounts received as retirement allowances, pensions, annuities or optional retirement allowances paid under the federal Social Security Act, the Railroad Retirement Act, the Federal Civil Service Retirement Act, or any other retirement system of the United States government, retirement allowances paid under the Mississippi Public Employees' Retirement System, Mississippi Highway Safety Patrol Retirement System or any other retirement system of the State of Mississippi or any political subdivision thereof. The exemption allowed under this paragraph (k) shall be available to the spouse or other beneficiary at the death of the primary retiree.

(l) Amounts received as retirement allowances, pensions, annuities or optional retirement allowances paid by any public or governmental retirement system not designated in subsection (k) or any private retirement system or plan of which the recipient was a member at any time during the period of his employment. The exemption allowed under this paragraph (l) shall be available to the spouse or other beneficiary at the death of the primary retiree.

(m) Compensation not to exceed the aggregate sum of Five Thousand Dollars ($5,000.00) for any taxable year received by a member of the National Guard or Reserve Forces of the United States as payment for inactive duty training, active duty training and state active duty.

(n) Compensation received for active service as a member below the grade of commissioned officer and so much of the compensation as does not exceed the aggregate sum of Five Hundred Dollars ($500.00) per month received for active service as a commissioned officer in the Armed Forces of the United States for any month during any part of which such members of the armed forces (i) served in a combat zone as designated by Executive Order of the President of the United States; or (ii) was hospitalized as a result of wounds, disease or injury incurred while serving in such combat zone.

(o) The proceeds received from federal and state forestry incentives programs.

(p) The amount representing the difference between the increase of gross income derived from sales for export outside the United States as compared to the preceding tax year wherein gross income from export sales was highest, and the net increase in expenses attributable to such increased exports. In the absence of direct accounting the ratio of net profits to total sales may be applied to the increase in export sales. This item (p) shall only apply to businesses located in this state engaging in the international export of Mississippi goods and services. Such goods or services shall have at least fifty percent (50%) of value added at a location in Mississippi.

(q) Amounts paid by the federal government for the construction of soil conservation systems * * * as required by a conservation plan adopted pursuant to 16 USC 3801 et seq.

(r) The amount deposited in a medical savings account, and any interest accrued thereon, that is a part of a medical savings account program as specified in the Medical Savings Account Act under Sections 71-9-1 through 71-9-9; provided, however, that any amount withdrawn from such account for purposes other than paying eligible medical expense or to procure health coverage, shall be included in gross income.

(s) Amounts paid by the Mississippi Soil and Water Conservation Commission from the Mississippi Soil and Water Cost-Share Program for the installation of water quality best management practices.

(5) Prisoners of war, missing in action-taxable status.

(a) Members of the Armed Forces. Gross income does not include compensation received for active service as a member of the Armed Forces of the United States for any month during any part of which such member is in a missing status, as defined in paragraph (d) of this subsection, during the Vietnam Conflict as a result of such conflict.

(b) Civilian employees. Gross income does not include compensation received for active service as an employee for any month during any part of which such employee is in a missing status during the Vietnam Conflict as a result of such conflict.

(c) Period of conflict. For the purpose of this subsection, the Vietnam Conflict began February 28, 1961, and ends on the date designated by the President by Executive Order as the date of the termination of combatant activities in Vietnam. For the purpose of this subsection, an individual is in a missing status as a result of the Vietnam Conflict if immediately before such status began he was performing service in Vietnam or was performing service in Southeast Asia in direct support of military operations in Vietnam. "Southeast Asia" as used in this paragraph is defined to include Cambodia, Laos, Thailand and waters adjacent thereto.

(d) "Missing status" means the status of an employee or member of the armed forces who is in active service and is officially carried or determined to be absent in a status of (i) missing; (ii) missing in action; (iii) interned in a foreign country; (iv) captured, beleaguered or besieged by a hostile force; or (v) detained in a foreign country against his will; but does not include the status of an employee or member of the armed forces for a period during which he is officially determined to be absent from his post of duty without authority.

(e) "Active service" means active federal service by an employee or member of the Armed Forces of the United States in an active duty status.

(f) "Employee" means one who is a citizen or national of the United States or an alien admitted to the United States for permanent residence and is a resident of the State of Mississippi and is employed in or under a federal executive agency or department of the armed forces.

(g) "Compensation" means (i) basic pay; (ii) special pay; (iii) incentive pay; (iv) basic allowance for quarters; (v) basic allowance for subsistence; and (vi) station per diem allowances for not more than ninety (90) days.

(h) If refund or credit of any overpayment of tax for any taxable year resulting from the application of subsection (5) of this section is prevented by the operation of any law or rule of law, such refund or credit of such overpayment of tax may, nevertheless, be made or allowed if claim therefor is filed with the State Tax Commission within three (3) years after the date of the enactment of this subsection.

(i) The provisions of this subsection shall be effective for taxable years ending on or after February 28, 1961.

(6) A shareholder of an S corporation, as defined in Section 27-8-3(1)(g), shall take into account the income, loss, deduction or credit of the S corporation only to the extent provided in Section 27-8-7(2).

* * *

SECTION 9. Section 7, Chapter 468, General Laws of 1994, is amended as follows:

Section 7. This act shall take effect and be in force from and after January 1, 1994 * * *.

SECTION 10. The following shall be codified as Section 25-15-303, Mississippi Code of 1972:

25-15-303. (1) There is created the State and Public School Employees Health Insurance Management Board, which shall administer the State Employees Life and Health Insurance Plan provided for under Section 25-15-3 et seq., and the Public School Employees Health Insurance Plans created under Section 25-15-251 et seq. The State and Public School Employees Health Insurance Management Board, hereafter referred to as the "board," shall also be responsible for administering all procedures for selecting third-party administrators provided for in Section 25-15-301. Whenever the term "department," "Department of Finance and Administration," or "board," appears in Sections 25-15-3 et seq., 25-15-251 et seq., and 25-15-301, such term means the State and Public School Employees Health Insurance Management Board.

(2) The board shall consist of the following:

(a) The Chairman of the Workers' Compensation Commission;

(b) The Commissioner of Insurance;

(d) The State Superintendent of Education;

(e) The Executive Director of the Department of Finance and Administration;

(f) Two (2) appointees of the Governor whose terms shall be concurrent with that of the Governor, one (1) of whom shall have experience in providing actuarial advice to companies that provide health insurance to large groups and one (1) of whom shall have experience in the day-to-day management and administration of a large self-funded health insurance group;

(g) The Chairman of the Senate Insurance Committee or his designee;

(h) The Chairman of the House of Representatives Insurance Committee or his designee;

(i) The Chairman of the Senate Appropriations Committee or his designee; and

(j) The Chairman of the House of Representatives Appropriations Committee or his designee.

The legislators, or their designees, shall serve as ex officio, nonvoting members of the board.

The Executive Director of the Department of Finance and Administration shall be the chairman of the board.

(3) The board shall meet at least monthly and maintain minutes of such meetings. A quorum shall consist of a majority of the authorized voting membership of the board. The board shall have the sole authority to promulgate rules and regulations governing the operations of the insurance plans and shall be vested with all legal authority necessary and proper to perform this function including, but not limited to:

(a) Defining the scope and coverages provided by the insurance plans;

(b) Seeking proposals for services or insurance through competitive processes where required by law and selecting service providers or insurers under procedures provided for by law; and

The Department of Finance and Administration shall also employ a State Insurance Administrator, who shall be responsible for the day-to-day management and administration of the insurance plans. The board shall employ a Deputy State Insurance Administrator who shall be an actuary and a member of the American Academy of Actuaries. The Deputy State Insurance Administrator shall have experience in providing actuarial services to companies which provide health insurance to large groups. The deputy administrator shall receive a salary set by the board and shall not be subject to the authority of the State Personnel Board for any purpose. The Department of Finance and Administration shall provide to the board on a full-time basis personnel and technical support necessary and sufficient to effectively and efficiently carry out the requirements of this section.

(4) Members of the board shall not receive any compensation or per diem, but may receive travel reimbursement provided for under Section 25-3-41 except that the legislators shall receive per diem and expenses which shall be paid from the contingent expense funds of their respective houses in the same amounts as provided for committee meetings when the Legislature is not in session; however, no per diem and expenses for attending meetings of the board shall be paid while the Legislature is in session.

SECTION 11. This act shall take effect and be in force from and after its passage.