Senate Bill No. 55
(By Senators Manchin, Kimble, Whitlow, Plymale, Anderson,
Ross, Craigo, Bailey, Boley, Schoonover, Helmick,
Dugan, Buckalew, Scott, Oliverio, Wagner, Dittmar, Wiedebusch,
Miller, Yoder, Minear, Deem, Walker, Tomblin, Mr. President, Love
and Sharpe)
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[Introduced January 19, 1995; referred to the Committee
on Banking and Insurance; and then to the Committee on Finance.]
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A BILL to amend and reenact section twelve, article twenty-one,
chapter eleven of the code of West Virginia, one thousand
nine hundred thirty-one, as amended; to amend and reenact
section six, article twenty-four of said chapter; and to
amend chapter thirty-three of said code by adding thereto a
new article, designated article forty-one, all relating to
medical care savings accounts; excluding individual,
employee and employer deposits to medical savings account
programs from personal and corporate income tax; creation of
the medical care savings account and trust act; legislative
findings; definitions; creation and minimum requirements of
employer-offered medical care savings accounts; proper use of medical care savings account funds; employer
contributions; employer funded advances for medical expenses
exceeding medical care savings account balance; withdrawal
of medical care savings account funds; distribution of
medical savings account funds upon the death of an employee;
procedures for administration of medical savings account
funds upon termination or change of employment; creation of
individual medical care savings account; establishment of
individual medical care of savings trust; proper use of
trust funds; deductibles; withdrawals of trust funds;
distribution of trust funds upon death of account holder;
individual responsibility for payment of medical services
received; report of insurance commissioner to the
Legislature; development of voucher program; conversion of
medicaid recipients; funding; and severability.
Be it enacted by the Legislature of West Virginia:
That section twelve, article twenty-one, chapter eleven of
the code of West Virginia, one thousand nine hundred thirty-one,
as amended, be amended and reenacted; that section six, article
twenty-four of said chapter be amended and reenacted; and that
chapter thirty-three of said code be amended by adding thereto a new article, designated article forty-one, all to read as
follows:
CHAPTER 11. TAXATION.
ARTICLE 21. PERSONAL INCOME TAX.
§11-21-12. West Virginia adjusted gross income of resident
individual.
(a) General. -- The West Virginia adjusted gross income of
a resident individual means his federal adjusted gross income as
defined in the laws of the United States for the taxable year
with the modifications specified in this section.
(b) Modifications increasing federal adjusted gross income.
-- There shall be added to federal adjusted gross income unless
already included therein the following items:
(1) Interest income on obligations of any state other than
this state or of a political subdivision of any such other state
unless created by compact or agreement to which this state is a
party;
(2) Interest or dividend income on obligations or securities
of any authority, commission or instrumentality of the United
States, which the laws of the United States exempt from federal
income tax but not from state income taxes;
(3) Income taxes imposed by this state or any other taxing jurisdiction, to the extent deductible in determining federal
adjusted gross income and not credited against federal income
tax: Provided, That this modification shall not be made for
taxable years beginning after the thirty-first day of December,
one thousand nine hundred eighty-six;
(4) Interest on indebtedness incurred or continued to
purchase or carry obligations or securities the income from which
is exempt from tax under this article, to the extent deductible
in determining federal adjusted gross income;
(5) Interest on a depository institution tax-exempt savings
certificate which is allowed as an exclusion from federal gross
income under Section 128 of the Internal Revenue Code, for the
federal taxable year;
(6) The amount allowed as a deduction from federal gross
income under Section 221 of the Internal Revenue Code by married
couples who file a joint federal return for the federal taxable
year: Provided, That this modification shall not be made for
taxable years beginning after the thirty-first day of December,
one thousand nine hundred eighty-six;
(7) The deferral value of certain income that is not
recognized for federal tax purposes, which value shall be an
amount equal to a percentage of the amount allowed as a deduction
in determining federal adjusted gross income pursuant to the
accelerated cost recovery system under Section 168 of the
Internal Revenue Code for the federal taxable year, with the
percentage of the federal deduction to be added as follows with
respect to the following recovery property: Three-year property
-- no modification; five-year property -- ten percent; ten-year
property -- fifteen percent; fifteen-year public utility property
-- twenty-five percent; and fifteen-year real property --
thirty-five percent: Provided, That this modification shall not
apply to any person whose federal deduction is determined by the
use of the straight line method: Provided, however, That this
modification shall not be made for taxable years beginning after
the thirty-first day of December, one thousand nine hundred
eighty-six; and
(8) The amount of a lump sum distribution for which the
taxpayer has elected under Section 402(e) of the Internal Revenue Code of 1986, as amended, to be separately taxed for federal
income tax purposes.
(c) Modifications reducing federal adjusted gross income. --
There shall be subtracted from federal adjusted gross income to
the extent included therein:
(1) Interest income on obligations of the United States and
its possessions to the extent includible in gross income for
federal income tax purposes;
(2) Interest or dividend income on obligations or securities
of any authority, commission or instrumentality of the United
States or of the state of West Virginia to the extent includible
in gross income for federal income tax purposes but exempt from
state income taxes under the laws of the United States or of the
state of West Virginia, including federal interest or dividends
paid to shareholders of a regulated investment company, under
Section 852 of the Internal Revenue Code for taxable years ending
after the thirtieth day of June, one thousand nine hundred
eighty-seven;
(3) Any gain from the sale or other disposition of property having a higher fair market value on the first day of January,
one thousand nine hundred sixty-one, than the adjusted basis at
said date for federal income tax purposes: Provided, That the
amount of this adjustment is limited to that portion of any such
gain which does not exceed the difference between such fair
market value and such adjusted basis: Provided, however, That if
such gain is considered a long-term capital gain for federal
income tax purposes, the modification shall be limited to forty
percent of such portion of the gain: Provided further, That this
modification shall not be made for taxable years beginning after
the thirty-first day of December, one thousand nine hundred
eighty-six;
(4) The amount of any refund or credit for overpayment of
income taxes imposed by this state, or any other taxing
jurisdiction, to the extent properly included in gross income for
federal income tax purposes;
(5) Annuities, retirement allowances, returns of
contributions and any other benefit received under the West
Virginia public employees retirement system, the West Virginia state teachers retirement system and all forms of military
retirement, including regular armed forces, reserves and national
guard, including any survivorship annuities derived therefrom, to
the extent includible in gross income for federal income tax
purposes: Provided, That notwithstanding any provisions in this
code to the contrary this modification shall be limited to the
first two thousand dollars of benefits received under the West
Virginia public employees retirement system, the West Virginia
state teachers retirement system and all forms of military
retirement including regular armed forces, reserves and national
guard, including any survivorship annuities derived therefrom, to
the extent includible in gross income for federal income tax
purposes for taxable years beginning after the thirty-first day
of December, one thousand nine hundred eighty-six; and the first
two thousand dollars of benefits received under any federal
retirement system to which Title 4 U.S.C. §111 applies:
Provided, however, That the total modification under this
paragraph shall not exceed two thousand dollars per person
receiving such retirement benefits and this limitation shall apply to all returns or amended returns filed after the last day
of December, one thousand nine hundred eighty-eight;
(6) Retirement income received in the form of pensions and
annuities after the thirty-first day of December, one thousand
nine hundred seventy-nine, under any West Virginia police, West
Virginia firemen's retirement system or the West Virginia
department of public safety death, disability and retirement
fund, including any survivorship annuities derived therefrom, to
the extent includible in gross income for federal income tax
purposes;
(7) Federal adjusted gross income in the amount of eight
thousand dollars received from any source after the thirty-first
day of December, one thousand nine hundred eighty-six, by any
person who has attained the age of sixty-five on or before the
last day of the taxable year, or by any person certified by
proper authority as permanently and totally disabled, regardless
of age, on or before the last day of the taxable year, to the
extent includible in federal adjusted gross income for federal
tax purposes: Provided, That if a person has a medical certification from a prior year and he is still permanently and
totally disabled, a copy of the original certificate is
acceptable as proof of disability. A copy of the form filed for
the federal disability income tax exclusion is acceptable:
Provided, however, That:
(i) Where the total modification under subdivisions (1),
(2), (5) and (6) of this subsection is eight thousand dollars per
person or more, no deduction shall be allowed under this
subdivision; and
(ii) Where the total modification under subdivisions (1),
(2), (5) and (6) of this subsection is less than eight thousand
dollars per person, the total modification allowed under this
subdivision for all gross income received by such person shall be
limited to the difference between eight thousand dollars and the
sum of modifications under such subdivisions;
(8) Federal adjusted gross income in the amount of eight
thousand dollars received from any source after the thirty-first
day of December, one thousand nine hundred eighty-six, by the
surviving spouse of any person who had attained the age of sixty-five or who had been certified as permanently and totally
disabled, to the extent includible in federal adjusted gross
income for federal tax purposes: Provided, That:
(i) Where the total modification under subdivisions (1),
(2), (5), (6) and (7) of this subsection is eight thousand
dollars or more, no deduction shall be allowed under this
subdivision; and
(ii) Where the total modification under subdivisions (1),
(2), (5), (6) and (7) of this subsection is less than eight
thousand dollars per person, the total modification allowed under
this subdivision for all gross income received by such person
shall be limited to the difference between eight thousand dollars
and the sum of such subdivisions;
(9) Any pay or allowances received, after the thirty-first
day of December, one thousand nine hundred seventy-nine, by West
Virginia residents who have not attained the age of sixty-five,
as compensation for active service in the armed forces of the
United States: Provided, That such deduction shall be limited to
an amount not to exceed four thousand dollars: Provided, however, That this modification shall not be made for taxable
years beginning after the thirty-first day of December, one
thousand nine hundred eighty-six;
(10) Gross income to the extent included in federal adjusted
gross income under Section 86 of the Internal Revenue Code for
federal income tax purposes: Provided, That this modification
shall not be made for taxable years beginning after the
thirty-first day of December, one thousand nine hundred
eighty-six;
(11) The amount of any lottery prize awarded by the West
Virginia state lottery commission, to the extent properly
included in gross income for federal income tax purposes:
Provided, That for taxable years beginning after the thirty-first
day of December, one thousand nine hundred ninety-two, this
modification shall not be made for lottery prizes awarded by the
West Virginia state lottery commission;
(12) Individual, employee and employer contributions and
interest accruing to medical care savings account programs for
the purchase of a qualified higher deductible health plan and for funding all or part of the deductible, established under section
four, article forty-one, chapter thirty-three of this code; and
(12) (13) Any other income which this state is prohibited
from taxing under the laws of the United States.
(d) Modification for West Virginia fiduciary adjustment. --
There shall be added to or subtracted from federal adjusted gross
income, as the case may be, the taxpayer's share, as beneficiary
of an estate or trust, of the West Virginia fiduciary adjustment
determined under section nineteen of this article.
(e) Partners and S corporation shareholders. -- The amounts
of modifications required to be made under this section by a
partner or an S corporation shareholder, which relate to items of
income, gain, loss or deduction of a partnership or an S
corporation, shall be determined under section seventeen of this
article.
(f) Husband and wife. -- If husband and wife determine their
federal income tax on a joint return but determine their West
Virginia income taxes separately, they shall determine their West
Virginia adjusted gross incomes separately as if their federal adjusted gross incomes had been determined separately.
ARTICLE 24. CORPORATION NET INCOME TAX.
§11-24-6. Adjustments in determining West Virginia taxable
income.
(a) General. -- In determining West Virginia taxable income
of a corporation, its taxable income as defined for federal
income tax purposes shall be adjusted and determined before the
apportionment provided by section seven of this article, by the
items specified in this section.
(b) Adjustments increasing federal taxable income. -- There
shall be added to federal taxable income, unless already included
in the computation of federal taxable income, the following
items:
(1) Interest or dividends on obligations or securities of
any state or of a political subdivision or authority thereof;
(2) Interest or dividends (less related expenses to the
extent not deducted in determining federal taxable income) on
obligations or securities of any authority, commission or
instrumentality of the United States which the laws of the United
States exempt from federal income tax but not from state income taxes;
(3) Income taxes and other taxes, including franchise and
excise taxes, which are based on, measured by, or computed with
reference to net income, imposed by this state or any other
taxing jurisdiction, to the extent deducted in determining
federal taxable income;
(4) The amount of unrelated business taxable income as
defined by Section 512 of the Internal Revenue Code of 1986, as
amended, of a corporation which by reason of its purposes is
generally exempt from federal income taxes; and
(5) The amount of any net operating loss deduction taken for
federal income tax purposes under Section 172 of the Internal
Revenue Code of 1986, as amended.
(c) Adjustments decreasing federal taxable income. -- There
shall be subtracted from federal taxable income to the extent
included therein:
(1) Any gain from the sale or other disposition of property
having a higher fair market value on the first day of July, one
thousand nine hundred sixty-seven, than the adjusted basis at said date for federal income tax purposes: Provided, That the
amount of this adjustment is limited to that portion of any such
gain which does not exceed the difference between such fair
market value and such adjusted basis;
(2) The amount of any refund or credit for overpayment of
income taxes and other taxes, including franchise and excise
taxes, which are based on, measured by, or computed with
reference to net income, imposed by this state or any other
taxing jurisdiction, to the extent properly included in gross
income for federal income tax purposes;
(3) The amount added to federal taxable income due to the
elimination of the reserve method for computation of the bad debt
deduction;
(4) The full amount of interest expense actually disallowed
in determining federal taxable income which was incurred or
continued to purchase or carry obligations or securities of any
state or of any political subdivision thereof;
(5) The amount required to be added to federal taxable
income as a dividend received from a foreign (non-United States) corporation under Section 78 of the Internal Revenue Code of
1986, as amended, by a corporation electing to take the foreign
tax credit for federal income tax purposes;
(6) The amount of salary expenses disallowed as a deduction
for federal income tax purposes due to claiming the federal jobs
credit under Section 51 of the Internal Revenue Code of 1986, as
amended;
(7) The amount included in federal adjusted gross income by
the operation of Section 951 of the Internal Revenue Code of
1986, as amended; and
(8) Employer contributions to medical care savings account
programs for the purchase of a qualified higher deductible health
plan and for funding all or part of the deductible, established
pursuant to section four, article forty-one, chapter thirty-three
of this code; and
(8) (9) Any amount included in federal adjusted gross income
which is foreign source income. Foreign source income includes:
(A) Interest and dividends, other than those derived from
sources within the United States;
(B) Rents, royalties, license and technical fees from
property located or services performed without the United States
or from any interest in such property, including rents, royalties
or fees for the use of or the privilege of using without the
United States any patents, copyrights, secret process and
formulas, good will, trademarks, trade brands, franchises and
other like properties; and
(C) Gains, profits or other income from the sale of
intangible or real property located without the United States.
In determining the source of "foreign source income," the
provisions of Sections 861, 862 and 863 of the Internal Revenue
Code of 1986, as amended, shall be applied.
(d) Net operating loss deduction. -- Except as otherwise
provided in this subsection, there shall be allowed as a
deduction for the taxable year an amount equal to the aggregate
of: (1) The West Virginia net operating loss carryovers to such
year; plus (2) the net operating loss carrybacks to such year:
Provided, That no more than three hundred thousand dollars of net
operating loss from any taxable year beginning after the thirty-first day of December, one thousand nine hundred
ninety-two, may be carried back to any previous taxable year.
For purposes of this subsection, the term "West Virginia net
operating loss deduction" means the deduction allowed by this
subsection, determined in accordance with Section 172 of the
Internal Revenue Code of 1986, as amended.
(1) Special rules. --
(A) When the corporation further adjusts its adjusted
federal taxable income under section seven of this article, the
West Virginia net operating loss deduction allowed by this
subsection shall be deducted after the section seven adjustments
are made;
(B) The tax commissioner shall prescribe such transition
regulations as he deems necessary for fair and equitable
administration of this subsection as amended by this act.
(2) Effective date. -- The provisions of this subsection, as
amended by chapter one hundred nineteen, acts of the Legislature,
one thousand nine hundred eighty-eight, shall apply to all
taxable years ending after the thirtieth day of June, one thousand nine hundred eighty-eight; and to all loss carryovers
from taxable years ending on or before said thirtieth day of
June.
(e) Special adjustments for expenditures for water and air
pollution control facilities. --
(1) If the taxpayer so elects under subdivision (2) of this
subsection, there shall be:
(A) Subtracted from federal taxable income the total of the
amounts paid or incurred during the taxable year for the
acquisition, construction or development within this state of
water pollution control facilities or air pollution control
facilities as defined in Section 169 of the Internal Revenue
Code; and
(B) Added to federal taxable income the total of the amounts
of any allowances for depreciation and amortization of such water
pollution control facilities or air pollution control facilities,
as so defined, to the extent deductible in determining federal
taxable income.
(2) The election referred to in subdivision (1) of this subsection shall be made in the return filed within the time
prescribed by law (including extensions thereof) for the taxable
year in which such amounts were paid or incurred. Such election
shall be made in such manner, and the scope of application of
such election shall be defined, as the tax commissioner may by
regulations prescribe, and shall be irrevocable when made as to
all amounts paid or incurred for any particular water pollution
control facility or air pollution control facility.
(3) Notwithstanding any other provisions of this subsection
or of section seven to the contrary, if the taxpayer's federal
taxable income is subject to allocation and apportionment under
section seven, the adjustments prescribed in paragraphs (A) and
(B), subdivision (1) of this subsection shall (instead of being
made to the taxpayer's federal taxable income before allocation
and apportionment thereof as provided in section seven) be made
to the portion of the taxpayer's net income, computed without
regard to such adjustments, allocated and apportioned to this
state in accordance with section seven of this article.
(f) Allowance for certain government obligations and obligations secured by residential property. -- The West Virginia
taxable income of a taxpayer subject to this article as adjusted
in accordance with subsections (b), (c), (d) and (e) of this
section shall be further adjusted by multiplying such taxable
income after such adjustment by said subsections by a fraction
equal to one minus a fraction:
(1) The numerator of which is the sum of the average of the
monthly beginning and ending account balances during the taxable
year (account balances to be determined at cost in the same
manner that such obligations, investments and loans are reported
on Schedule L of the Federal Form 1120) of the following:
(A) Obligations or securities of the United States, or of
any agency, authority, commission or instrumentality of the
United States and any other corporation or entity created under
the authority of the United States Congress for the purpose of
implementing or furthering an objective of national policy;
(B) Obligations or securities of this state and any
political subdivision or authority thereof;
(C) Investments or loans primarily secured by mortgages, or deeds of trust, on residential property located in this state and
occupied by nontransients; and
(D) Loans primarily secured by a lien or security agreement
on residential property in the form of a mobile home, modular
home or double-wide, located in this state and occupied by
nontransients.
(2) The denominator of which is the average of the monthly
beginning and ending account balances of the total assets of the
taxpayer which are shown on Schedule L of Federal Form 1120,
which are filed by the taxpayer with the Internal Revenue
Service.
CHAPTER 33. INSURANCE.
ARTICLE 41. MEDICAL CARE SAVINGS ACCOUNT AND TRUST ACT.
§33-41-1. Short title.
This article shall be known and may be cited as the "Medical
Care Savings Account Act."
§33-41-2. Legislative findings.
The Legislature finds and declares:
(a) Many citizens of this state are without health
insurance.
(b) The costs of health care are escalating, forcing
employers to trim the level and availability of benefits to their
employees.
(c) The projected increase in the older population in this
state will create even greater demands on the state to provide
long-term care for those in need.
(d) In response to the runaway cost increases in health care
spending, medical care savings accounts shall be set forth to
increase health insurance availability for citizens of this
state, to provide incentives to eliminate unnecessary medical
treatment and paperwork and to encourage competition in seeking
health care.
(e) To alleviate the impoverishment of citizens of this
state requiring long-term care, medical care savings accounts
shall be set forth to promote saving for long-term care and to
provide incentives for individuals to protect themselves from
financial hardship due to a long-term health care need.
(f) By setting aside money in a medical care savings
account:
(1) Citizens of this state can insure themselves for both
routine and major medical services and long-term care through
employer-funded or individual-funded medical care savings account
arrangements and reduced cost qualified higher deductible
insurance policies.
(2) Employees can change jobs, using the medical care
savings account to provide for their health care needs while they
are between jobs.
(3) Sole proprietors during times of recession will have
medical dollars saved to cushion them.
(4) Individuals and families will continue to have the
freedom to choose their own doctor and other health care service
providers.
(5) High school graduates not attending college and
full-time or part-time college students no longer considered
dependents will be better able to afford health care.
(6) Early retirees will have medical dollars saved to
continue health coverage.
(7) Health care costs and spending increases will be reduced by comparative shopping by consumers for quality health care
services.
(8) The problem of long-term care financing will be
substantially reduced by empowering the citizens of this state to
save for their future need.
§33-41-3. Definitions.
As used in this article:
(a) "Account administrator" means any of the following:
(1) A national or state chartered bank, a federal or state
chartered savings and loan association, a federal or state
chartered savings bank, or a federal or state chartered credit
union.
(2) A trust company authorized to act as a fiduciary.
(3) An insurance company authorized to do business in this
state pursuant to the insurance code or health care corporation
operating pursuant to the nonprofit health care corporation
reform act.
(4) A broker-dealer, commodity issuer, investment advisor,
or agent registered pursuant to the uniform securities act.
(5) A third party administrator with a current certificate
of authority issued pursuant to the third party administrator
act.
(6) A certified public accountant licensed to practice in
this state pursuant to the occupational code.
(7) An attorney licensed to practice in this state.
(8) An employer, if the employer has a self-insured health
plan under Employer Retirement Income Security Act of 1974,
Public Law 93-406, 88 Stat. 829.
(9) An employer that participates in the medical care
savings account program.
(b) "Apportionment" means the premium differential between
the premiums for a qualified higher deductible plan and the plan
previously offered by the employer, based on bona fide quotes
from insurers offering similar benefits for similar employees in
the same geographic area. In the event that no plan was
previously offered, the portion contributed to a medical care
savings account may be less than the higher deductible of the
qualified higher deductible plan, and the premium differential formula shall be based on bona fide quotes for a low deductible
health plan and a qualified higher deductible plan offering
similar benefits for similar employees in the same geographic
area.
(c) "Deductible" means the total deductible for an employee
and all the dependents of that employee for a calendar year.
(d) "Dependent" means the spouse of the employee or a child
of the employee if the child is any of the following:
(1) Under the age of nineteen years, or under twenty-three
years of age and enrolled as a full-time student at an accredited
college or university.
(2) 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.
(3) Mentally or physically incapacitated to the extent that
he or she is not self-sufficient.
(e) "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. Domicile
continues until another permanent home or principal establishment
is established.
(f) "Eligible medical expense" means an expense paid by the
taxpayer for medical care described in Section 213(d) of the
Internal Revenue Code.
(g) "Employee means the individual for whose benefit or for
the benefit of whose dependents a medical care savings account is
established.
(h) "ERISA" means the Employer Retirement Income Security
Act of 1974, Public Law 93-406,88 Stat. 829.
(i) "Higher deductible" means a deductible of not less than
one thousand dollars and not more than five thousand dollars for
the year one thousand nine hundred ninety-five. This minimum and
maximum shall be adjusted annually thereafter by the secretary of
tax and revenue, as necessary, by a percentage equal to the
previous year's increase in the national Consumer Price Index.
(j) "Individual" includes the qualified dependents of the individual. Individual includes a self-employed individual, an
unemployed individual who is not eligible for medicaid, medicare
or any other state or federal program for the provision of health
services and an employed individual whose employer does not offer
a medical care savings account program.
(k) "Individual medical care savings account" or "account"
means a trust administered by a trustee created or organized to
pay the eligible medical expense, dental and long-term care
expenses of the individual account holder to promote good health.
(l) "Medical care savings account" or "account" means an
account established in this state pursuant to a medical care
savings account program to pay the eligible medical expenses of
an employee and his or her dependents.
(m) "Medical care savings account program" or "program"
means a program that includes all of the following:
(1) The purchase by an employer or by employees or a shared
purchase of a qualified higher deductible health plan for the
benefit of an employee and his or her dependents.
(2) The contribution on behalf of an employee into an interest bearing medical care savings account by his or her
employer of all or part of the premium differential realized by
the employer based on the purchase of a qualified higher
deductible health plan for the benefit of the employee. An
employer that did not previously provide a health coverage
policy, certificate or contract for his or her employees or an
employer that chooses, may contribute all or part of the
deductible of the plan purchased pursuant to this subdivision
(2). The employee may contribute into the account in addition to
a contribution by the employer all or part of the difference
between the employer's contribution and the maximum contribution
as determined pursuant to this subparagraph. A contribution
under this subdivision shall not exceed five thousand dollars for
the year one thousand nine hundred ninety-five and shall be
adjusted annually as set forth herein.
(3) An account administrator to administer the medical
care savings account from which payment of claims is made. Not
more than thirty days after an account administrator begins to
administer an account, the administrator shall notify in writing each employee on whose behalf the administrator administers an
account of the date of the last business day of the
administrator's business year.
(n) "Qualified higher deductible health plan" means a health
coverage policy, certificate or contract that provides for
payments for covered benefits that exceed the higher deductible
and that is purchased by an employer or an employee or an
individual for the benefit of an employee or individual and the
person's dependents, for whom the employer or the employee or the
individual makes deposits into a medical care savings account.
The qualified higher deductible health plan may participate in
any managed care health program or network. A managed care
program shall not discriminate but must sell access to any
individual, employee, employer or organization who wants to
participate.
(o) "Trustee" means a federal or state chartered bank,
savings bank, savings and loan association, credit union,
insurance company, trust company or any other entity authorized
to act as a fiduciary.
§33-41-4. Medical care savings accounts.
(a) For tax years beginning after the year one thousand nine
hundred ninety-five, an employer, except as otherwise provided by
statute, contract, or a collective bargaining agreement, may
offer a medical care savings account program to the employer's
employees.
(b) An employer that offers a medical care savings account
program shall inform all employees in writing of the federal and
state tax status of contributions made pursuant to this article,
before making the first contribution and then at least annually
before making the first contribution in any calendar year.
(c) Except as provided in section five of this article,
principal contributed to by the employee and employer and
interest earned on a medical on a medical care savings account
and money reimbursed to an employee for eligible medical expenses
are exempt from taxation under West Virginia Income Tax Act,
section twelve, article twenty-one, and section six, article
twenty-four, of chapter eleven.
(d) The account administrator shall utilize the funds held in a medical care savings account solely for the purpose of
paying the eligible medical expenses of the employee or his or
her dependents, or to purchase or assist in the purchase of a
health coverage policy, certificate or contract, if the employer
does not fully fund the qualified higher deductible health
insurance plan. Funds held in a medical care savings account
shall not be used to cover medical expenses of the employee or
his or her dependents that are otherwise covered, including, but
not limited to, medical expenses covered pursuant to an
automobile insurance policy, workers' compensation insurance
policy or self-insured plan, or another health coverage policy,
certificate or contract.
(e) The employee may submit documentation of medical
expenses paid by the employee during the tax year to the account
administrator. The account administrator shall reimburse the
employee from the employee's account for eligible medical
expenses.
(f) If an employer makes contributions to a medical care
savings account program on a periodic installment basis, the employer may advance to an employee, interest free, an amount
necessary to cover medical expenses incurred that exceed the
amount in the employee's medical care savings account when the
expense is incurred, if the employee agrees to repay the advance
from future installments or when he or she ceases to be an
employee of the employer.
(g) Notwithstanding subsections (a) through (f) of this
section and subject to subsection (i) of this section, an
employee may withdraw money from his or her medical care savings
account for any purpose other than a purpose described in
subsection (d) of this section only on the last business day of
the account administrator's business year. Money withdrawn
pursuant to this subsection is income for the purposes of state
and federal income taxation.
(h) Subject to subsection (i) of this section, if the
employee withdraws money for any purpose other than a purpose
described in subsection (d) of this section at any other time,
all of the following apply:
(1) The amount of the withdrawal is income for the purposes of state income taxation in the tax year of the withdrawal.
(2) The administrator shall withhold, and on behalf of the
employee shall pay, a penalty to the state treasurer equal to ten
percent of the amount of the withdrawal.
(3) Interest earned on the account during the tax year in
which a withdrawal under this subsection is made is income for
purposes of article twenty-one, chapter eleven of this code.
(i) The amount of a disbursement of any assets of a medical
care savings account pursuant to a filing for protection under
Title 11 of the United States Code, 11 U.S.C. §101, et seq., by
an employee or person for whose benefit the account was
established is not considered a withdrawal for purposes of this
section and is not subject to taxation under article twenty-one,
chapter eleven of this code. Subsection (h) of this section does
not apply.
(j) Upon the death of the employee, the account
administrator shall distribute the principal and accumulated
interest of the medical care savings account to the estate of the
employee.
(k) If an employee is no longer employed by an employer that
participates in a medical care savings account program and the
employee, not more than sixty days after his or her final day of
employment requests in writing to the former employer's account
administrator that the amount remain with that administrator and
that account administrator agrees to retain the account, the
money in the medical care savings account may be utilized for the
benefit of the employee or his or her dependents subject to this
article and remain exempt from taxation pursuant to this article.
Not more than thirty days after the expiration of the sixty days,
if the account administrator does not accept the former
employee's account, the employer shall mail a check to the former
employee at the employee's last known address equal to the amount
in the account on that day and that amount is subject to taxation
pursuant to subsection (h) of this section, but is not subject to
the penalty under subdivision (2), subsection (h) of this
section; unless the former employee becomes employed with a
different employer that participates in a medical care savings
account program and the employee transfers his or her medical care savings account to that new employer's account
administrator; or the employee transfers his or her medical care
savings account to an individual medical care savings account in
which event the transferred amount is not subject to taxation or
the provisions of subsection (h) of this section.
(l) After an employee reaches sixty years of age,
withdrawals shall be permitted for eligible medical, dental or
long-term care expenses only.
§33-41-5. Individual medical care savings account.
(a) A person may deposit cash contributions to an individual
medical care savings account provided that total yearly
contributions shall be made on or before the fifteenth day of
April, of each year for the prior year and shall not exceed the
higher deductible of a qualified higher deductible plan plus one
thousand dollars which may be used towards the purchase of a
qualified higher deductible insurance plan.
(b) The maximum allowable amount of yearly contribution for
subsequent years may be increased annually by an amount not to
exceed the higher deductible of the qualified higher deductible plan of the account holder and his or her dependents.
(c) Interest earned on an individual medical care savings
account is not included as personal income taxable under article
twenty-one, chapter eleven except as required in subsection (e).
(d) The individual medical care savings account shall be
established as a trust and placed with an account administrator.
The account administrator shall utilize the trust assets solely
for the purpose of paying the medical, dental and long-term care
expenses of the account holder.
(e) Individual medical care savings account funds may be
withdrawn by the account holder at any time for any purpose,
subject to the following restrictions and penalties:
(1) The higher deductible required for payment of covered
benefits under the qualified higher deductible plan or fifty
percent of the total amount in the account whichever is greater,
must be reserved at all times or accounted for in eligible
deductible health care expenditures under the individual medical
care savings account on an annual basis.
(2) There shall be a distribution penalty for withdrawal by the account holder of individual medical care savings account
funds not used for health care expenditures. Account funds or
any portion thereof used as security for a loan shall be treated
as distributed. Such penalty shall be ten percent of the amount
of interest earned as of the date of withdrawal on the account,
and, upon such withdrawal, the interest earned during the prior
tax year shall be subject to state income taxation.
(3) When a person is no longer considered a legal dependent
under a qualified higher deductible plan the account holder may
withdraw, without penalty, the premium necessary to purchase a
new qualified higher deductible plan and subject to the
limitation in subdivision (1), subsection (e) of this section
funds to meet the higher deductible to establish an individual
medical care savings account for the person no longer considered
a legal dependent under the prior qualified higher deductible
plan.
(f) Upon the death of the account holder, the account
principal, as well as any interest accumulated thereon, shall be
distributed to the decedent's estate and taxed as part of the estate as provided by law or distributed to the account holder's
designated beneficiary or beneficiaries.
§33-41-6. Responsibilities of employee or individual
account holders.
(a) Each person under this article is responsible to pay for
his or her receipt of medical services at the point of service.
A person may either make a cash payment and seek reimbursement,
use a debit or credit card or give an assignment of benefits.
(b) Each person is responsible to pay for his or her health
care. Persons who have no insurance coverage or who have not met
their deductible or copayment obligations are nevertheless
responsible for all debts incurred for their health care. Those
persons and entities providing health services are encouraged to
use the full force of the law to collect medical debts.
§33-41-7. Duties of insurance commissioner.
The commissioner of insurance shall report on or before the
first day of January, one thousand nine hundred ninety-six, to
the House of Delegates and Senate standing committees on
insurance and health all of the following:
(a) The availability of health care coverage under and market share of medical care savings account programs.
(b) Results of a survey of employer and employee satisfaction
with medical care savings account programs.
(c) The results of loss ratio study relative to medical care
savings account programs.
(d) An enrolled actuarial analysis of the cost-projections of
converting the medicaid, public employees insurance association,
(PEIA) and medicare programs to medical care savings account
programs.
§33-41-8. Voucher program.
(a) On or before the first day of January, one thousand nine
hundred ninety-six, the secretary of the department of health and
human resources shall:
(1) Develop a voucher program and prepare all rules for the
implementation of the program in accord with subdivision (3) of
this subsection.
(2) Develop in cooperation with the commissioner of insurance
a program to convert medicaid recipients to medical care savings
account program participants including application for a federal waiver to be phased in over a two-year period.
(3) By the year one thousand nine hundred ninety-five,
institute a model program converting an actuarially sound sample
of medicaid recipients to a medical care savings account program
and monitor and report health care usage and cost in the model
program.
(b) There is hereby created a voucher system to assist
eligible persons including individuals, employees and families
below two hundred percent of the poverty level who do not qualify
for medicaid, medicare or other state or federal program of
health benefits in paying their share of their health insurance.
Vouchers for eligible persons shall be for a specific share of
their health insurance including deductible as set forth herein.
Eligible persons include those:
(1) Employees and individuals whose total family gross income
equals or is below the federal poverty limit for similarly
situated families and have no health insurance and have a zero
balance in their medical care savings account exclusive of
interest. These individuals and employees shall receive a voucher for the individual and employee's total portion of the
yearly premium and deductible which will be made by contribution
to the medical care savings account program. If an employer pays
any portion of either the premium for the qualified higher
deductible plan or the deductible, the employee's voucher shall
be reduced dollar for dollar.
(2) Employees and individuals whose total family income is
greater than one hundred percent of the federal poverty level but
less than one hundred ninety-one percent of the federal poverty
level shall receive a voucher for the premium and deductible as
set forth in this subsection. If the employer pays any portion
of either the premium for the qualified higher deductible plan or
the deductible made by contribution to the medical care savings
account program, the voucher amount shall be reduced dollar for
dollar. Available dollars left in the medical care savings
accounts at the end of a tax year which are not state funding,
shall reduce dollar for dollar that portion of the voucher used
to fund the savings account only. If the employee's or
individual's income is the following percent of the federal poverty level, as adjusted time to time by Congress, then the
voucher shall be adjusted as follows:
INCOME LEVEL VOUCHER
Tied to poverty level Amount
101% - 110% 90%
111% - 120% 80%
121% - 130% 70%
131% - 150% 50%
151% - 170% 30%
171% - 199% 10%
(c) Eligible persons who receive state contributions to fund
all or part of their deductible may not withdraw the state's
contribution for any purpose except for:
(1) Qualified medical expenses, including medical, dental and
long-term care expenses, either through electronic transfer,
reimbursement, debit card or assignment of benefits.
(2) Interest earned on money in the account may be withdrawn
on the twelfth month anniversary date of the opening of the
account and used for any purpose. This interest income is personal income and is taxable under article twenty-one, chapter
eleven of this code. Interest left in the account shall
compound.
(d) The state's share of the voucher shall be recalculated
annually, unless the individual's or employee's eligibility
changes sooner. The amount in the individual's or employee's
account shall not exceed the yearly deductible, exclusive of
interest, until such time as the individual or employee no longer
receives voucher assistance.
(e) When an employee's or individual's income changes, the
employee or individual must notify the department of health and
human resources immediately upon receipt of the additional
income. The employee or individual will be responsible for the
employee's or individual's share of the premium as set forth
herein as the income supports such responsibility.
§33-41-9. Funding.
The voucher program shall be funded in part from all tobacco
excise taxes.
§33-41-10. Severability.
In the event any part or provision of this article be held to
be unconstitutional by any court of competent jurisdiction, such
holding and decision of the court shall not affect the validity
and constitutionality of the remaining parts and provisions of
this article.
§33-41-11. Effective date.
This article shall take effect on the first day of January,
one thousand nine hundred ninety-six.
NOTE: The purpose of this bill is to provide employers and
employees incentiv
es to create medical care savings accounts
through employment. The bill also creates the Medical Care
Savings and Trust Act. In doing so, it sets forth a comprehensive
mechanism for the administration of medical care savings
accounts, including maximum annual contributions, tax exemption
status for accrued interest, proper use of funds, deductibles,
withdrawal of trust funds, distribution of funds upon the death
of an account holder, development of a voucher program, as well
as other provisions.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.
Article forty-one is new; therefore, strike-throughs and underscoring
have been omitted.