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91_HB2271enr
HB2271 Enrolled LRB9104872JSpc
1 AN ACT to create the Small Employer Health Insurance
2 Rating Act.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 1. Short title. This Act may be cited as the
6 Small Employer Health Insurance Rating Act.
7 Section 5. Purpose. The legislature recognizes that all
8 too often, small employers are forced to increase employee
9 co-pays and deductibles or drop health insurance coverage
10 altogether because of unexpected rate increases as a result
11 of one major medical problem. It is the intent of this Act
12 to improve the efficiency and fairness of the small group
13 health insurance marketplace.
14 Section 10. Definitions. For purposes of this Act:
15 "Actuarial certification" means a written statement by a
16 member of the American Academy of Actuaries or other
17 individual acceptable to the Director that a small employer
18 carrier is in compliance with the provisions of Section 25 of
19 this Act, based upon an examination which includes a review
20 of the appropriate records and of the actuarial assumptions
21 and methods utilized by the small employer carrier in
22 establishing premium rates for the applicable health benefit
23 plans.
24 "Base premium rate" means for each class of business as
25 to a rating period, the lowest premium rate charged or which
26 could be charged under a rating system for that class of
27 business by the small employer carrier to small employers
28 with similar case characteristics for health benefit plans
29 with the same or similar coverage.
30 "Carrier" means any entity which provides health
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1 insurance in this State. For the purposes of this Act,
2 carrier includes a licensed insurance company, a prepaid
3 hospital or medical service plan, a health maintenance
4 organization, or any other entity providing a plan of health
5 insurance or health benefits subject to state insurance
6 regulation.
7 "Case characteristics" means demographic, geographic or
8 other objective characteristics of a small employer, that are
9 considered by the small employer carrier, in the
10 determination of premium rates for the small employer. Claim
11 experience, health status, and duration of coverage shall not
12 be characteristics for the purposes of the Small Employer
13 Health Insurance Rating Act.
14 "Class of business" means all or a separate grouping of
15 small employers established pursuant to Section 20.
16 "Director" means the Director of Insurance.
17 "Department" means the Department of Insurance.
18 "Health benefit plan" or "plan" shall mean any hospital
19 or medical expense-incurred policy, hospital or medical
20 service plan contract, or health maintenance organization
21 subscriber contract. Health benefit plan shall not include
22 individual, accident-only, credit, dental, vision, medicare
23 supplement, hospital indemnity, long term care, specific
24 disease, stop loss or disability income insurance, coverage
25 issued as a supplement to liability insurance, workers'
26 compensation or similar insurance, or automobile medical
27 payment insurance.
28 "Index rate" means, for each class of business as to a
29 rating period for small employers with similar case
30 characteristics, the arithmetic mean of the applicable base
31 premium rate and the corresponding highest premium rate.
32 "Late enrollee" has the meaning given that term in the
33 Illinois Health Insurance Portability and Accountability Act.
34 "New business premium rate" means, for each class of
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1 business as to a rating period, the lowest premium rate
2 charged or offered or which could have been charged or
3 offered by the small employer carrier to small employers with
4 similar case characteristics for newly issued health benefit
5 plans with the same or similar coverage.
6 "Objective characteristics" means measurable or
7 observable phenomena. An example of a measurable
8 characteristic would be the number of employees who were late
9 enrollees. Examples of observable characteristics would be
10 geographic location of the employer or gender of the
11 employee.
12 "Premium" means all monies paid by a small employer and
13 eligible employees as a condition of receiving coverage from
14 a small employer carrier, including any fees or other
15 contributions associated with the health benefit plan.
16 "Rating period" means the calendar period for which
17 premium rates established by a small employer carrier are
18 assumed to be in effect.
19 "Small employer" has the meaning given that term in the
20 Illinois Health Insurance Portability and Accountability Act.
21 "Small employer carrier" means a carrier that offers
22 health benefit plans covering employees of one or more small
23 employers in this State.
24 Section 15. Applicability and Scope.
25 (a) This Act shall apply to each health benefit plan for
26 a small employer that is delivered, issued for delivery,
27 renewed or continued in this State after July 1, 2000. For
28 purposes of this Section, the date a plan is continued shall
29 be the first rating period which commences after July 1,
30 2000.
31 The Act shall apply to any such health benefit plan which
32 provides coverage to employees of a small employer, except
33 that the Act shall not apply to individual health insurance
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1 policies.
2 Section 20. Establishment of Class of Business.
3 (a) A small employer carrier may establish a separate
4 class of business only to reflect substantial differences in
5 expected claims experience or administrative costs related to
6 the following reasons:
7 (1) the small employer carrier uses more than one
8 type of system for the marketing and sale of health
9 benefit plans to small employers;
10 (2) the small employer carrier has acquired a class
11 of business from another small employer carrier; or
12 (3) the small employer carrier provides coverage to
13 one or more association groups.
14 (b) A small employer carrier may establish up to 4
15 separate classes of business under subsection (a).
16 (c) The Director may approve the establishment of
17 additional classes of business upon application to the
18 Director and a finding by the Director that such action would
19 enhance the efficiency and fairness of the small employer
20 marketplace.
21 Section 25. Premium Rates.
22 (a) Premium rates for health benefit plans subject to
23 this Act shall be subject to all of the following provisions:
24 (1) The index rate for a rating period for any
25 class of business shall not exceed the index rate for any
26 other class of business by more than 20%.
27 (2) For a class of business, the premium rates
28 charged during a rating period to small employers with
29 similar case characteristics for the same or similar
30 coverage, or the rates that could be charged to such
31 employers under the rating system for that class of
32 business, shall not vary from the index rate by more than
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1 25% of the index rate.
2 (3) The percentage increase in the premium rate
3 charged to a small employer for a new rating period shall
4 not exceed the sum of the following:
5 (A) the percentage change in the new business
6 premium rate measured from the first day of the
7 prior rating period to the first day of the new
8 rating period. In the case of a health benefit plan
9 into which the small employer carrier is no longer
10 enrolling new small employers, the small employer
11 carrier shall use the percentage change in the base
12 premium rate;
13 (B) an adjustment, not to exceed 15% annually
14 and adjusted pro rata for rating periods of less
15 than one year, due to claim experience, health
16 status, or duration of coverage of the employees or
17 dependents of the small employer as determined from
18 the small employer carrier's rate manual for the
19 class of business; and
20 (C) any adjustment due to change in coverage
21 or change in the case characteristics of the small
22 employer as determined from the small employer
23 carrier's rate manual for the class of business.
24 (4) Adjustments in rates for a new rating period
25 due to claim experience, health status and duration of
26 coverage shall not be charged to individual employees or
27 dependents. Any such adjustment shall be applied
28 uniformly to the rates charged for all employees and
29 dependents of the small employer.
30 (5) In the case of health benefit plans delivered
31 or issued for delivery prior to the effective date of
32 this Act, a premium rate for a rating period may exceed
33 the ranges set forth in items (1) and (2) of subsection
34 (a) for a period of 3 years following the effective date
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1 of this Act. In such case, the percentage increase in
2 the premium rate charged to a small employer for a new
3 rating period shall not exceed the sum of the following:
4 (A) the percentage change in the new business
5 premium rate measured from the first day of the
6 prior rating period to the first day of the new
7 rating period; in the case of a class of business
8 into which the small employer carrier is no longer
9 enrolling new small employes, the small employer
10 carrier shall use the percentage change in the base
11 premium rate, provided that such change does not
12 exceed, on a percentage basis, the change in the new
13 business premium rate for the most similar class of
14 business into which the small employer carrier is
15 actively enrolling new small employers; and
16 (B) any adjustment due to change in coverage
17 or change in the case characteristics of the small
18 employer as determined from the carrier's rate
19 manual for the class of business.
20 (6) Small employer carriers shall apply rating
21 factors, including case characteristics, consistently
22 with respect to all small employers in a class of
23 business. A small employer carrier shall treat all health
24 benefit plans issued or renewed in the same calendar
25 month as having the same rating period.
26 (7) For the purposes of this subsection, a health
27 benefit plan that contains a restricted network provision
28 shall not be considered similar coverage to a health
29 benefit plan that does not contain such a provision,
30 provided that the restriction of benefits to network
31 providers results in substantial differences in claim
32 costs.
33 (b) A small employer carrier shall not transfer a small
34 employer involuntarily into or out of a class of business. A
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1 small employer carrier shall not offer to transfer a small
2 employer into or out of a class of business unless such offer
3 is made to transfer all small employers in the class of
4 business without regard to case characteristics, claim
5 experience, health status or duration of coverage since
6 issue.
7 Section 30. Rating and underwriting records.
8 (a) A small employer carrier shall maintain at its
9 principal place of business a complete and detailed
10 description of its rating practices and renewal underwriting
11 practices, including information and documentation that
12 demonstrates that its rating methods and practices are based
13 upon commonly accepted actuarial assumptions and are in
14 accordance with sound actuarial principles.
15 (b) A small employer carrier shall file with the
16 Director annually on or before May 15, an actuarial
17 certification certifying that the carrier is in compliance
18 with this Act, and that the rating methods of the small
19 employer carrier are actuarially sound. Such certification
20 shall be in a form and manner, and shall contain such
21 information, as specified by the Director. A copy of the
22 certification shall be retained by the small employer carrier
23 at its principal place of business for a period of three
24 years from the date of certification. This shall include any
25 work papers prepared in support of the actuarial
26 certification.
27 (c) A small employer carrier shall make the information
28 and documentation described in subsection (a) available to
29 the Director upon request. Except in cases of violations of
30 this Act, the information shall be considered proprietary and
31 trade secret information and shall not be subject to
32 disclosure by the Director to persons outside of the
33 Department except as agreed to by the small employer carrier
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1 or as ordered by a court of competent jurisdiction.
2 Section 35. Suspension of Rate Requirements. The
3 Director may suspend all or any part of Section 25 as to the
4 premium rates applicable to one or more small employers for
5 one or more rating periods upon a filing by the small
6 employer carrier and a finding by the Director that either
7 the suspension is reasonable in light of the financial
8 viability of the carrier or the suspension would enhance the
9 efficiency and fairness of the small employer health
10 insurance marketplace.
11 Section 40. Director's Regulatory Authority. The
12 Director may adopt and promulgate rules and regulations to
13 carry out the provisions of this Act.
14 Section 99. Effective date. This Act takes effect
15 January 1, 2000.
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