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91_HB2271eng
HB2271 Engrossed 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 30 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, a multiple-employer welfare arrangement, or any
5 other entity providing a plan of health insurance or health
6 benefits subject to state insurance 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 Act.
14 "Class of business" means all or a separate grouping of
15 small employers established pursuant to Section 25.
16 "Director" means the Director of Insurance.
17 "Department" means the Department of Insurance.
18 "Eligible employee" means an employee who works on a
19 full-time basis for the small employer, with a normal week of
20 30 or more hours, and has satisfied the waiting period and is
21 a member of the class eligible for insurance. Eligible
22 employee may also include a sole proprietor, a partner of a
23 partnership or an independent contractor, provided such sole
24 proprietor, partner or independent contractor is included as
25 an employee under a health benefit plan of a small employer.
26 It does not include an employee who works on a part-time,
27 temporary, seasonal or substitute basis.
28 "ERISA" means the Employee Retirement Income Security Act
29 of 1974, as amended.
30 "Health benefit plan" or plan shall mean any hospital or
31 medical expense-incurred policy or certificate, hospital or
32 medical service plan contract, or health maintenance
33 organization subscriber contract. Health benefit plan shall
34 not include individual, accident-only, credit, dental,
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1 vision, medicare supplement, hospital indemnity, long term
2 care or disability income insurance, coverage issued as a
3 supplement to liability insurance, workers' compensation or
4 similar insurance, or automobile medical payment insurance.
5 "Index rate" means, for each class of business as to a
6 rating period for small employers with similar case
7 characteristics, the arithmetic average of the applicable
8 base premium rate and the corresponding highest premium rate.
9 "Late enrollee" means an eligible employee or dependent
10 who requests enrollment in a health benefit plan of a small
11 employer following the initial enrollment period during which
12 the individual is entitled to enroll under the terms of the
13 health benefit plan, provided that the initial enrollment
14 period is a period of at least 30 days. However, an eligible
15 employee or dependent shall not be considered a late enrollee
16 if:
17 (1) the individual meets each of the following:
18 (A) the individual was covered under an
19 employer based health benefit plan at the time of
20 the initial enrollment;
21 (B) the individual lost coverage under
22 qualifying previous coverage as a result of
23 termination of employment or eligibility, the
24 involuntary termination of the qualifying previous
25 coverage, death of a spouse or divorce; and
26 (C) the individual requests enrollment within
27 30 days after the termination of the qualifying
28 previous coverage;
29 (2) the individual is employed by an employer which
30 offers multiple health benefit plans and the individual
31 elects a different plan during an open enrollment period;
32 or
33 (3) a court has ordered coverage be provided for a
34 spouse or minor or dependent child under a covered
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1 employee's health benefit plan and request for enrollment
2 is made within 30 days after issuance of the court order.
3 "MEWA" means a "multiple-employer welfare arrangement" as
4 defined in Section 3 of ERISA, as amended, except for any
5 arrangement which is fully insured within the meaning of
6 Section 514(b)(6) of ERISA, as amended.
7 "New business premium rate" means, for each class of
8 business as to a rating period, the lowest premium rate
9 charged or offered or which could have been charged or
10 offered by the small employer carrier to small employers with
11 similar case characteristics for newly issued health benefit
12 plans with the same or similar coverage.
13 "Preexisting condition" means a condition which, during a
14 12 month period immediately preceding the effective date of
15 coverage, had manifested itself in such a manner as would
16 cause an ordinarily prudent person to seek medical advice,
17 diagnosis, care or treatment or for which medical advice,
18 diagnosis, care, or treatment was recommended or received, or
19 a pregnancy existing on the effective date of coverage.
20 "Premium" means all monies paid by a small employer and
21 eligible employees as a condition of receiving coverage from
22 a small employer carrier, including any fees or other
23 contributions associated with the health benefit plan.
24 "Rating period" means the calendar period for which
25 premium rates established by a small employer carrier are
26 assumed to be in effect.
27 "Small employer" means any person, firm, corporation,
28 partnership, or association that is actively engaged in
29 business that, on at least 50% of its working days during the
30 preceding calendar quarter, employed at least 2 but no more
31 than 25 eligible employees, the majority of whom were
32 employed in this State. In determining the number of
33 eligible employees, companies that are affiliated companies,
34 or that are eligible to file a combined tax return for
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1 purposes of state taxation, shall be considered one employer.
2 "Small employer carrier" means a carrier that offers
3 health benefit plans covering eligible employees of one or
4 more small employers in this State.
5 Section 15. Applicability and Scope.
6 (a) This Act shall apply to each health benefit plan for
7 a small employer that is delivered, issued for delivery,
8 renewed or continued in this State after January 1, 2000.
9 For purposes of this Section, the date a plan is continued
10 shall be the first rating period which commences after
11 January 1, 2000.
12 The Act shall apply to any such health benefit plan which
13 provides coverage to employees of a small employer, except
14 that the Act shall not apply to individual health insurance
15 policies.
16 (b)(1) Except as provided in paragraph (2) for the
17 purposes of this Act, carriers that are affiliated companies
18 or that are eligible to file a consolidated tax return shall
19 be treated as one carrier and any restrictions or limitations
20 imposed by this Act shall apply as if all health benefit
21 plans delivered or issued for delivery to small employers in
22 this State by such affiliated carriers were issued by one
23 carrier.
24 (2) An affiliated carrier that is a health maintenance
25 organization having a certificate of authority under Section
26 2-1 of the Health Maintenance Organization Act may be
27 considered to be a separate carrier for the purposes of this
28 Act.
29 Section 20. Underwriting Provisions.
30 Health benefit plans covering small employers and, to the
31 extent permitted by ERISA, other benefit arrangements
32 covering small employers shall be subject to the following
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1 provisions, as applicable:
2 (1) Preexisting condition limitation: No policy
3 provision shall exclude or limit coverage for a
4 preexisting condition for a period beyond 12 months
5 following the effective date of a person's coverage.
6 (2) Portability of coverage: The preexisting
7 condition limitation period shall be reduced to the
8 extent a person was covered under a prior employer-based
9 health benefit plan if:
10 (A) the person is not a late enrollee; and
11 (B) the prior coverage was continuous to a
12 date not more than 30 days prior to the effective
13 date of the new coverage, exclusive of any
14 applicable waiting period.
15 (3) If a small employer carrier offers coverage to
16 a small employer, the small employer carrier shall offer
17 coverage to all of the eligible employees of a small
18 employer and their dependents. A small employer carrier
19 shall not offer coverage to only certain individuals in
20 an eligible class of a small employer group, except in
21 the case of late enrollees. Persons lawfully excluded by
22 a carrier prior to the effective date of this Act may
23 continue to be excluded by that carrier.
24 (4) A small employer carrier shall not modify a
25 health benefit plan with respect to a small employer or
26 any eligible employee or dependent, except that for
27 employees to whom the preexisting condition
28 limitations may apply, a small employer carrier may
29 restrict or exclude coverage or benefits for a specific
30 condition for a maximum period of 12 months from the
31 effective date of the eligible employee's or dependent's
32 coverage by way of rider or endorsement. As to employees
33 to whom the portability of coverage provisions apply, no
34 riders or endorsements may reduce or limit benefits to be
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1 provided under the portability of coverage provisions.
2 Any modification legally implemented by a carrier prior
3 to the effective date of this Act may be continued by
4 that carrier.
5 Section 25. Establishment of Class of Business.
6 (a) A small employer carrier may establish a separate
7 class of business only to reflect substantial differences in
8 expected claims experience or administrative costs related to
9 the following reasons:
10 (1) the small employer carrier uses more than one
11 type of system for the marketing and sale of health
12 benefit plans to small employers;
13 (2) the small employer carrier has acquired a class
14 of business from another small employer carrier; or
15 (3) the small employer carrier provides coverage to
16 one or more association groups.
17 (b) A small employer carrier may establish up to 3
18 separate classes of business under subsection (a).
19 (c) The Director may establish regulations to provide
20 for a period of transition in order for a small employer
21 carrier to come into compliance with subsection (b) in the
22 instance of acquisition of an additional class of business
23 from another small employer carrier.
24 (d) The Director may approve the establishment of
25 additional classes of business upon application to the
26 Director and a finding by the Director that such action would
27 enhance the efficiency and fairness of the small employer
28 marketplace.
29 Section 30. Premium Rates.
30 (a) Premium rates for health benefit plans subject to
31 this Act shall be subject to all of the following provisions:
32 (1) The index rate for a rating period for any
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1 class of business shall not exceed the index rate for any
2 other class of business by more than 20%.
3 (2) For a class of business, the premium rates
4 charged during a rating period to small employers with
5 similar case characteristics for the same or similar
6 coverage, or the rates that could be charged to such
7 employers under the rating system for that class of
8 business, shall not vary from the index rate by more than
9 30% of the index rate for the first rating period
10 following January 1, 2000, by more than 20% of the index
11 rate for the second rating period following January 1,
12 2000, nor by more than 10% of the index rate for any
13 subsequent rating period.
14 (3) The percentage increase in the premium rate
15 charged to a small employer for a new rating period shall
16 not exceed the sum of the following:
17 (A) the percentage change in the new business
18 premium rate measured from the first day of the
19 prior rating period to the first day of the new
20 rating period. In the case of a health benefit plan
21 into which the small employer carrier is no longer
22 enrolling new small employers, the small employer
23 carrier shall use the percentage change in the base
24 premium rate;
25 (B) an adjustment, not to exceed 15% annually
26 and adjusted pro rata for rating periods of less
27 than one year, due to claim experience, health
28 status, or duration of coverage of the employees or
29 dependents of the small employer as determined from
30 the small employer carrier's rate manual for the
31 class of business; and
32 (C) any adjustment due to change in coverage
33 or change in the case characteristics of the small
34 employer as determined from the small employer
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1 carrier's rate manual for the class of business.
2 (4) Adjustments in rates for a new rating period
3 due to claim experience, health status and duration of
4 coverage shall not be charged to individual employees or
5 dependents. Any such adjustment shall be applied
6 uniformly to the rates charged for all employees and
7 dependents of the small employer.
8 (5) In the case of health benefit plans delivered
9 or issued for delivery prior to the effective date of
10 this Act, a premium rate for a rating period may exceed
11 the ranges set forth in items (1) and (2) of subsection
12 (a) for a period of 3 years following the effective date
13 of this Act. In such case, the percentage increase in
14 the premium rate charged to a small employer for a new
15 rating period shall not exceed the sum of the following:
16 (A) the percentage change in the new business
17 premium rate measured from the first day of the
18 prior rating period to the first day of the new
19 rating period; in the case of a class of business
20 into which the small employer carrier is no longer
21 enrolling new small employes, the small employer
22 carrier shall use the percentage change in the base
23 premium rate, provided that such change does not
24 exceed, on a percentage basis, the change in the new
25 business premium rate for the most similar class of
26 business into which the small employer carrier is
27 actively enrolling new small employers; and
28 (B) any adjustment due to change in coverage
29 or change in the case characteristics of the small
30 employer as determined from the carrier's rate
31 manual for the class of business.
32 (6) Small employer carriers shall apply rating
33 factors, including case characteristics, consistently
34 with respect to all small employers in a class of
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1 business. A small employer carrier shall treat all health
2 benefit plans issued or renewed in the same calendar
3 month as having the same rating period.
4 (7) For the purposes of this subsection, a health
5 benefit plan that contains a restricted network provision
6 shall not be considered similar coverage to a health
7 benefit plan that does not contain such a provision,
8 provided that the restriction of benefits to network
9 providers results in substantial differences in claim
10 costs.
11 (b) A small employer carrier shall not transfer a small
12 employer involuntarily into or out of a class of business. A
13 small employer carrier shall not offer to transfer a small
14 employer into or out of a class of business unless such offer
15 is made to transfer all small employers in the class of
16 business without regard to case characteristics, claim
17 experience, health status or duration of coverage since
18 issue.
19 (c) The Director may suspend for a specified period the
20 application of item (1) of subsection (a) as to the premium
21 rates applicable to one or more small employers included
22 within a class of business of a small employer carrier for
23 one or more rating periods upon a filing by the small
24 employer carrier and a finding by the Director either that
25 the suspension is reasonable in light of the financial
26 condition of the small employer carrier or that suspension
27 would enhance the efficiency and fairness of the marketplace
28 for small employer health insurance.
29 Section 35. Rating and underwriting records.
30 (a) A small employer carrier shall maintain at its
31 principal place of business a complete and detailed
32 description of its rating practices and renewal underwriting
33 practices, including information and documentation that
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1 demonstrates that its rating methods and practices are based
2 upon commonly accepted actuarial assumptions and are in
3 accordance with sound actuarial principles.
4 (b) A small employer carrier shall file with the
5 Director annually on or before March 15, an actuarial
6 certification certifying that the carrier is in compliance
7 with this Act, and that the rating methods of the small
8 employer carrier are actuarially sound. Such certification
9 shall be in a form and manner, and shall contain such
10 information, as specified by the Director. A copy of the
11 certification shall be retained by the small employer carrier
12 at its principal place of business.
13 (c) A small employer carrier shall make the information
14 and documentation described in subsection (a) available to
15 the Director upon request. Except in cases of violations of
16 this Act, the information shall be considered proprietary and
17 trade secret information and shall not be subject to
18 disclosure by the Director to persons outside of the
19 Department except as agreed to by the small employer carrier
20 or as ordered by a court of competent jurisdiction.
21 Section 40. Suspension of Rate Requirements. The
22 Director may suspend all or any part of Section 30 as to the
23 premium rates applicable to one or more small employers for
24 one or more rating periods upon a filing by the small
25 employer carrier and a finding by the Director that either
26 the suspension is reasonable in light of the financial
27 condition of the carrier or the suspension would enhance the
28 efficiency and fairness of the small employer health
29 insurance marketplace.
30 Section 45. Director's Regulatory Authority. The
31 Director may adopt and promulgate rules and regulations to
32 carry out the provisions of this Act.
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1 Section 99. Effective date. This Act takes effect
2 January 1, 2000.
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