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91_HB2271ham001
LRB9104872JSfgam
1 AMENDMENT TO HOUSE BILL 2271
2 AMENDMENT NO. . Amend House Bill 2271 by replacing
3 the title with the following:
4 "AN ACT to create the Small Employer Health Insurance
5 Rating Act."; and
6 by replacing everything after the enacting clause with the
7 following:
8 "Section 1. Short title. This Act may be cited as the
9 Small Employer Health Insurance Rating Act.
10 Section 5. Purpose. The legislature recognizes that all
11 too often, small employers are forced to increase employee
12 co-pays and deductibles or drop health insurance coverage
13 altogether because of unexpected rate increases as a result
14 of one major medical problem. It is the intent of this Act
15 to improve the efficiency and fairness of the small group
16 health insurance marketplace.
17 Section 10. Definitions. For purposes of this Act:
18 "Actuarial certification" means a written statement by a
19 member of the American Academy of Actuaries or other
20 individual acceptable to the Director that a small employer
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1 carrier is in compliance with the provisions of Section 30 of
2 this Act, based upon an examination which includes a review
3 of the appropriate records and of the actuarial assumptions
4 and methods utilized by the small employer carrier in
5 establishing premium rates for the applicable health benefit
6 plans.
7 "Base premium rate" means for each class of business as
8 to a rating period, the lowest premium rate charged or which
9 could be charged under a rating system for that class of
10 business by the small employer carrier to small employers
11 with similar case characteristics for health benefit plans
12 with the same or similar coverage.
13 "Carrier" means any entity which provides health
14 insurance in this State. For the purposes of this Act,
15 carrier includes a licensed insurance company, a prepaid
16 hospital or medical service plan, a health maintenance
17 organization, a multiple-employer welfare arrangement, or any
18 other entity providing a plan of health insurance or health
19 benefits subject to state insurance regulation.
20 "Case characteristics" means demographic, geographic or
21 other objective characteristics of a small employer, that are
22 considered by the small employer carrier, in the
23 determination of premium rates for the small employer. Claim
24 experience, health status, and duration of coverage shall not
25 be characteristics for the purposes of the Small Employer
26 Health Insurance Act.
27 "Class of business" means all or a separate grouping of
28 small employers established pursuant to Section 25.
29 "Director" means the Director of Insurance.
30 "Department" means the Department of Insurance.
31 "Eligible employee" means an employee who works on a
32 full-time basis for the small employer, with a normal week of
33 30 or more hours, and has satisfied the waiting period and is
34 a member of the class eligible for insurance. Eligible
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1 employee may also include a sole proprietor, a partner of a
2 partnership or an independent contractor, provided such sole
3 proprietor, partner or independent contractor is included as
4 an employee under a health benefit plan of a small employer.
5 It does not include an employee who works on a part-time,
6 temporary, seasonal or substitute basis.
7 "ERISA" means the Employee Retirement Income Security Act
8 of 1974, as amended.
9 "Health benefit plan" or plan shall mean any hospital or
10 medical expense-incurred policy or certificate, hospital or
11 medical service plan contract, or health maintenance
12 organization subscriber contract. Health benefit plan shall
13 not include individual, accident-only, credit, dental,
14 vision, medicare supplement, hospital indemnity, long term
15 care or disability income insurance, coverage issued as a
16 supplement to liability insurance, workers' compensation or
17 similar insurance, or automobile medical payment insurance.
18 "Index rate" means, for each class of business as to a
19 rating period for small employers with similar case
20 characteristics, the arithmetic average of the applicable
21 base premium rate and the corresponding highest premium rate.
22 "Late enrollee" means an eligible employee or dependent
23 who requests enrollment in a health benefit plan of a small
24 employer following the initial enrollment period during which
25 the individual is entitled to enroll under the terms of the
26 health benefit plan, provided that the initial enrollment
27 period is a period of at least 30 days. However, an eligible
28 employee or dependent shall not be considered a late enrollee
29 if:
30 (1) the individual meets each of the following:
31 (A) the individual was covered under an
32 employer based health benefit plan at the time of
33 the initial enrollment;
34 (B) the individual lost coverage under
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1 qualifying previous coverage as a result of
2 termination of employment or eligibility, the
3 involuntary termination of the qualifying previous
4 coverage, death of a spouse or divorce; and
5 (C) the individual requests enrollment within
6 30 days after the termination of the qualifying
7 previous coverage;
8 (2) the individual is employed by an employer which
9 offers multiple health benefit plans and the individual
10 elects a different plan during an open enrollment period;
11 or
12 (3) a court has ordered coverage be provided for a
13 spouse or minor or dependent child under a covered
14 employee's health benefit plan and request for enrollment
15 is made within 30 days after issuance of the court order.
16 "MEWA" means an "multiple-employer welfare arrangement"
17 as defined in Section 3 of ERISA, as amended, except for any
18 arrangement which is fully insured within the meaning of
19 Section 514(b)(6) of ERISA, as amended.
20 "New business premium rate" means, for each class of
21 business as to a rating period, the lowest premium rate
22 charged or offered or which could have been charged or
23 offered by the small employer carrier to small employers with
24 similar case characteristics for newly issued health benefit
25 plans with the same or similar coverage.
26 "Preexisting condition" means a condition which, during a
27 12 month period immediately preceding the effective date of
28 coverage, had manifested itself in such a manner as would
29 cause an ordinarily prudent person to seek medical advice,
30 diagnosis, care or treatment or for which medical advice,
31 diagnosis care, or treatment was recommended or received, or
32 a pregnancy existing on the effective date of coverage.
33 "Premium" means all monies paid by a small employer and
34 eligible employees as a condition of receiving coverage from
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1 a small employer carrier, including any fees or other
2 contributions associated with the health benefit plan.
3 "Rating period" means the calendar period for which
4 premium rates established by a small employer carrier are
5 assumed to be in effect.
6 "Small employer" means any person, firm, corporation,
7 partnership, or association that is actively engaged in
8 business that, on at least 50% of its working days during the
9 preceding calendar quarter, employed at least 2 but no more
10 than 25 eligible employees, the majority of whom were
11 employed in this State. In determining the number of
12 eligible employees, companies that are affiliated companies,
13 or that are eligible to file a combined tax return for
14 purposes of state taxation, shall be considered one employer.
15 "Small employer carrier" means a carrier that offers
16 health benefit plans covering eligible employees of one or
17 more small employers in this State.
18 Section 15. Applicability and Scope.
19 (a) This Act shall apply to each health benefit plan for
20 a small employer that is delivered, issued for deliver,
21 renewed or continued in this State after January 1, 2000.
22 For purposes of this Section, the date a plan is continued
23 shall be the first rating period which commences after
24 January 1, 2000.
25 The Act shall apply to any such health benefit plan which
26 provides coverage to employees of a small employer, except
27 that the Act shall not apply to individual health insurance
28 policies.
29 (b)(1) Except as provided in paragraph (2) for the
30 purposes of this Act, carriers that are affiliated companies
31 or that are eligible to file a consolidate tax return shall
32 be treated as one carrier and any restrictions or limitations
33 imposed by this Act shall apply as if all health benefit
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1 plans delivered or issued for delivery to small employers in
2 this State by such affiliated carriers were issued by one
3 carrier.
4 (2) An affiliated carrier that is a health maintenance
5 organization having a certificate of authority under Section
6 2-1 of the Health Maintenance Organization Act may be
7 considered to be a separate carrier for the purposes of this
8 Act.
9 Section 20. Underwriting Provisions.
10 Health benefit plans covering small employers and, to the
11 extent permitted by ERISA, other benefit arrangements
12 covering small employers shall be subject to the following
13 provisions, as applicable:
14 (1) Preexisting condition limitation: No policy
15 provision shall exclude or limit coverage for a
16 preexisting condition for a period beyond 12 months
17 following the effective date of a person's coverage.
18 (2) Portability of coverage: The preexisting
19 condition limitation period shall be reduced to the
20 extent a person was covered under a prior employer-based
21 health benefit plan if:
22 (A) the person is not a late enrollee; and
23 (B) the prior coverage was continuous to a
24 date not more than 30 days prior to the effective
25 date of the new coverage, exclusive of any
26 applicable waiting period.
27 (3) If a small employer carrier offers coverage to
28 a small employer, the small employer carrier shall offer
29 coverage to all of the eligible employees of a small
30 employer and their dependents. A small employer carrier
31 shall not offer coverage to only certain individuals in
32 an eligible class of a small employer group, except in
33 the case of late enrollees. Persons lawfully excluded by
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1 a carrier prior to the effective date of this Act may
2 continue to be excluded by that carrier.
3 (4) A small employer carrier shall not modify a
4 health benefit plan with respect to a small employer or
5 any eligible employee or dependent, except that for
6 employees to whom the preexisting condition
7 limitations may apply, a small employer carrier may
8 restrict or exclude coverage or benefits for a specific
9 condition for a maximum period of 12 months from the
10 effective date of the eligible employee's or dependent's
11 coverage by way of rider or endorsement. As to employees
12 to whom the portability of coverage provisions apply, no
13 riders or endorsements may reduce or limit benefits to be
14 provided under the portability of coverage provisions.
15 Any modification legally implemented by a carrier prior
16 to the effective date of this Act may be continued by
17 that carrier.
18 Section 25. Establishment of Class of Business.
19 (a) A small employer carrier may establish a separate
20 class of business only to reflect substantial differences in
21 expected claims experience or administrative costs related to
22 the following reasons:
23 (1) the small employer carrier uses more than one
24 type of system for the marketing and sale of health
25 benefit plans to small employers;
26 (2) the small employer carrier has acquired a class
27 of business from another small employer carrier; or
28 (3) the small employer carrier provides coverage to
29 one or more association groups.
30 (b) A small employer carrier may establish up to 3
31 separate classes of business under subsection (a).
32 (c) The Director may establish regulations to provide
33 for a period of transition in order for a small employer
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1 carrier to come into compliance with subsection (b) in the
2 instance of acquisition of an additional class of business
3 from another small employer carrier.
4 (d) The Director may approve the establishment of
5 additional classes of business upon application to the
6 Director and a finding by the Director that such action would
7 enhance the efficiency and fairness of the small employer
8 marketplace.
9 Section 30. Premium Rates.
10 (a) Premium rates for health benefit plans subject to
11 this Act shall be subject to all of the following provisions:
12 (1) The index rate for a rating period for any
13 class of business shall not exceed the index rate for any
14 other class of business by more than 20%.
15 (2) For a class of business, the premium rates
16 charged during a rating period to small employers with
17 similar case characteristics for the same or similar
18 coverage, or the rates that could be charged to such
19 employers under the rating system for that class of
20 business, shall not vary from the index rate by more than
21 30% of the index rate for the first rating period
22 following January 1, 2000, by more than 20% of the index
23 rate for the second rating period following January 1,
24 2000, nor by more than 10% of the index rate for any
25 subsequent rating period.
26 (3) The percentage increase in the premium rate
27 charged to a small employer for a new rating period shall
28 not exceed the sum of the following:
29 (A) the percentage change in the new business
30 premium rate measured from the first day of the
31 prior rating period to the first day of the new
32 rating period. In the case of a health benefit plan
33 into which the small employer carrier is no longer
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1 enrolling new small employers, the small employer
2 carrier shall use the percentage change in the base
3 premium rate;
4 (B) an adjustment, not to exceed 15% annually
5 and adjusted pro rata for rating periods of less
6 than one year, due to claim experience, health
7 status, or duration of coverage of the employees or
8 dependents of the small employer as determined from
9 the small employer carrier's rate manual for the
10 class of business; and
11 (C) any adjustment due to change in coverage
12 or change in the case characteristics of the small
13 employer as determined from the small employer
14 carrier's rate manual for the class of business.
15 (4) Adjustments in rates for a new rating period
16 due to claim experience, health status and duration of
17 coverage shall not be charged to individual employees or
18 dependents. Any such adjustment shall be applied
19 uniformly to the rates charged for all employees and
20 dependents of the small employer.
21 (5) In the case of health benefit plans delivered
22 or issued for deliver prior to the effective date of this
23 Act, a premium rate for a rating period may exceed the
24 ranges set forth in items (1) and (2) of subsection (a)
25 for a period of 3 years following the effective date of
26 this Act. In such case, the percentage increase in the
27 premium rate charged to a small employer for a new rating
28 period shall not exceed the sum of the following:
29 (A) the percentage change in the new business
30 premium rate measured from the first day of the
31 prior rating period to the first day of the new
32 rating period; in the case of a class of business
33 into which the small employer carrier is no longer
34 enrolling new small employes, the small employer
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1 carrier shall use the percentage change in the base
2 premium rate, provided that such change does not
3 exceed, on a percentage basis, the change in the new
4 business premium rate for the most similar class of
5 business into which the small employer carrier is
6 actively enrolling new small employers; and
7 (B) any adjustment due to change in coverage
8 or change in the case characteristics of the small
9 employer as determined from the carrier's rate
10 manual for the class of business.
11 (6) Small employer carriers shall apply rating
12 factors, including case characteristics, consistently
13 with respect to all small employers in a class of
14 business. A small employer carrier shall treat all health
15 benefit plans issued or renewed in the same calendar
16 month as having the same rating period.
17 (7) For the purposes of this subsection, a health
18 benefit plan that contains a restricted network provision
19 shall not be considered similar coverage to a health
20 benefit plan that does not contain such a provision,
21 provided that the restriction of benefits to network
22 providers results in substantial differences in claim
23 costs.
24 (b) A small employer carrier shall not transfer a small
25 employer involuntarily into or out of a class of business. A
26 small employer carrier shall not offer to transfer a small
27 employer into or out of a class of business unless such offer
28 is made to transfer all small employers in the class of
29 business without regard to case characteristics, claim
30 experience, health status or duration of coverage since
31 issue.
32 (c) The Director may suspend for a specified period the
33 application of item (1) of subsection (a) as to the premium
34 rates applicable to one or more small employers included
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1 within a class of business of a small employer carrier for
2 one or more rating periods upon a filing by the small
3 employer carrier and a finding by the Director either that
4 the suspension is reasonable in light of the financial
5 condition of the small employer carrier or that suspension
6 would enhance the efficiency and fairness of the marketplace
7 for small employer health insurance.
8 Section 35. Rating and underwriting records.
9 (a) A small employer carrier shall maintain at its
10 principal place of business a complete and detailed
11 description of its rating practices and renewal underwriting
12 practices, including information and documentation that
13 demonstrates that its rating methods and practices are based
14 upon commonly accepted actuarial assumptions and are in
15 accordance with sound actuarial principles.
16 (b) A small employer carrier shall file with the
17 Director annually on or before March 15, an actuarial
18 certification certifying that the carrier is in compliance
19 with this Act, and that the rating methods of the small
20 employer carrier are actuarially sound. Such certification
21 shall be in a form and manner, and shall contain such
22 information, as specified by the Director. A copy of the
23 certification shall be retained by the small employer carrier
24 at its principal place of business.
25 (c) A small employer carrier shall make the information
26 and documentation described in subsection (a) available to
27 the Director upon request. Except in cases of violations of
28 this Act, the information shall be considered proprietary and
29 trade secret information and shall not be subject to
30 disclosure by the Director to persons outside of the
31 Department except as agreed to by the small employer carrier
32 or as ordered by a court of competent jurisdiction.
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1 Section 40. Suspension of Rate Requirements. The
2 Director may suspend all or any part of Section 30 as to the
3 premium rates applicable to one or more small employers for
4 one or more rating periods upon a filing by the small
5 employer carrier and a finding by the Director that either
6 the suspension is reasonable in light of the financial
7 condition of the carrier or the suspension would enhance the
8 efficiency and fairness of the small employer health
9 insurance marketplace.
10 Section 45. Director's Regulatory Authority. The
11 Director may adopt and promulgate rules and regulations to
12 carry out the provisions of this Act.
13 Section 99. Effective date. This Act takes effect
14 January 1, 2000.".