Public Act 90-0337 of the 90th General Assembly
Public Act 90-0337
HB1311 Enrolled LRB9003839JSgc
AN ACT to create the Health Care Purchasing Group Act.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 1. Short title. This Act may be cited as the
Health Care Purchasing Group Act.
Section 5. Purpose. The purpose and intent of this Act
is to authorize the formation, operation, and regulation of
health care purchasing groups (referred to in this Act as
"HPGs") as described by this Act, to authorize the sale and
regulation of health insurance products for employers that
are sold to HPGs, and to encourage the development of
financially secure and cost effective markets for the basic
health care needs of employers, employees, and their
dependents in this State. Nothing in this Act authorizes an
employer to join with other employers to self-insure through
risk pooling.
Section 10. Definitions. As used in this Act:
"Director" means the Director of Insurance.
"Employee" means a person who works on a full-time basis
for the employer, with a normal week of 30 or more hours, and
has satisfied any applicable waiting periods for insurance.
"Employee" may also include a sole proprietor, a partner of a
partnership, a retired employee, or an independent
contractor, provided the sole proprietor, partner, retired
employee, or independent contractor is included as an
employee under a health benefit plan of the employer. It
does not need to include an employee who works on a
part-time, temporary, seasonal, or substitute basis.
"Employer" may include any legal form of doing business
or employing people, including a self-employed sole
proprietor.
"Health benefit plan" means any hospital or medical
expense-incurred policy or certificate, hospital or medical
service plan contract, or health maintenance organization
subscriber contract. Health benefit plan shall not include a
policy or certificate of individual, accident-only, credit,
dental, vision, medicare supplement, hospital indemnity,
specified disease, long term care or disability income
insurance, coverage issued as a supplement to liability
insurance, workers' compensation or similar insurance, or
automobile medical payment insurance.
"Health insurance contract", "group or master health
insurance contract" and "insurance" refer to the forms of
insurance obligations which a "risk-bearer" as defined in
this Section has been authorized to issue.
"Late enrollee" means an employee or dependent who
requests enrollment in a health benefit plan of an employer
following the initial enrollment period during which the
individual is entitled to enroll under the terms of the
health insurance contract, provided that the initial
enrollment period is a period of at least 30 days. However,
an employee or dependent shall not be considered a late
enrollee if:
(1) The individual meets each of the following:
(A) the individual was covered under a prior
employer based health benefit plan at the time of the
initial enrollment;
(B) the individual lost coverage under qualifying
previous coverage as a result of termination of
employment or eligibility, the involuntary termination of
the qualifying previous coverage, death of a spouse or
divorce; and
(C) the individual requests enrollment within 30
days after the termination of the qualifying previous
coverage;
(2) the individual is employed by an employer that
offers multiple health insurance alternatives and the
individual elects a different coverage during an open
enrollment period; or
(3) a court has ordered coverage be provided for a
spouse or minor or dependent child under a covered employee's
health insurance contract and request for enrollment is made
within 30 days after issuance of the court order.
"Preexisting condition" means a condition that, during a
period of no more than 12 months immediately preceding the
effective date of coverage, had manifested itself in a manner
that would cause an ordinarily prudent person to seek medical
advice, diagnosis, care, or treatment, or for which medical
advice, diagnosis, care, or treatment was recommended or
received.
"Risk-bearer" means an insurance company licensed in this
State and authorized to transact the kinds of business
described in clause (b) of Class 1 and clause (a) of Class 2
of Section 4 of the Illinois Insurance Code and entities
authorized under the Health Maintenance Organization Act.
Section 15. Health care purchasing groups; membership;
formation.
(a) An HPG may be an organization formed by 2 or more
employers with no more than 2,500 covered individuals, an HPG
sponsor or a risk-bearer for purposes of contracting for
health insurance under this Act to cover employees and
dependents of HPG members. An HPG shall not be prevented
from supplementing health insurance coverage purchased under
this Act by contracting for services from entities licensed
and authorized in Illinois to provide those services under
the Dental Service Plan Act, the Limited Health Service
Organization Act, Vision Service Plan Act, or Voluntary
Health Services Plans Act. An HPG may be a separate legal
entity or simply a group of 2 or more employers with no more
than 2,500 covered individuals aggregated under this Act by
an HPG sponsor or risk-bearer for insurance purposes. There
shall be no limit as to the number of HPGs that may operate
in any geographic area of the State. No insurance risk may
be borne or retained by the HPG. All health insurance
contracts issued to the HPG must be delivered or issued for
delivery in Illinois.
(b) Members of an HPG must be Illinois domiciled
employers, except that an employer domiciled elsewhere may
become a member of an Illinois HPG for the sole purpose of
insuring its employees whose place of employment is located
within this State. HPG membership may include employers
having no more than 2,500 covered individuals.
(c) If an HPG is formed by any 2 or more employers with
no more than 2,500 covered individuals, it is authorized to
negotiate, solicit, market, obtain proposals for, and enter
into group or master health insurance contracts on behalf of
its members and their employees and employee dependents so
long as it meets all of the following requirements:
(1) The HPG must be an organization having the
legal capacity to contract and having its legal situs in
Illinois.
(2) The principal persons responsible for the
conduct of the HPG must perform their HPG related
functions in Illinois.
(3) No HPG may collect premium in its name or hold
or manage premium or claim fund accounts unless duly
licensed and qualified as a managing general agent
pursuant to Section 141a of the Illinois Insurance Code
or a third party administrator pursuant to Section
511.105 of the Illinois Insurance Code.
(4) If the HPG gives an offer, application, notice,
or proposal of insurance to an employer, it must disclose
to that employer the total cost of the insurance. Dues,
fees, or charges to be paid to the HPG, HPG sponsor, or
any other entity as a condition to purchasing the
insurance must be itemized. The HPG shall also disclose
to its members the amount of any dividends, experience
refunds, or other such payments it receives from the
risk-bearer.
(5) An HPG must register with the Director before
entering into a group or master health insurance contract
on behalf of its members and must renew the registration
annually on forms and at times prescribed by the Director
in rules specifying, at minimum, (i) the identity of the
officers and directors, trustees, or attorney-in-fact of
the HPG; (ii) a certification that those persons have not
been convicted of any felony offense involving a breach
of fiduciary duty or improper manipulation of accounts;
and (iii) the number of employer members then enrolled in
the HPG, together with any other information that may be
needed to carry out the purposes of this Act.
(6) At the time of initial registration and each
renewal thereof an HPG shall pay a fee of $100 to the
Director.
(d) If an HPG is formed by an HPG sponsor or risk-bearer
and the HPG performs no marketing, negotiation, solicitation,
or proposing of insurance to HPG members, exclusive of
ministerial acts performed by individual employers to service
their own employees, then a group or master health insurance
contract may be issued in the name of the HPG and held by an
HPG sponsor, risk-bearer, or designated employer member
within the State. In these cases the HPG requirements
specified in subsection (c) shall not be applicable, however:
(1) the group or master health insurance contract
must contain a provision permitting the contract to be
enforced through legal action initiated by any employer
member or by an employee of an HPG member who has paid
premium for the coverage provided;
(2) the group or master health insurance contract
must be available for inspection and copying by any HPG
member, employee, or insured dependent at a designated
location within the State at all normal business hours;
and
(3) any information concerning HPG membership
required by rule under item (5) of subsection (c) must be
provided by the HPG sponsor in its registration and
renewal forms or by the risk-bearer in its annual
reports.
Section 20. HPG sponsors. Except as provided by Sections
15 and 25 of this Act, only a corporation authorized by the
Secretary of State to transact business in Illinois may
sponsor one or more HPGs with no more than 10,000 covered
individuals by negotiating, soliciting, or servicing health
insurance contracts for HPGs and their members. Such a
corporation may assert and maintain authority to act as an
HPG sponsor by complying with all of the following
requirements:
(1) The principal officers and directors
responsible for the conduct of the HPG sponsor must
perform their HPG sponsor related functions in Illinois.
(2) No insurance risk may be borne or retained by
the HPG sponsor; all health insurance contracts issued to
HPGs through the HPG sponsor must be delivered in
Illinois.
(3) No HPG sponsor may collect premium in its name
or hold or manage premium or claim fund accounts unless
duly qualified and licensed as a managing general agent
pursuant to Section 141a of the Illinois Insurance Code
or as a third party administrator pursuant to Section
511.105 of the Illinois Insurance Code.
(4) If the HPG gives an offer, application, notice,
or proposal of insurance to an employer, it must disclose
the total cost of the insurance. Dues, fees, or charges
to be paid to the HPG, HPG sponsor, or any other entity
as a condition to purchasing the insurance must be
itemized. The HPG shall also disclose to its members the
amount of any dividends, experience refunds, or other
such payments it receives from the risk-bearer.
(5) An HPG sponsor must register with the Director
before negotiating or soliciting any group or master
health insurance contract for any HPG and must renew the
registration annually on forms and at times prescribed by
the Director in rules specifying, at minimum, (i) the
identity of the officers and directors of the HPG sponsor
corporation; (ii) a certification that those persons have
not been convicted of any felony offense involving a
breach of fiduciary duty or improper manipulation of
accounts; (iii) the number of employer members then
enrolled in each HPG sponsored; (iv) the date on which
each HPG was issued a group or master health insurance
contract, if any; and (v) the date on which each such
contract, if any, was terminated.
(6) At the time of initial registration and each
renewal thereof an HPG sponsor shall pay a fee of $100 to
the Director.
Section 25. Risk-bearer.
(a) A risk-bearer may issue for delivery in this State
any health insurance contracts as provided by this Act. A
risk-bearer may also be a sponsor of an HPG.
(b) A risk-bearer must also file an annual report in the
form and at the time prescribed by the Director in rules that
shall require, at minimum, (i) the number of employer
members then enrolled in each HPG; (ii) the date on which
each HPG was issued a group or master health insurance
contract, if any; and (iii) the date on which each such
contract, if any, was terminated, together with any other
information that may be necessary to carry out the purposes
of this Act. A fee of $25 shall be paid to the Director at
the time the annual report is filed.
Section 30. Insurance policy requirements.
(a) No health insurance contract may be issued or
delivered pursuant to this Act unless a copy of the form of
the contract has been filed with the Director and approved in
accordance with Section 355 of the Illinois Insurance Code.
It must also contain, in substance, those provisions
contained in Sections 357.1 through 357.30 of the Illinois
Insurance Code as may be applicable and contain all other
provisions applicable to group accident and health insurance
policies as provided in Article XX of the Illinois Insurance
Code, except as provided in Section 50 of this Act. This
subsection (a) does not apply to health maintenance
organizations.
(b) No health maintenance organization contract may be
issued or delivered under this Act unless a copy of the form
of the contract has been filed with the Director and approved
in accordance with Section 4-13 of the Health Maintenance
Organization Act. It must also provide or arrange for and
pay for or reimburse the cost of basic health care services
as defined in Section 1-2 of the Health Maintenance
Organization Act and provide the benefits specified in the
Health Maintenance Organization Act for group contracts.
(c) In the event that the enrollee has moved outside of
the service area of the health maintenance organization, the
HMO must make available conversion coverage through a
contract with a licensed insurance carrier. The conversion
coverage must be similar to that which is provided through
the HMO. Coverage shall be considered "similar" if it
provides a comprehensive medical benefit plan for at least 18
months and is provided without imposing any preexisting
condition limitation or exclusion, other than those remaining
unexpired under the contract from which conversion is
exercised.
(d) Nothing in this Act shall preclude a risk-bearer and
an HPG or employer from entering into a contract that
contains provisions whereby each party agrees to continue the
contract in force for a prescribed period of time.
(e) Nothing in this Act shall preclude a risk-bearer
from offering health insurance contracts that contain
benefits in addition to those required in subsection (a).
(f) No HPG may purchase insurance providing for a
deductible or an aggregate limit unless the deductible or
aggregate limit applies separately to each individual insured
person of the purchasing group.
Section 35. Underwriting provisions. All health insurance
contracts issued under this Act shall be subject to the
following provisions, as applicable:
(1) Preexisting condition limitation: No health
insurance contract or certificate issued under the
contract shall exclude or limit coverage for a
preexisting condition for a period beyond 12 months from
the effective date of a person's coverage.
(2) Portability of coverage: Preexisting condition
limitation periods shall be reduced to the extent a
person was covered under a prior employer-based health
benefit plan, notwithstanding the benefit levels of the
prior plan, if:
(A) the person is not a late enrollee; and
(B) the prior coverage was continuous to a
date not more than 30 days prior to the effective
date of the new coverage, exclusive of any
applicable waiting period.
(3) If a risk-bearer offers coverage to an
employer, the risk-bearer shall offer coverage to all of
the employees of an employer and their dependents. A
risk-bearer shall not offer coverage to only certain
individuals of an employer group, except in the case of
late enrollees.
(4) As to employees to whom portability provisions
do not apply, a risk-bearer shall not modify a health
insurance contract or certificate thereunder with respect
to an employer or any employee or dependent, except a
risk-bearer may restrict or exclude coverage or benefits
for a specific condition for a maximum period of 12
months from the effective date of the employee's or
dependent's coverage by way of rider or endorsement. As
to employees to whom the portability of coverage
provisions apply, no riders or endorsements may reduce or
limit benefits to be provided under the portability of
coverage provisions.
Section 40. Renewability.
(a) A health insurance contract subject to this Act
shall be renewable with respect to all insured employees or
dependents, at the option of the HPG or employer, whichever
is a party to the master health insurance contract, except in
any of the following cases:
(1) nonpayment of required premiums;
(2) fraud or misrepresentation of the employer or,
with respect to coverage of individual insureds, the
insureds or their representatives;
(3) noncompliance with the risk-bearer's minimum
participation requirements;
(4) noncompliance with the risk-bearer's employer
contribution requirements;
(5) noncompliance with contract provisions;
(6) repeated misuse of a provider network
provision;
(7) the risk-bearer elects to non-renew all of its
health insurance contracts delivered or issued for
delivery to HPGs or employers under this Act; or
(8) the Director finds that the continuation of the
coverage would:
(A) Not be in the best interests of the policy
holders or certificate holders; or
(B) Impair the risk-bearer's ability to meet
its contractual obligations.
(b) A risk-bearer that elects not to renew a health
insurance contract under item (7) of subsection (a) shall
provide notice of the decision not to renew coverage to all
affected employers and to the official in charge of insurance
regulation in each state in which an affected insured
individual is known to reside at least 180 days prior to the
nonrenewal of any health insurance contract by the
risk-bearer. Notice to an official in charge of insurance
regulation under this subsection shall be provided at least
3 working days before the notice to the affected employers.
Further, the risk-bearer shall be prohibited from writing new
business under this Act for a period of 5 years from the date
of notice to the Director.
Section 45. Disclosure requirements. In connection with
the offering for sale of any health insurance contract or
certificate under the contract to an HPG sponsor, HPG,
employer, and employee, a risk-bearer shall make a reasonable
disclosure, as part of its solicitation and sales materials
of all of the following:
(1) the provisions of the health insurance contracts
concerning the risk-bearer's right to change premium rates
and the factors, other than claim experience, that affect
changes in premium rates;
(2) that the rating restrictions contained in Section 30
of the Small Employer Rating, Renewability and Portability
Health Insurance Act are not applicable to the health
insurance contract being offered;
(3) the provisions relating to renewability of policies
and contracts;
(4) the provisions relating to any preexisting condition
provision; and
(5) the provisions relating to portability provisions.
Section 50. Benefit levels. Nothing in this Act
precludes those HPG members who meet the criteria established
in the Small Employer Group Health Insurance Law (Article
XIXB of the Illinois Insurance Code) or HPGs whose members
all meet the criteria established in that Law from being
eligible for the type of coverage set forth in that Law.
Section 60. Administrative and procedural authority
regarding HPGs and HPG sponsors. The Director is authorized
to make use of any of the powers established under the
Illinois Insurance Code to enforce the laws of this State.
This includes but is not limited to, the Director's
administrative authority to investigate, issue subpoenas,
conduct depositions and hearings, issue orders (including
without limitation orders pursuant to Article XII 1/2 and
Section 401.1 of the Illinois Insurance Code), and impose
penalties. With regard to any investigation, administrative
proceedings, or litigation, the Director shall rely on the
procedural law and regulations of this State.
Section 65. Fees.
(a) The Director shall charge, collect, and give proper
acquittance for the payment all fees provided for by this
Act, except that any Illinois corporations licensed by the
Department of Insurance pursuant to the provisions of the
Illinois Insurance Code, the Dental Service Plan Act, the
Health Maintenance Organization Act, the Limited Health
Service Organization Act, the Vision Service Plan Act and the
Voluntary Health Services Plans Act or licensed as a third
party administrator or as a managing general agent is exempt
from the registration fee imposed under this Act.
(b) Any funds collected under provisions of this Act
shall be treated in the manner provided in subsection (11) of
Section 408 of the Illinois Insurance Code.
Section 70. Rules. The Director shall promulgate rules as
may be necessary or desirable to carry out the provisions of
this Act.
Section 75. Severability. The provisions of this Act are
severable under Section 1.31 of the Statute on Statutes.