Chapter 07-221

Chapter 221

2007 -- H 6054 AS AMENDED

Enacted 07/03/07

A N A C T

RELATING TO INSURANCE -- SMALL EMPLOYER HEALTH INSURANCE

Introduced By: Representatives Costantino, Kennedy, and Lewiss

Date Introduced: March 01, 2007

It is enacted by the General Assembly as follows:

SECTION 1. Section 27-50-3 of the General Laws in Chapter 27-50 entitled "Small

Employer Health Insurance Availability Act" is hereby amended to read as follows:

27-50-3. Definitions. [Effective July 1, 2007.] -- (a) "Actuarial certification" means a

written statement signed by a member of the American Academy of Actuaries or other individual

acceptable to the director that a small employer carrier is in compliance with the provisions of

section 27-50-5, based upon the person's examination and including a review of the appropriate

records and the actuarial assumptions and methods used by the small employer carrier in

establishing premium rates for applicable health benefit plans.

(b) "Adjusted community rating" means a method used to develop a carrier's premium

which spreads financial risk across the carrier's entire small group population in accordance with

the requirements in section 27-50-5.

through one or more intermediaries controls or is controlled by, or is under common control with,

a specified entity or person.

(d) "Affiliation period" means a period of time that must expire before health insurance

coverage provided by a carrier becomes effective, and during which the carrier is not required to

provide benefits.

(e) "Bona fide association" means, with respect to health benefit plans offered in this

state, an association which:

(1) Has been actively in existence for at least five (5) years;

(2) Has been formed and maintained in good faith for purposes other than obtaining

insurance;

(3) Does not condition membership in the association on any health-status related factor

relating to an individual (including an employee of an employer or a dependent of an employee);

(4) Makes health insurance coverage offered through the association available to all

members regardless of any health status-related factor relating to those members (or individuals

eligible for coverage through a member);

(5) Does not make health insurance coverage offered through the association available

other than in connection with a member of the association;

(6) Is composed of persons having a common interest or calling;

(7) Has a constitution and bylaws; and

(8) Meets any additional requirements that the director may prescribe by regulation.

(f) "Carrier" or "small employer carrier" means all entities licensed, or required to be

licensed, in this state that offer health benefit plans covering eligible employees of one or more

small employers pursuant to this chapter. For the purposes of this chapter, carrier includes an

insurance company, a nonprofit hospital or medical service corporation, a fraternal benefit

society, a health maintenance organization as defined in chapter 41 of this title or as defined in

chapter 62 of title 42, or any other entity providing a plan of health insurance or health benefits

subject to state insurance regulation.

(g) "Church plan" has the meaning given this term under section 3(33) of the Employee

Retirement Income Security Act of 1974 [29 U.S.C. section 1002(33)].

(h) "Control" is defined in the same manner as in chapter 35 of this title.

(i) (1) "Creditable coverage" means, with respect to an individual, health benefits or

coverage provided under any of the following:

(A) A group health plan;

(B) A health benefit plan;

seq., or 42 U.S.C. section 1395j et seq., (Medicare);

(iv) Title XIX of the Social Security Act, 42 U.S.C. section 1396 et seq., (Medicaid),

other than coverage consisting solely of benefits under 42 U.S.C. section 1396s (the program for

distribution of pediatric vaccines);

(v) 10 U.S.C. section 1071 et seq., (medical and dental care for members and certain

former members of the uniformed services, and for their dependents)(Civilian Health and

Medical Program of the Uniformed Services)(CHAMPUS). For purposes of 10 U.S.C. section

1071 et seq., "uniformed services" means the armed forces and the commissioned corps of the

national oceanic and atmospheric administration and of the public health service;

(vi) A medical care program of the Indian Health Service or of a tribal organization;

(vii) A state health benefits risk pool;

(viii) A health plan offered under 5 U.S.C. section 8901 et seq., (Federal Employees

Health Benefits Program (FEHBP));

(ix) A public health plan, which for purposes of this chapter, means a plan established or

maintained by a state, county, or other political subdivision of a state that provides health

insurance coverage to individuals enrolled in the plan; or

(x) A health benefit plan under section 5(e) of the Peace Corps Act (22 U.S.C. section

2504(e)).

(2) A period of creditable coverage shall not be counted, with respect to enrollment of an

individual under a group health plan, if, after the period and before the enrollment date, the

individual experiences a significant break in coverage.

(j) "Dependent" means a spouse, an unmarried child under the age of nineteen (19) years,

an unmarried child who is a student under the age of twenty-five (25) years, and an unmarried

child of any age who is financially dependent upon, the parent and is medically determined to

have a physical or mental impairment which can be expected to result in death or which has

lasted or can be expected to last for a continuous period of not less than twelve (12) months.

(k) "Director" means the director of the department of business regulation.

(l) [Deleted by P.L. 2006, ch. 258, section 2, and P.L. 2006, ch. 296, section 2.]

(m) "Eligible employee" means an employee who works on a full-time basis with a

normal work week of thirty (30) or more hours, except that at the employer's sole discretion, the

term shall also include an employee who works on a full-time basis with a normal work week of

anywhere between at least seventeen and one-half (17.5) and thirty (30) hours, so long as this

eligibility criterion is applied uniformly among all of the employer's employees and without

regard to any health status-related factor. The term includes a self-employed individual, a sole

proprietor, a partner of a partnership, and may include an independent contractor, if the self-

employed individual, sole proprietor, partner, or independent contractor is included as an

employee under a health benefit plan of a small employer, but does not include an employee who

works on a temporary or substitute basis or who works less than seventeen and one-half (17.5)

hours per week. Any retiree under contract with any independently incorporated fire district is

also included in the definition of eligible employee. Persons covered under a health benefit plan

pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1986 shall not be considered

"eligible employees" for purposes of minimum participation requirements pursuant to section 27-

50-7(d)(9).

(n) "Enrollment date" means the first day of coverage or, if there is a waiting period, the

first day of the waiting period, whichever is earlier.

(o) "Established geographic service area" means a geographic area, as approved by the

director and based on the carrier's certificate of authority to transact insurance in this state, within

which the carrier is authorized to provide coverage.

(p) "Family composition" means:

(1) Enrollee;

(2) Enrollee, spouse and children;

(3) Enrollee and spouse; or

(4) Enrollee and children.

(q) "Genetic information" means information about genes, gene products, and inherited

characteristics that may derive from the individual or a family member. This includes information

regarding carrier status and information derived from laboratory tests that identify mutations in

specific genes or chromosomes, physical medical examinations, family histories, and direct

analysis of genes or chromosomes.

(r) "Governmental plan" has the meaning given the term under section 3(32) of the

Employee Retirement Income Security Act of 1974, 29 U.S.C. section 1002(32), and any federal

governmental plan.

(s) (1) "Group health plan" means an employee welfare benefit plan as defined in section

3(1) of the Employee Retirement Income Security Act of 1974, 29 U.S.C. section 1002(1), to the

extent that the plan provides medical care, as defined in subsection (y) of this section, and

including items and services paid for as medical care to employees or their dependents as defined

under the terms of the plan directly or through insurance, reimbursement, or otherwise.

(2) For purposes of this chapter:

(i) Any plan, fund, or program that would not be, but for PHSA Section 2721(e), 42

U.S.C. section 300gg(e), as added by P.L. 104-191, an employee welfare benefit plan and that is

established or maintained by a partnership, to the extent that the plan, fund or program provides

medical care, including items and services paid for as medical care, to present or former partners

in the partnership, or to their dependents, as defined under the terms of the plan, fund or program,

directly or through insurance, reimbursement or otherwise, shall be treated, subject to paragraph

(ii) of this subdivision, as an employee welfare benefit plan that is a group health plan;

(ii) In the case of a group health plan, the term "employer" also includes the partnership

in relation to any partner; and

(iii) In the case of a group health plan, the term "participant" also includes an individual

who is, or may become, eligible to receive a benefit under the plan, or the individual's beneficiary

who is, or may become, eligible to receive a benefit under the plan, if:

(A) In connection with a group health plan maintained by a partnership, the individual is

a partner in relation to the partnership; or

(B) In connection with a group health plan maintained by a self-employed individual,

under which one or more employees are participants, the individual is the self-employed

individual.

(t) (1) "Health benefit plan" means any hospital or medical policy or certificate, major

medical expense insurance, hospital or medical service corporation subscriber contract, or health

maintenance organization subscriber contract. Health benefit plan includes short-term and

catastrophic health insurance policies, and a policy that pays on a cost-incurred basis, except as

otherwise specifically exempted in this definition.

(2) "Health benefit plan" does not include one or more, or any combination of, the

following:

(i) Coverage only for accident or disability income insurance, or any combination of

those;

(ii) Coverage issued as a supplement to liability insurance;

(iii) Liability insurance, including general liability insurance and automobile liability

insurance;

(iv) Workers' compensation or similar insurance;

(v) Automobile medical payment insurance;

(vi) Credit-only insurance;

(vii) Coverage for on-site medical clinics; and

(viii) Other similar insurance coverage, specified in federal regulations issued pursuant

to Pub. L. No. 104-191, under which benefits for medical care are secondary or incidental to other

insurance benefits.

(3) "Health benefit plan" does not include the following benefits if they are provided

under a separate policy, certificate, or contract of insurance or are otherwise not an integral part

of the plan:

(i) Limited scope dental or vision benefits;

(ii) Benefits for long-term care, nursing home care, home health care, community-based

care, or any combination of those; or

(iii) Other similar, limited benefits specified in federal regulations issued pursuant to

Pub. L. No. 104-191.

(4) "Health benefit plan" does not include the following benefits if the benefits are

provided under a separate policy, certificate or contract of insurance, there is no coordination

between the provision of the benefits and any exclusion of benefits under any group health plan

maintained by the same plan sponsor, and the benefits are paid with respect to an event without

regard to whether benefits are provided with respect to such an event under any group health plan

maintained by the same plan sponsor:

(i) Coverage only for a specified disease or illness; or

(ii) Hospital indemnity or other fixed indemnity insurance.

(5) "Health benefit plan" does not include the following if offered as a separate policy,

certificate, or contract of insurance:

(i) Medicare supplemental health insurance as defined under section 1882(g)(1) of the

Social Security Act, 42 U.S.C. section 1395ss(g)(1);

(ii) Coverage supplemental to the coverage provided under 10 U.S.C. section 1071 et

seq.; or

(iii) Similar supplemental coverage provided to coverage under a group health plan.

(6) A carrier offering policies or certificates of specified disease, hospital confinement

indemnity, or limited benefit health insurance shall comply with the following:

(i) The carrier files on or before March 1 of each year a certification with the director

that contains the statement and information described in paragraph (ii) of this subdivision;

(ii) The certification required in paragraph (i) of this subdivision shall contain the

following:

(A) A statement from the carrier certifying that policies or certificates described in this

paragraph are being offered and marketed as supplemental health insurance and not as a substitute

for hospital or medical expense insurance or major medical expense insurance; and

(B) A summary description of each policy or certificate described in this paragraph,

including the average annual premium rates (or range of premium rates in cases where premiums

vary by age or other factors) charged for those policies and certificates in this state; and

(iii) In the case of a policy or certificate that is described in this paragraph and that is

offered for the first time in this state on or after July 13, 2000, the carrier shall file with the

director the information and statement required in paragraph (ii) of this subdivision at least thirty

(30) days prior to the date the policy or certificate is issued or delivered in this state.

(u) "Health maintenance organization" or "HMO" means a health maintenance

organization licensed under chapter 41 of this title.

(v) "Health status-related factor" means any of the following factors:

(1) Health status;

(2) Medical condition, including both physical and mental illnesses;

(3) Claims experience;

(4) Receipt of health care;

(5) Medical history;

(6) Genetic information;

(7) Evidence of insurability, including conditions arising out of acts of domestic

violence; or

(8) Disability.

(w) (1) "Late enrollee" means an eligible employee or dependent who requests

enrollment in a health benefit plan of a small employer following the initial enrollment period

during which the individual is entitled to enroll under the terms of the health benefit plan,

provided that the initial enrollment period is a period of at least thirty (30) days.

(2) "Late enrollee" does not mean an eligible employee or dependent:

(i) Who meets each of the following provisions:

(A) The individual was covered under creditable coverage at the time of the initial

enrollment;

(B) The individual lost creditable coverage as a result of cessation of employer

contribution, termination of employment or eligibility, reduction in the number of hours of

employment, involuntary termination of creditable coverage, or death of a spouse, divorce or

legal separation, or the individual and/or dependents are determined to be eligible for RIteCare

under chapter 5.1 of title 40 or chapter 12.3 of title 42 or for RIteShare under chapter 8.4 of title

40; and

creditable coverage or the change in conditions that gave rise to the termination of coverage;

(ii) If, where provided for in contract or where otherwise provided in state law, the

individual enrolls during the specified bona fide open enrollment period;

(iii) If the individual is employed by an employer which offers multiple health benefit

plans and the individual elects a different plan during an open enrollment period;

(iv) If a court has ordered coverage be provided for a spouse or minor or dependent child

under a covered employee's health benefit plan and a request for enrollment is made within thirty

(30) days after issuance of the court order;

(v) If the individual changes status from not being an eligible employee to becoming an

eligible employee and requests enrollment within thirty (30) days after the change in status;

(vi) If the individual had coverage under a COBRA continuation provision and the

coverage under that provision has been exhausted; or

(vii) Who meets the requirements for special enrollment pursuant to section 27-50-7 or

27-50-8.

(x) "Limited benefit health insurance" means that form of coverage that pays stated

predetermined amounts for specific services or treatments or pays a stated predetermined amount

per day or confinement for one or more named conditions, named diseases or accidental injury.

(y) "Medical care" means amounts paid for:

(1) The diagnosis, care, mitigation, treatment, or prevention of disease, or amounts paid

for the purpose of affecting any structure or function of the body;

(2) Transportation primarily for and essential to medical care referred to in subdivision

(1); and

(3) Insurance covering medical care referred to in subdivisions (1) and (2) of this

subsection.

(z) "Network plan" means a health benefit plan issued by a carrier under which the

financing and delivery of medical care, including items and services paid for as medical care, are

provided, in whole or in part, through a defined set of providers under contract with the carrier.

(aa) "Person" means an individual, a corporation, a partnership, an association, a joint

venture, a joint stock company, a trust, an unincorporated organization, any similar entity, or any

combination of the foregoing.

(bb) "Plan sponsor" has the meaning given this term under section 3(16)(B) of the

Employee Retirement Income Security Act of 1974, 29 U.S.C. section 1002(16)(B).

(cc) (1) "Preexisting condition" means a condition, regardless of the cause of the

condition, for which medical advice, diagnosis, care, or treatment was recommended or received

during the six (6) months immediately preceding the enrollment date of the coverage.

(2) "Preexisting condition" does not mean a condition for which medical advice,

diagnosis, care, or treatment was recommended or received for the first time while the covered

person held creditable coverage and that was a covered benefit under the health benefit plan,

provided that the prior creditable coverage was continuous to a date not more than ninety (90)

days prior to the enrollment date of the new coverage.

(3) Genetic information shall not be treated as a condition under subdivision (1) of this

subsection for which a preexisting condition exclusion may be imposed in the absence of a

diagnosis of the condition related to the information.

(dd) "Premium" means all moneys paid by a small employer and eligible employees as a

condition of receiving coverage from a small employer carrier, including any fees or other

contributions associated with the health benefit plan.

(ee) "Producer" means any insurance producer licensed under chapter 2.4 of this title.

(ff) "Rating period" means the calendar period for which premium rates established by a

small employer carrier are assumed to be in effect.

(gg) "Restricted network provision" means any provision of a health benefit plan that

conditions the payment of benefits, in whole or in part, on the use of health care providers that

have entered into a contractual arrangement with the carrier pursuant to provide health care

services to covered individuals.

(hh) "Risk adjustment mechanism" means the mechanism established pursuant to section

27-50-16.

(ii) "Self-employed individual" means an individual or sole proprietor who derives a

substantial portion of his or her income from a trade or business through which the individual or

sole proprietor has attempted to earn taxable income and for which he or she has filed the

appropriate Internal Revenue Service Form 1040, Schedule C or F, for the previous taxable year.

(jj) "Significant break in coverage" means a period of ninety (90) consecutive days

during all of which the individual does not have any creditable coverage, except that neither a

waiting period nor an affiliation period is taken into account in determining a significant break in

coverage.

(kk) "Small employer" means, except for its use in section 27-50-7, any person, firm,

corporation, partnership, association, political subdivision, or self-employed individual that is

actively engaged in business including, but not limited to, a business or a corporation organized

under the Rhode Island Non-Profit Corporation Act, chapter 6 of title 7, or a similar act of

another state that, on at least fifty percent (50%) of its working days during the preceding

calendar quarter, employed no more than fifty (50) eligible employees, with a normal work week

of thirty (30) or more hours, the majority of whom were employed within this state, and is not

formed primarily for purposes of buying health insurance and in which a bona fide employer-

employee relationship exists. In determining the number of eligible employees, companies that

are affiliated companies, or that are eligible to file a combined tax return for purposes of taxation

by this state, shall be considered one employer. Subsequent to the issuance of a health benefit

plan to a small employer and for the purpose of determining continued eligibility, the size of a

small employer shall be determined annually. Except as otherwise specifically provided,

provisions of this chapter that apply to a small employer shall continue to apply at least until the

plan anniversary following the date the small employer no longer meets the requirements of this

definition. The term small employer includes a self-employed individual.

(ll) "Waiting period" means, with respect to a group health plan and an individual who is

a potential enrollee in the plan, the period that must pass with respect to the individual before the

individual is eligible to be covered for benefits under the terms of the plan. For purposes of

calculating periods of creditable coverage pursuant to subsection (j)(2) of this section, a waiting

period shall not be considered a gap in coverage.

(mm) "Wellness health benefit plan" means a plan developed pursuant to section 27-50-

10.

(nn) "Health insurance commissioner" or "commissioner" means that individual

appointed pursuant to section 42-14.5-1 of the general laws and afforded those powers and duties

as set forth in sections 42-14.5-2 and 42-14.5-3 of title 42.

(oo) "Low-wage firm" means those with average wages that fall within the bottom

quartile of all Rhode Island employers.

(pp) "Wellness health benefit plan" means the health benefit plan offered by each small

employer carrier pursuant to section 27-50-7.

(qq) "Commissioner" means the health insurance commissioner.

(rr) "Basic benefit health plan" means a lower cost health benefit plan developed pursuant

to section 27-50-10.1.

(ss) "Uninsured small employer" means a small employer as defined in subsection 27-50-

3 (kk) that has not provided health insurance coverage to its employees within the last twelve (12)

months. A small employer shall be considered to have provided health insurance coverage if the

small employer has both arranged for such coverage and contributed toward health insurance

coverage.

SECTION 2. Chapter 27-50 of the General Laws entitled "Small Employer Health

Insurance Availability Act" is hereby amended by adding thereto the following section:

27-50-10.1. Basic benefit health plan. – (a) Small employer carriers are hereby

authorized to actively market and sell basic benefit health plans developed pursuant to this section

on and after July 1, 2007. Basic benefit health plans authorized under this section shall be

exempt from any law requiring the coverage of a health care service or benefit or requiring the

reimbursement, utilization, or inclusion of a specific category of licensed health care practitioner;

provided, however, coverage for the medical treatment of mental illness and substance abuse

shall be provided in accordance with chapter 38.2 of title 27;

(b) Basic benefits health plans shall provide affordable health care coverage through

flexible products that provide access to basic health services. Basic benefits health plans shall

provide limited, flexible coverage for the following services:

(i) Inpatient hospitalization;

(ii) Outpatient surgery and diagnostics;

(iii) Outpatient physician coverage, including preventative office visits;

(iv) Accidental injury and emergency coverage;

(v) Prescription drug coverage.

of such services including, but not limited to, the following;

(i) Primary care gatekeepers;

(ii) Preadmission certification;

(iii) Mandatory second opinion prior to elective surgery;

(iv) Preauthorization for specified services;

(v) Concurrent utilization review and management;

(vi) Discharge planning for hospital care;

(vii) Deductibles and copayments;

(viii)Less costly alternatives to inpatient care;

(ix) Annual limits or maximums for each category of service; and

(x) Restricted networks with limited coverage for out-of-network services.

(d)_The annual deductible shall not exceed two thousand dollars ($2,000) per individual

and four thousand dollars ($4,000) per family.

(e) Basic benefit health plans shall be available only to uninsured small employers,

provided, however, that once a small employer enrolls in a basic benefit health plan such small

employer shall be guaranteed renewability of such basic benefit health plan coverage.

(f) The average annualized individual premium rate for a basic benefit health plan shall

be less than seven and one–half percent (7.5%) of the average annual statewide wage, as reported

by the Rhode Island department of labor and training, in their report entitled "Quarterly Census of

Rhode Island Employment and Wages." In the event that this report is no longer available or the

Office of the Health Insurance Commissioner ("OHIC") determines that it is no longer

appropriate for the determination of maximum annualized premium, an alternative method shall

be adopted in regulation by the OHIC. The maximum annualized individual premium rate shall

be determined no later than August 1st of each year, to be applied to the subsequent calendar

year premium rates.

(g) The Health Insurance Commissioner shall issue a report to the General Assembly as

to the status and market impact of the basic benefit health plan program and shall make

recommendation to the General Assembly regarding the expansion, continuation or termination of

the program on or before March 1, 2010.

(h)The authority provided to small employer carriers to sell basic benefit health plans

pursuant to this section shall take effect on July 1, 2007.

SECTION 3. This act shall take effect upon passage and shall expire on December 31,

2010 unless specifically reauthorized by the general assembly.

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LC02321

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