2003 -- S 0540

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LC01838

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2003

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A N A C T

RELATING TO INSURANCE -- SMALL EMPLOYER HEALTH INSURANCE

AVAILABILITY ACT

     Introduced By: Senators Tassoni, Bates, and F Caprio

     Date Introduced: February 13, 2003

     Referred To: Senate Commerce, Housing & Municipal Government

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 27-50-5 of the General Laws in Chapter 27-50 entitled "Small

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

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      27-50-5. Restrictions relating to premium rates. [Effective until October 1, 2003.] --

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(a) Premium rates for health benefit plans subject to this chapter are subject to the following

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provisions:

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      (1) Subject to subdivision (2) of this subsection, a small employer carrier shall develop

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its rates based on an adjusted community rate and may only vary the adjusted community rate for:

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      (i) Age;

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      (ii) Gender; and

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      (iii) Family composition.

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      (2) Until October 1, 2004, a small employer carrier who as of June 1, 2000, varied rates

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by health status may vary the adjusted community rates for health status by ten percent (10%),

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provided that the resulting rates comply with the other requirements of this section, including

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subdivision (5) of this subsection. After October 1, 2004, no small employer carrier may vary the

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adjusted community rate based on health status.

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      (3) The adjustment for age in paragraph (1)(i) of this subsection may not use age

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brackets smaller than five (5) year increments and these shall begin with age thirty (30) and end

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with age sixty-five (65).

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      (4) The small employer carriers are permitted to develop separate rates for individuals

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age sixty-five (65) or older for coverage for which Medicare is the primary payer and coverage

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for which Medicare is not the primary payer. Both rates are subject to the requirements of this

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subsection.

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      (5) For each health benefit plan offered by a carrier, the highest premium rate for each

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family composition type shall not exceed two (2) times the premium rate that could be charged to

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a small employer with the lowest premium rate for that family composition type, effective

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October 1, 2004. Until October 1, 2004, the highest premium rate for each family composition

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type shall not exceed four (4) times the premium rate that could be charged to a small employer

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with the lowest premium rate for that family composition.

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      (6) [Effective until September 30, 2004.]Upon renewal of a health benefit plan, the

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premium rate for each group shall not exceed the premium rate charged by that carrier to that

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group during the prior rating period by more than: (i) cost and utilization trends for that carrier;

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plus (ii) the sum of any premium changes due to changes in the size, age, gender or family

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composition of the group; plus, (iii) ten percent (10%); plus (iv) the change in the actuarial value

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of the benefits due to changes in the health benefit plan for that group. This subdivision expires

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on September 30, 2004.

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      (7) Premium rates for bona fide associations except for the Rhode Island Builders'

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Association whose membership is limited to those who are actively involved in supporting the

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construction industry in Rhode Island shall comply with the requirements of section 27-50-5.

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      (b) The premium charged for a health benefit plan may not be adjusted more frequently

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than annually except that the rates may be changed to reflect:

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      (1) Changes to the enrollment of the small employer;

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      (2) Changes to the family composition of the employee; or

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      (3) Changes to the health benefit plan requested by the small employer.

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      (c) Premium rates for health benefit plans shall comply with the requirements of this

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section.

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      (d) Small employer carriers shall apply rating factors consistently with respect to all

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small employers. Rating factors shall produce premiums for identical groups that differ only by

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the amounts attributable to plan design and do not reflect differences due to the nature of the

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groups assumed to select particular health benefit plans. Nothing in this section shall be construed

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to prevent a group health plan and a health insurance carrier offering health insurance coverage

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from establishing premium discounts or rebates or modifying otherwise applicable copayments or

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deductibles in return for adherence to programs of health promotion and disease prevention,

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provided that the resulting rates comply with the other requirements of this section, including

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subdivision (a)(5) of this section.

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      (e) For the purposes of this section, a health benefit plan that contains a restricted

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network provision shall not be considered similar coverage to a health benefit plan that does not

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contain such a provision, provided that the restriction of benefits to network providers results in

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substantial differences in claim costs.

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      (f) The director may establish regulations to implement the provisions of this section and

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to assure that rating practices used by small employer carriers are consistent with the purposes of

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this chapter, including regulations that assure that differences in rates charged for health benefit

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plans by small employer carriers are reasonable and reflect objective differences in plan design or

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coverage (not including differences due to the nature of the groups assumed to select particular

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health benefit plans or separate claim experience for individual health benefit plans).

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      (g) In connection with the offering for sale of any health benefit plan to a small

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employer, a small employer carrier shall make a reasonable disclosure, as part of its solicitation

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and sales materials, of all of the following:

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      (1) The provisions of the health benefit plan concerning the small employer carrier's

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right to change premium rates and the factors, other than claim experience, that affect changes in

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premium rates;

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      (2) The provisions relating to renewability of policies and contracts;

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      (3) The provisions relating to any preexisting condition provision; and

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      (4) A listing of and descriptive information, including benefits and premiums, about all

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benefit plans for which the small employer is qualified.

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      (h) (1) Each small employer carrier shall maintain at its principal place of business a

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complete and detailed description of its rating practices and renewal underwriting practices,

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including information and documentation that demonstrate that its rating methods and practices

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are based upon commonly accepted actuarial assumptions and are in accordance with sound

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actuarial principles.

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      (2) Each small employer carrier shall file with the director annually on or before March

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15 an actuarial certification certifying that the carrier is in compliance with this chapter and that

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the rating methods of the small employer carrier are actuarially sound. The certification shall be

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in a form and manner, and shall contain the information, specified by the director. A copy of the

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certification shall be retained by the small employer carrier at its principal place of business.

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      (3) A small employer carrier shall make the information and documentation described in

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subdivision (1) of this subsection available to the director upon request. Except in cases of

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violations of this chapter, the information shall be considered proprietary and trade secret

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information and shall not be subject to disclosure by the director to persons outside of the

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department except as agreed to by the small employer carrier or as ordered by a court of

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competent jurisdiction.

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      (i) The requirements of this section apply to all health benefit plans issued or renewed on

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or after October 1, 2000.

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     SECTION 2. Section 27-50-9 of the General Laws in Chapter 27-50 entitled "Small

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

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     27-50-9. Periodic market evaluation. – (a) Within three (3) months after March 31,

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2002, September 30, 2003, and every thirty-six (36) months after this, the director shall obtain an

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independent actuarial study and report. The director shall assess a fee, not to exceed the sum of

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five dollars ($5.00) per subscriber, to the health plans to commission the report. The report shall

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analyze the effectiveness of the chapter in promoting rate stability, product availability, and

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coverage affordability. The report may contain recommendations for actions to improve the

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overall effectiveness, efficiency, and fairness of the small group health insurance marketplace.

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The report shall address whether carriers and producers are fairly actively marketing or issuing

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health benefit plans to small employers in fulfillment of the purposes of the chapter. The report

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may contain recommendations for market conduct or other regulatory standards or action.

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     (b) In the event the report concludes that a health plan did not comply with the

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requirements of this chapter, and that as a consequence thereof a small employer was charged an

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excessive premium, the director may, after notice to the health plan and conducting a hearing

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thereon, order the health plan to reimburse such employers the difference between the premium

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which was charged such employers and the premium which should have been charged had the

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health plan complied with the provisions of this chapter. In making such determination, the

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director may also consider the extent to which other employers were charged a premium which

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was lower than the premium which should have been charged had the health plan strictly adhered

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to the requirements of this chapter.

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     SECTION 3. Section 1 of this act shall take effect upon passage. Section 2 of this act

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shall take effect on July 1, 2003 and shall apply to any market evaluation or market conduct study

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prepared on or after July 1, 2003.

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LC01838

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO INSURANCE -- SMALL EMPLOYER HEALTH INSURANCE

AVAILABILITY ACT

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     This act would (1) eliminate the second rate calculation; (2) perpetuate the 4:1

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restriction on rate variability; (3) repeal the exemption for the Rhode Island Builders’

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Association; (4) limit the fee the director of the department of business regulation could assess

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health plans for periodic market evaluations to five dollars ($5.00) per subscriber, in the small

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employer health insurance availability act; and (5) authorize the director to order a health plan to

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reimburse employers when the health plan does not comply with requirements, and an employer

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is charged an excessive premium

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     Section 1 of this act would take effect upon passage. Section 2 of this act would take

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effect on July 1, 2003 and would apply to any market evaluation or market conduct study

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prepared on or after July 1, 2003.

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LC01838

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