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91_HB2271enr HB2271 Enrolled 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 25 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 HB2271 Enrolled -2- LRB9104872JSpc 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, or any other entity providing a plan of health 5 insurance or health benefits subject to state insurance 6 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 Rating Act. 14 "Class of business" means all or a separate grouping of 15 small employers established pursuant to Section 20. 16 "Director" means the Director of Insurance. 17 "Department" means the Department of Insurance. 18 "Health benefit plan" or "plan" shall mean any hospital 19 or medical expense-incurred policy, hospital or medical 20 service plan contract, or health maintenance organization 21 subscriber contract. Health benefit plan shall not include 22 individual, accident-only, credit, dental, vision, medicare 23 supplement, hospital indemnity, long term care, specific 24 disease, stop loss or disability income insurance, coverage 25 issued as a supplement to liability insurance, workers' 26 compensation or similar insurance, or automobile medical 27 payment insurance. 28 "Index rate" means, for each class of business as to a 29 rating period for small employers with similar case 30 characteristics, the arithmetic mean of the applicable base 31 premium rate and the corresponding highest premium rate. 32 "Late enrollee" has the meaning given that term in the 33 Illinois Health Insurance Portability and Accountability Act. 34 "New business premium rate" means, for each class of HB2271 Enrolled -3- LRB9104872JSpc 1 business as to a rating period, the lowest premium rate 2 charged or offered or which could have been charged or 3 offered by the small employer carrier to small employers with 4 similar case characteristics for newly issued health benefit 5 plans with the same or similar coverage. 6 "Objective characteristics" means measurable or 7 observable phenomena. An example of a measurable 8 characteristic would be the number of employees who were late 9 enrollees. Examples of observable characteristics would be 10 geographic location of the employer or gender of the 11 employee. 12 "Premium" means all monies paid by a small employer and 13 eligible employees as a condition of receiving coverage from 14 a small employer carrier, including any fees or other 15 contributions associated with the health benefit plan. 16 "Rating period" means the calendar period for which 17 premium rates established by a small employer carrier are 18 assumed to be in effect. 19 "Small employer" has the meaning given that term in the 20 Illinois Health Insurance Portability and Accountability Act. 21 "Small employer carrier" means a carrier that offers 22 health benefit plans covering employees of one or more small 23 employers in this State. 24 Section 15. Applicability and Scope. 25 (a) This Act shall apply to each health benefit plan for 26 a small employer that is delivered, issued for delivery, 27 renewed or continued in this State after July 1, 2000. For 28 purposes of this Section, the date a plan is continued shall 29 be the first rating period which commences after July 1, 30 2000. 31 The Act shall apply to any such health benefit plan which 32 provides coverage to employees of a small employer, except 33 that the Act shall not apply to individual health insurance HB2271 Enrolled -4- LRB9104872JSpc 1 policies. 2 Section 20. Establishment of Class of Business. 3 (a) A small employer carrier may establish a separate 4 class of business only to reflect substantial differences in 5 expected claims experience or administrative costs related to 6 the following reasons: 7 (1) the small employer carrier uses more than one 8 type of system for the marketing and sale of health 9 benefit plans to small employers; 10 (2) the small employer carrier has acquired a class 11 of business from another small employer carrier; or 12 (3) the small employer carrier provides coverage to 13 one or more association groups. 14 (b) A small employer carrier may establish up to 4 15 separate classes of business under subsection (a). 16 (c) The Director may approve the establishment of 17 additional classes of business upon application to the 18 Director and a finding by the Director that such action would 19 enhance the efficiency and fairness of the small employer 20 marketplace. 21 Section 25. Premium Rates. 22 (a) Premium rates for health benefit plans subject to 23 this Act shall be subject to all of the following provisions: 24 (1) The index rate for a rating period for any 25 class of business shall not exceed the index rate for any 26 other class of business by more than 20%. 27 (2) For a class of business, the premium rates 28 charged during a rating period to small employers with 29 similar case characteristics for the same or similar 30 coverage, or the rates that could be charged to such 31 employers under the rating system for that class of 32 business, shall not vary from the index rate by more than HB2271 Enrolled -5- LRB9104872JSpc 1 25% of the index rate. 2 (3) The percentage increase in the premium rate 3 charged to a small employer for a new rating period shall 4 not exceed the sum of the following: 5 (A) the percentage change in the new business 6 premium rate measured from the first day of the 7 prior rating period to the first day of the new 8 rating period. In the case of a health benefit plan 9 into which the small employer carrier is no longer 10 enrolling new small employers, the small employer 11 carrier shall use the percentage change in the base 12 premium rate; 13 (B) an adjustment, not to exceed 15% annually 14 and adjusted pro rata for rating periods of less 15 than one year, due to claim experience, health 16 status, or duration of coverage of the employees or 17 dependents of the small employer as determined from 18 the small employer carrier's rate manual for the 19 class of business; and 20 (C) any adjustment due to change in coverage 21 or change in the case characteristics of the small 22 employer as determined from the small employer 23 carrier's rate manual for the class of business. 24 (4) Adjustments in rates for a new rating period 25 due to claim experience, health status and duration of 26 coverage shall not be charged to individual employees or 27 dependents. Any such adjustment shall be applied 28 uniformly to the rates charged for all employees and 29 dependents of the small employer. 30 (5) In the case of health benefit plans delivered 31 or issued for delivery prior to the effective date of 32 this Act, a premium rate for a rating period may exceed 33 the ranges set forth in items (1) and (2) of subsection 34 (a) for a period of 3 years following the effective date HB2271 Enrolled -6- LRB9104872JSpc 1 of this Act. In such case, the percentage increase in 2 the premium rate charged to a small employer for a new 3 rating period shall not exceed the sum of the following: 4 (A) the percentage change in the new business 5 premium rate measured from the first day of the 6 prior rating period to the first day of the new 7 rating period; in the case of a class of business 8 into which the small employer carrier is no longer 9 enrolling new small employes, the small employer 10 carrier shall use the percentage change in the base 11 premium rate, provided that such change does not 12 exceed, on a percentage basis, the change in the new 13 business premium rate for the most similar class of 14 business into which the small employer carrier is 15 actively enrolling new small employers; and 16 (B) any adjustment due to change in coverage 17 or change in the case characteristics of the small 18 employer as determined from the carrier's rate 19 manual for the class of business. 20 (6) Small employer carriers shall apply rating 21 factors, including case characteristics, consistently 22 with respect to all small employers in a class of 23 business. A small employer carrier shall treat all health 24 benefit plans issued or renewed in the same calendar 25 month as having the same rating period. 26 (7) For the purposes of this subsection, a health 27 benefit plan that contains a restricted network provision 28 shall not be considered similar coverage to a health 29 benefit plan that does not contain such a provision, 30 provided that the restriction of benefits to network 31 providers results in substantial differences in claim 32 costs. 33 (b) A small employer carrier shall not transfer a small 34 employer involuntarily into or out of a class of business. A HB2271 Enrolled -7- LRB9104872JSpc 1 small employer carrier shall not offer to transfer a small 2 employer into or out of a class of business unless such offer 3 is made to transfer all small employers in the class of 4 business without regard to case characteristics, claim 5 experience, health status or duration of coverage since 6 issue. 7 Section 30. Rating and underwriting records. 8 (a) A small employer carrier shall maintain at its 9 principal place of business a complete and detailed 10 description of its rating practices and renewal underwriting 11 practices, including information and documentation that 12 demonstrates that its rating methods and practices are based 13 upon commonly accepted actuarial assumptions and are in 14 accordance with sound actuarial principles. 15 (b) A small employer carrier shall file with the 16 Director annually on or before May 15, an actuarial 17 certification certifying that the carrier is in compliance 18 with this Act, and that the rating methods of the small 19 employer carrier are actuarially sound. Such certification 20 shall be in a form and manner, and shall contain such 21 information, as specified by the Director. A copy of the 22 certification shall be retained by the small employer carrier 23 at its principal place of business for a period of three 24 years from the date of certification. This shall include any 25 work papers prepared in support of the actuarial 26 certification. 27 (c) A small employer carrier shall make the information 28 and documentation described in subsection (a) available to 29 the Director upon request. Except in cases of violations of 30 this Act, the information shall be considered proprietary and 31 trade secret information and shall not be subject to 32 disclosure by the Director to persons outside of the 33 Department except as agreed to by the small employer carrier HB2271 Enrolled -8- LRB9104872JSpc 1 or as ordered by a court of competent jurisdiction. 2 Section 35. Suspension of Rate Requirements. The 3 Director may suspend all or any part of Section 25 as to the 4 premium rates applicable to one or more small employers for 5 one or more rating periods upon a filing by the small 6 employer carrier and a finding by the Director that either 7 the suspension is reasonable in light of the financial 8 viability of the carrier or the suspension would enhance the 9 efficiency and fairness of the small employer health 10 insurance marketplace. 11 Section 40. Director's Regulatory Authority. The 12 Director may adopt and promulgate rules and regulations to 13 carry out the provisions of this Act. 14 Section 99. Effective date. This Act takes effect 15 January 1, 2000.