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S1471.......................................by COMMERCE AND HUMAN RESOURCES
HEALTH INSURANCE - Amends, repeals and adds to existing law to remove the
rate bands on health benefit plans offered by small group employer and
individual disability insurers; to expand the rate band on basic, standard
and catastrophic plans to fifty percent until July 1, 2004; and to
establish a joint subcommittee of the Senate Commerce and Human Resources
Committee and the House Business Committee to monitor the effects of the
legislation.
02/18 Senate intro - 1st rdg - to printing
02/21 Rpt prt - to Com/HuRes
S1471
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-fifth Legislature Second Regular Session - 2000
IN THE SENATE
SENATE BILL NO. 1471
BY COMMERCE AND HUMAN RESOURCES COMMITTEE
1 AN ACT
2 RELATING TO HEALTH INSURANCE; AMENDING SECTION 41-4706, IDAHO CODE, TO EXPAND
3 THE RATE BANDS FOR BASIC, STANDARD AND CATASTROPHIC HEALTH BENEFIT PLANS
4 OFFERED BY A SMALL EMPLOYER HEALTH INSURANCE CARRIER TO FIFTY PERCENT OF
5 THE INDEX RATE, TO PROVIDE THAT THE AUTHORIZED INCREASE IN THE PREMIUM
6 RATE CHARGED TO A SMALL EMPLOYER IS TO BE MEASURED BY THE INDEX RATE, TO
7 PROVIDE FOR A PHASE-IN OF ANY INCREASE IN PREMIUM RATES OCCURRING AFTER
8 JULY 1, 2004, AND TO MAKE TECHNICAL CORRECTIONS; AMENDING SECTION 41-4716,
9 IDAHO CODE, TO EXEMPT HEALTH BENEFIT PLANS OFFERED BY A SMALL EMPLOYER
10 CARRIER FROM RATE BAND RESTRICTIONS IF THE CARRIER OFFERS A BASIC, STAN-
11 DARD AND CATASTROPHIC PLAN; AMENDING SECTION 41-5206, IDAHO CODE, TO
12 EXPAND THE RATE BANDS FOR BASIC, STANDARD AND CATASTROPHIC HEALTH BENEFIT
13 PLANS OFFERED BY AN INDIVIDUAL HEALTH INSURANCE CARRIER TO FIFTY PERCENT
14 OF THE INDEX RATE, TO PROVIDE THAT THE AUTHORIZED INCREASE IN THE PREMIUM
15 RATE CHARGED TO AN INDIVIDUAL IS TO BE MEASURED BY THE INDEX RATE, AND TO
16 PROVIDE FOR A PHASE-IN OF ANY INCREASE IN PREMIUM RATES OCCURRING AFTER
17 JULY 1, 2004, AND TO MAKE A TECHNICAL CORRECTION; AMENDING SECTION
18 41-5212, IDAHO CODE, TO EXEMPT HEALTH BENEFIT PLANS OFFERED BY AN INDIVID-
19 UAL CARRIER FROM RATE BAND RESTRICTIONS IF THE CARRIER OFFERS A BASIC,
20 STANDARD AND CATASTROPHIC PLAN AND TO MAKE TECHNICAL CORRECTIONS; REPEAL-
21 ING SECTIONS 41-4706, 41-4716, 41-5206 AND 41-5212, IDAHO CODE; AMENDING
22 CHAPTER 47, TITLE 41, IDAHO CODE, BY THE ADDITION OF A NEW SECTION
23 41-4706, IDAHO CODE, TO PROVIDE FOR RESTRICTIONS RELATING TO PREMIUM
24 RATES; AMENDING CHAPTER 47, TITLE 41, IDAHO CODE, BY THE ADDITION OF A NEW
25 SECTION 41-4716, IDAHO CODE, TO PROVIDE FOR STANDARDS TO ASSURE FAIR MAR-
26 KETING AND APPLICATION OF RATE BANDS TO ALL HEALTH BENEFIT PLANS OFFERED
27 BY A SMALL EMPLOYER CARRIER; AMENDING CHAPTER 52, TITLE 41, IDAHO CODE, BY
28 THE ADDITION OF A NEW SECTION 41-5206, IDAHO CODE, TO PROVIDE FOR RESTRIC-
29 TIONS RELATING TO PREMIUM RATES; AMENDING CHAPTER 52, TITLE 41, IDAHO
30 CODE, BY THE ADDITION OF A NEW SECTION 41-5212, IDAHO CODE, TO PROVIDE FOR
31 STANDARDS TO ASSURE FAIR MARKETING AND APPLICATION OF RATE BANDS TO ALL
32 HEALTH BENEFIT PLANS OFFERED BY AN INDIVIDUAL HEALTH INSURANCE CARRIER; TO
33 PROVIDE FOR APPLICATION OF THE ACT; TO PROVIDE FOR APPOINTMENT OF A JOINT
34 OVERSIGHT SUBCOMMITTEE OF THE GERMANE COMMITTEES TO MONITOR THE EFFECTS OF
35 SECTIONS 1, 2, 3 AND 4 OF THIS ACT; AND PROVIDING AN EFFECTIVE DATE AND A
36 SUNSET CLAUSE.
37 Be It Enacted by the Legislature of the State of Idaho:
38 SECTION 1. That Section 41-4706, Idaho Code, be, and the same is hereby
39 amended to read as follows:
40 41-4706. RESTRICTIONS RELATING TO PREMIUM RATES. (1) Premium rates for
41 health benefit plans subject to the provisions of this chapter shall be sub-
42 ject to the provisions of the following provisions:
43 (a) The index rate for a rating period for any class of business shall
2
1 not exceed the index rate for any other class of business by more than
2 twenty percent (20%).
3 (b) For a class of business, with respect to basic, standard and cata-
4 strophic health benefit plans only, the premium rates charged during a
5 rating period to small employers with similar case characteristics for the
6 same or similar coverage, or the rates that could be charged to such
7 employers under the rating system for that class of business, shall not
8 vary from the index rate by more than twenty-five fifty percent (250%) of
9 the index rate.
10 (c) The percentage increase in the premium rate charged to a small
11 employer for a new rating period may not exceed the sum of the following:
12 (i) The percentage change in the new business premium index rate
13 measured from the first day of the prior rating period to the first
14 day of the new rating period. In the case of a health benefit plan
15 into which the small employer carrier is no longer enrolling new
16 small employers, the small employer carrier shall use the percentage
17 change in the base premium rate, provided that such change does not
18 exceed, on a percentage basis, the change in the new business premium
19 index rate for the most similar health benefit plan into which the
20 small employer carrier is actively enrolling new small employers;
21 (ii) Any adjustment, not to exceed fifteen percent (15%) annually
22 and adjusted pro rata for rating periods of less than one (1) year,
23 due to the claim experience, health status or duration of coverage of
24 the employees or dependents of the small employer as determined from
25 the small employer carrier's rate manual for the class of business;
26 and
27 (iii) Any adjustment due to change in coverage or change in the case
28 characteristics of the small employer as determined from the small
29 employer carrier's rate manual for the class of business.
30 (d) Adjustments in rates for claim experience, health status and duration
31 of coverage shall not be charged to individual employees or dependents.
32 Any such adjustment shall be applied uniformly to the rates charged for
33 all employees and dependents of the small employer.
34 (e) Premium rates for health benefit plans shall comply with the require-
35 ments of this section notwithstanding any assessments paid or payable by
36 small employer carriers pursuant to section 41-4711, Idaho Code.
37 (f) In the case of health benefit plans in existence, delivered or issued
38 for delivery prior to the effective date of this chapter or renewed on or
39 after July 1, 2000, a premium rate for a rating period may exceed the
40 ranges set forth in subsections (1)(a) and (b) of this section for a
41 period of three (3) years following the effective date of this chapter
42 July 1, 2004. In such case, the percentage increase in the premium rate
43 charged to a small employer for a new rating period shall not exceed the
44 sum of the following:
45 (i) The percentage change in the new business premium index rate
46 measured from the first day of the prior rating period to the first
47 day of the new rating period. In the case of a health benefit plan
48 into which the small employer carrier is no longer enrolling new
49 small employers, the small employer carrier shall use the percentage
50 change in the base premium rate, provided that such change does not
51 exceed, on a percentage basis, the change in the new business premium
52 index rate for the most similar health benefit plan into which the
53 small employer carrier is actively enrolling new small employers; and
54 (ii) Any adjustment due to change in coverage or change in the case
55 characteristics of the small employer as determined from the
3
1 carrier's rate manual for the class of business.
2 (g) (i) Small employer carriers shall apply rating factors, including
3 case characteristics, consistently with respect to all small employ-
4 ers in a class of business. Rating factors shall produce premiums for
5 identical groups which differ only by the amounts attributable to
6 plan design and do not reflect differences due to the nature of the
7 groups assumed to select particular health benefit plans; and
8 (ii) A small employer carrier shall treat all health benefit plans
9 issued or renewed in the same calendar month as having the same rat-
10 ing period.
11 (h) For the purposes of this subsection, a health benefit plan that uti-
12 lizes a restricted provider network shall not be considered similar cov-
13 erage to a health benefit plan that does not utilize such a network, pro-
14 vided that utilization of the restricted provider network results in sub-
15 stantial differences in claims costs.
16 (i) The small employer carrier shall not use case characteristics, other
17 than age, individual tobacco use, geography, as defined by rule of the
18 director, or gender, without prior approval of the director.
19 (j) A small employer carrier may utilize age as a case characteristic in
20 establishing premium rates, provided that the same rating factor shall be
21 applied to all dependents under the age of twenty-three (23) years of age,
22 and the same rating factor shall be applied on a quinquennial basis as to
23 individuals or nondependents twenty (20) years of age or older.
24 (k) The director may establish rules to implement the provisions of this
25 section and to assure that rating practices used by small employer carri-
26 ers are consistent with the purposes of this chapter, including rules
27 that:
28 (i) Assure that differences in rates charged for health benefit
29 plans by small employer carriers are reasonable and reflect objective
30 differences in plan design, not including differences due to the
31 nature of the groups assumed to select particular health benefit
32 plans;
33 (ii) Prescribe the manner in which case characteristics may be used
34 by small employer carriers; and
35 (iii) Prescribe the manner in which a small employer carrier is to
36 demonstrate compliance with the provisions of this section, including
37 requirements that a small employer carrier provide the director with
38 actuarial certification as to such compliance.
39 (2) A small employer carrier shall not transfer a small employer involun-
40 tarily into or out of a class of business. A small employer carrier shall not
41 offer to transfer a small employer into or out of a class of business unless
42 such offer is made to transfer all small employers in the class of business
43 without regard to case characteristics, claim experience, health status or
44 duration of coverage since issue.
45 (3) The director may suspend for a specified period the application of
46 subsection (1)(a) of this section as to the premium rates applicable to one
47 (1) or more small employers included within a class of business of a small
48 employer carrier for one (1) or more rating periods upon a filing by the small
49 employer carrier and a finding by the director either that the suspension is
50 reasonable in light of the financial condition of the small employer carrier
51 or that the suspension would enhance the efficiency and fairness of the
52 marketplace for small employer health insurance.
53 (4) In connection with the offering for sale of any health benefit plan
54 to a small employer, a small employer carrier shall make a reasonable disclo-
55 sure, as part of its solicitation and sales materials, of all of the follow-
4
1 ing:
2 (a) The extent to which premium rates for a specified small employer are
3 established or adjusted based upon the actual or expected variation in
4 claims costs or actual or expected variation in health status of the
5 employees of the small employer and their dependents;
6 (b) The provisions of the health benefit plan concerning the small
7 employer carrier's right to change premium rates and the factors, other
8 than claim experience, that affect changes in premium rates;
9 (c) The provisions relating to renewability of policies and contracts;
10 and
11 (d) The provisions relating to any preexisting condition provision.
12 (5) (a) Each small employer carrier shall maintain at its principal place
13 of business a complete and detailed description of its rating practices
14 and renewal underwriting practices, including information and documenta-
15 tion that demonstrate that its rating methods and practices are based upon
16 commonly accepted actuarial assumptions and are in accordance with sound
17 actuarial principles.
18 (b) Each small employer carrier shall file with the director annually on
19 or before March 15, an actuarial certification certifying that the carrier
20 is in compliance with the provisions of this chapter and that the rating
21 methods of the small employer carrier are actuarially sound. Such certifi-
22 cation shall be in a form and manner, and shall contain such information,
23 as specified by the director. A copy of the certification shall be
24 retained by the small employer carrier at its principal place of business.
25 (c) A small employer carrier shall make the information and documentation
26 described in subsection (4)(a) of this section available to the director
27 upon request. Except in cases of violations of the provisions of this
28 chapter, the information shall be considered proprietary and trade secret
29 information and shall not be subject to disclosure by the director to per-
30 sons outside of the department except as agreed to by the small employer
31 carrier or as ordered by a court of competent jurisdiction.
32 SECTION 2. That Section 41-4716, Idaho Code, be, and the same is hereby
33 amended to read as follows:
34 41-4716. STANDARDS TO ASSURE FAIR MARKETING. (1) Each small employer car-
35 rier shall actively market health benefit plan coverage, including the basic,
36 standard and catastrophic health benefit plans, to eligible small employers in
37 the state. If a small employer carrier denies coverage to a small employer on
38 the basis of the health status or claims experience of the small employer or
39 its employees or dependents, the small employer carrier shall offer the small
40 employer the opportunity to purchase offers a basic, health benefit plan, a
41 standard health benefit plan and a catastrophic health benefit plan, then any
42 other plan it offers shall not be subject to the restrictions relating to pre-
43 mium rates provided in section 41-4706, Idaho Code.
44 (2) (a) Except as provided in subsection (2)(b) of this section, no small
45 employer carrier or agent shall, directly or indirectly, engage in the
46 following activities:
47 (i) Encouraging or directing small employers to refrain from filing
48 an application for coverage with the small employer carrier because
49 of the health status, claims experience, industry, occupation or geo-
50 graphic location of the small employer;
51 (ii) Encouraging or directing small employers to seek coverage from
52 another carrier because of the health status, claims experience,
53 industry, occupation or geographic location of the small employer.
5
1 (b) The provisions of subsection (2)(a) of this section shall not apply
2 with respect to information provided by a small employer carrier or agent
3 to a small employer regarding the established geographic service area or a
4 restricted network provision of a small employer carrier.
5 (3) (a) Except as provided in subsection (2)(b) of this section, no small
6 employer carrier shall, directly or indirectly, enter into any contract,
7 agreement or arrangement with an agent that provides for or results in the
8 compensation paid to an agent for the sale of a health benefit plan to be
9 varied because of the health status, claims experience, industry, occupa-
10 tion or geographic location of the small employer.
11 (b) The provisions of subsection (a) of this section shall not apply with
12 respect to a compensation arrangement that provides compensation to an
13 agent on the basis of percentage of premium, provided that the percentage
14 shall not vary because of the health status, claims experience, industry,
15 occupation or geographic area of the small employer.
16 (4) A small employer carrier shall provide reasonable compensation, as
17 provided under the plan of operation of the program, to an agent, if any, for
18 the sale of a basic, standard or catastrophic health benefit plan.
19 (5) No small employer carrier may terminate, fail to renew or limit its
20 contract or agreement of representation with an agent for any reason related
21 to the health status, claims experience, occupation or geographic location of
22 the small employers placed by the agent with the small employer carrier.
23 (6) No small employer carrier or agent may induce or otherwise encourage
24 a small employer to separate or otherwise exclude an employee from health cov-
25 erage or benefits provided in connection with the employee's employment.
26 (7) Denial by a small employer carrier of an application for coverage
27 from a small employer shall be in writing and shall state the reason or rea-
28 sons for the denial.
29 (8) The director may establish regulations setting forth additional stan-
30 dards to provide for the fair marketing and broad availability of health bene-
31 fit plans to small employers in this state.
32 (9) (a) A violation of the provisions of this section by a small employer
33 carrier or an agent shall be an unfair trade practice pursuant to the pro-
34 visions of section 41-1302, Idaho Code.
35 (b) If a small employer carrier enters into a contract, agreement or
36 other arrangement with a third-party administrator to provide administra-
37 tive, marketing or other services related to the offering of health bene-
38 fit plans to small employers in this state, the third-party administrator
39 shall be subject to the provisions of this section as if it were a small
40 employer carrier.
41 SECTION 3. That Section 41-5206, Idaho Code, be, and the same is hereby
42 amended to read as follows:
43 41-5206. RESTRICTIONS RELATING TO PREMIUM RATES. (1) Premium rates for
44 health benefit plans subject to the provisions of this chapter shall be sub-
45 ject to the following provisions:
46 (a) With respect to basic, standard and catastrophic health benefit plans
47 only, tThe premium rates charged during a rating period to individuals
48 with similar case characteristics for the same or similar coverage, or the
49 rates that could be charged to such individuals under the rating system,
50 shall not vary from the index rate by more than twenty-five fifty percent
51 (250%) of the index rate.
52 (b) The percentage increase in the premium rate charged to an individual
53 for a new rating period may not exceed the sum of the following:
6
1 (i) The percentage change in the new business premium index rate
2 measured from the first day of the prior rating period to the first
3 day of the new rating period. In the case of a health benefit plan
4 into which the individual carrier is no longer enrolling new indi-
5 viduals, the individual carrier shall use the percentage change in
6 the base premium rate, provided that such change does not exceed, on
7 a percentage basis, the change in the new business premium index rate
8 for the most similar health benefit plan into which the individual
9 carrier is actively enrolling new individuals.
10 (ii) Any adjustment, not to exceed fifteen percent (15%) annually
11 and adjusted pro rata for rating periods of less than one (1) year,
12 due to the claim experience, health status or duration of coverage of
13 the individual or dependents as determined from the individual
14 carrier's rate manual; and
15 (iii) Any adjustment due to change in coverage or change in the case
16 characteristics of the individual as determined from the individual
17 carrier's rate manual.
18 (c) Premium rates for health benefit plans shall comply with the require-
19 ments of this section notwithstanding any assessments paid or payable by
20 carriers pursuant to section 41-4711, Idaho Code.
21 (d) In the case of health benefit plans in existence, delivered or issued
22 for delivery prior to the effective date of this chapter or renewed on or
23 after July 1, 2000, a premium rate for a rating period may exceed the
24 ranges set forth in subsections (1)(a) and (b) of this section for a
25 period of three (3) years following the effective date of this chapter
26 July 1, 2004. In such case, the percentage increase in the premium rate
27 charged to an individual for a new rating period shall not exceed the sum
28 of the following:
29 (i) The percentage change in the new business premium index rate
30 measured from the first day of the prior rating period to the first
31 day of the new rating period. In the case of a health benefit plan
32 into which the individual carrier is no longer enrolling new individ-
33 uals, the individual carrier shall use the percentage change in the
34 base premium rate, provided that such change does not exceed, on a
35 percentage basis, the change in the new business premium index rate
36 for the most similar health benefit plan into which the individual
37 carrier is actively enrolling new individuals; and
38 (ii) Any adjustment due to change in coverage or change in the case
39 characteristics of the individual as determined from the carrier's
40 rate manual.
41 (e) (i) Individual carriers shall apply rating factors, including case
42 characteristics, consistently with respect to all individuals. Rating
43 factors shall produce premiums for identical individuals which differ
44 only by the amounts attributable to plan design and do not reflect
45 differences due to the nature of the individuals assumed to select
46 particular health benefit plans; and
47 (ii) An individual carrier shall treat all health benefit plans
48 issued or renewed in the same calendar month as having the same rat-
49 ing period.
50 (f) For purposes of this subsection, a health benefit plan that utilizes
51 a restricted provider network shall not be considered similar coverage to
52 a health benefit plan that does not utilize such a network, provided that
53 utilization of the restricted provider network results in substantial dif-
54 ferences in claims costs.
55 (g) The individual carrier shall not use case characteristics, other than
7
1 age, individual tobacco use, geography as defined by rule of the director,
2 or gender, without prior approval of the director.
3 (h) An individual carrier may utilize age as a case characteristic in
4 establishing premium rates, provided that the same rating factor shall be
5 applied to all dependents under the age of twenty-three (23) years of age,
6 and the same rating factor shall be applied on a quinquennial basis as to
7 individuals or nondependents twenty (20) years of age or older.
8 (i) The director may establish rules to implement the provisions of this
9 section and to assure that rating practices used by individual carriers
10 are consistent with the purposes of this chapter, including rules that:
11 (i) Assure that differences in rates charged for health benefit
12 plans by individual carriers are reasonable and reflect objective
13 differences in plan design, not including differences due to the
14 nature of the individuals assumed to select particular health benefit
15 plans;
16 (ii) Prescribe the manner in which case characteristics may be used
17 by individual carriers; and
18 (iii) Prescribe the manner in which an individual carrier is to
19 demonstrate compliance with the provisions of this section, including
20 requirements that an individual carrier provide the director with
21 actuarial certification as to such compliance.
22 (2) The director may suspend for a specified period the application of
23 subsection (1)(a) of this section as to the premium rates applicable to one
24 (1) or more individuals for one (1) or more rating periods upon a filing by
25 the individual carrier and a finding by the director either that the suspen-
26 sion is reasonable in light of the financial condition of the individual car-
27 rier or that the suspension would enhance the efficiency and fairness of the
28 marketplace for individual health insurance.
29 (3) In connection with the offering for sale of any health benefit plan
30 to an individual, an individual carrier shall make a reasonable disclosure, as
31 part of its solicitation and sales materials, of all of the following:
32 (a) The extent to which premium rates for an individual are established
33 or adjusted based upon the actual or expected variation in claims costs or
34 actual or expected variation in health status of the individual and his
35 dependents;
36 (b) The provisions of the health benefit plan concerning the individual
37 carrier's right to change premium rates and the factors, other than claim
38 experience, that affect changes in premium rates;
39 (c) The provisions relating to renewability of policies and contracts;
40 and
41 (d) The provisions relating to any preexisting condition provision.
42 (4) (a) Each individual carrier shall maintain at its principal place of
43 business a complete and detailed description of its rating practices and
44 renewal underwriting practices, including information and documentation
45 that demonstrate that its rating methods and practices are based upon com-
46 monly accepted actuarial assumptions and are in accordance with sound
47 actuarial principles.
48 (b) Each individual carrier shall file with the director annually on or
49 before September 15, an actuarial certification certifying that the car-
50 rier is in compliance with the provisions of this chapter and that the
51 rating methods of the individual carrier are actuarially sound. Such cer-
52 tification shall be in a form and manner, and shall contain such informa-
53 tion, as specified by the director. A copy of the certification shall be
54 retained by the individual carrier at its principal place of business.
55 (c) An individual carrier shall make the information and documentation
8
1 described in subsection (4)(a) of this section available to the director
2 upon request. Except in cases of violations of the provisions of this
3 chapter, the information shall be considered proprietary and trade secret
4 information and shall not be subject to disclosure by the director to per-
5 sons outside of the department except as agreed to by the individual car-
6 rier or as ordered by a court of competent jurisdiction.
7 SECTION 4. That Section 41-5212, Idaho Code, be, and the same is hereby
8 amended to read as follows:
9 41-5212. STANDARDS TO ASSURE FAIR MARKETING. (1) Each individual carrier
10 shall actively market health benefit plan coverage, including the basic, stan-
11 dard and catastrophic health benefit plans, to eligible individuals in the
12 state. If an individual carrier denies coverage to an individual on the basis
13 of the health status or claims experience of the individual or dependents, the
14 individual carrier shall offer the individual the opportunity to purchase
15 offers a basic, standard or catastrophic health benefit plan, then any other
16 plan it offers shall not be subject to the restrictions relating to premium
17 rates provided in section 41-5206, Idaho Code.
18 (2) (a) Except as provided in subsection (2)(b) of this section, no indi-
19 vidual carrier or agent shall, directly or indirectly, engage in the fol-
20 lowing activities:
21 (i) Encouraging or directing individuals to refrain from filing an
22 application for coverage with the individual carrier because of the
23 health status, claims experience, industry, occupation or geographic
24 location of the individual or dependents.
25 (ii) Encouraging or directing individuals to seek coverage from
26 another carrier because of the health status, claims experience,
27 industry, occupation or geographic location of the individual.
28 (b) The provisions of subsection (2)(a) of this section shall not apply
29 with respect to information provided by an individual carrier or agent to
30 an individual regarding the established geographic service area or a
31 restricted network provision of an individual carrier.
32 (3) (a) Except as provided in subsection (2)(b) of this section, no indi-
33 vidual carrier shall, directly or indirectly, enter into any contract,
34 agreement or arrangement with an agent that provides for or results in the
35 compensation paid to an agent for the sale of a health benefit plan to be
36 carried because of the health status, claims experience, industry, occupa-
37 tion or geographic location of the individual.
38 (b) The provisions of paragraph (a) of this subsection shall not apply
39 with respect to a compensation arrangement that provides compensation to
40 an agent on the basis of percentage of premium, provided that the percent-
41 age shall not vary because of the health status, claims experience, indus-
42 try, occupation or geographic area of the individual.
43 (4) An individual carrier shall provide reasonable compensation, as pro-
44 vided under the plan of operation of the program, to an agent, if any, for the
45 sale of a basic, standard or catastrophic health benefit plan.
46 (5) No individual carrier may terminate, fail to renew or limit its con-
47 tract or agreement of representation with an agent for any reason related to
48 the health status, claims experience, occupation or geographic location of the
49 individuals placed by the agent with the individual carrier.
50 (6) Denial by an individual carrier of an application for coverage from
51 an individual shall be in writing and shall state the reason or reasons for
52 the denial.
53 (7) The director may establish rules setting forth additional standards
9
1 to provide for the fair marketing and broad availability of health benefit
2 plans to individuals in this state.
3 (8) (a) A violation of the provisions of this section by an individual
4 carrier or an agent shall be an unfair trade practice pursuant to the pro-
5 visions of section 41-1302, Idaho Code.
6 (b) If an individual carrier enters into a contract, agreement or other
7 arrangement with a third-party administrator to provide administrative,
8 marketing or other services related to the offering of health benefit
9 plans to individuals in this state, the third-party administrator shall be
10 subject to the provisions of this section as if it were an individual car-
11 rier.
12 SECTION 5. That Sections 41-4706, 41-4716, 41-5206 and 41-5212, Idaho
13 Code, be, and the same are hereby repealed.
14 SECTION 6. That Chapter 47, Title 41, Idaho Code, be, and the same is
15 hereby amended by the addition thereto of a NEW SECTION, to be known and des-
16 ignated as Section 41-4706, Idaho Code, and to read as follows:
17 41-4706. RESTRICTIONS RELATING TO PREMIUM RATES. (1) Premium rates for
18 health benefit plans subject to the provisions of this chapter shall be sub-
19 ject to the following provisions:
20 (a) The index rate for a rating period for any class of business shall
21 not exceed the index rate for any other class of business by more than
22 twenty percent (20%).
23 (b) For a class of business, the premium rates charged during a rating
24 period to small employers with similar case characteristics for the same
25 or similar coverage, or the rates that could be charged to such employers
26 under the rating system for that class of business, shall not vary from
27 the index rate by more than twenty-five percent (25%) of the index rate.
28 (c) The percentage increase in the premium rate charged to a small
29 employer for a new rating period may not exceed the sum of the following:
30 (i) The percentage change in the new business premium rate measured
31 from the first day of the prior rating period to the first day of the
32 new rating period. In the case of a health benefit plan into which
33 the small employer carrier is no longer enrolling new small employ-
34 ers, the small employer carrier shall use the percentage change in
35 the base premium rate, provided that such change does not exceed, on
36 a percentage basis, the change in the new business premium rate for
37 the most similar health benefit plan into which the small employer
38 carrier is actively enrolling new small employers;
39 (ii) Any adjustment, not to exceed fifteen percent (15%) annually
40 and adjusted pro rata for rating periods of less than one (1) year,
41 due to the claim experience, health status or duration of coverage of
42 the employees or dependents of the small employer as determined from
43 the small employer carrier's rate manual for the class of business;
44 and
45 (iii) Any adjustment due to change in coverage or change in the case
46 characteristics of the small employer as determined from the small
47 employer carrier's rate manual for the class of business.
48 (d) Adjustments in rates for claim experience, health status and duration
49 of coverage shall not be charged to individual employees or dependents.
50 Any such adjustment shall be applied uniformly to the rates charged for
51 all employees and dependents of the small employer.
52 (e) Premium rates for health benefit plans shall comply with the require-
10
1 ments of this section notwithstanding any assessments paid or payable by
2 small employer carriers pursuant to section 41-4711, Idaho Code.
3 (f) In the case of health benefit plans in existence, delivered or issued
4 for delivery or renewed on or after July 1, 2000, a premium rate for a
5 rating period may exceed the ranges set forth in subsections (1)(a) and
6 (b) of this section for a period of three (3) years following July 1,
7 2004. In such case, the percentage increase in the premium rate charged to
8 a small employer for a new rating period shall not exceed the sum of the
9 following:
10 (i) The percentage change in the new business premium rate measured
11 from the first day of the prior rating period to the first day of the
12 new rating period. In the case of a health benefit plan into which
13 the small employer carrier is no longer enrolling new small employ-
14 ers, the small employer carrier shall use the percentage change in
15 the base premium rate, provided that such change does not exceed, on
16 a percentage basis, the change in the new business premium rate for
17 the most similar health benefit plan into which the small employer
18 carrier is actively enrolling new small employers; and
19 (ii) Any adjustment due to change in coverage or change in the case
20 characteristics of the small employer as determined from the
21 carrier's rate manual for the class of business.
22 (g) (i) Small employer carriers shall apply rating factors, including
23 case characteristics, consistently with respect to all small employ-
24 ers in a class of business. Rating factors shall produce premiums for
25 identical groups which differ only by the amounts attributable to
26 plan design and do not reflect differences due to the nature of the
27 groups assumed to select particular health benefit plans; and
28 (ii) A small employer carrier shall treat all health benefit plans
29 issued or renewed in the same calendar month as having the same rat-
30 ing period.
31 (h) For the purposes of this subsection, a health benefit plan that uti-
32 lizes a restricted provider network shall not be considered similar cover-
33 age to a health benefit plan that does not utilize such a network, pro-
34 vided that utilization of the restricted provider network results in sub-
35 stantial differences in claims costs.
36 (i) The small employer carrier shall not use case characteristics, other
37 than age, individual tobacco use, geography, as defined by rule of the
38 director, or gender, without prior approval of the director.
39 (j) A small employer carrier may utilize age as a case characteristic in
40 establishing premium rates, provided that the same rating factor shall be
41 applied to all dependents under twenty-three (23) years of age, and the
42 same rating factor shall be applied on a quinquennial basis as to individ-
43 uals or nondependents twenty (20) years of age or older.
44 (k) The director may establish rules to implement the provisions of this
45 section and to assure that rating practices used by small employer carri-
46 ers are consistent with the purposes of this chapter, including rules
47 that:
48 (i) Assure that differences in rates charged for health benefit
49 plans by small employer carriers are reasonable and reflect objective
50 differences in plan design, not including differences due to the
51 nature of the groups assumed to select particular health benefit
52 plans;
53 (ii) Prescribe the manner in which case characteristics may be used
54 by small employer carriers; and
55 (iii) Prescribe the manner in which a small employer carrier is to
11
1 demonstrate compliance with the provisions of this section, including
2 requirements that a small employer carrier provide the director with
3 actuarial certification as to such compliance.
4 (2) A small employer carrier shall not transfer a small employer involun-
5 tarily into or out of a class of business. A small employer carrier shall not
6 offer to transfer a small employer into or out of a class of business unless
7 such offer is made to transfer all small employers in the class of business
8 without regard to case characteristics, claim experience, health status or
9 duration of coverage since issue.
10 (3) The director may suspend for a specified period the application of
11 subsection (1)(a) of this section as to the premium rates applicable to one
12 (1) or more small employers included within a class of business of a small
13 employer carrier for one (1) or more rating periods upon a filing by the small
14 employer carrier and a finding by the director either that the suspension is
15 reasonable in light of the financial condition of the small employer carrier
16 or that the suspension would enhance the efficiency and fairness of the
17 marketplace for small employer health insurance.
18 (4) In connection with the offering for sale of any health benefit plan
19 to a small employer, a small employer carrier shall make a reasonable disclo-
20 sure, as part of its solicitation and sales materials, of all of the follow-
21 ing:
22 (a) The extent to which premium rates for a specified small employer are
23 established or adjusted based upon the actual or expected variation in
24 claims costs or actual or expected variation in health status of the
25 employees of the small employer and their dependents;
26 (b) The provisions of the health benefit plan concerning the small
27 employer carrier's right to change premium rates and the factors, other
28 than claim experience, that affect changes in premium rates;
29 (c) The provisions relating to renewability of policies and contracts;
30 and
31 (d) The provisions relating to any preexisting condition provision.
32 (5) (a) Each small employer carrier shall maintain at its principal place
33 of business a complete and detailed description of its rating practices
34 and renewal underwriting practices, including information and documenta-
35 tion that demonstrate that its rating methods and practices are based upon
36 commonly accepted actuarial assumptions and are in accordance with sound
37 actuarial principles.
38 (b) Each small employer carrier shall file with the director annually on
39 or before March 15, an actuarial certification certifying that the carrier
40 is in compliance with the provisions of this chapter and that the rating
41 methods of the small employer carrier are actuarially sound. Such certifi-
42 cation shall be in a form and manner, and shall contain such information,
43 as specified by the director. A copy of the certification shall be
44 retained by the small employer carrier at its principal place of business.
45 (c) A small employer carrier shall make the information and documentation
46 described in subsection (4)(a) of this section available to the director
47 upon request. Except in cases of violations of the provisions of this
48 chapter, the information shall be considered proprietary and trade secret
49 information and shall not be subject to disclosure by the director to per-
50 sons outside of the department except as agreed to by the small employer
51 carrier or as ordered by a court of competent jurisdiction.
52 SECTION 7. That Chapter 47, Title 41, Idaho Code, be, and the same is
53 hereby amended by the addition thereto of a NEW SECTION, to be known and des-
54 ignated as Section 41-4716, Idaho Code, and to read as follows:
12
1 41-4716. STANDARDS TO ASSURE FAIR MARKETING. (1) Each small employer car-
2 rier shall actively market health benefit plan coverage, including the basic,
3 standard and catastrophic health benefit plans, to eligible small employers in
4 the state. If a small employer carrier denies coverage to a small employer on
5 the basis of the health status or claims experience of the small employer or
6 its employees or dependents, the small employer carrier shall offer the small
7 employer the opportunity to purchase a basic, health benefit plan, a standard
8 health benefit plan and a catastrophic health benefit plan.
9 (2) (a) Except as provided in subsection (2)(b) of this section, no small
10 employer carrier or agent shall, directly or indirectly, engage in the
11 following activities:
12 (i) Encouraging or directing small employers to refrain from filing
13 an application for coverage with the small employer carrier because
14 of the health status, claims experience, industry, occupation or geo-
15 graphic location of the small employer;
16 (ii) Encouraging or directing small employers to seek coverage from
17 another carrier because of the health status, claims experience,
18 industry, occupation or geographic location of the small employer.
19 (b) The provisions of subsection (2)(a) of this section shall not apply
20 with respect to information provided by a small employer carrier or agent
21 to a small employer regarding the established geographic service area or a
22 restricted network provision of a small employer carrier.
23 (3) (a) Except as provided in subsection (2)(b) of this section, no small
24 employer carrier shall, directly or indirectly, enter into any contract,
25 agreement or arrangement with an agent that provides for or results in the
26 compensation paid to an agent for the sale of a health benefit plan to be
27 varied because of the health status, claims experience, industry, occupa-
28 tion or geographic location of the small employer.
29 (b) The provisions of subsection (a) of this section shall not apply with
30 respect to a compensation arrangement that provides compensation to an
31 agent on the basis of percentage of premium, provided that the percentage
32 shall not vary because of the health status, claims experience, industry,
33 occupation or geographic area of the small employer.
34 (4) A small employer carrier shall provide reasonable compensation, as
35 provided under the plan of operation of the program, to an agent, if any, for
36 the sale of a basic, standard or catastrophic health benefit plan.
37 (5) No small employer carrier may terminate, fail to renew or limit its
38 contract or agreement of representation with an agent for any reason related
39 to the health status, claims experience, occupation or geographic location of
40 the small employers placed by the agent with the small employer carrier.
41 (6) No small employer carrier or agent may induce or otherwise encourage
42 a small employer to separate or otherwise exclude an employee from health cov-
43 erage or benefits provided in connection with the employee's employment.
44 (7) Denial by a small employer carrier of an application for coverage
45 from a small employer shall be in writing and shall state the reason or rea-
46 sons for the denial.
47 (8) The director may establish regulations setting forth additional stan-
48 dards to provide for the fair marketing and broad availability of health bene-
49 fit plans to small employers in this state.
50 (9) (a) A violation of the provisions of this section by a small employer
51 carrier or an agent shall be an unfair trade practice pursuant to the pro-
52 visions of section 41-1302, Idaho Code.
53 (b) If a small employer carrier enters into a contract, agreement or
54 other arrangement with a third-party administrator to provide administra-
55 tive, marketing or other services related to the offering of health bene-
13
1 fit plans to small employers in this state, the third-party administrator
2 shall be subject to the provisions of this section as if it were a small
3 employer carrier.
4 SECTION 8. That Chapter 52, Title 41, Idaho Code, be, and the same is
5 hereby amended by the addition thereto of a NEW SECTION, to be known and des-
6 ignated as Section 41-5206, Idaho Code, and to read as follows:
7 41-5206. RESTRICTIONS RELATING TO PREMIUM RATES. (1) Premium rates for
8 health benefit plans subject to the provisions of this chapter shall be sub-
9 ject to the following provisions:
10 (a) The premium rates charged during a rating period to individuals with
11 similar case characteristics for the same or similar coverage, or the
12 rates that could be charged to such individuals under the rating system,
13 shall not vary from the index rate by more than twenty-five percent (25%)
14 of the index rate.
15 (b) The percentage increase in the premium rate charged to an individual
16 for a new rating period may not exceed the sum of the following:
17 (i) The percentage change in the new business premium rate measured
18 from the first day of the prior rating period to the first day of the
19 new rating period. In the case of a health benefit plan into which
20 the individual carrier is no longer enrolling new individuals, the
21 individual carrier shall use the percentage change in the base pre-
22 mium rate, provided that such change does not exceed, on a percentage
23 basis, the change in the new business premium rate for the most simi-
24 lar health benefit plan into which the individual carrier is actively
25 enrolling new individuals.
26 (ii) Any adjustment, not to exceed fifteen percent (15%) annually
27 and adjusted pro rata for rating periods of less than one (1) year,
28 due to the claim experience, health status or duration of coverage of
29 the individual or dependents as determined from the individual
30 carrier's rate manual; and
31 (iii) Any adjustment due to change in coverage or change in the case
32 characteristics of the individual as determined from the individual
33 carrier's rate manual.
34 (c) Premium rates for health benefit plans shall comply with the require-
35 ments of this section notwithstanding any assessments paid or payable by
36 carriers pursuant to section 41-4711, Idaho Code.
37 (d) In the case of health benefit plans in existence, delivered or issued
38 for delivery or renewed on or after July 1, 2000, a premium rate for a
39 rating period may exceed the ranges set forth in subsections (1)(a) and
40 (b) of this section for a period of three (3) years following July 1,
41 2004. In such case, the percentage increase in the premium rate charged to
42 an individual for a new rating period shall not exceed the sum of the fol-
43 lowing:
44 (i) The percentage change in the new business premium rate measured
45 from the first day of the prior rating period to the first day of the
46 new rating period. In the case of a health benefit plan into which
47 the individual carrier is no longer enrolling new individuals, the
48 individual carrier shall use the percentage change in the base pre-
49 mium rate, provided that such change does not exceed, on a percentage
50 basis, the change in the new business premium rate for the most simi-
51 lar health benefit plan into which the individual carrier is actively
52 enrolling new individuals; and
53 (ii) Any adjustment due to change in coverage or change in the case
14
1 characteristics of the individual as determined from the carrier's
2 rate manual.
3 (e) (i) Individual carriers shall apply rating factors, including case
4 characteristics, consistently with respect to all individuals. Rating
5 factors shall produce premiums for identical individuals which differ
6 only by the amounts attributable to plan design and do not reflect
7 differences due to the nature of the individuals assumed to select
8 particular health benefit plans; and
9 (ii) An individual carrier shall treat all health benefit plans
10 issued or renewed in the same calendar month as having the same rat-
11 ing period.
12 (f) For purposes of this subsection, a health benefit plan that utilizes
13 a restricted provider network shall not be considered similar coverage to
14 a health benefit plan that does not utilize such a network, provided that
15 utilization of the restricted provider network results in substantial dif-
16 ferences in claims costs.
17 (g) The individual carrier shall not use case characteristics, other than
18 age, individual tobacco use, geography as defined by rule of the director,
19 or gender, without prior approval of the director.
20 (h) An individual carrier may utilize age as a case characteristic in
21 establishing premium rates, provided that the same rating factor shall be
22 applied to all dependents under twenty-three (23) years of age, and the
23 same rating factor shall be applied on a quinquennial basis as to individ-
24 uals or nondependents twenty (20) years of age or older.
25 (i) The director may establish rules to implement the provisions of this
26 section and to assure that rating practices used by individual carriers
27 are consistent with the purposes of this chapter, including rules that:
28 (i) Assure that differences in rates charged for health benefit
29 plans by individual carriers are reasonable and reflect objective
30 differences in plan design, not including differences due to the
31 nature of the individuals assumed to select particular health benefit
32 plans;
33 (ii) Prescribe the manner in which case characteristics may be used
34 by individual carriers; and
35 (iii) Prescribe the manner in which an individual carrier is to
36 demonstrate compliance with the provisions of this section, including
37 requirements that an individual carrier provide the director with
38 actuarial certification as to such compliance.
39 (2) The director may suspend for a specified period the application of
40 subsection (1)(a) of this section as to the premium rates applicable to one
41 (1) or more individuals for one (1) or more rating periods upon a filing by
42 the individual carrier and a finding by the director either that the suspen-
43 sion is reasonable in light of the financial condition of the individual car-
44 rier or that the suspension would enhance the efficiency and fairness of the
45 marketplace for individual health insurance.
46 (3) In connection with the offering for sale of any health benefit plan
47 to an individual, an individual carrier shall make a reasonable disclosure, as
48 part of its solicitation and sales materials, of all of the following:
49 (a) The extent to which premium rates for an individual are established
50 or adjusted based upon the actual or expected variation in claims costs or
51 actual or expected variation in health status of the individual and his
52 dependents;
53 (b) The provisions of the health benefit plan concerning the individual
54 carrier's right to change premium rates and the factors, other than claim
55 experience, that affect changes in premium rates;
15
1 (c) The provisions relating to renewability of policies and contracts;
2 and
3 (d) The provisions relating to any preexisting condition provision.
4 (4) (a) Each individual carrier shall maintain at its principal place of
5 business a complete and detailed description of its rating practices and
6 renewal underwriting practices, including information and documentation
7 that demonstrate that its rating methods and practices are based upon com-
8 monly accepted actuarial assumptions and are in accordance with sound
9 actuarial principles.
10 (b) Each individual carrier shall file with the director annually on or
11 before September 15, an actuarial certification certifying that the car-
12 rier is in compliance with the provisions of this chapter and that the
13 rating methods of the individual carrier are actuarially sound. Such cer-
14 tification shall be in a form and manner, and shall contain such informa-
15 tion, as specified by the director. A copy of the certification shall be
16 retained by the individual carrier at its principal place of business.
17 (c) An individual carrier shall make the information and documentation
18 described in subsection (4)(a) of this section available to the director
19 upon request. Except in cases of violations of the provisions of this
20 chapter, the information shall be considered proprietary and trade secret
21 information and shall not be subject to disclosure by the director to per-
22 sons outside of the department except as agreed to by the individual car-
23 rier or as ordered by a court of competent jurisdiction.
24 SECTION 9. That Chapter 52, Title 41, Idaho Code, be, and the same is
25 hereby amended by the addition thereto of a NEW SECTION, to be known and des-
26 ignated as Section 41-5212, Idaho Code, and to read as follows:
27 41-5212. STANDARDS TO ASSURE FAIR MARKETING. (1) Each individual carrier
28 shall actively market health benefit plan coverage, including the basic, stan-
29 dard and catastrophic health benefit plans, to eligible individuals in the
30 state. If an individual carrier denies coverage to an individual on the basis
31 of the health status or claims experience of the individual or dependents, the
32 individual carrier shall offer the individual the opportunity to purchase a
33 basic, standard or catastrophic health benefit plan.
34 (2) (a) Except as provided in subsection (2)(b) of this section, no indi-
35 vidual carrier or agent shall, directly or indirectly, engage in the fol-
36 lowing activities:
37 (i) Encouraging or directing individuals to refrain from filing an
38 application for coverage with the individual carrier because of the
39 health status, claims experience, industry, occupation or geographic
40 location of the individual or dependents.
41 (ii) Encouraging or directing individuals to seek coverage from
42 another carrier because of the health status, claims experience,
43 industry, occupation or geographic location of the individual.
44 (b) The provisions of subsection (2)(a) of this section shall not apply
45 with respect to information provided by an individual carrier or agent to
46 an individual regarding the established geographic service area or a
47 restricted network provision of an individual carrier.
48 (3) (a) Except as provided in subsection (2)(b) of this section, no indi-
49 vidual carrier shall, directly or indirectly, enter into any contract,
50 agreement or arrangement with an agent that provides for or results in the
51 compensation paid to an agent for the sale of a health benefit plan to be
52 carried because of the health status, claims experience, industry, occupa-
53 tion or geographic location of the individual.
16
1 (b) The provisions of paragraph (a) of this subsection shall not apply
2 with respect to a compensation arrangement that provides compensation to
3 an agent on the basis of percentage of premium, provided that the percent-
4 age shall not vary because of the health status, claims experience, indus-
5 try, occupation or geographic area of the individual.
6 (4) An individual carrier shall provide reasonable compensation, as pro-
7 vided under the plan of operation of the program, to an agent, if any, for the
8 sale of a basic, standard or catastrophic health benefit plan.
9 (5) No individual carrier may terminate, fail to renew or limit its con-
10 tract or agreement of representation with an agent for any reason related to
11 the health status, claims experience, occupation or geographic location of the
12 individuals placed by the agent with the individual carrier.
13 (6) Denial by an individual carrier of an application for coverage from
14 an individual shall be in writing and shall state the reason or reasons for
15 the denial.
16 (7) The director may establish rules setting forth additional standards
17 to provide for the fair marketing and broad availability of health benefit
18 plans to individuals in this state.
19 (8) (a) A violation of the provisions of this section by an individual
20 carrier or an agent shall be an unfair trade practice pursuant to the pro-
21 visions of section 41-1302, Idaho Code.
22 (b) If an individual carrier enters into a contract, agreement or other
23 arrangement with a third-party administrator to provide administrative,
24 marketing or other services related to the offering of health benefit
25 plans to individuals in this state, the third-party administrator shall be
26 subject to the provisions of this section as if it were an individual car-
27 rier.
28 SECTION 10. Sections 1, 2, 3 and 4 of this act shall apply to all new
29 health benefit plans delivered or issued for delivery on and after July 1,
30 2000, and with respect to plans in existence on July 1, 2000, only upon the
31 renewal thereof.
32 SECTION 11. The chairman of the Senate Commerce and Human Resources Com-
33 mittee shall appoint two senators and the chairman of the House of Representa-
34 tives Business Committee shall appoint two representatives to act as a joint
35 oversight subcommittee to monitor the effects of Sections 1, 2, 3 and 4 of
36 this act. The subcommittee shall report its findings and recommendations to
37 the full committees, the task force on health insurance premiums and such
38 other persons as the germane committee chairmen shall direct. The subcommittee
39 shall continue in effect during each legislative session until the date of
40 adjournment of the Second Regular Session of the Fifty-seventh Idaho Legisla-
41 ture in 2004.
42 SECTION 12. Sections 1, 2, 3, 4 and 10 of this act shall become effective
43 on July 1, 2000. Sections 5, 6, 7, 8 and 9 shall become effective on July 1,
44 2004. Section 11 shall be null, void and of no force and effect on and after
45 the date of adjournment of the Second Regular Session of the Fifty-seventh
46 Idaho Legislature in 2004.
STATEMENT OF PURPOSE
RS 10121
This legislation removes the statutory restriction that confines the rates for health
insurance premiums within a range of 20% of an index rate. This statutory
requirement is commonly known as a "rate band". The purpose for establishing
rate bands is to shift part of the cost for individuals with a higher actuarial risk of
illness (and groups in the case of employer group policies) to individuals with a
lower actuarial risk of illness. This legislation removes the statutorily mandated
cost shift created by the rate banding process so that there is a more realistic
opportunity to keep healthy people insured and retain their contribution to the
pool of funds available to cover insured health care costs.
FISCAL IMPACT
This legislation is designed to retain encourage people with lower health risks to
maintain insurance. To the extent the legislation is successful, it could slow the
rate of increases in premiums for all insurance programs. However, the effect on
the State and local government cannot be determined with any significant degree
of accuracy in advance.
CONTACT: SENATOR STEGNER
STATEMENT OF PURPOSE/FISCAL IMPACT S 1471