H.B. 133

1

HEALTH SYSTEM REFORM
2 2008 GENERAL SESSION
3 STATE OF UTAH
4 Chief Sponsor: David Clark
5 Senate Sponsor: ____________
6
7 LONG TITLE
8 General Description:
9 This bill amends the Health Code, the Insurance Code, and the Governor's Office of
10 Economic Development to implement a strategic plan for health system reform.
11 Highlighted Provisions:
12 This bill:
13 . directs the Department of Health to work with the Insurance Department, the
14 Department of Workforce Services, the Governor's Office of Economic
15 Development, and the Legislature's Business and Labor Interim Committee to
16 develop and implement a state strategic plan for health system reform that includes
17 the development of one or more new insurance products;
18 . requires the Insurance Department to participate in the development and
19 implementation of the state's strategic plan for health system reform;
20 . requires the Insurance Department to:
21 . work with insurers to develop standards for health insurance applications and
22 standards for compatible systems of electronic submission of applications;
23 . facilitate a private sector method of collection of premium payments from
24 multiple sources; and
25 . encourage health insurers to develop new health insurance products that meet
26 certain criteria;
27 . changes the threshold at which an individual qualifies for the state's Comprehensive

28 Health Insurance Pool;
29 . changes the eligibility for the individual market so that:
30 . if Utah's Premium Partnership for Health Insurance may be used to help
31 purchase an individual policy, an insurer may not deny coverage based on the
32 individual's use of a premium subsidy; and
33 . eligibility for Utah's Premium Partnership for Health Insurance is a qualifying
34 event for coverage under an employer plan;
35 . requires the Department of Workforce Services to participate in the development of
36 the strategic plan for health system reform;
37 . repeals an income tax subtraction for health care insurance;
38 . enacts a non-refundable tax credit for health insurance premiums paid by an
39 individual;
40 . enacts the "Health System Reform Act" which:
41 . requires the Governor's Office of Economic Development to serve as the
42 coordinating entity to work with the executive branch agencies, advisory
43 committees, and the Legislature to develop the strategic plan, report to the
44 Legislature, and assist with the implementation of the strategic plan as approved
45 and enacted by the Legislature;
46 . gives the Legislature's Business and Labor Interim Committee oversight of the
47 executive branch's development and implementation of the health system
48 reform; and
49 . describes the state's strategic plan for health system reform and the time line for
50 implementing the strategic plan; and
51 . makes technical amendments.
52 Monies Appropriated in this Bill:
53 This bill appropriates:
54 . as an ongoing appropriation, $615,000, from the General Fund for fiscal year
55 2008-09 to the Department of Health to be used to fund health care cost and quality
56 data collection, analysis, and distribution; and
57 . $500,000 from the General Fund for fiscal year 2008-09 only, to the Department of
58 Health to fund the department's implementation of the standards developed for the

59 electronic exchange of clinical health information.
60 Other Special Clauses:
61 This bill provides retrospective operation.
62 This bill coordinates with H.B. 62, Recodification of Title 63, State Affairs in General,
63 providing for technical cross reference changes.
64 This bill coordinates with S.B. 31, Income Tax Amendments, to provide for
65 apportionment of a tax credit.
66 Utah Code Sections Affected:
67 AMENDS:
68 31A-30-106, as last amended by Laws of Utah 2004, Chapter 108
69 31A-30-108, as last amended by Laws of Utah 2004, Chapters 2 and 329
70 59-10-103, as last amended by Laws of Utah 2006, Fourth Special Session, Chapter 2
71 59-10-114, as last amended by Laws of Utah 2007, Chapter 100
72 59-10-1204, as enacted by Laws of Utah 2006, Fourth Special Session, Chapter 2
73 ENACTS:
74 26-18-12, Utah Code Annotated 1953
75 31A-2-218, Utah Code Annotated 1953
76 31A-22-635, Utah Code Annotated 1953
77 35A-1-104.5, Utah Code Annotated 1953
78 59-10-1017, Utah Code Annotated 1953
79 63-38f-2401, Utah Code Annotated 1953
80 63-38f-2402, Utah Code Annotated 1953
81 63-38f-2403, Utah Code Annotated 1953
82 63-38f-2404, Utah Code Annotated 1953
83 63-38f-2405, Utah Code Annotated 1953
84
85 Be it enacted by the Legislature of the state of Utah:
86 Section 1. Section 26-18-12 is enacted to read:
87 26-18-12. Implementation of health system reform -- Medicaid program.
88 The department, including the Division of Health Care Financing within the
89 department, shall:

90 (1) work with the Governor's Office of Economic Development, the Insurance
91 Department, the Department of Workforce Services, and the Legislature's Business and Labor
92 Interim Committee to develop and implement health system reform in accordance with the
93 strategic plan described in Title 63, Chapter 38f, Part 24, Health System Reform Act;
94 (2) develop and submit amendments and waivers for the state's Medicaid plan as
95 necessary to carry out the provisions of the Health System Reform Act;
96 (3) seek federal approval of an amendment to Utah's Premium Partnership for Health
97 Insurance that would allow the state's Medicaid program to subsidize the purchase by an
98 individual of health insurance that:
99 (a) covers the individual or the individual and the individual's family; and
100 (b) (i) (A) is not paid for with employer contributions; and
101 (B) may include a deductible greater than $1,000 per person; or
102 (ii) (A) is paid for with employer contributions that total less than 50% of the cost of
103 the policy; and
104 (B) may include a deductible greater than $1,000 per person;
105 (4) in coordination with the Department of Workforce Services:
106 (a) establish a Children's Health Insurance Program eligibility policy, consistent with
107 federal requirements, that prohibits enrollment of a child in the program if the child's parent
108 qualifies for assistance under Utah's Premium Partnership for Health Insurance; and
109 (b) involve community partners, insurance agents and producers, community based
110 service organizations, and the education community to increase enrollment of eligible
111 employees and individuals in Utah's Premium Partnership for Health Insurance and the
112 Children's Health Insurance Program;
113 (5) as funding permits, and in coordination with the department's adoption of standards
114 for the electronic exchange of clinical health data, help the private sector form an alliance of
115 employers, hospitals and other health care providers, patients, and health insurers to develop
116 and use evidence-based health care quality measures for the purpose of improving health care
117 decision making by health care providers, consumers, and third party payers; and
118 (6) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
119 make rules, as necessary, to implement the strategic plan for health system reform described in
120 Section 63-38f-2405 .

121 Section 2. Section 31A-2-218 is enacted to read:
122 31A-2-218. Implementation of strategic plan for health system reform.
123 The commissioner and the department shall:
124 (1) work with the Governor's Office of Economic Development, the Department of
125 Health, the Department of Workforce Services, and the Legislature's Business and Labor
126 Interim Committee to develop and implement health system reform in accordance with the
127 strategic plan described in Title 63, Chapter 38f, Part 24, Health System Reform Act;
128 (2) work with health insurers in accordance with Section 31A-22-635 to develop
129 standards for health insurance applications and compatible electronic systems;
130 (3) facilitate a private sector method for the collection of health insurance premium
131 payments made for a single policy by multiple payers, including the policyholder, one or more
132 employers of one or more individuals covered by the policy, government programs, and others
133 by educating employers and insurers about collection services available through private
134 vendors, including financial institutions;
135 (4) encourage health insurers to develop products that:
136 (a) encourage health care providers to follow best practice protocols; and
137 (b) incorporate other health care quality improvement mechanisms;
138 (5) report to the Legislature's Business and Labor Interim Committee on or before
139 November 12, 2008 regarding legislation needed to implement the strategic plan described in
140 Title 63, Chapter 38f, Part 24, Health System Reform Act;
141 (6) involve the Office of Consumer Health Assistance created in Section 31A-2-216 , as
142 necessary, to accomplish the requirements of this section; and
143 (7) in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
144 make rules, as necessary, to implement the strategic plan for health system reform described in
145 Section 63-38f-2405 .
146 Section 3. Section 31A-22-635 is enacted to read:
147 31A-22-635. Development of uniform health insurance applications.
148 (1) For purposes of this section, "insurer":
149 (a) is defined in Subsection 31A-22-634 (1); and
150 (b) includes the state employee's risk pool under Section 49-20-202 .
151 (2) Beginning July 1, 2009, all insurers offering health insurance shall use a uniform

152 application form.
153 (3) The uniform application form shall be adopted and approved by the commissioner
154 in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act. The
155 commissioner shall consult with the health insurance industry when adopting the uniform
156 application form.
157 (4) (a) Beginning July 1, 2010, all insurers shall offer compatible systems of electronic
158 submission of application forms, approved by the commissioner in accordance with Title 63,
159 Chapter 46a, Utah Administrative Rulemaking Act. The systems approved by the
160 commissioner may include monitoring and disseminating information concerning eligibility
161 and coverage of individuals.
162 (b) The commissioner shall regulate any fees charged by insurers to an enrollee for a
163 uniform application form or electronic submission of the application forms.
164 Section 4. Section 31A-30-106 is amended to read:
165 31A-30-106. Premiums -- Rating restrictions -- Disclosure.
166 (1) Premium rates for health benefit plans under this chapter are subject to the
167 provisions of this Subsection (1).
168 (a) The index rate for a rating period for any class of business may not exceed the
169 index rate for any other class of business by more than 20%.
170 (b) (i) For a class of business, the premium rates charged during a rating period to
171 covered insureds with similar case characteristics for the same or similar coverage, or the rates
172 that could be charged to such employers under the rating system for that class of business, may
173 not vary from the index rate by more than 30% of the index rate, except as provided in Section
174 31A-22-625 .
175 (ii) A covered carrier that offers individual and small employer health benefit plans
176 may use the small employer index rates to establish the rate limitations for individual policies,
177 even if some individual policies are rated below the small employer base rate.
178 (c) The percentage increase in the premium rate charged to a covered insured for a new
179 rating period, adjusted pro rata for rating periods less than a year, may not exceed the sum of
180 the following:
181 (i) the percentage change in the new business premium rate measured from the first day
182 of the prior rating period to the first day of the new rating period;

183 (ii) any adjustment, not to exceed 15% annually and adjusted pro rata for rating periods
184 of less than one year, due to the claim experience, health status, or duration of coverage of the
185 covered individuals as determined from the covered carrier's rate manual for the class of
186 business, except as provided in Section 31A-22-625 ; and
187 (iii) any adjustment due to change in coverage or change in the case characteristics of
188 the covered insured as determined from the covered carrier's rate manual for the class of
189 business.
190 (d) (i) Adjustments in rates for claims experience, health status, and duration from
191 issue may not be charged to individual employees or dependents.
192 (ii) Any adjustment described in Subsection (1)(d)(i) shall be applied uniformly to the
193 rates charged for all employees and dependents of the small employer.
194 (e) A covered carrier may use industry as a case characteristic in establishing premium
195 rates, provided that the highest rate factor associated with any industry classification does not
196 exceed the lowest rate factor associated with any industry classification by more than 15%.
197 (f) (i) Covered carriers shall apply rating factors, including case characteristics,
198 consistently with respect to all covered insureds in a class of business.
199 (ii) Rating factors shall produce premiums for identical groups that:
200 (A) differ only by the amounts attributable to plan design; and
201 (B) do not reflect differences due to the nature of the groups assumed to select
202 particular health benefit products.
203 (iii) A covered carrier shall treat all health benefit plans issued or renewed in the same
204 calendar month as having the same rating period.
205 (g) For the purposes of this Subsection (1), a health benefit plan that uses a restricted
206 network provision may not be considered similar coverage to a health benefit plan that does not
207 use [such] a restricted network provision, provided that use of the restricted network provision
208 results in substantial difference in claims costs.
209 (h) The covered carrier may not, without prior approval of the commissioner, use case
210 characteristics other than:
211 (i) age;
212 (ii) gender;
213 (iii) industry;

214 (iv) geographic area;
215 (v) family composition; and
216 (vi) group size.
217 (i) (i) The commissioner [may] shall establish rules in accordance with Title 63,
218 Chapter 46a, Utah Administrative Rulemaking Act, to:
219 (A) implement this chapter; and
220 (B) assure that rating practices used by covered carriers are consistent with the
221 purposes of this chapter.
222 (ii) The rules described in Subsection (1)(i)(i) may include rules that:
223 (A) assure that differences in rates charged for health benefit products by covered
224 carriers are reasonable and reflect objective differences in plan design, not including
225 differences due to the nature of the groups assumed to select particular health benefit products;
226 (B) prescribe the manner in which case characteristics may be used by covered carriers;
227 (C) implement the individual enrollment cap under Section 31A-30-110 , including
228 specifying:
229 (I) the contents for certification;
230 (II) auditing standards;
231 (III) underwriting criteria for uninsurable classification; and
232 (IV) limitations on high risk enrollees under Section 31A-30-111 ; and
233 (D) establish the individual enrollment cap under Subsection 31A-30-110 (1).
234 (j) Before implementing regulations for underwriting criteria for uninsurable
235 classification, the commissioner shall contract with an independent consulting organization to
236 develop industry-wide underwriting criteria for uninsurability based on an individual's expected
237 claims under open enrollment coverage exceeding [200%] 325% of that expected for a standard
238 insurable individual with the same case characteristics.
239 (k) The commissioner shall revise rules issued for Sections 31A-22-602 and
240 31A-22-605 regarding individual accident and health policy rates to allow rating in accordance
241 with this section.
242 (2) For purposes of Subsection (1)(c)(i), if a health benefit product is a health benefit
243 product into which the covered carrier is no longer enrolling new covered insureds, the covered
244 carrier shall use the percentage change in the base premium rate, provided that the change does

245 not exceed, on a percentage basis, the change in the new business premium rate for the most
246 similar health benefit product into which the covered carrier is actively enrolling new covered
247 insureds.
248 (3) (a) A covered carrier may not transfer a covered insured involuntarily into or out of
249 a class of business.
250 (b) A covered carrier may not offer to transfer a covered insured into or out of a class
251 of business unless the offer is made to transfer all covered insureds in the class of business
252 without regard:
253 (i) to case characteristics;
254 (ii) claim experience;
255 (iii) health status; or
256 (iv) duration of coverage since issue.
257 (4) (a) Each covered carrier shall maintain at the covered carrier's principal place of
258 business a complete and detailed description of its rating practices and renewal underwriting
259 practices, including information and documentation that demonstrate that the covered carrier's
260 rating methods and practices are:
261 (i) based upon commonly accepted actuarial assumptions; and
262 (ii) in accordance with sound actuarial principles.
263 (b) (i) Each covered carrier shall file with the commissioner, on or before April 1 of
264 each year, in a form, manner, and containing such information as prescribed by the
265 commissioner, an actuarial certification certifying that:
266 (A) the covered carrier is in compliance with this chapter; and
267 (B) the rating methods of the covered carrier are actuarially sound.
268 (ii) A copy of the certification required by Subsection (4)(b)(i) shall be retained by the
269 covered carrier at the covered carrier's principal place of business.
270 (c) A covered carrier shall make the information and documentation described in this
271 Subsection (4) available to the commissioner upon request.
272 (d) Records submitted to the commissioner under this section shall be maintained by
273 the commissioner as protected records under Title 63, Chapter 2, Government Records Access
274 and Management Act.
275 Section 5. Section 31A-30-108 is amended to read:

276 31A-30-108. Eligibility for small employer and individual market.
277 (1) (a) Small employer carriers shall accept residents for small group coverage as set
278 forth in the Health Insurance Portability and Accountability Act, P.L. 104-191, 110 Stat. 1962,
279 Sec. 2701(f) and 2711(a).
280 (b) Individual carriers shall accept residents for individual coverage pursuant:
281 (i) to P.L. 104-191, 110 Stat. 1979, Sec. 2741(a)-(b); and
282 (ii) Subsection (3).
283 (2) (a) Small employer carriers shall offer to accept all eligible employees and their
284 dependents at the same level of benefits under any health benefit plan provided to a small
285 employer.
286 (b) Small employer carriers may:
287 (i) request a small employer to submit a copy of the small employer's quarterly income
288 tax withholdings to determine whether the employees for whom coverage is provided or
289 requested are bona fide employees of the small employer; and
290 (ii) deny or terminate coverage if the small employer refuses to provide documentation
291 requested under Subsection (2)(b)(i).
292 (3) Except as provided in Subsections (5) and (6) and Section 31A-30-110 , individual
293 carriers shall accept for coverage individuals to whom all of the following conditions apply:
294 (a) the individual is not covered or eligible for coverage:
295 (i) (A) as an employee of an employer;
296 (B) as a member of an association; or
297 (C) as a member of any other group; and
298 (ii) under:
299 (A) a health benefit plan; or
300 (B) a self-insured arrangement that provides coverage similar to that provided by a
301 health benefit plan as defined in Section 31A-1-301 ;
302 (b) the individual is not covered and is not eligible for coverage under any public
303 health benefits arrangement including:
304 (i) the Medicare program established under Title XVIII of the Social Security Act;
305 (ii) the Medicaid program established under Title XIX of the Social Security Act;
306 (iii) any act of Congress or law of this or any other state that provides benefits

307 comparable to the benefits provided under this chapter; or
308 (iv) coverage under the Comprehensive Health Insurance Pool Act created in Chapter
309 29, Comprehensive Health Insurance Pool Act;
310 (c) unless the maximum benefit has been reached the individual is not covered or
311 eligible for coverage under any:
312 (i) Medicare supplement policy;
313 (ii) conversion option;
314 (iii) continuation or extension under COBRA; or
315 (iv) state extension;
316 (d) the individual has not terminated or declined coverage described in Subsection
317 (3)(a), (b), or (c) within 93 days of application for coverage, unless:
318 (i) an individual or employee is eligible for premium assistance under Utah's Premium
319 Partnership for Health Insurance within the state Medicaid plan, in which case the requirement
320 of this Subsection (3)(d) does not apply; or
321 (ii) the individual is eligible for individual coverage under P.L. 104-191, 110 Stat.
322 1979, Sec. 2741(b), in which case, the requirement of this Subsection (3)(d) does not apply;
323 and
324 (e) the individual is certified as ineligible for the Health Insurance Pool if:
325 (i) the individual applies for coverage with the Comprehensive Health Insurance Pool
326 within 30 days after being rejected or refused coverage by the covered carrier and reapplies for
327 coverage with that covered carrier within 30 days after the date of issuance of a certificate
328 under Subsection 31A-29-111 (5)(c); or
329 (ii) the individual applies for coverage with any individual carrier within 45 days after:
330 (A) notice of cancellation of coverage under Subsection 31A-29-115 (1); or
331 (B) the date of issuance of a certificate under Subsection 31A-29-111 (5)(c) if the
332 individual applied first for coverage with the Comprehensive Health Insurance Pool.
333 (4) (a) If coverage is obtained under Subsection (3)(e)(i) and the required premium is
334 paid, the effective date of coverage shall be the first day of the month following the individual's
335 submission of a completed insurance application to that covered carrier.
336 (b) If coverage is obtained under Subsection (3)(e)(ii) and the required premium is
337 paid, the effective date of coverage shall be the day following the:

338 (i) cancellation of coverage under Subsection 31A-29-115 (1); or
339 (ii) submission of a completed insurance application to the Comprehensive Health
340 Insurance Pool.
341 (5) (a) An individual carrier is not required to accept individuals for coverage under
342 Subsection (3) if the carrier issues no new individual policies in the state after July 1, 1997.
343 (b) A carrier described in Subsection (5)(a) may not issue new individual policies in
344 the state for five years from July 1, 1997.
345 (c) Notwithstanding Subsection (5)(b), a carrier may request permission to issue new
346 policies after July 1, 1999, which may only be granted if:
347 (i) the carrier accepts uninsurables as is required of a carrier entering the market under
348 Subsection 31A-30-110 ; and
349 (ii) the commissioner finds that the carrier's issuance of new individual policies:
350 (A) is in the best interests of the state; and
351 (B) does not provide an unfair advantage to the carrier.
352 (6) (a) If the Comprehensive Health Insurance Pool as set forth under Title 31A,
353 Chapter 29, is dissolved or discontinued, or if enrollment is capped or suspended, an individual
354 carrier may decline to accept individuals applying for individual enrollment, other than
355 individuals applying for coverage as set forth in P.L. 104-191, 110 Stat. 1979, Sec. 2741
356 (a)-(b).
357 (b) Within two calendar days of taking action under Subsection (6)(a), an individual
358 carrier will provide written notice to the Utah Insurance Department.
359 (7) (a) If a small employer carrier offers health benefit plans to small employers
360 through a network plan, the small employer carrier may:
361 (i) limit the employers that may apply for the coverage to those employers with eligible
362 employees who live, reside, or work in the service area for the network plan; and
363 (ii) within the service area of the network plan, deny coverage to an employer if the
364 small employer carrier has demonstrated to the commissioner that the small employer carrier:
365 (A) will not have the capacity to deliver services adequately to enrollees of any
366 additional groups because of the small employer carrier's obligations to existing group contract
367 holders and enrollees; and
368 (B) applies this section uniformly to all employers without regard to:

369 (I) the claims experience of an employer, an employer's employee, or a dependent of an
370 employee; or
371 (II) any health status-related factor relating to an employee or dependent of an
372 employee.
373 (b) (i) A small employer carrier that denies a health benefit product to an employer in
374 any service area in accordance with this section may not offer coverage in the small employer
375 market within the service area to any employer for a period of 180 days after the date the
376 coverage is denied.
377 (ii) This Subsection (7)(b) does not:
378 (A) limit the small employer carrier's ability to renew coverage that is in force; or
379 (B) relieve the small employer carrier of the responsibility to renew coverage that is in
380 force.
381 (c) Coverage offered within a service area after the 180-day period specified in
382 Subsection (7)(b) is subject to the requirements of this section.
383 (8) Notwithstanding the provisions of Subsection (3)(b)(ii), an individual may not be
384 denied coverage under this chapter because the individual receives assistance unde