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S.B. 60

1    

OPEN ENROLLMENT AMENDMENTS

2    
1997 GENERAL SESSION

3    
STATE OF UTAH

4    
Sponsor: George Mantes

5    AN ACT RELATING TO INSURANCE; MODIFYING ELIGIBILITY REQUIREMENTS AND
6    PREMIUM RATES FOR COMPREHENSIVE HEALTH INSURANCE POOL;
7    AUTHORIZING THE ISSUANCE OF CERTIFICATES TO INDIVIDUALS WHOSE
8    HEALTH CONDITION DOES NOT MEET INSURANCE POOL CRITERIA; REQUIRING
9    SPECIFIED INSURANCE CARRIERS TO COVER INDIVIDUALS WHO PRESENT A
10    CERTIFICATE FROM INSURANCE POOL; APPROPRIATING $5,000,000 TO THE POOL
11    FUND FOR FISCAL YEAR 1997-98 AND AUTHORIZING PART OF STATE'S
12    CIGARETTE TAX TO BE CREDITED TO POOL FUND STARTING FISCAL YEAR
13    1998-99; AMENDING LAW TO REFLECT FEDERAL CHANGES; ALLOWING
14    INSURERS TO IMPOSE A 25% SURCHARGE IF A SMALL GROUP CHANGES
15    CARRIERS; AMENDING DEFINITIONS; MAKING TECHNICAL CHANGES AND
16    CONFORMING AMENDMENTS; REPEALING SECTIONS RELATED TO OPEN
17    ENROLLMENT; AND PROVIDING AN EFFECTIVE DATE.
18    This act affects sections of Utah Code Annotated 1953 as follows:
19    AMENDS:
20         31A-29-111, as last amended by Chapter 321, Laws of Utah 1995
21         31A-29-112, as enacted by Chapter 232, Laws of Utah 1990
22         31A-29-117, as enacted by Chapter 232, Laws of Utah 1990
23         31A-29-120, as last amended by Chapter 20, Laws of Utah 1995
24         31A-30-102, as last amended by Chapter 321, Laws of Utah 1995
25         31A-30-103, as last amended by Chapter 243, Laws of Utah 1996
26         31A-30-104, as last amended by Chapter 321, Laws of Utah 1995
27         31A-30-106, as last amended by Chapter 321, Laws of Utah 1995

1         31A-30-107, as last amended by Chapter 321, Laws of Utah 1995
2         31A-30-108, as enacted by Chapter 321, Laws of Utah 1995
3         31A-30-109, as enacted by Chapter 321, Laws of Utah 1995
4         31A-30-111, as enacted by Chapter 321, Laws of Utah 1995
5         59-14-204, as last amended by Chapter 266, Laws of Utah 1991
6    ENACTS:
7         31A-30-106.7, Utah Code Annotated 1953
8    REPEALS AND REENACTS:
9         31A-29-115, as enacted by Chapter 232, Laws of Utah 1990
10    REPEALS:
11         31A-30-110, as enacted by Chapter 321, Laws of Utah 1995
12         31A-30-113, as enacted by Chapter 321, Laws of Utah 1995
13    Be it enacted by the Legislature of the state of Utah:
14        Section 1. Section 31A-29-111 is amended to read:
15         31A-29-111. Eligibility -- Limitations.
16        (1) Any person who has resided in this state for at least 12 consecutive months
17    immediately preceding the date of application or who is a dependent child [24] 25 years of age or
18    less of such a person is eligible for pool coverage if[: (a)] the person pays the established premium
19    and provides evidence of[: (i)] a rejection or refusal by an insurer to issue health insurance
20    coverage [similar to the pool's coverage] for reasons relating to health[; or], unless:
21        [(ii) a refusal by an insurer to issue the insurance except at a rate exceeding the pool rate
22    for reasons relating to health; and]
23        [(b) after May 1, 1997, the person is not able to obtain coverage under the open enrollment
24    provisions of Chapter 30 because the carriers in the state subject to Chapter 30 have reached the
25    HIP count maximum as provided in Section 31A-30-110.]
26        [(c) The eligibility requirements in Subsection (b) apply to new enrollees and shall not be
27    used to disqualify persons enrolled in the pool prior to May 1, 1997. Persons participating in the
28    pool prior to May 1, 1997, may either remain in the pool or obtain coverage under Chapter 30.]
29        [(2) (a) The board shall promulgate a list of medical or health conditions for which a
30    person is eligible for plan coverage without applying for health insurance coverage under
31    Subsection (1). A person who demonstrates the existence or history of any medical or health

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1    condition on the list promulgated by the board is eligible to apply directly to the pool for
2    coverage.]
3        [(b) The provisions of Subsection (a) shall not apply after May 1, 1997.]
4        [(3) A person is not eligible for coverage under this chapter if:]
5        (a) at the time of pool application, the person is eligible for health care benefits under
6    Medicaid or Medicare, except as provided in Section 31A-29-112;
7        (b) the person has terminated coverage in the pool, unless:
8        (i) 12 months have elapsed since the termination date; or
9        (ii) the person demonstrates that continuous other coverage has been involuntarily
10    terminated for any reason other than nonpayment of premium;
11        (c) the pool has paid the maximum lifetime benefit to or on behalf of the person;
12        (d) the person is an inmate of a public institution; [or]
13        (e) the person is eligible for other public programs for which medical care is provided[.];
14        (f) the person's health condition does not meet the criteria established under Subsection
15    (4); or
16        [(4) In addition to other reasons for termination, if a person with pool coverage establishes
17    residency outside Utah for three consecutive months, the person's coverage terminates.]
18        (g) the person is a member of an employee group that offers health insurance or a
19    self-insurance arrangement to all its employees or members.
20        [(5)] (2) (a) [Any] If otherwise eligible under Subsections (1)(a) through (1)(g), a person
21    whose health insurance coverage from a state health risk pool with similar coverage is terminated
22    because of nonresidency in another state may apply for coverage under the pool.
23        (b) If the coverage is applied for under Subsection (2)(a) within 31 days after the
24    termination and if premiums are paid for the entire coverage period under the pool, the effective
25    date of the pool's coverage shall be the date of termination of previous coverage.
26        (c) The waiting period of a person with a preexisting condition applying for coverage
27    under this chapter shall be waived if the waiting period was satisfied under a similar plan from
28    another state and that state's benefit limitation was not reached.
29        [(6) Although the pool is open to application from individual members of an employee
30    group, the pool may not accept a person from a group that is capable of offering health insurance
31    or a self-insurance arrangement to all of its employees or members and that has unreasonably

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1    excluded that person from eligibility in the group's plan. The board shall establish policies and
2    guidelines to assist the pool administrator in evaluating applications from persons who are
3    employees or members of a group that offers health insurance or a self-insurance arrangement to
4    employees or members of the group.]
5        [(7) (a) The board may determine the total number of persons that shall be enrolled for
6    coverage by the pool at any time for the purpose of controlling expenditures so they do not exceed
7    available revenues and shall permit and prohibit enrollment in order to maintain the number
8    authorized.]
9        [(b) Nothing in this subsection authorizes the board to prohibit enrollment for any reason
10    other than to control the number of persons in the pool.]
11        (3) If an eligible person applies for pool coverage within 45 days of being denied coverage
12    by an insurance carrier for health reasons, the effective date for pool coverage shall be set at the
13    first day of the month following the submission of the completed insurance application to the
14    carrier.
15        (4) (a) The board shall establish and adjust, as necessary, underwriting criteria based on:
16        (i) health condition; and
17        (ii) expected claims so that expected claims do not exceed available funding.
18        (b) If a person is denied coverage under the criteria established in Subsection (4)(a), the
19    pool shall issue a certificate to the applicant for coverage under Subsection 31A-30-108(3).
20        Section 2. Section 31A-29-112 is amended to read:
21         31A-29-112. Medicaid recipients.
22        (1) If authorized by federal statutes or rules, a person receiving Medicaid benefits may
23    continue to receive those benefits while satisfying the preexisting condition requirements
24    established by Section 31A-29-113 and the terms of the policy issued under this chapter.
25        (2) If allowed by federal statute, federal regulation, state statute, or rule, the Department
26    of Health shall allocate premiums paid to the pool by a person receiving Medicaid benefits to that
27    person's spenddown for purposes of the Medicaid no-grant program.
28        (3) (a) If a person continues to receive Medicaid benefits after the requirements for a
29    preexisting condition are satisfied, the pool administrator may not issue an insurance policy or
30    allow that person to receive any benefit from the pool.
31        (b) If a person continues to receive Medicaid benefits when the requirements for a

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1    preexisting condition are satisfied, the pool administrator shall give any premiums collected by
2    it during the preexisting conditions period to the Medicaid program.
3        (4) (a) If any person is covered by a pool policy and becomes eligible to receive Medicaid
4    benefits, that person's coverage by the pool terminates as of the effective date of the receipt of
5    Medicaid benefits.
6        (b) The pool administrator shall:
7        (i) include a provision in the insurance policy requiring a person covered by a pool policy
8    to provide written notice to the pool administration if he becomes covered by Medicaid; and
9        (ii) terminate a person's coverage by the pool as of the effective date of the person's receipt
10    of Medicaid benefits when the pool administrator becomes aware that the person is covered by
11    Medicaid.
12        (5) If a person terminates coverage under Medicaid and applies for coverage under a pool
13    policy within 45 days after terminating the coverage, the person may begin coverage under a pool
14    policy as of the date that Medicaid coverage terminated, if a person meets the other eligibility
15    requirements of the chapter and pays the required premium.
16        (6) If a person's eligibility for Medicaid requires a spenddown, as defined in rule, that
17    exceeds the premium for a pool policy, that person shall be considered eligible for coverage by the
18    pool.
19        Section 3. Section 31A-29-115 is repealed and reenacted to read:
20         31A-29-115. Cancellation --Notice.
21        (1) (a) On the date of renewal, the pool may cancel a person's policy if:
22        (i) the person's health condition exceeds the criteria established in Subsection
23    31-29-111(4); and
24        (ii) the pool has provided written notice to the person's last-known address no less than
25    60 days before cancellation.
26        (b) The pool shall issue a certificate to a person whose policy is cancelled under
27    Subsection (1)(a) for coverage under Subsection 31A-30-108(3).
28        (2) The pool may cancel a person's policy at any time if:
29        (a) the person establishes a residency outside of Utah for three consecutive months; and
30        (b) the pool has provided written notice to the person's last-known address no less than 15
31    days before cancellation.

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1        Section 4. Section 31A-29-117 is amended to read:
2         31A-29-117. Premium rates.
3        (1) Premium charges for coverage under the pool may not be unreasonable in relation to
4    the benefits provided, the risk experience, and the reasonable expenses provided in the coverage.
5    Separate schedules of premium rates based on age and other appropriate demographic
6    characteristics may apply for individual risks.
7        [(2) (a) The administrator shall determine the standard risk rate by calculating the average
8    individual standard rate charged for each type of plan offered by the five insurers and health care
9    plans with the largest premium volume for coverages in the state similar to the pool coverage to
10    which an adjustment factor is applied to reflect reasonable substandard risk rates for an insurable
11    population.]
12        [(b) In the event five insurers do not offer similar coverage, the standard risk rate for each
13    type of plan offered shall be established using reasonable actuarial techniques and shall reflect
14    experience and anticipated expenses for such coverage based on reasonable substandard risk rates
15    for an insurable population.]
16        [(c) Initial minimum rates of the pool may be not less than 125% of the standard risk rate.]
17        [(d) Maximum rates for pool coverage may not exceed 200% of the standard risk rates.]
18        [(e) Standard risk rates shall be calculated annually.]
19        [(f) All rates and rate schedules shall be submitted by the administrator to the board and
20    the commissioner for approval.]
21        [(3) Nothing in this section shall prevent the board from establishing different rates for
22    pool coverage which reflect experience and anticipated expense for coverage provided under the
23    alternative benefit plans offered by the pool.]
24        (2) The board shall establish premium rates that are at least 200% of the average of the
25    lowest rates offered by the five largest carriers for individual coverage or small group coverage
26    that satisfies the basic coverage requirement of Section 31A-30-109.
27        (3) The board may establish a premium scale based on income. The highest rate may not
28    exceed the expected claims and expenses for the individual.
29        (4) If a person is an eligible individual as defined in the Health Insurance Portability and
30    Accountability Act, P.L. 104-191, 110 Stat. 1979, Sec 2741(b), the maximum premium rate for
31    that person may not exceed the amount permitted under P.L. 104-191, 110 Stat. 1986, Sec.

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1    2744(c)(2)(B).
2        Section 5. Section 31A-29-120 is amended to read:
3         31A-29-120. Enterprise fund.
4        (1) There is created an enterprise fund known as the Comprehensive Health Insurance Pool
5    Enterprise Fund.
6        (2) The following funds shall be credited to the Pool Fund:
7        (a) [$75,000] $5,000,000 appropriated from the General Fund for Fiscal Year 1997-98;
8        (b) for fiscal year 1998-99 and every year thereafter, revenue generated from the cigarette
9    tax levied under Section 59-14-204 in the amount of:
10        (i) .275 cents on each cigarette, for all cigarettes weighing not more than three pounds per
11    thousand cigarettes; and
12        (ii) .339 cents on each cigarette, for all cigarettes weighing in excess of three pounds per
13    thousand cigarettes;
14        [(b)] (c) pool policy premium payments; and
15        [(c)] (d) all interest and dividends earned on the fund's assets.
16        (3) All money received by the Pool Fund shall be deposited in compliance with Section
17    51-4-1 and shall be held by the state treasurer and invested in accordance with Title 51, Chapter
18    7, State Money Management Act.
19        (4) The Pool Fund shall comply with the accounting policies, procedures, and reporting
20    requirements established by the Division of Finance.
21        (5) The Pool Fund shall comply with Title 63A, Utah Administrative Services Code.
22        Section 6. Section 31A-30-102 is amended to read:
23         31A-30-102. Purpose statement.
24        The purpose of this chapter is to:
25        (1) prevent abusive rating practices[, to];
26        (2) require disclosure of rating practices to purchasers[, to];
27        (3) establish rules regarding renewability of coverage[, to];
28        (4) improve the overall fairness and efficiency of the individual and small group insurance
29    market; and [to]
30        (5) provide [a limited open enrollment period] increased access for individual and small
31    [employer] employers to health insurance.

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1        Section 7. Section 31A-30-103 is amended to read:
2         31A-30-103. Definitions.
3        As used in this part:
4        (1) "Actuarial certification" means a written statement by a member of the American
5    Academy of Actuaries or other individual approved by the commissioner that a covered carrier is
6    in compliance with the provisions of Section 31A-30-106, based upon the examination of the
7    covered carrier, including review of the appropriate records and of the actuarial assumptions and
8    methods utilized by the covered carrier in establishing premium rates for applicable health benefit
9    plans.
10        (2) "Affiliate" or "affiliated" means any entity or person who directly or indirectly through
11    one or more intermediaries, controls or is controlled by, or is under common control with, a
12    specified entity or person.
13        (3) "Base premium rate" means, for each class of business as to a rating period, the lowest
14    premium rate charged or that could have been charged under a rating system for that class of
15    business by the covered carrier to covered insureds with similar case characteristics for health
16    benefit plans with the same or similar coverage.
17        (4) "Basic coverage" means the coverage provided in the Basic Health Care Plan
18    established by the Health Benefit Plan Committee under Subsection 31A-22-613.5(8).
19        (5) "Carrier" means any person or entity that provides health insurance in this state
20    including an insurance company, a prepaid hospital or medical care plan, a health maintenance
21    organization, a multiple employer welfare arrangement, and any other person or entity providing
22    a health insurance plan under this title.
23        (6) "Case characteristics" means demographic or other objective characteristics of a
24    covered insured that are considered by the carrier in determining premium rates for the covered
25    insured. However, duration of coverage since the policy was issued, claim experience, and health
26    status, are not case characteristics for the purposes of this chapter.
27        (7) "Class of business" means all or a separate grouping of covered insureds established
28    under Section 31A-30-105.
29        (8) "Conversion policy" means a policy providing coverage under the conversion
30    provisions required in Title 31A, Chapter 22, Part VII, Group Disability Insurance.
31        (9) "Covered carrier" means any individual carrier or small employer carrier subject to this

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1    act.
2        (10) "Covered individual" means any individual who is covered under a health benefit plan
3    subject to this act.
4        (11) "Covered insureds" means small employers and individuals who are issued a health
5    benefit plan that is subject to this act.
6        (12) "Dependent" means individuals to the extent they are defined to be a dependent by:
7        (a) the health benefit plan covering the covered individual; and
8        (b) the provisions of Chapter 22, Part VI, Disability Insurance.
9        (13) (a) "Eligible employee" means:
10        [(a)] (i) an employee who works on a full-time basis and has a normal work week of 30
11    or more hours[. "Eligible employee"], and includes a sole proprietor, and a partner of a
12    partnership, if the sole proprietor or partner is included as an employee under a health benefit plan
13    of a small employer; or
14        [(b)] (ii) an independent contractor if the independent contractor is included under a health
15    benefit plan of a small employer.
16        [(c)] (b) "Eligible employee" does not include:
17        (i) an employee who works on a part-time, temporary, or substitute basis[.]; or
18        (ii) the spouse or dependents of the employer.
19        (14) "Established geographic service area" means a geographical area approved by the
20    commissioner within which the carrier is authorized to provide coverage.
21        (15) "Health benefit plan" means any certificate under a group health insurance policy, or
22    any health insurance policy, except that health benefit plan does not include coverage only for:
23        (a) accident;
24        (b) dental;
25        (c) vision;
26        (d) Medicare supplement;
27        (e) long-term care; or
28        (f) the following when offered and marketed as supplemental health insurance and not as
29    a substitute for hospital or medical expense insurance or major medical expense insurance:
30        (i) specified disease;
31        (ii) hospital confinement indemnity; or

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1        (iii) limited health plan.
2        [(16) "HIP count maximum" means N[.02+((CS+CI)/(TS+TI))] where, for purposes of this
3    formula:]
4        [(a) "N" means the number of individuals covered under the Comprehensive Health
5    Insurance Pool created in Chapter 29 as of December 31, 1995;]
6        [(b) "CS" means the carrier's small employer coverage count as of December 31, 1995;]
7        [(c) "CI" means the carrier's individual coverage count as of December 31, 1995;]
8        [(d) "TS" means the sum of CS for all carriers; and]
9        [(e) "TI" means the sum of CI for all carriers.]
10        [(17)] (16) "Index rate" means, for each class of business as to a rating period for covered
11    insureds with similar case characteristics, the arithmetic average of the applicable base premium
12    rate and the corresponding highest premium rate.
13        [(18)] (17) "Individual carrier" means a carrier that offers health benefit plans covering
14    insureds in this state under individual or conversion policies.
15        [(19) "Individual coverage count" means the number of natural persons covered under a
16    carrier's health benefit plans that are individual or conversion policies not counted in the small
17    employer coverage count.]
18        [(20)] (18) "New business premium rate" means, for each class of business as to a rating
19    period, the lowest premium rate charged or offered, or that could have been charged or offered,
20    by the carrier to covered insureds with similar case characteristics for newly issued health benefit
21    plans with the same or similar coverage.
22        [(21) "Open enrollment cap" means the percentage set by the commissioner in accordance
23    with Subsections 31A-30-110(1)(a) and (b).]
24        [(22)] (19) "Premium" means all monies paid by covered insureds and covered individuals
25    as a condition of receiving coverage from a covered carrier, including any fees or other
26    contributions associated with the health benefit plan.
27        [(23)] (20) "Rating period" means the calendar period for which premium rates established
28    by a covered carrier are assumed to be in effect, as determined by the carrier. However, a covered
29    carrier may not have more than one rating period in any calendar month, and no more than 12
30    rating periods in any calendar year.
31        [(24)] (21) "Resident" means an individual who has resided in this state for at least 12

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1    consecutive months immediately preceding the date of application.
2        [(25)] (22) "Small employer" means any person, firm, corporation, partnership, or
3    association actively engaged in business that, on at least 50% of its working days during the
4    preceding calendar quarter, employed at least [one] two and no more than 50 eligible employees,
5    the majority of whom were employed within this state. In determining the number of eligible
6    employees, companies that are affiliated or that are eligible to file a combined tax return for
7    purposes of state taxation[,] are considered one employer.
8        [(26)] (23) "Small employer carrier" means a carrier that offers health benefit plans
9    covering eligible employees of one or more small employers in this state.
10        [(27)] (24) "Small employer coverage count" means the number of natural persons covered
11    under a carrier's health benefit plans covering eligible employees of one or more small employers
12    in this state.
13        [(28) "Uninsurable" means any individual insured by the Comprehensive Health Insurance
14    Pool created in Chapter 29, and an applicant for health insurance coverage who has a condition of
15    health that does not meet consistently applied underwriting criteria as established by the
16    commissioner in accordance with Subsections 31A-30-106(k) and (l) for which coverage the
17    applicant is applying.]
18        [(29) "Uninsurable coverage count" for a given calendar year means the number of natural
19    persons classified as uninsurable at initial enrollment that were covered by a carrier during that
20    calendar year.]
21        [(30) "Uninsurable percentage" for a given calendar year equals UC/(CS+CI) where, for
22    purposes of this formula:]
23        [(a) "UC" means the uninsurable coverage count for that year;]
24        [(b) "CS" means the carrier's small employer coverage count as of December 31 of the
25    preceding year; and]
26        [(c) "CI" means the carrier's individual coverage count as of December 31 of the preceding
27    year.]
28        Section 8. Section 31A-30-104 is amended to read:
29         31A-30-104. Applicability and scope.
30        (1) This chapter applies to any health benefit plan that provides coverage to[:] individuals
31    and small employer groups.

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1        [(a) the employees of a small employer in this state if any of the following conditions are
2    met:]
3        [(i) any part of the premium or benefits of the plan is paid by or on behalf of the small
4    employer;]
5        [(ii) the eligible employee or dependent is reimbursed, whether through wage adjustments
6    or otherwise, by or on behalf of the small employer for any portion of the premium; or]
7        [(iii) the health benefit plan is treated by the employer or any of the eligible employees or
8    dependents as part of a plan or program for the purposes of Section 106, 125, or 162 of the Internal
9    Revenue Code; and]
10        [(b) individuals in this state under individual or conversion policies not covered under
11    Subsection (a).]
12        (2) (a) Except as provided in Subsection (b), for the purposes of this chapter, carriers that
13    are affiliated companies or that are eligible to file a consolidated tax return shall be treated as one
14    carrier and any restrictions or limitations imposed by this chapter shall apply as if all health benefit
15    plans delivered or issued for delivery to covered insureds in this state by such affiliated carriers
16    were issued by one carrier.
17        (b) An affiliated carrier that is a health maintenance organization having a certificate of
18    authority under this title may be considered to be a separate carrier for the purposes of this chapter.
19        (c) Unless otherwise authorized by the commissioner, a covered carrier may not enter into
20    one or more ceding arrangements with respect to health benefit plans delivered or issued for
21    delivery to covered insureds in this state if such arrangements would result in less than 50% of the
22    insurance obligation or risk for such health benefit plans being retained by the ceding carrier. The
23    provisions of Section 31A-22-1201 apply if a covered carrier cedes or assumes all of the insurance
24    obligation or risk with respect to one or more health benefit plans delivered or issued for delivery
25    to covered insureds in this state.
26        (3) (a) A Taft Hartley trust created in accordance with Section 302(c)(5) of the Federal
27    Labor Management Relations Act, or a carrier with the written authorization of such a trust, may
28    make a written request to the commissioner for a waiver from the application of any of the
29    provisions of Subsection 31A-30-106(1) with respect to a health benefit plan provided to the trust.
30        (b) The commissioner may grant such a waiver if the commissioner finds that application
31    with respect to the trust would:

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1        (i) have a substantial adverse effect on the participants and beneficiaries of the trust; and
2        (ii) require significant modifications to one or more collective bargaining arrangements
3    under which the trust is established or maintained.
4        (c) A waiver granted under this subsection may not apply to an individual if the person
5    participates in such a trust as an associate member of any employee organization.
6        (4) All premium rate restrictions or limitations imposed by this chapter shall apply as if
7    all health benefit plans delivered or issued for delivery to small employers in this state by a carrier
8    combination as described in Subsection (2) were issued by one carrier and all other health benefit
9    plans covered under this chapter by that carrier combination were issued by a separate carrier if
10    this results in lower premium rates for the covered health benefit plans which are not small
11    employer health benefit plans.
12        Section 9. Section 31A-30-106 is amended to read:
13         31A-30-106. Premiums -- Rating restrictions -- Disclosure.
14        (1) Premium rates for health benefit plans under this chapter are subject to the following
15    provisions:
16        (a) The index rate for a rating period for any class of business shall not exceed the index
17    rate for any other class of business by more than 20%.
18        (b) For a class of business, the premium rates charged during a rating period to covered
19    insureds with similar case characteristics for the same or similar coverage, or the rates that could
20    be charged to such employers under the rating system for that class of business, may not vary from
21    the index rate by more than 25% of the index rate.
22        (c) The percentage increase in the premium rate charged to a covered insured for a new
23    rating period, adjusted pro rata for rating periods less than a year, may not exceed the sum of the
24    following:
25        (i) the percentage change in the new business premium rate measured from the first day
26    of the prior rating period to the first day of the new rating period. In the case of a health benefit
27    plan into which the covered carrier is no longer enrolling new covered insureds, the covered carrier
28    shall use the percentage change in the base premium rate, provided that such change does not
29    exceed, on a percentage basis, the change in the new business premium rate for the most similar
30    health benefit plan into which the covered carrier is actively enrolling new covered insureds;
31        (ii) any adjustment, not to exceed 15% annually and adjusted pro rata for rating periods

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1    of less than one year, due to the claim experience, health status, or duration of coverage of the
2    covered individuals as determined from the covered carrier's rate manual for the class of business;
3    and
4        (iii) any adjustment due to change in coverage or change in the case characteristics of the
5    covered insured as determined from the covered carrier's rate manual for the class of business.
6        (d) Adjustments in rates for claims experience, health status, and duration from issue may
7    not be charged to individual employees or dependents. Any such adjustment shall be applied
8    uniformly to the rates charged for all employees and dependents of the small employer.
9        (e) A covered carrier may utilize industry as a case characteristic in establishing premium
10    rates, provided that the highest rate factor associated with any industry classification does not
11    exceed the lowest rate factor associated with any industry classification by more than 15%.
12        (f) In the case of health benefit plans issued prior to July 1, 1994, a premium rate for a
13    rating period, adjusted pro rata for rating period of less than a year, may exceed the ranges under
14    Subsections (1)(a) and (b) until July 1, 1996. In that case, the percentage increase in the premium
15    rate charged to a covered insured for a new rating period may not exceed the sum of the following:
16        (i) the percentage change in the new business premium rate measured from the first day
17    of the prior rating period to the first day of the new rating period. In the case where a covered
18    carrier is not issuing any new policies the covered carrier shall use the percentage change in the
19    base premium rate, provided that such change does not exceed, on a percentage basis, the change
20    in the new business premium rate for the most similar health benefit plan into which the covered
21    carrier is actively enrolling new covered insureds; and
22        (ii) any adjustment due to change in coverage or change in the case characteristics of the
23    covered insured as determined from the carrier's rate manual for the class of business.
24        (g) The commissioner may grant a one-year extension of the July 1, 1996, deadline
25    specified in Subsection (f) if the commissioner determines that an extension is needed to avoid
26    significant disruption of the health insurance market subject to this chapter or to insure the
27    financial stability of carriers in the market.
28        (h) (i) Covered carriers shall apply rating factors, including case characteristics,
29    consistently with respect to all covered insureds in a class of business. Rating factors shall
30    produce premiums for identical groups which differ only by the amounts attributable to plan
31    design and do not reflect differences due to the nature of the groups assumed to select particular

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1    health benefit plans.
2        (ii) A covered carrier shall treat all health benefit plans issued or renewed in the same
3    calendar month as having the same rating period.
4        (i) For the purposes of this subsection, a health benefit plan that utilizes a restricted
5    network provision shall not be considered similar coverage to a health benefit plan that does not
6    utilize such a network, provided that utilization of the restricted network provision results in
7    substantial difference in claims costs.
8        (j) The covered carrier shall not, without prior approval of the commissioner, use case
9    characteristics other than age, gender, industry, geographic area, family composition, and group
10    size.
11        (k) The commissioner may establish regulations in accordance with Title 63, Chapter 46a,
12    Utah Administrative Rulemaking Act, to implement the provisions of this chapter and to assure
13    that rating practices used by covered carriers are consistent with the purposes of this chapter,
14    including regulations that:
15        (i) assure that differences in rates charged for health benefit plans by covered carriers are
16    reasonable and reflect objective differences in plan design (not including differences due to the
17    nature of the groups assumed to select particular health benefit plans);
18        (ii) prescribe the manner in which case characteristics may be used by covered carriers;
19        (iii) require insurers, as a condition of transacting business with regard to health insurance
20    disability policies after January 1, 1995, to reissue a health insurance disability policy to any
21    policyholder whose insurance disability policy has, after January 1, 1994, been terminated by the
22    insurer for reasons other than those listed in Subsections 31A-30-107(1)(a) through (1)(e) or not
23    renewed by the insurer after January 1, 1994. The commissioner may prescribe terms for the
24    reissue of coverage that the commissioner determines are reasonable and necessary to provide
25    continuity of coverage to insured individuals;
26        [(iv) implement the enrollment cap under Section 31A-30-110, including specifying the
27    contents for certification, auditing standards, underwriting criteria for uninsurable classification,
28    and limitations on high risk enrollees under Section 31A-30-111; and]
29        [(v) establish a minimum uninsurable coverage count under Subsection 31A-30-110(1).]
30        [(l) Before implementing regulations for underwriting criteria for uninsurable
31    classification, the commissioner shall contract with an independent consulting organization to

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1    develop industry-wide underwriting criteria for uninsurability based on an individual's expected
2    claims under open enrollment coverage exceeding 200% of that expected for a standard insurable
3    individual with the same case characteristics.]
4        [(m)] (l) The commissioner shall revise rules issued for Sections 31A-22-602 and
5    31A-22-605 regarding individual disability policy rates to allow rating in accordance with [Section
6    31A-30-106] this section.
7        (2) A covered carrier shall not transfer a covered insured involuntarily into or out of a class
8    of business. A covered carrier shall not offer to transfer a covered insured into or out of a class
9    of business unless such offer is made to transfer all covered insureds in the class of business
10    without regard to case characteristics, claim experience, health status, or duration of coverage since
11    issue.
12        (3) Upon offering for sale any health benefit plan to a small employer, or individual, the
13    covered carrier shall, as part of its solicitation and sales materials, disclose or make available all
14    of the following:
15        (a) the extent to which premium rates for a specified covered insured are established or
16    adjusted in part based on the actual or expected variation in claims costs or actual or expected
17    variation in health status of covered individuals;
18        (b) provisions concerning the covered carrier's right to change premium rates and the
19    factors other than claim experience which affect changes in premium rates;
20        (c) provisions relating to renewability of policies and contracts; and
21        (d) provisions relating to any preexisting condition provision.
22        (4) (a) Each covered carrier shall maintain at its principal place of business a complete and
23    detailed description of its rating practices and renewal underwriting practices, including
24    information and documentation that demonstrate that its rating methods and practices are based
25    upon commonly accepted actuarial assumptions and are in accordance with sound actuarial
26    principles.
27        (b) Each covered carrier shall file with the commissioner, on or before March 15 of each
28    year, in a form, manner, and containing such information as prescribed by the commissioner, an
29    actuarial certification certifying that the covered carrier is in compliance with this chapter and that
30    the rating methods of the covered carrier are actuarially sound. A copy of that certification shall
31    be retained by the covered carrier at its principal place of business.

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1        (c) A covered carrier shall make the information and documentation described in this
2    subsection available to the commissioner upon request.
3        (d) Records submitted to the commissioner under the provisions of this [subsection]
4    section shall be maintained by the commissioner as protected records under Title 63, Chapter 2,
5    Government Records Access and Management Act.
6        Section 10. Section 31A-30-106.7 is enacted to read:
7         31A-30-106.7. Surcharge for groups changing carriers.
8        If prior notice is given, a covered carrier may impose upon a small group that changes
9    coverage to that carrier from another carrier a one-time surcharge of up to 25% of the annualized
10    premium which the carrier could otherwise charge under Section 31A-30-106.
11        Section 11. Section 31A-30-107 is amended to read:
12         31A-30-107. Renewal -- Limitations -- Exclusions.
13        (1) A health benefit plan subject to this chapter is renewable with respect to all covered
14    individuals at the option of the covered insured except in any of the following cases:
15        (a) nonpayment of the required premiums;
16        (b) fraud or misrepresentation of the employer or, with respect to coverage of individual
17    insureds, the insureds or their representatives;
18        (c) noncompliance with the covered carrier's minimum participation requirements;
19        (d) noncompliance with the covered carrier's employer contribution requirements;
20        (e) repeated misuse of a provider network provision; or
21        (f) an election by the covered carrier to nonrenew all of its health benefit plans issued to
22    covered insureds in this state, in which case the covered carrier shall:
23        (i) provide advanced notice of its decision under this subsection to the commissioner in
24    each state in which it is licensed; and
25        (ii) provide notice of the decision not to renew coverage to all affected covered insureds
26    and to the commissioner in each state in which an affected insured individual is known to reside
27    at least 180 days prior to the nonrenewal of any health benefit plans by the covered carrier. Notice
28    to the commissioner under this subsection shall be provided at least three working days prior to
29    the notice to the affected covered insureds.
30        (2) A covered carrier that elects not to renew a health benefit plan under Subsection (1)(f)
31    is prohibited from writing new business subject to this chapter in this state for a period of five

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1    years from the date of notice to the commissioner.
2        (3) When a covered carrier is doing business subject to this chapter in one service area of
3    this state, Subsections (1) and (2) apply only to the covered carrier's operations in that service area.
4        (4) Health benefit plans covering covered insureds shall comply with the following
5    provisions:
6        (a) (i) A health benefit plan may not deny, exclude, or limit benefits for a covered
7    individual for losses incurred more than 12 months following the effective date of the individual's
8    coverage due to a preexisting condition.
9        (ii) A health benefit plan may not define a preexisting condition more restrictively than:
10        [(i) a condition that would cause an ordinarily prudent person to seek medical advice,
11    diagnosis, care, or treatment;]
12        [(ii)] (A) a condition for which medical advice, diagnosis, care, or treatment was
13    recommended or received during the six months immediately preceding the effective date of
14    coverage; or
15        [(iii)] (B) for an individual insurance policy, a pregnancy existing on the effective date of
16    coverage.
17        (b) A covered carrier shall waive any time period applicable to a preexisting condition
18    exclusion or limitation period with respect to particular services in a health benefit plan for the
19    period of time the individual was previously covered by public or private health insurance or by
20    any other health benefit arrangement that provided benefits with respect to such services, provided
21    that the previous coverage was continuous to a date not more than 90 days prior to the effective
22    date of the new coverage. The period of continuous coverage shall not include any waiting period
23    for the effective date of the new coverage applied by the employer of the carrier. This subsection
24    does not preclude application of any waiting period applicable to all new enrollees under such
25    plan.
26        Section 12. Section 31A-30-108 is amended to read:
27         31A-30-108. Eligibility for small employer and individual market.
28        (1) (a) [Covered] Small employer carriers shall accept residents for [open enrollment]
29    small group coverage as set forth in [this section, in the order in which they apply for coverage and
30    subject to the limitations set forth in Sections 31A-30-110 and 31A-30-111] the Health Insurance
31    Portability and Accountability Act, P.L. 104-191, 110 Stat. 1962, Sec. 2711(a).

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1        (b) Individual carriers and small employer carriers, if required to provide individual
2    coverage under Section (1)(c), shall accept residents for individual coverage pursuant to P.L.
3    104-191, 110 Stat. 1979, Sec. 2741(a)-(b) and Subsection (3).
4        (c) A small employer carrier that offers an individual health insurance policy in any state
5    with benefits comparable to or greater than basic coverage under Section 31A-30-109 shall offer
6    individual health insurance in Utah.
7        (2) (a) Small employer carriers shall offer to accept all eligible employees and their
8    dependents at the same level of benefits under any health benefit plan provided to a small
9    employer.
10        (b) Small employer carriers shall accept uninsured small employers for whom coverage
11    has not been terminated by the small employer or by a carrier for the cases specified in Subsections
12    31A-30-107(1)(a) through (e) during the preceding 12-month period.
13        (c) Small employer carriers may:
14        (i) request a small employer to submit a copy of its quarterly state individual income tax
15    filings to determine whether the employees for whom coverage is provided or requested are bona
16    fide employees of the small employer; and
17        (ii) deny or terminate coverage if the small employer refuses to provide documentation
18    requested under Subsection (2)(c)(i).
19        (3) [Covered] Individual carriers and small employer carriers, if required to provide
20    coverage under Subsection (1)(c), shall accept for coverage individuals to whom all of the
21    following conditions apply:
22        (a) the individual is not [applying for] covered or eligible for coverage, as an employee
23    of an employer, as a member of an association, or as a member of any other group[; and] under:
24        (i) a health benefit plan; or
25        (ii) a self-insured arrangement that provides coverage similar to that provided by a health
26    benefit plan as defined in Section 31A-30-103;
27        (b) the individual is not covered and is not eligible for coverage under any public health
28    benefits arrangement including the Medicare program established under Title XVIII or the
29    Medicaid program established under Title XIV of the ["]Social Security Act,["] or any other act
30    of congress or law of this or any other state that provides benefits comparable to the benefits
31    provided under this part, [but not] including coverage under the Comprehensive Health Insurance

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1    Pool created in Chapter 29;
2        (c) [(i)] the individual is not covered or eligible for coverage under any [private health
3    benefit arrangement, including any] Medicare supplement policy, [and is not eligible for coverage
4    under a Medicare supplement policy, a] conversion option, continuation or extension under
5    COBRA, or state extension[; (ii) coverage, under Subsection (i), does not include any policy for
6    which] unless the maximum benefit has been reached; [and]
7        (d) the individual has not terminated or declined coverage described in Subsection (a), (b),
8    or (c) within [120] 63 days of application for [open enrollment.] coverage, unless the individual
9    is eligible for individual coverage under P.L. 104-191, 110 Stat. 1979, Sec. 2741(b), in which case,
10    the requirement of this Subsection (3)(d) does not apply; and
11        (e) the individual is certified as ineligible for the Health Insurance Pool and applies for
12    coverage with the carrier within 45 days after the later of:
13        (i) the cancellation of coverage under Subsection 31A-29-115(1); or
14        (ii) the issuance of a certificate under Subsection 31A-29-111(4)(b).
15        (4) If coverage is obtained under Subsection (3), the effective date of coverage shall be the
16    earlier of the first day of the month following the individual's submission of a completed insurance
17    application to:
18        (a) the Comprehensive Health Insurance Pool; or
19        (b) any insurance carrier if:
20        (i) the carrier denied the individual coverage for health reasons; and
21        (ii) the individual applied for coverage with the Comprehensive Health Insurance Pool
22    within 45 days of being denied coverage under Subsection (4)(b)(i).
23        Section 13. Section 31A-30-109 is amended to read:
24         31A-30-109. Basic benefit plan.
25        [Covered carriers must] An individual or small employer carrier who offers individual
26    coverage pursuant to Section 31A-30-108 shall offer at least basic coverage [under the open
27    enrollment provisions of this chapter].
28        Section 14. Section 31A-30-111 is amended to read:
29         31A-30-111. Limitations on high risk enrollees.
30        (1) The requirements of this chapter do not apply to any carrier that is currently in a state
31    of supervision, insolvency, or liquidation. If a carrier demonstrates to the satisfaction of the

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1    commissioner that the requirements of this chapter would place the carrier in a state of supervision,
2    insolvency, or liquidation the commissioner may waive or modify the requirements of [Sections]
3    Section 31A-30-108 [and 31A-30-110].
4        (2) A modification or waiver by the commissioner under this section shall be effective for
5    period of not more than one year. At the end of the year, a carrier must demonstrate new need for
6    the modification or waiver.
7        Section 15. Section 59-14-204 is amended to read:
8         59-14-204. Tax basis -- Rate -- Future increase.
9        (1) There is levied a tax upon the sale, use, or storage of cigarettes in the state.
10        (2) The rates of the tax levied under Subsection (1) are:
11        (a) 1.325 cents on each cigarette, for all cigarettes weighing not more than three pounds
12    per thousand cigarettes; and
13        (b) 1.925 cents on each cigarette, for all cigarettes weighing in excess of three pounds per
14    thousand cigarettes.
15        (3) The tax levied under Subsection (1) shall be paid by the manufacturer, jobber,
16    distributor, wholesaler, retailer, user, or consumer.
17        (4) The tax rates specified in this section shall be increased by the commission by the same
18    amount as any future reduction in the federal excise tax on cigarettes.
19        (5) (a) Except as provided in Subsection (5)(b), revenue generated under Subsection (1)
20    shall be deposited into the General Fund.
21        (b) For fiscal year 1998-99 and every year thereafter, the following revenue generated
22    under Subsection (1) shall be deposited into the Comprehensive Health Insurance Pool Enterprise
23    Fund created in Section 31A-29-120:
24        (i) .275 cents on each cigarette, for all cigarettes weighing not more than three pounds per
25    thousand cigarettes; and
26        (ii) .339 cents on each cigarette, for all cigarettes weighing in excess of three pounds per
27    thousand cigarettes.
28        Section 16. Repealer.
29        This act repeals:
30        Section 31A-30-110, Enrollment cap and length of enrollment windows.
31        Section 31A-30-113, Effective dates.

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1        Section 17. Appropriation.
2        There is appropriated from the General Fund for fiscal year 1997-98, $5,000,000 to the
3    Comprehensive Health Insurance Pool Enterprise Fund created by Section 31A-29-120.
4        Section 18. Effective date.
5        If approved by two-thirds of all the members elected to each house, this act takes effect on
6    May 1, 1997.




Legislative Review Note
    as of 1-30-97 2:00 PM

A limited legal review of this bill raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel


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