First Substitute H.B. 254

Representative Rebecca D. Lockhart proposes to substitute the following bill:

1 INSURANCE DEPARTMENT - HEALTH
2 INSURANCE REPORTING REQUIREMENTS
3 2000 GENERAL SESSION
4 STATE OF UTAH
5 Sponsor: Rebecca D. Lockhart
6 AN ACT RELATING TO INSURANCE; AMENDING OR ELIMINATING CERTAIN
7 REPORTING REQUIREMENTS OF THE DEPARTMENT; ELIMINATING THE
8 REQUIREMENT THAT THE DEPARTMENT DEVELOP A BASIC INDIVIDUAL HEALTH
9 CARE PLAN; AND MAKING TECHNICAL AND CONFORMING AMENDMENTS.
10 This act affects sections of Utah Code Annotated 1953 as follows:
11 AMENDS:
12 31A-22-613.5, as last amended by Chapter 13, Laws of Utah 1998
13 31A-30-103, as last amended by Chapter 265, Laws of Utah 1997
14 31A-30-110, as last amended by Chapters 10 and 265, Laws of Utah 1997
15 Be it enacted by the Legislature of the state of Utah:
16 Section 1. Section 31A-22-613.5 is amended to read:
17 31A-22-613.5. Price and value comparisons of health insurance.
18 (1) This section applies generally to all health insurance policies and health maintenance
19 organization contracts.
20 (2) (a) Immediately after the effective date of this section, the commissioner shall appoint
21 a Health Benefit Plan Committee.
22 (b) The committee shall be composed of representatives of carriers, employers, employees,
23 health care providers, consumers, and producers, appointed to four-year terms.
24 (c) Notwithstanding the requirements of Subsection (2)(b), the commissioner shall, at the
25 time of appointment or reappointment, adjust the length of terms to ensure that the terms of

26 committee members are staggered so that approximately half of the committee is appointed every
27 two years.
28 (3) When a vacancy occurs in the membership for any reason, the replacement shall be
29 appointed for the unexpired term.
30 (4) (a) Members shall receive no compensation or benefits for their services, but may
31 receive per diem and expenses incurred in the performance of the member's official duties at the
32 rates established by the Division of Finance under Sections 63A-3-106 and 63A-3-107 .
33 (b) Members may decline to receive per diem and expenses for their service.
34 [(5) The committee shall serve as an advisory committee to the commissioner and shall
35 recommend services to be covered, copays, deductibles, levels of coinsurance, annual
36 out-of-pocket maximums, exclusions, and limitations for two or more designated health care plans
37 to be marketed in the state.]
38 [(a) The plans recommended by the committee may include reasonable benefit differentials
39 applicable to participating and nonparticipating providers.]
40 [(b) The plans recommended by the committee shall not prohibit the use of the following
41 cost management techniques by an insurer:]
42 [(i) preauthorization of health care services;]
43 [(ii) concurrent review of health care services;]
44 [(iii) case management of health care services;]
45 [(iv) retrospective review of medical appropriateness;]
46 [(v) selective contracting with hospitals, physicians, and other health care providers to the
47 extent permitted by law; and]
48 [(vi) other reasonable techniques intended to manage health care costs.]
49 [(c) The committee shall submit the plans to the commissioner within 180 days after the
50 appointment of the committee in accordance with this section.]
51 [(d) The commissioner shall adopt two or more health benefit plans within 60 days after
52 the committee submits recommendations.]
53 [(e) If the committee fails to submit recommendations to the commissioner within 180
54 days after appointment, the commissioner shall, within 90 days, develop two or more designated
55 health benefit plans. The commissioner shall, after notice and hearing, adopt two or more
56 designated health benefit plans. The commissioner shall provide incentives for personal

57 management of health care expenses by adopting one plan that applies deductibles in the amount
58 of $1,500 and another plan that applies deductibles in the amount of $2,500. These plans may
59 include illustrations and explanations showing the premium savings generated by the high
60 deductibles being applied to a medical savings account for the insured which can be used to pay
61 medical expenses up to the plan deductible and/or any other medical expenses not covered by the
62 insurance, and an explanation that any funds in the savings account belong to the insured.]
63 [(f) The commissioner may reconvene a Health Benefit Plan Committee in accordance
64 with Subsections (2) and (5) to recommend revisions to the designated benefit plans adopted by
65 the commissioner.]
66 [(6) (a) Within 180 days after the adoption of the designated benefit plans by the
67 commissioner, or any changes in the designated plans an insurer offering health insurance policies
68 for sale in this state shall, at the request of a potential buyer, offer the current designated plans at
69 a premium based on factors such as that buyer's previous claims experience, group size,
70 demographic characteristics, and health status.]
71 [(b) This section does not prohibit an insurer from refusing to insure, under any plan, a
72 person or group. However, if the insurer offers any policy or contract to that person or group, the
73 insurer must offer the designated plans.]
74 [(7) The designated benefit plans, described in Subsection (5) are intended to facilitate
75 price and value comparisons by consumers. The designated benefit plans are not minimum
76 standards for health insurance policies. An insurer offering the designated benefit plans may offer
77 policies that provide more or less coverage than the designated benefit plans.]
78 [(8)] (5) (a) The commissioner shall convene or reconvene a Health Benefit Plan
79 Committee for the purpose of developing a Basic Health Care Plan to be offered under the open
80 enrollment provisions of Chapter 30.
81 (b) The commissioner shall adopt a Basic Health Care Plan within 60 days after the
82 committee submits recommendations, or if the committee fails to submit recommendations to the
83 commissioner within 180 days after appointment, the commissioner shall, within 90 days, adopt
84 a Basic Health Care Plan.
85 [(c) (i) Before adoption of a plan under Subsection (8)(b), the commissioner shall submit
86 the proposed Basic Health Care Plan to the Health and Human Services Interim Committee for
87 review and recommendations.]

88 [(ii) After the commissioner adopts the Basic Health Care Plan, the Health and Human
89 Services Interim Committee shall provide legislative oversight of the Basic Health Care Plan and
90 may recommend legislation to modify the Basic Health Care Plan adopted by the commissioner.]
91 [(d)] (c) The committee's recommendations for the Basic Health Care Plan shall be
92 advisory to the commissioner.
93 [(9) (a)] (6) (a) The commissioner shall promote informed consumer behavior and
94 responsible health insurance and health plans by requiring an insurer issuing health insurance
95 policies or health maintenance organization contracts to provide to all enrollees, prior to
96 enrollment in the health benefit plan or health insurance policy, written disclosure of:
97 (i) restrictions or limitations on prescription drugs and biologics including the use of a
98 formulary and generic substitution. If a formulary is used, the drugs included and the patented
99 drugs not included, and any conditions which exist as a precedent to coverage shall be made
100 readily available to prospective enrollees and evidence of the fact of that disclosure shall be
101 maintained by the insurer; and
102 (ii) coverage limits under the plan.
103 [(b) An insurer described in Subsection (9)(a) shall also submit the written disclosure
104 required by this Subsection to the commissioner annually, and anytime thereafter when the insurer
105 amends the treatment policies, practice standards, or restrictions described in Subsection (8)(a).]
106 [(c)] (b) The commissioner may adopt rules to implement the disclosure requirements of
107 this Subsection (6), taking into account business confidentiality of the insurer, definitions of terms,
108 and the method of disclosure to enrollees.
109 [(10) (a) The commissioner shall annually publish a table comparing the rates charged by
110 insurers for the designated health plans and other health insurance plans in this state.]
111 [(b) The comparison shall list the top 20 insurers writing the greatest volume by premium
112 dollar per calendar year and others requesting inclusion in the comparison.]
113 [(c) In conjunction with the rate comparison described in this subsection, the
114 commissioner shall publish for each of the listed health insurers a table comparing the complaints
115 filed and the combined loss and expense ratio as described in Subsections 31A-2-208.5 (2) and (3).]
116 Section 2. Section 31A-30-103 is amended to read:
117 31A-30-103. Definitions.
118 As used in this part:

119 (1) "Actuarial certification" means a written statement by a member of the American
120 Academy of Actuaries or other individual approved by the commissioner that a covered carrier is
121 in compliance with the provisions of Section 31A-30-106 , based upon the examination of the
122 covered carrier, including review of the appropriate records and of the actuarial assumptions and
123 methods utilized by the covered carrier in establishing premium rates for applicable health benefit
124 plans.
125 (2) "Affiliate" or "affiliated" means any entity or person who directly or indirectly through
126 one or more intermediaries, controls or is controlled by, or is under common control with, a
127 specified entity or person.
128 (3) "Base premium rate" means, for each class of business as to a rating period, the lowest
129 premium rate charged or that could have been charged under a rating system for that class of
130 business by the covered carrier to covered insureds with similar case characteristics for health
131 benefit plans with the same or similar coverage.
132 (4) "Basic coverage" means the coverage provided in the Basic Health Care Plan
133 established by the Health Benefit Plan Committee under [Subsection] Section 31A-22-613.5 [(8)].
134 (5) "Carrier" means any person or entity that provides health insurance in this state
135 including an insurance company, a prepaid hospital or medical care plan, a health maintenance
136 organization, a multiple employer welfare arrangement, and any other person or entity providing
137 a health insurance plan under this title.
138 (6) "Case characteristics" means demographic or other objective characteristics of a
139 covered insured that are considered by the carrier in determining premium rates for the covered
140 insured. However, duration of coverage since the policy was issued, claim experience, and health
141 status, are not case characteristics for the purposes of this chapter.
142 (7) "Class of business" means all or a separate grouping of covered insureds established
143 under Section 31A-30-105 .
144 (8) "Conversion policy" means a policy providing coverage under the conversion
145 provisions required in Title 31A, Chapter 22, Part VII, Group Disability Insurance.
146 (9) "Covered carrier" means any individual carrier or small employer carrier subject to this
147 act.
148 (10) "Covered individual" means any individual who is covered under a health benefit plan
149 subject to this act.

150 (11) "Covered insureds" means small employers and individuals who are issued a health
151 benefit plan that is subject to this act.
152 (12) "Dependent" means individuals to the extent they are defined to be a dependent by:
153 (a) the health benefit plan covering the covered individual; and
154 (b) the provisions of Chapter 22, Part VI, Disability Insurance.
155 (13) (a) "Eligible employee" means:
156 (i) an employee who works on a full-time basis and has a normal work week of 30 or more
157 hours, and includes a sole proprietor, and a partner of a partnership, if the sole proprietor or partner
158 is included as an employee under a health benefit plan of a small employer; or
159 (ii) an independent contractor if the independent contractor is included under a health
160 benefit plan of a small employer.
161 (b) "Eligible employee" does not include:
162 (i) an employee who works on a part-time, temporary, or substitute basis; or
163 (ii) the spouse or dependents of the employer.
164 (14) "Established geographic service area" means a geographical area approved by the
165 commissioner within which the carrier is authorized to provide coverage.
166 (15) "Health benefit plan" means any certificate under a group health insurance policy, or
167 any health insurance policy, except that health benefit plan does not include coverage only for:
168 (a) accident;
169 (b) dental;
170 (c) vision;
171 (d) Medicare supplement;
172 (e) long-term care; or
173 (f) the following when offered and marketed as supplemental health insurance and not as
174 a substitute for hospital or medical expense insurance or major medical expense insurance:
175 (i) specified disease;
176 (ii) hospital confinement indemnity; or
177 (iii) limited benefit plan.
178 (16) "Index rate" means, for each class of business as to a rating period for covered
179 insureds with similar case characteristics, the arithmetic average of the applicable base premium
180 rate and the corresponding highest premium rate.

181 (17) "Individual carrier" means a carrier that offers health benefit plans covering insureds
182 in this state under individual policies.
183 (18) "Individual coverage count" means the number of natural persons covered under a
184 carrier's health benefit plans that are individual policies.
185 (19) "Individual enrollment cap" means the percentage set by the commissioner in
186 accordance with Section 31A-30-110 .
187 (20) "New business premium rate" means, for each class of business as to a rating period,
188 the lowest premium rate charged or offered, or that could have been charged or offered, by the
189 carrier to covered insureds with similar case characteristics for newly issued health benefit plans
190 with the same or similar coverage.
191 (21) "Premium" means all monies paid by covered insureds and covered individuals as a
192 condition of receiving coverage from a covered carrier, including any fees or other contributions
193 associated with the health benefit plan.
194 (22) "Rating period" means the calendar period for which premium rates established by
195 a covered carrier are assumed to be in effect, as determined by the carrier. However, a covered
196 carrier may not have more than one rating period in any calendar month, and no more than 12
197 rating periods in any calendar year.
198 (23) "Resident" means an individual who has resided in this state for at least 12
199 consecutive months immediately preceding the date of application.
200 (24) "Small employer" means any person, firm, corporation, partnership, or association
201 actively engaged in business that, on at least 50% of its working days during the preceding
202 calendar quarter, employed at least two and no more than 50 eligible employees, the majority of
203 whom were employed within this state. In determining the number of eligible employees,
204 companies that are affiliated or that are eligible to file a combined tax return for purposes of state
205 taxation are considered one employer.
206 (25) "Small employer carrier" means a carrier that offers health benefit plans covering
207 eligible employees of one or more small employers in this state.
208 (26) "Uninsurable" means an individual who:
209 (a) is eligible for the Comprehensive Health Insurance Pool coverage under the
210 underwriting criteria established in Subsection 31A-29-111 (4); or
211 (b) (i) is issued a certificate for coverage under Subsection 31A-30-108 (3); and

212 (ii) has a condition of health that does not meet consistently applied underwriting criteria
213 as established by the commissioner in accordance with Subsections 31A-30-106 (k) and (l) for
214 which coverage the applicant is applying.
215 (27) "Uninsurable percentage" for a given calendar year equals UC/CI where, for purposes
216 of this formula:
217 (a) "UC" means the number of uninsurable individuals who were issued an individual
218 policy on or after July 1, 1997; and
219 (b) "CI" means the carrier's individual coverage count as of December 31 of the preceding
220 year.
221 Section 3. Section 31A-30-110 is amended to read:
222 31A-30-110. Individual enrollment cap.
223 (1) The commissioner shall set the individual enrollment cap at .5% on July 1, 1997.
224 (2) The commissioner shall raise the individual enrollment cap by .5% at the later of the
225 following dates:
226 (a) six months from the last increase in the individual enrollment cap; or
227 (b) the date when CCI/TI is greater than .90, where:
228 (i) "CCI" is the total individual coverage count for all carriers certifying that their
229 uninsurable percentage has reached the individual enrollment cap; and
230 (ii) "TI" is the total individual coverage count for all carriers.
231 (3) The commissioner may establish a minimum number of uninsurable individuals that
232 a carrier entering the market who is subject to this chapter must accept under the individual
233 enrollment provisions of this chapter.
234 (4) Beginning July 1, 1997, an individual carrier may decline to accept individuals
235 applying for individual enrollment under Subsection 31A-30-108 (3), other than individuals
236 applying for coverage as set forth in P.L. 104-191, 110 Stat. 1979, Sec. 2741 (a)-(b), if:
237 (a) the uninsurable percentage for that carrier equals or exceeds the cap established in
238 Subsection (1); and
239 (b) the covered carrier has certified on forms provided by the commissioner that its
240 uninsurable percentage equals or exceeds the individual enrollment cap.
241 (5) The department may audit a carrier's records to verify whether the carrier's uninsurable
242 classification meets industry standards for underwriting criteria as established by the commissioner

243 in accordance with Subsection 31A-30-106 (1)(k).
244 (6) (a) On or before July 1, 1997, and each July 1 thereafter, the commissioner:
245 (i) shall report to the [Utah Health Policy Commission on] Health and Human Services
246 Interim Committee, upon request of the committee, regarding the distribution of risks assumed by
247 various carriers in the state under the individual enrollment provision of this part; and
248 (ii) may [make] offer recommendations to the [Utah Health Policy Commission and the
249 Legislature] Health and Human Services Interim Committee regarding the adjustment of the .5%
250 cap on individual enrollment or some other risk adjustment to maintain equitable distribution of
251 risk among carriers.
252 (b) If the commissioner determines that individual enrollment is causing a substantial
253 adverse effect on premiums, enrollment, or experience, the commissioner may suspend, limit, or
254 delay further individual enrollment for up to 12 months.
255 (c) The commissioner shall adopt rules to establish a uniform methodology for calculating
256 and reporting loss ratios for individual policies for determining whether the individual enrollment
257 provisions of Section 31A-30-108 should be waived for an individual carrier experiencing
258 significant and adverse financial impact as a result of complying with those provisions.
259 [(7) (a) On or before November 30, 1995, the commissioner shall report to the Health
260 Policy Commission and the Legislature on:]
261 [(i) the impact of the Small Employer Health Insurance Act on availability of small
262 employer insurance in the market;]
263 [(ii) the number of carriers who have withdrawn from the market or ceased to issue new
264 policies since the implementation of the Small Employer Health Insurance Act;]
265 [(iii) the expected impact of the individual enrollment provisions on the factors described
266 in Subsections (7)(i) and (ii); and]
267 [(iv) the claims experience, costs, premiums, participation, and viability of the
268 Comprehensive Health Insurance Pool created in Chapter 29.]
269 [(b) The report to the Legislature shall be submitted in writing to each legislator.]