H.B. 106

This document includes House Committee Amendments incorporated into the bill on Mon, Feb 2, 2004 at 3:10 PM by kholt. --> This document includes House Floor Amendments incorporated into the bill on Thu, Feb 19, 2004 at 3:20 PM by chopkin. --> This document includes Senate Committee Amendments incorporated into the bill on Mon, Feb 23, 2004 at 3:29 PM by rday. --> 1

HEALTH INSURANCE ACT AMENDMENTS
2 2004 GENERAL SESSION
3 STATE OF UTAH
4 Sponsor: James A. Dunnigan
5
6 LONG TITLE
7 General Description:
8 This bill amends accident and health insurance provisions related to premium grace
9 periods, H [ conversion policy rating restrictions, ] h and discontinuation of coverage in the
10 individual and small employer market.
11 Highlighted Provisions:
12 This bill:
13 . changes the grace period for nonpayment of premium to 15 days;
14 . clarifies coverage during a grace period;
15 . provides that if the Comprehensive Health Insurance Pool is dissolved or
16 discontinued, or if enrollment is capped or suspended, a covered carrier:
17 . may elect to discontinue offering new individual health benefit plans but then
18 may not reenter the individual market for five years;
19 . may continue to write business in the small employer market; and
20 . may decline to accept individuals applying for individual enrollment, other than
21 HIPAA eligible individuals;
22 . repeals the provision that links individual premium rates to the rates established by
23 the Comprehensive Health Insurance Pool;
24 . amends preexisting conditions waiver provisions for the Comprehensive Health
25 Insurance Pool; S [ and ]
. AMENDS POWERS OF THE BOARD; AND s
26 . makes technical amendments.
27 Monies Appropriated in this Bill:

28 None
29 Other Special Clauses:
30 S [ None ] THIS BILL PROVIDES AN IMMEDIATE EFFECTIVE DATE. s
31 Utah Code Sections Affected:
32 AMENDS:
33 31A-8-402.3, as last amended by Chapter 252, Laws of Utah 2003
34 31A-22-607, as last amended by Chapter 116, Laws of Utah 2001
35 31A-22-721, as last amended by Chapter 252, Laws of Utah 2003
35a S 31A-29-106, AS LAST AMENDED BY CHAPTER 168, LAWS OF UTAH 2003 s
36 31A-29-113, as last amended by Chapter 168, Laws of Utah 2003
37 31A-30-107, as last amended by Chapter 252, Laws of Utah 2003
38 31A-30-107.3, as enacted by Chapter 308, Laws of Utah 2002
39 31A-30-108, as last amended by Chapter 308, Laws of Utah 2002
40 REPEALS:
41 31A-30-106.6, as enacted by Chapter 265, Laws of Utah 1997
42
43 Be it enacted by the Legislature of the state of Utah:
44 Section 1. Section 31A-8-402.3 is amended to read:
45 31A-8-402.3. Discontinuance, nonrenewal, or changes to group health benefit
46 plans.
47 (1) Except as otherwise provided in this section, a group health benefit plan for a plan
48 sponsor is renewable and continues in force:
49 (a) with respect to all eligible employees and dependents; and
50 (b) at the option of the plan sponsor.
51 (2) A health benefit plan for a plan sponsor may be discontinued or nonrenewed:
52 (a) for a network plan, if:
53 (i) there is no longer any enrollee under the group health plan who lives, resides, or
54 works in:
55 (A) the service area of the insurer; or
56 (B) the area for which the insurer is authorized to do business; and
57 (ii) in the case of the small employer market, the insurer applies the same criteria the
58 insurer would apply in denying enrollment in the plan under Subsection 31A-30-108 [(6)] (7);

59 or
60 (b) for coverage made available in the small or large employer market only through an
61 association, if:
62 (i) the employer's membership in the association ceases; and
63 (ii) the coverage is terminated uniformly without regard to any health status-related
64 factor relating to any covered individual.
65 (3) A health benefit plan for a plan sponsor may be discontinued if:
66 (a) a condition described in Subsection (2) exists;
67 (b) the plan sponsor fails to pay premiums or contributions in accordance with the
68 terms of the contract;
69 (c) the plan sponsor:
70 (i) performs an act or practice that constitutes fraud; or
71 (ii) makes an intentional misrepresentation of material fact under the terms of the
72 coverage;
73 (d) the insurer:
74 (i) elects to discontinue offering a particular health benefit product delivered or issued
75 for delivery in this state; and
76 (ii) (A) provides notice of the discontinuation in writing:
77 (I) to each plan sponsor, employee, or dependent of a plan sponsor or an employee; and
78 (II) at least 90 days before the date the coverage will be discontinued;
79 (B) provides notice of the discontinuation in writing:
80 (I) to the commissioner; and
81 (II) at least three working days prior to the date the notice is sent to the affected plan
82 sponsors, employees, and dependents of the plan sponsors or employees;
83 (C) offers to each plan sponsor, on a guaranteed issue basis, the option to purchase:
84 (I) all other health benefit products currently being offered by the insurer in the market;
85 or
86 (II) in the case of a large employer, any other health benefit product currently being
87 offered in that market; and
88 (D) in exercising the option to discontinue that product and in offering the option of
89 coverage in this section, acts uniformly without regard to:

90 (I) the claims experience of a plan sponsor;
91 (II) any health status-related factor relating to any covered participant or beneficiary; or
92 (III) any health status-related factor relating to any new participant or beneficiary who
93 may become eligible for the coverage; or
94 (e) the insurer:
95 (i) elects to discontinue all of the insurer's health benefit plans in:
96 (A) the small employer market;
97 (B) the large employer market; or
98 (C) both the small employer and large employer markets; and
99 (ii) (A) provides notice of the discontinuation in writing:
100 (I) to each plan sponsor, employee, or dependent of a plan sponsor or an employee; and
101 (II) at least 180 days before the date the coverage will be discontinued;
102 (B) provides notice of the discontinuation in writing:
103 (I) to the commissioner in each state in which an affected insured individual is known
104 to reside; and
105 (II) at least 30 working days prior to the date the notice is sent to the affected plan
106 sponsors, employees, and the dependents of the plan sponsors or employees;
107 (C) discontinues and nonrenews all plans issued or delivered for issuance in the
108 market; and
109 (D) provides a plan of orderly withdrawal as required by Section 31A-4-115 .
110 (4) A large employer health benefit plan may be discontinued or nonrenewed:
111 (a) if a condition described in Subsection (2) exists; or
112 (b) for noncompliance with the insurer's:
113 (i) minimum participation requirements; or
114 (ii) employer contribution requirements.
115 (5) A small employer health benefit plan may be discontinued or nonrenewed:
116 (a) if a condition described in Subsection (2) exists; or
117 (b) for noncompliance with the insurer's employer contribution requirements.
118 (6) A small employer health benefit plan may be nonrenewed:
119 (a) if a condition described in Subsection (2) exists; or
120 (b) for noncompliance with the insurer's minimum participation requirements.

121 (7) (a) Except as provided in Subsection (7)(d), an eligible employee may be
122 discontinued if after issuance of coverage the eligible employee:
123 (i) engages in an act or practice in connection with the coverage that constitutes fraud;
124 or
125 (ii) makes an intentional misrepresentation of material fact in connection with the
126 coverage.
127 (b) An eligible employee that is discontinued under Subsection (7)(a) may reenroll:
128 (i) 12 months after the date of discontinuance; and
129 (ii) if the plan sponsor's coverage is in effect at the time the eligible employee applies
130 to reenroll.
131 (c) At the time the eligible employee's coverage is discontinued under Subsection
132 (7)(a), the insurer shall notify the eligible employee of the right to reenroll when coverage is
133 discontinued.
134 (d) An eligible employee may not be discontinued under this Subsection (7) because of
135 a fraud or misrepresentation that relates to health status.
136 (8) For purposes of this section, a reference to "plan sponsor" includes a reference to
137 the employer:
138 (a) with respect to coverage provided to an employer member of the association; and
139 (b) if the health benefit plan is made available by an insurer in the employer market
140 only through:
141 (i) an association;
142 (ii) a trust; or
143 (iii) a discretionary group.
144 (9) An insurer may modify a health benefit plan for a plan sponsor only:
145 (a) at the time of coverage renewal; and
146 (b) if the modification is effective uniformly among all plans with that product.
147 Section 2. Section 31A-22-607 is amended to read:
148 31A-22-607. Grace period.
149 (1) Every individual or franchise accident and health insurance policy shall contain
150 clauses providing for a grace period for premium payment only of at least [seven days for
151 weekly premium policies, ten] 15 days H [ [ ] for H WEEKLY OR h monthly premium policies and
151a 30 days for all other [ ] ] h

152 H [ [ ] policies, for each premium after the first []] h . [During the grace period, the policy
152a continues in
153 force]. A carrier may elect to include a grace period that is longer than 15 days H FOR WEEKLY OR
153a MONTHLY POLICIES h .
154 (a) The policy is not in force during the grace period.
155 (b) If the insurer receives payment before the grace period expires, the policy continues
156 in force with no gap in coverage.
157 (c) If the insurer does not receive payment before the grace period expires, the policy
158 shall be terminated as of the last date for which the premium was paid in full.
159 (d) A grace period is not required if the policyholder has requested that the policy be
160 discontinued.
161 (2) Every group or blanket accident and health policy shall provide for a grace period
162 of at least 30 days, unless the policyholder gives written notice of discontinuance prior to the
163 date of discontinuance, in accordance with the policy terms. In group or blanket policies, the
164 policy may provide for payment of a pro rata premium for the period the policy is in effect
165 during the grace period under this Subsection (2).
166 (3) If the insurer has not guaranteed the insured a right to renew an accident and health
167 policy, any grace period beyond the expiration or anniversary date may, if provided in the
168 policy, be cut off by compliance with the notice provision under Subsection 31A-21-303 (4)(b).
169 Section 3. Section 31A-22-721 is amended to read:
170 31A-22-721. A health benefit plan for a plan sponsor -- Discontinuance and
171 nonrenewal.
172 (1) Except as otherwise provided in this section, a health benefit plan for a plan
173 sponsor is renewable and continues in force:
174 (a) with respect to all eligible employees and dependents; and
175 (b) at the option of the plan sponsor.
176 (2) A health benefit plan for a plan sponsor may be discontinued or nonrenewed:
177 (a) for a network plan, if:
178 (i) there is no longer any enrollee under the group health plan who lives, resides, or
179 works in:
180 (A) the service area of the insurer; or
181 (B) the area for which the insurer is authorized to do business; and
182 (ii) in the case of the small employer market, the insurer applies the same criteria the

183 insurer would apply in denying enrollment in the plan under Subsection 31A-30-108 [(6)] (7);
184 or
185 (b) for coverage made available in the small or large employer market only through an
186 association, if:
187 (i) the employer's membership in the association ceases; and
188 (ii) the coverage is terminated uniformly without regard to any health status-related
189 factor relating to any covered individual.
190 (3) A health benefit plan for a plan sponsor may be discontinued if:
191 (a) a condition described in Subsection (2) exists;
192 (b) the plan sponsor fails to pay premiums or contributions in accordance with the
193 terms of the contract;
194 (c) the plan sponsor:
195 (i) performs an act or practice that constitutes fraud; or
196 (ii) makes an intentional misrepresentation of material fact under the terms of the
197 coverage;
198 (d) the insurer:
199 (i) elects to discontinue offering a particular health benefit product delivered or issued
200 for delivery in this state;
201 (ii) (A) provides notice of the discontinuation in writing:
202 (I) to each plan sponsor, employee, and dependent of a plan sponsor or employee; and
203 (II) at least 90 days before the date the coverage will be discontinued;
204 (B) provides notice of the discontinuation in writing:
205 (I) to the commissioner; and
206 (II) at least three working days prior to the date the notice is sent to the affected plan
207 sponsors, employees, and dependents of plan sponsors or employees;
208 (C) offers to each plan sponsor, on a guaranteed issue basis, the option to purchase any
209 other health benefit products currently being offered:
210 (I) by the insurer in the market; or
211 (II) in the case of a large employer, any other health benefit plan currently being
212 offered in that market; and
213 (D) in exercising the option to discontinue that product and in offering the option of

214 coverage in this section, the insurer acts uniformly without regard to:
215 (I) the claims experience of a plan sponsor;
216 (II) any health status-related factor relating to any covered participant or beneficiary; or
217 (III) any health status-related factor relating to a new participant or beneficiary who
218 may become eligible for coverage; or
219 (e) the insurer:
220 (i) elects to discontinue all of the insurer's health benefit plans:
221 (A) in the small employer market; or
222 (B) the large employer market; or
223 (C) both the small and large employer markets;
224 (ii) (A) provides notice of the discontinuance in writing:
225 (I) to each plan sponsor, employee, or dependent of a plan sponsor or an employee; and
226 (II) at least 180 days before the date the coverage will be discontinued;
227 (B) provides notice of the discontinuation in writing:
228 (I) to the commissioner in each state in which an affected insured individual is known
229 to reside; and
230 (II) at least 30 business days prior to the date the notice is sent to the affected plan
231 sponsors, employees, and dependents of a plan sponsor or employee;
232 (C) discontinues and nonrenews all plans issued or delivered for issuance in the
233 market; and
234 (D) provides a plan of orderly withdrawal as required by Section 31A-4-115 .
235 (4) A large employer health benefit plan may be discontinued or nonrenewed:
236 (a) if a condition described in Subsection (2) exists; or
237 (b) for noncompliance with the insurer's:
238 (i) minimum participation requirements; or
239 (ii) employer contribution requirements.
240 (5) A small employer health benefit plan may be discontinued or nonrenewed:
241 (a) if a condition described in Subsection (2) exists; or
242 (b) for noncompliance with the insurer's employer contribution requirements.
243 (6) A small employer health benefit plan may be nonrenewed:
244 (a) if a condition described in Subsection (2) exists; or

245 (b) for noncompliance with the insurer's minimum participation requirements.
246 (7) (a) Except as provided in Subsection (7)(d), an eligible employee may be
247 discontinued if after issuance of coverage the eligible employee:
248 (i) engages in an act or practice that constitutes fraud in connection with the coverage;
249 or
250 (ii) makes an intentional misrepresentation of material fact in connection with the
251 coverage.
252 (b) An eligible employee that is discontinued under Subsection (7)(a) may reenroll:
253 (i) 12 months after the date of discontinuance; and
254 (ii) if the plan sponsor's coverage is in effect at the time the eligible employee applies
255 to reenroll.
256 (c) At the time the eligible employee's coverage is discontinued under Subsection
257 (7)(a), the insurer shall notify the eligible employee of the right to reenroll when coverage is
258 discontinued.
259 (d) An eligible employee may not be discontinued under this Subsection (7) because of
260 a fraud or misrepresentation that relates to health status.
261 (8) (a) Except as provided in Subsection (8)(b), an insurer that elects to discontinue
262 offering a health benefit plan under Subsection (3)(e) shall be prohibited from writing new
263 business in such market in this state for a period of five years beginning on the date of
264 discontinuation of the last coverage that is discontinued.
265 (b) The commissioner may waive the prohibition under Subsection (8)(a) when the
266 commissioner finds that waiver is in the public interest:
267 (i) to promote competition; or
268 (ii) to resolve inequity in the marketplace.
269 (9) If an insurer is doing business in one established geographic service area of the
270 state, this section applies only to the insurer's operations in that geographic service area.
271 (10) An insurer may modify a health benefit plan for a plan sponsor only:
272 (a) at the time of coverage renewal; and
273 (b) if the modification is effective uniformly among all plans with a particular product
274 or service.
275 (11) For purposes of this section, a reference to "plan sponsor" includes a reference to

276 the employer:
277 (a) with respect to coverage provided to an employer member of the association; and
278 (b) if the health benefit plan is made available by an insurer in the employer market
279 only through:
280 (i) an association;
281 (ii) a trust; or
282 (iii) a discretionary group.
283 (12) (a) A small employer that, after purchasing a health benefit plan in the small group
284 market, employs on average more than 50 eligible employees on each business day in a
285 calendar year may continue to renew the health benefit plan purchased in the small group
286 market.
287 (b) A large employer that, after purchasing a health benefit plan in the large group
288 market, employs on average less than 51 eligible employees on each business day in a calendar
289 year may continue to renew the health benefit plan purchased in the large group market.
290 (13) An insurer offering employer sponsored health benefit plans shall comply with the
291 Health Insurance Portability and Accountability Act, P. L. 104-191, 110 Stat. 1962, Sec. 2701
292 and 2702.
292a S Section 4. Section 31A-29-106 is amended to read:
292b 31A-29-106. Powers and duties of board.
292c (1) The board shall have the general powers and authority granted under the laws of this state
292d to insurance companies licensed to transact health care insurance business. In addition, the board
292e shall have the specific authority to:
292f (a) enter into contracts to carry out the provisions and purposes of this chapter, including,
292g with the approval of the commissioner, contracts with:
292h (i) similar pools of other states for the joint performance of common administrative functions;
292i or
292j (ii) persons or other organizations for the performance of administrative functions;
292k (b) sue or be sued, including taking such legal action necessary to avoid the payment of
292l improper claims against the pool or the coverage provided through the pool;
292m (c) establish appropriate rates, rate schedules, rate adjustments, expense allowances, agents'
292n referral fees, claim reserve formulas, and any other actuarial function appropriate to the operation of
292o the pool;
292p (d) issue policies of insurance in accordance with the requirements of this chapter;
292q (e) retain an executive director and appropriate legal, actuarial, and other personnel as

292r necessary to provide technical assistance in the operations of the pool;
292s (f) establish rules, conditions, and procedures for reinsuring risks under this chapter;
292t (g) cause the pool to have an annual audit of its operations by the state auditor; s

292u S (h) coordinate with the Department of Health in seeking to obtain from the Centers for
292v Medicare and Medicaid Services, or other appropriate office or agency of government, all appropriate
292w waivers, authority, and permission needed to coordinate the coverage available from the pool with
292x coverage available under Medicaid, either before or after Medicaid coverage, or as a conversion
292y option upon completion of Medicaid eligibility, without the necessity for requalification by the
292z enrollee;
292aa (i) provide for and employ cost containment measures and requirements including
292ab preadmission certification, concurrent inpatient review, and individual case management for the
292ac purpose of making the pool more cost-effective;
292ad (j) offer pool coverage through contracts with health maintenance organizations, preferred
292ae provider organizations, and other managed care systems that will manage costs while maintaining
292af quality care;
292ag (k) establish annual limits on benefits payable under the pool to or on behalf of any enrollee;
292ah (l) exclude from coverage under the pool specific benefits, medical conditions, and
292ai procedures for the purpose of protecting the financial viability of the pool;
292aj (m) administer the Pool Fund;
292ak (n) make rules in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act,
292al to implement this chapter; and
292am (o) adopt, trademark, and copyright a trade name for the pool for use in marketing and
292an publicizing the pool and its products.
292ao (2) (a) The board shall prepare and submit an annual report to the Legislature which shall
292ap include:
292aq (i) the net premiums anticipated;
292ar (ii) actuarial projections of payments required of the pool;
292as (iii) the expenses of administration; and
292at (iv) the anticipated reserves or losses of the pool.
292au (b) The budget for operation of the pool is subject to the approval of the board.
292av (c) The administrative budget of the board and the commissioner under this chapter shall
292aw comply with the requirements of Title 63, Chapter 38, Budgetary Procedures Act, and is subject to
292ax review and approval by the Legislature.
292ay (3) (a) THE BOARD SHALL ON OR BEFORE SEPTEMBER 1, 2004, REQUIRE THE PLAN
292az ADMINISTRATOR OR AN INDEPENDENT ACTUARIAL CONSULTANT RETAINED BY THE PLAN
292ba ADMINISTRATOR TO REDETERMINE THE REASONABLE EQUIVALENT OF THE CRITERIA FOR
292bb UNINSURABILITY REQUIRED UNDER SUBSECTION 31A-30-106(j) THAT IS USED BY THE BOARD TO
292bc DETERMINE ELIGIBILITY FOR COVERAGE IN THE POOL.
292bd (b) THE BOARD SHALL REDETERMINE THE CRITERIA ESTABLISHED IN SUBSECTION (3)(a)
292be AT LEAST EVERY FIVE YEARS THEREAFTER. s
293 Section 4. Section 31A-29-113 is amended to read:
294 31A-29-113. Benefits -- Additional types of pool insurance -- Preexisting
295 conditions -- Waiver -- Maximum benefits.

296 (1) (a) The pool policy shall pay for eligible medical expenses rendered or furnished
297 for the diagnoses or treatment of illness or injury that:
298 (i) exceed the deductible and copayment amounts applicable under Section
299 31A-29-114 ; and
300 (ii) are not otherwise limited or excluded.
301 (b) Eligible medical expenses are the allowed charges established by the board for the
302 health care services and items rendered during times for which benefits are extended under the
303 pool policy.
304 (2) The coverage to be issued by the pool, its schedule of benefits, exclusions, and
305 other limitations shall be established by the board.
306 (3) The commissioner shall approve the benefit package developed by the board to

307 ensure its compliance with this chapter.
308 (4) The pool shall offer at least one benefit plan through a managed care program as
309 authorized under Section 31A-29-106 .
310 (5) This chapter may not be construed to prohibit the pool from issuing additional types
311 of pool policies with different types of benefits which in the opinion of the board may be of
312 benefit to the citizens of Utah.
313 (6) The board shall design and require an administrator to employ cost containment
314 measures and requirements including preadmission certification and concurrent inpatient
315 review for the purpose of making the pool more cost effective. The provisions of Sections
316 31A-22-617 and 31A-22-618 do not apply to coverage issued under this chapter.
317 (7) (a) A pool policy may contain provisions under which coverage for a preexisting
318 condition is excluded during a six-month period following the effective date of plan coverage
319 for a given individual.
320 (b) Subsection (7)(a) does not apply to a HIPAA eligible individual.
321 (8) A pool policy may exclude coverage for pregnancies for ten months following the
322 effective date of coverage, unless the individual is HIPAA eligible.
323 (9) (a) The pool will waive the preexisting condition exclusion described in Subsection
324 (7)(a) for an individual that is changing health coverage to the pool, to the extent to which
325 similar exclusions have been satisfied under any prior health insurance coverage if[: (i)] the
326 individual applies not later than 63 days following the date of involuntary termination, other
327 than for nonpayment of premiums, from health coverage[; or].
328 [(ii) the individual's premium rate exceeds the rate of the pool for equal or lesser
329 coverage provided that the application for pool coverage is made no later than 63 days
330 following the termination from the prior health insurance coverage.]
331 (b) In accordance with Subsections (7)(b) and (8), the pool may not apply a preexisting
332 condition exclusion if the individual is HIPAA eligible.
333 (c) If this Subsection (9) applies, coverage in the pool shall be effective from the date
334 on which the prior coverage was terminated.
335 (10) Covered benefits available from the pool may not exceed a $1,000,000 lifetime
336 maximum, which includes a per enrollee calendar year maximum established by the board.
337 Section 5. Section 31A-30-107 is amended to read:

338 31A-30-107. Renewal -- Limitations -- Exclusions -- Discontinuance and
339 nonrenewal.
340 (1) Except as otherwise provided in this section, a small employer health benefit plan is
341 renewable and continues in force:
342 (a) with respect to all eligible employees and dependents; and
343 (b) at the option of the plan sponsor.
344 (2) A small employer health benefit plan may be discontinued or nonrenewed:
345 (a) for a network plan, if:
346 (i) there is no longer any enrollee under the group health plan who lives, resides, or
347 works in:
348 (A) the service area of the covered carrier; or
349 (B) the area for which the covered carrier is authorized to do business; and
350 (ii) in the case of the small employer market, the small employer carrier applies the
351 same criteria the small employer carrier would apply in denying enrollment in the plan under
352 Subsection 31A-30-108 [(6)] (7); or
353 (b) for coverage made available in the small or large employer market only through an
354 association, if:
355 (i) the employer's membership in the association ceases; and
356 (ii) the coverage is terminated uniformly without regard to any health status-related
357 factor relating to any covered individual.
358 (3) A small employer health benefit plan may be discontinued if:
359 (a) a condition described in Subsection (2) exists;
360 (b) the plan sponsor fails to pay premiums or contributions in accordance with the
361 terms of the contract;
362 (c) the plan sponsor:
363 (i) performs an act or practice that constitutes fraud; or
364 (ii) makes an intentional misrepresentation of material fact under the terms of the
365 coverage;
366 (d) the covered carrier:
367 (i) elects to discontinue offering a particular small employer health benefit product
368 delivered or issued for delivery in this state; and

369 (ii) (A) provides notice of the discontinuation in writing:
370 (I) to each plan sponsor, employee, or dependent of a plan sponsor or an employee; and
371 (II) at least 90 days before the date the coverage will be discontinued;
372 (B) provides notice of the discontinuation in writing:
373 (I) to the commissioner; and
374 (II) at least three working days prior to the date the notice is sent to the affected plan
375 sponsors, employees, and dependents of the plan sponsors or employees;
376 (C) offers to each plan sponsor, on a guaranteed issue basis, the option to purchase all
377 other small employer health benefit products currently being offered by the small employer
378 carrier in the market; and
379 (D) in exercising the option to discontinue that product and in offering the option of
380 coverage in this section, acts uniformly without regard to:
381 (I) the claims experience of a plan sponsor;
382 (II) any health status-related factor relating to any covered participant or beneficiary; or
383 (III) any health status-related factor relating to any new participant or beneficiary who
384 may become eligible for the coverage; or
385 (e) the covered carrier:
386 (i) elects to discontinue all of the covered carrier's small employer health benefit plans
387 in:
388 (A) the small employer market;
389 (B) the large employer market; or
390 (C) both the small employer and large employer markets; and
391 (ii) (A) provides notice of the discontinuation in writing:
392 (I) to each plan sponsor, employee, or dependent of a plan sponsor or an employee; and
393 (II) at least 180 days before the date the coverage will be discontinued;
394 (B) provides notice of the discontinuation in writing:
395 (I) to the commissioner in each state in which an affected insured individual is known
396 to reside; and
397 (II) at least 30 working days prior to the date the notice is sent to the affected plan
398 sponsors, employees, and the dependents of the plan sponsors or employees;
399 (C) discontinues and nonrenews all plans issued or delivered for issuance in the

400 market; and
401 (D) provides a plan of orderly withdrawal as required by Section 31A-4-115 .
402 (4) A small employer health benefit plan may be discontinued or nonrenewed:
403 (a) if a condition described in Subsection (2) exists; or
404 (b) for noncompliance with the insurer's employer contribution requirements.
405 (5) A small employer health benefit plan may be nonrenewed:
406 (a) if a condition described in Subsection (2) exists; or
407 (b) for noncompliance with the insurer's minimum participation requirements.
408 (6) (a) Except as provided in Subsection (6)(d), an eligible employee may be
409 discontinued if after issuance of coverage the eligible employee:
410 (i) engages in an act or practice that constitutes fraud in connection with the coverage;
411 or
412 (ii) makes an intentional misrepresentation of material fact in connection with the
413 coverage.
414 (b) An eligible employee that is discontinued under Subsection (6)(a) may reenroll:
415 (i) 12 months after the date of discontinuance; and
416 (ii) if the plan sponsor's coverage is in effect at the time the eligible employee applies
417 to reenroll.
418 (c) At the time the eligible employee's coverage is discontinued under Subsection
419 (6)(a), the covered carrier shall notify the eligible employee of the right to reenroll when
420 coverage is discontinued.
421 (d) An eligible employee may not be discontinued under this Subsection (6) because of
422 a fraud or misrepresentation that relates to health status.
423 (7) For purposes of this section, a reference to "plan sponsor" includes a reference to
424 the employer:
425 (a) with respect to coverage provided to an employer member of the association; and
426 (b) if the small employer health benefit plan is made available by a covered carrier in
427 the employer market only through:
428 (i) an association;
429 (ii) a trust; or
430 (iii) a discretionary group.

431 (8) A covered carrier may modify a small employer health benefit plan only:
432 (a) at the time of coverage renewal; and
433 (b) if the modification is effective uniformly among all plans with that product.
434 Section 6. Section 31A-30-107.3 is amended to read:
435 31A-30-107.3. Discontinuance and nonrenewal limitations and conditions.
436 (1) (a) A carrier that elects to discontinue offering a health benefit plan under
437 Subsection 31A-30-107 (3)(e) or 31A-30-107.1 (3)(e) is prohibited from writing new business:
438 (i) in the small employer and individual market in this state; and
439 (ii) for a period of five years beginning on the date of discontinuation of the last
440 coverage that is discontinued.
441 (b) The prohibition described in Subsection (1)(a) may be waived if the commissioner
442 finds that waiver is in the public interest:
443 (i) to promote competition; or
444 (ii) to resolve inequity in the marketplace.
445 (2) (a) If the Comprehensive Health Insurance Pool as set forth under Title 31A,
446 Chapter 29, is dissolved or discontinued, or if enrollment is capped or suspended, an individual
447 carrier:
448 (i) may elect to discontinue offering new individual health benefit plans, except to
449 HIPAA eligibles, but must keep existing individual health benefit plans in effect, except those
450 individual plans that are not renewed under the provisions of Subsection 31A-30-107 (2) or
451 31A-30-107.1 (2);
452 (ii) may elect to continue to offer new individual and small H [ employee ] EMPLOYER h
452a health benefit
453 plans; or
454 (iii) may elect to discontinue all of the covered carriers health benefit plans in the
455 individual or small group market under the provisions of Subsection 31A-30-107 (3)(e) or
456 31A-30-107.1 (3)(e).
457 (b) A carrier that makes an election under Subsection (2)(a)(i) is:
458 (i) prohibited from writing new business:
459 (A) in the individual market in this state; and
460 (B) for a period of five years beginning on the date of discontinuation;
461 (ii) may continue to write new business in the small employer market; and

462 (iii) must provide written notice of the election under Subsection (2)(a)(i) within two
463 calendar days of the election to the Utah Insurance Department.
464 (c) The prohibition described in Subsection (2)(b)(i) may be waived if the
465 commissioner finds that waiver is in the public interest:
466 (i) to promote competition; or
467 (ii) to resolve inequity in the marketplace.
468 (d) A carrier that makes an election under Subsection (2)(a)(iii) is subject to the
469 provisions of Subsection (1).
470 [(2)] (3) If a carrier is doing business in one established geographic service area of the
471 state, Sections 31A-30-107 and 31A-30-107.1 apply only to the carrier's operations in that
472 geographic service area.
473 [(3)] (4) If a small employer employs less than two employees, a carrier may not
474 discontinue or not renew the health benefit plan until the first renewal date following the
475 beginning of a new plan year, even if the carrier knows as of the beginning of the plan year that
476 the employer no longer has at least two current employees.
477 Section 7. Section 31A-30-108 is amended to read:
478 31A-30-108. Eligibility for small employer and individual market.
479 (1) (a) Small employer carriers shall accept residents for small group coverage as set
480 forth in the Health Insurance Portability and Accountability Act, P.L. 104-191, 110 Stat. 1962,
481 Sec. 2701(f) and 2711(a).
482 (b) Individual carriers shall accept residents for individual coverage pursuant:
483 (i) to P.L. 104-191, 110 Stat. 1979, Sec. 2741(a)-(b); and
484 (ii) Subsection (3).
485 (2) (a) Small employer carriers shall offer to accept all eligible employees and their
486 dependents at the same level of benefits under any health benefit plan provided to a small
487 employer.
488 (b) Small employer carriers may:
489 (i) request a small employer to submit a copy of the small employer's quarterly income
490 tax withholdings to determine whether the employees for whom coverage is provided or
491 requested are bona fide employees of the small employer; and
492 (ii) deny or terminate coverage if the small employer refuses to provide documentation

493 requested under Subsection (2)(b)(i).
494 (3) Except as provided in [Subsection] Subsections (5) and (6) and Section
495 31A-30-110 , individual carriers shall accept for coverage individuals to whom all of the
496 following conditions apply:
497 (a) the individual is not covered or eligible for coverage:
498 (i) (A) as an employee of an employer;
499 (B) as a member of an association; or
500 (C) as a member of any other group; and
501 (ii) under:
502 (A) a health benefit plan; or
503 (B) a self-insured arrangement that provides coverage similar to that provided by a
504 health benefit plan as defined in Section 31A-1-301 ;
505 (b) the individual is not covered and is not eligible for coverage under any public
506 health benefits arrangement including:
507 (i) the Medicare program established under Title XVIII of the Social Security Act;
508 (ii) the Medicaid program established under Title XIX of the Social Security Act;
509 (iii) any act of Congress or law of this or any other state that provides benefits
510 comparable to the benefits provided under this chapter; or
511 (iv) coverage under the Comprehensive Health Insurance Pool Act created in Chapter
512 29, Comprehensive Health Insurance Pool Act;
513 (c) unless the maximum benefit has been reached the individual is not covered or
514 eligible for coverage under any:
515 (i) Medicare supplement policy;
516 (ii) conversion option;
517 (iii) continuation or extension under COBRA; or
518 (iv) state extension;
519 (d) the individual has not terminated or declined coverage described in Subsection
520 (3)(a), (b), or (c) within 93 days of application for coverage, unless the individual is eligible for
521 individual coverage under P.L. 104-191, 110 Stat. 1979, Sec. 2741(b), in which case, the
522 requirement of this Subsection (3)(d) does not apply; and
523 (e) the individual is certified as ineligible for the Health Insurance Pool if:

524 (i) the individual applies for coverage with the Comprehensive Health Insurance Pool
525 within 30 days after being rejected or refused coverage by the covered carrier and reapplies for
526 coverage with that covered carrier within 30 days after the date of issuance of a certificate
527 under Subsection 31A-29-111 (4)(c); or
528 (ii) the individual applies for coverage with any individual carrier within 45 days after:
529 (A) notice of cancellation of coverage under Subsection 31A-29-115 (1); or
530 (B) the date of issuance of a certificate under Subsection 31A-29-111 (4)(c) if the
531 individual applied first for coverage with the Comprehensive Health Insurance Pool.
532 (4) (a) If coverage is obtained under Subsection (3)(e)(i) and the required premium is
533 paid, the effective date of coverage shall be the first day of the month following the individual's
534 submission of a completed insurance application to that covered carrier.
535 (b) If coverage is obtained under Subsection (3)(e)(ii) and the required premium is
536 paid, the effective date of coverage shall be the day following the:
537 (i) cancellation of coverage under Subsection 31A-29-115 (1); or
538 (ii) submission of a completed insurance application to the Comprehensive Health
539 Insurance Pool.
540 (5) (a) An individual carrier is not required to accept individuals for coverage under
541 Subsection (3) if the carrier issues no new individual policies in the state after July 1, 1997.
542 (b) A carrier described in Subsection (5)(a) may not issue new individual policies in
543 the state for five years from July 1, 1997.
544 (c) Notwithstanding Subsection (5)(b), a carrier may request permission to issue new
545 policies after July 1, 1999, which may only be granted if:
546 (i) the carrier accepts uninsurables as is required of a carrier entering the market under
547 Subsection 31A-30-110 ; and
548 (ii) the commissioner finds that the carrier's issuance of new individual policies:
549 (A) is in the best interests of the state; and
550 (B) does not provide an unfair advantage to the carrier.
551 (6) (a) If H [ enrollment in ] h the Comprehensive Health Insurance Pool as set forth under
552 Title 31A, Chapter 29, is H DISSOLVED OR DISCONTINUED, OR IF ENROLLMENT IS h capped or
552a suspended, an individual carrier may decline to accept
553 individuals applying for individual enrollment, other than individuals applying for coverage as
554 set forth in P.L. 104-191, 110 Stat. 1979, Sec. 2741 (a)-(b).

555 (b) Within two calendar days of taking action under Subsection (6)(a), an individual
556 carrier will provide written notice to the Utah Insurance Department.
557 [(6)] (7) (a) If a small employer carrier offers health benefit plans to small employers
558 through a network plan, the small employer carrier may:
559 (i) limit the employers that may apply for the coverage to those employers with eligible
560 employees who live, reside, or work in the service area for the network plan; and
561 (ii) within the service area of the network plan, deny coverage to an employer if the
562 small employer carrier has demonstrated to the commissioner that the small employer carrier:
563 (A) will not have the capacity to deliver services adequately to enrollees of any
564 additional groups because of the small employer carrier's obligations to existing group contract
565 holders and enrollees; and
566 (B) applies this section uniformly to all employers without regard to:
567 (I) the claims experience of an employer, an employer's employee, or a dependent of an
568 employee; or
569 (II) any health status-related factor relating to an employee or dependent of an
570 employee.
571 (b) (i) A small employer carrier that denies a health benefit product to an employer in
572 any service area in accordance with this section may not offer coverage in the small employer
573 market within the service area to any employer for a period of 180 days after the date the
574 coverage is denied.
575 (ii) This Subsection [(6)] (7)(b) does not:
576 (A) limit the small employer carrier's ability to renew coverage that is in force; or
577 (B) relieve the small employer carrier of the responsibility to renew coverage that is in
578 force.
579 (c) Coverage offered within a service area after the 180-day period specified in
580 Subsection [(6)] (7)(b) is subject to the requirements of this section.
581 Section 8. Repealer.
582 This bill repeals:
583 Section 31A-30-106.6, Individual rates.
583a S Section 9. Effective date.
583b IF APPROVED BY TWO-THIRDS OF ALL THE MEMBERS ELECTED TO EACH HOUSE, THIS
583c BILL TAKES EFFECT UPON APPROVAL BY THE GOVERNOR, OR THE DAY FOLLOWING THE
583d CONSTITUTIONAL TIME LIMIT OF UTAH CONSTITUTION ARTICLE VII, SECTION 8, WITHOUT THE
583e GOVERNOR'S SIGNATURE, OR IN THE CASE OF A VETO, THE DATE OF VETO OVERRIDE. s

Legislative Review Note
as of 1-22-04 4:02 PM

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

Office of Legislative Research and General Counsel