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Second Substitute S.B. 294

Senator J. Stuart Adams proposes the following substitute bill:




Chief Sponsor: J. Stuart Adams

House Sponsor: James A. Dunnigan

             7      LONG TITLE
             8      General Description:
             9          This bill amends provisions related to access to health insurance in the Insurance Code.
             10      Highlighted Provisions:
             11          This bill:
             12          .    amends the case characteristics that a small employer carrier may use when
             13      establishing premium rates for a group;
             14          .    changes the ratio that may be used for the age bands to an overall ratio that may not
             15      exceed 6:1;
             16          .    changes the ratio that may be used for family tiers to a ratio that may not exceed
             17      6:1;
             18          .    amends the family tier structure, effective September 1, 2011, to create a fifth tier
             19      separating employee plus one dependent from employee plus more than one
             20      dependent; and
             21          .    makes technical amendments.
             22      Money Appropriated in this Bill:
             23          None
             24      Other Special Clauses:
             25          None

             26      Utah Code Sections Affected:
             27      AMENDS:
             28          31A-30-106.1, as enacted by Laws of Utah 2010, Chapter 68
             30      Be it enacted by the Legislature of the state of Utah:
             31          Section 1. Section 31A-30-106.1 is amended to read:
             32           31A-30-106.1. Small employer premiums -- Rating restrictions -- Disclosure.
             33          (1) Premium rates for small employer health benefit plans under this chapter are
             34      subject to the provisions of this section for a health benefit plan that is issued or renewed, on or
             35      after January 1, 2011.
             36          (2) (a) The index rate for a rating period for any class of business may not exceed the
             37      index rate for any other class of business by more than 20%.
             38          (b) For a class of business, the premium rates charged during a rating period to covered
             39      insureds with similar case characteristics for the same or similar coverage, or the rates that
             40      could be charged to an employer group under the rating system for that class of business, may
             41      not vary from the index rate by more than 30% of the index rate, except when catastrophic
             42      mental health coverage is selected as provided in Subsection 31A-22-625 (2)(d).
             43          (3) The percentage increase in the premium rate charged to a covered insured for a new
             44      rating period, adjusted pro rata for rating periods less than a year, may not exceed the sum of
             45      the following:
             46          (a) the percentage change in the new business premium rate measured from the first
             47      day of the prior rating period to the first day of the new rating period;
             48          (b) any adjustment, not to exceed 15% annually for rating periods of less than one year,
             49      due to the claim experience, health status, or duration of coverage of the covered individuals as
             50      determined from the small employer carrier's rate manual for the class of business, except when
             51      catastrophic mental health coverage is selected as provided in Subsection 31A-22-625 (2)(d);
             52      and
             53          (c) any adjustment due to change in coverage or change in the case characteristics of
             54      the covered insured as determined for the class of business from the small employer carrier's
             55      rate manual.
             56          (4) (a) Adjustments in rates for claims experience, health status, and duration from

             57      issue may not be charged to individual employees or dependents.
             58          (b) Rating adjustments and factors, including case characteristics, shall be applied
             59      uniformly and consistently to the rates charged for all employees and dependents of the small
             60      employer.
             61          (c) Rating factors shall produce premiums for identical groups that:
             62          (i) differ only by the amounts attributable to plan design; and
             63          (ii) do not reflect differences due to the nature of the groups assumed to select
             64      particular health benefit products.
             65          (d) A small employer carrier shall treat all health benefit plans issued or renewed in the
             66      same calendar month as having the same rating period.
             67          (5) A health benefit plan that uses a restricted network provision may not be considered
             68      similar coverage to a health benefit plan that does not use a restricted network provision,
             69      provided that use of the restricted network provision results in substantial difference in claims
             70      costs.
             71          (6) The small employer carrier may [not use] only use the following case
             72      characteristics [other than the following]:
             73          (a) age, in accordance with Subsection (7);
             74          (b) geographic area; and
             75          (c) family composition in accordance with Subsection (8).
             76          [(a) age, as] (7) Age shall be determined at the beginning of the plan year, limited to:
             77          [(i)] (a) the following age bands:
             78          [(A)] (i) less than 20;
             79          [(B)] (ii) 20-24;
             80          [(C)] (iii) 25-29;
             81          [(D)] (iv) 30-34;
             82          [(E)] (v) 35-39;
             83          [(F)] (vi) 40-44;
             84          [(G)] (vii) 45-49;
             85          [(H)] (viii) 50-54;
             86          [(I)] (ix) 55-59;
             87          [(J)] (x) 60-64; and

             88          [(K)] (xi) 65 and above; and
             89          [(ii)] (b) (i) a standard slope ratio range for each age band, applied to each family
             90      composition tier rating structure under Subsection [(6)(c)] (8):
             91          (A) as developed by the department by administrative rule; and
             92          (B) not to exceed an overall ratio of [5] 6:1; and
             93          [(C)] (ii) the age slope ratios for each age band may not overlap[;].
             94          [(b) geographic area; and]
             95          [(c) family] (8) Family composition[,] is limited to:
             96          [(i)] (a) an overall ratio of [5] 6:1 or less; and
             97          [(ii)] (b) a [four] tier rating structure that includes:
             98          (i) until September 1, 2011, four tiers that include:
             99          (A) employee only;
             100          (B) employee plus spouse;
             101          (C) employee plus a dependent or dependents; and
             102          (D) a family, consisting of an employee plus spouse, and a dependent or dependents[.];
             103      and
             104          (ii) on or after September 1, 2011, five tiers that include:
             105          (A) employee only;
             106          (B) employee plus spouse;
             107          (C) employee plus a dependent; and
             108          (D) employee plus more than one dependent, other than a spouse; and
             109          (E) a family, consisting of an employee plus spouse, and a dependent or dependents.
             110          [(7)] (9) If a health benefit plan is a health benefit plan into which the small employer
             111      carrier is no longer enrolling new covered insureds, the small employer carrier shall use the
             112      percentage change in the base premium rate, provided that the change does not exceed, on a
             113      percentage basis, the change in the new business premium rate for the most similar health
             114      benefit product into which the small employer carrier is actively enrolling new covered
             115      insureds.
             116          [(8)] (10) (a) A covered carrier may not transfer a covered insured involuntarily into or
             117      out of a class of business.
             118          (b) A covered carrier may not offer to transfer a covered insured into or out of a class

             119      of business unless the offer is made to transfer all covered insureds in the class of business
             120      without regard to:
             121          (i) case characteristics;
             122          (ii) claim experience;
             123          (iii) health status; or
             124          (iv) duration of coverage since issue.
             125          [(9)] (11) (a) Each small employer carrier shall maintain at the small employer carrier's
             126      principal place of business a complete and detailed description of its rating practices and
             127      renewal underwriting practices, including information and documentation that demonstrate that
             128      the small employer carrier's rating methods and practices are:
             129          (i) based upon commonly accepted actuarial assumptions; and
             130          (ii) in accordance with sound actuarial principles.
             131          (b) (i) Each small employer carrier shall file with the commissioner on or before April
             132      1 of each year, in a form and manner and containing information as prescribed by the
             133      commissioner, an actuarial certification certifying that:
             134          (A) the small employer carrier is in compliance with this chapter; and
             135          (B) the rating methods of the small employer carrier are actuarially sound.
             136          (ii) A copy of the certification required by Subsection [(9)] (11)(b)(i) shall be retained
             137      by the small employer carrier at the small employer carrier's principal place of business.
             138          (c) A small employer carrier shall make the information and documentation described
             139      in this Subsection [(9)] (11) available to the commissioner upon request.
             140          [(10)] (12) (a) The commissioner shall, by July 1, 2010, establish rules in accordance
             141      with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, to:
             142          (i) implement this chapter; and
             143          (ii) assure that rating practices used by small employer carriers under this section and
             144      carriers for individual plans under Section 31A-30-106 , as effective on January 1, 2011, are
             145      consistent with the purposes of this chapter.
             146          (b) The rules may:
             147          (i) assure that differences in rates charged for health benefit plans by carriers are
             148      reasonable and reflect objective differences in plan design, not including differences due to the
             149      nature of the groups or individuals assumed to select particular health benefit plans; and

             150          (ii) prescribe the manner in which case characteristics may be used by small employer
             151      and individual carriers.
             152          [(11)] (13) Records submitted to the commissioner under this section shall be
             153      maintained by the commissioner as protected records under Title 63G, Chapter 2, Government
             154      Records Access and Management Act.

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