H.B. 2003 Enrolled

1

INSURANCE AMENDMENTS
2 2011 SECOND SPECIAL SESSION
3 STATE OF UTAH
4 Chief Sponsor: James A. Dunnigan
5 Senate Sponsor: J. Stuart Adams
6
7 LONG TITLE
8 General Description:
9 This bill amends the provisions related to health benefit plans in the Insurance Code.
10 Highlighted Provisions:
11 This bill:
12 . amends provisions related to unfair marketing practices by insurance producers;
13 . amends the case characteristics a small employer carrier may use when establishing
14 health insurance premium rates for a small employer group;
15 . amends the calculation of premium cost for family coverage in the small employer
16 group market by:
17 . allowing a carrier to use either four, five, or six rate tiers based on family size
18 for plans offered outside of the Health Insurance Exchange; and
19 . limiting a carrier to four rate tiers based on family size for plans offered in the
20 defined contribution market on the Health Insurance Exchange;
21 . authorizes the Insurance Department actuary to allow different rating practices
22 related to family tiering in and out of the Health Insurance Exchange;
23 . amends provisions that require notice to a small employer group of the risk factor
24 used to calculate a group's health insurance premium; and
25 . makes technical amendments.
26 Money Appropriated in this Bill:
27 This bill appropriates:
28 . $35,000 from the General Fund, One-time, for fiscal year 2011-12 only, to the
29 Insurance Department - Risk Adjuster.

30 Other Special Clauses:
31 None
32 Utah Code Sections Affected:
33 AMENDS:
34 31A-23a-402, as last amended by Laws of Utah 2011, Chapters 62 and 289
35 31A-30-106.1, as last amended by Laws of Utah 2011, Chapters 284 and 400
36 31A-30-115, as enacted by Laws of Utah 2011, Chapter 400
37 31A-30-202.5, as enacted by Laws of Utah 2010, Chapter 68
38 31A-30-207, as last amended by Laws of Utah 2011, Chapter 400
39 31A-30-211, as enacted by Laws of Utah 2011, Chapter 400
40
41 Be it enacted by the Legislature of the state of Utah:
42 Section 1. Section 31A-23a-402 is amended to read:
43 31A-23a-402. Unfair marketing practices -- Communication -- Unfair
44 discrimination -- Coercion or intimidation -- Restriction on choice.
45 (1) (a) (i) Any of the following may not make or cause to be made any communication
46 that contains false or misleading information, relating to an insurance product or contract, any
47 insurer, or any licensee under this title, including information that is false or misleading
48 because it is incomplete:
49 (A) a person who is or should be licensed under this title;
50 (B) an employee or producer of a person described in Subsection (1)(a)(i)(A);
51 (C) a person whose primary interest is as a competitor of a person licensed under this
52 title; and
53 (D) a person on behalf of any of the persons listed in this Subsection (1)(a)(i).
54 (ii) As used in this Subsection (1), "false or misleading information" includes:
55 (A) assuring the nonobligatory payment of future dividends or refunds of unused
56 premiums in any specific or approximate amounts, but reporting fully and accurately past
57 experience is not false or misleading information; and

58 (B) with intent to deceive a person examining it:
59 (I) filing a report;
60 (II) making a false entry in a record; or
61 (III) wilfully refraining from making a proper entry in a record.
62 (iii) A licensee under this title may not:
63 (A) use any business name, slogan, emblem, or related device that is misleading or
64 likely to cause the insurer or other licensee to be mistaken for another insurer or other licensee
65 already in business; or
66 (B) use any advertisement or other insurance promotional material that would cause a
67 reasonable person to mistakenly believe that a state or federal government agency, including
68 the Health Insurance Exchange, also called the "Utah Health Exchange," created in Section
69 63M-1-2504 , the Comprehensive Health Insurance Pool created in Chapter 29, Comprehensive
70 Health Insurance Pool Act, and the Children's Health Insurance Program created in Title 26,
71 Chapter 40, Utah Children's Health Insurance Act:
72 (I) is responsible for the insurance sales activities of the person;
73 (II) stands behind the credit of the person;
74 (III) guarantees any returns on insurance products of or sold by the person; or
75 (IV) is a source of payment of any insurance obligation of or sold by the person.
76 (iv) A person who is not an insurer may not assume or use any name that deceptively
77 implies or suggests that person is an insurer.
78 (v) A person other than persons licensed as health maintenance organizations under
79 Chapter 8 may not use the term "Health Maintenance Organization" or "HMO" in referring to
80 itself.
81 (b) A licensee's violation creates a rebuttable presumption that the violation was also
82 committed by the insurer if:
83 (i) the licensee under this title distributes cards or documents, exhibits a sign, or
84 publishes an advertisement that violates Subsection (1)(a), with reference to a particular
85 insurer:

86 (A) that the licensee represents; or
87 (B) for whom the licensee processes claims; and
88 (ii) the cards, documents, signs, or advertisements are supplied or approved by that
89 insurer.
90 (2) (a) A title insurer or producer or any officer or employee of either may not pay,
91 allow, give, or offer to pay, allow, or give, directly or indirectly, as an inducement to obtaining
92 any title insurance business:
93 (i) any rebate, reduction, or abatement of any rate or charge made incident to the
94 issuance of the title insurance;
95 (ii) any special favor or advantage not generally available to others; or
96 (iii) any money or other consideration, except if approved under Section 31A-2-405 ; or
97 (iv) material inducement.
98 (b) "Charge made incident to the issuance of the title insurance" includes escrow
99 charges, and any other services that are prescribed in rule by the Title and Escrow Commission
100 after consultation with the commissioner and subject to Section 31A-2-404 .
101 (c) An insured or any other person connected, directly or indirectly, with the
102 transaction may not knowingly receive or accept, directly or indirectly, any benefit referred to
103 in Subsection (2)(a), including:
104 [(A)] (i) a person licensed under Title 61, Chapter 2c, Utah Residential Mortgage
105 Practices and Licensing Act;
106 [(B)] (ii) a person licensed under Title 61, Chapter 2f, Real Estate Licensing and
107 Practices Act;
108 [(C)] (iii) a builder;
109 [(D)] (iv) an attorney; or
110 [(E)] (v) an officer, employee, or agent of a person listed in this Subsection (2)(c)(iii).
111 (3) (a) An insurer may not unfairly discriminate among policyholders by charging
112 different premiums or by offering different terms of coverage, except on the basis of
113 classifications related to the nature and the degree of the risk covered or the expenses involved.

114 (b) Rates are not unfairly discriminatory if they are averaged broadly among persons
115 insured under a group, blanket, or franchise policy, and the terms of those policies are not
116 unfairly discriminatory merely because they are more favorable than in similar individual
117 policies.
118 (4) (a) This Subsection (4) applies to:
119 (i) a person who is or should be licensed under this title;
120 (ii) an employee of that licensee or person who should be licensed;
121 (iii) a person whose primary interest is as a competitor of a person licensed under this
122 title; and
123 (iv) one acting on behalf of any person described in Subsections (4)(a)(i) through (iii).
124 (b) A person described in Subsection (4)(a) may not commit or enter into any
125 agreement to participate in any act of boycott, coercion, or intimidation that:
126 (i) tends to produce:
127 (A) an unreasonable restraint of the business of insurance; or
128 (B) a monopoly in that business; or
129 (ii) results in an applicant purchasing or replacing an insurance contract.
130 (5) (a) (i) Subject to Subsection (5)(a)(ii), a person may not restrict in the choice of an
131 insurer or licensee under this chapter, another person who is required to pay for insurance as a
132 condition for the conclusion of a contract or other transaction or for the exercise of any right
133 under a contract.
134 (ii) A person requiring coverage may reserve the right to disapprove the insurer or the
135 coverage selected on reasonable grounds.
136 (b) The form of corporate organization of an insurer authorized to do business in this
137 state is not a reasonable ground for disapproval, and the commissioner may by rule specify
138 additional grounds that are not reasonable. This Subsection (5) does not bar an insurer from
139 declining an application for insurance.
140 (6) A person may not make any charge other than insurance premiums and premium
141 financing charges for the protection of property or of a security interest in property, as a

142 condition for obtaining, renewing, or continuing the financing of a purchase of the property or
143 the lending of money on the security of an interest in the property.
144 (7) (a) A licensee under this title may not refuse or fail to return promptly all indicia of
145 agency to the principal on demand.
146 (b) A licensee whose license is suspended, limited, or revoked under Section
147 31A-2-308 , 31A-23a-111 , or 31A-23a-112 may not refuse or fail to return the license to the
148 commissioner on demand.
149 (8) (a) A person may not engage in an unfair method of competition or any other unfair
150 or deceptive act or practice in the business of insurance, as defined by the commissioner by
151 rule, after a finding that the method of competition, the act, or the practice:
152 (i) is misleading;
153 (ii) is deceptive;
154 (iii) is unfairly discriminatory;
155 (iv) provides an unfair inducement; or
156 (v) unreasonably restrains competition.
157 (b) Notwithstanding Subsection (8)(a), for purpose of the title insurance industry, the
158 Title and Escrow Commission shall make rules, subject to Section 31A-2-404 , that define an
159 unfair method of competition or unfair or deceptive act or practice after a finding that the
160 method of competition, the act, or the practice:
161 (i) is misleading;
162 (ii) is deceptive;
163 (iii) is unfairly discriminatory;
164 (iv) provides an unfair inducement; or
165 (v) unreasonably restrains competition.
166 Section 2. Section 31A-30-106.1 is amended to read:
167 31A-30-106.1. Small employer premiums -- Rating restrictions -- Disclosure.
168 (1) Premium rates for small employer health benefit plans under this chapter are
169 subject to this section [for a health benefit plan that is issued or renewed, on or after July 1,

170 2011].
171 (2) (a) The index rate for a rating period for any class of business may not exceed the
172 index rate for any other class of business by more than 20%.
173 (b) For a class of business, the premium rates charged during a rating period to covered
174 insureds with similar case characteristics for the same or similar coverage, or the rates that
175 could be charged to an employer group under the rating system for that class of business, may
176 not vary from the index rate by more than 30% of the index rate, except when catastrophic
177 mental health coverage is selected as provided in Subsection 31A-22-625 (2)(d).
178 (3) The percentage increase in the premium rate charged to a covered insured for a new
179 rating period, adjusted pro rata for rating periods less than a year, may not exceed the sum of
180 the following:
181 (a) the percentage change in the new business premium rate measured from the first
182 day of the prior rating period to the first day of the new rating period;
183 (b) any adjustment, not to exceed 15% annually and adjusted pro rata for rating periods
184 of less than one year, due to the claim experience, health status, or duration of coverage of the
185 covered individuals as determined from the small employer carrier's rate manual for the class of
186 business, except when catastrophic mental health coverage is selected as provided in
187 Subsection 31A-22-625 (2)(d); and
188 (c) any adjustment due to change in coverage or change in the case characteristics of
189 the covered insured as determined for the class of business from the small employer carrier's
190 rate manual.
191 (4) (a) Adjustments in rates for claims experience, health status, and duration from
192 issue may not be charged to individual employees or dependents.
193 (b) Rating adjustments and factors, including case characteristics, shall be applied
194 uniformly and consistently to the rates charged for all employees and dependents of the small
195 employer.
196 (c) Rating factors shall produce premiums for identical groups that:
197 (i) differ only by the amounts attributable to plan design; and

198 (ii) do not reflect differences due to the nature of the groups assumed to select
199 particular health benefit products.
200 (d) A small employer carrier shall treat all health benefit plans issued or renewed in the
201 same calendar month as having the same rating period.
202 (5) A health benefit plan that uses a restricted network provision may not be considered
203 similar coverage to a health benefit plan that does not use a restricted network provision,
204 provided that use of the restricted network provision results in substantial difference in claims
205 costs.
206 (6) The small employer carrier may not use case characteristics other than the
207 following:
208 (a) age of the employee, [as determined at the beginning of the plan year, limited to:] in
209 accordance with Subsection (7);
210 (b) geographic area;
211 (c) family composition in accordance with Subsection (9);
212 (d) for plans renewed or effective on or after July 1, 2011, gender of the employee and
213 spouse; and
214 (e) for an individual age 65 and older, whether the employer policy is primary or
215 secondary to Medicare.
216 (7) Age limited to:
217 [(i)] (a) the following age bands:
218 [(A)] (i) less than 20;
219 [(B)] (ii) 20-24;
220 [(C)] (iii) 25-29;
221 [(D)] (iv) 30-34;
222 [(E)] (v) 35-39;
223 [(F)] (vi) 40-44;
224 [(G)] (vii) 45-49;
225 [(H)] (viii) 50-54;

226 [(I)] (ix) 55-59;
227 [(J)] (x) 60-64; and
228 [(K)] (xi) 65 and above; and
229 [(ii)] (b) a standard slope ratio range for each age band, applied to each family
230 composition tier rating structure under Subsection [(6)(c)] (9)(b):
231 [(A)] (i) as developed by the commissioner by administrative rule; and
232 [(B)] (ii) not to exceed an overall ratio [of 5:1; and] as provided in Subsection (8).
233 (8) (a) The overall ratio permitted in Subsection (7)(b)(ii) may not exceed:
234 (i) 5:1 for plans renewed or effective before January 1, 2012; and
235 (ii) 6:1 for plans renewed or effective on or after January 1, 2012; and
236 [(C)] (b) the age slope ratios for each age band may not overlap[;].
237 [(b) geographic area;]
238 [(c) family] (9) Except as provided in Subsection 31A-30-207 (2), family
239 composition[,] is limited to:
240 [(i)] (a) an overall ratio of [5:1 or less; and]:
241 [(ii) a four]
242 (i) 5:1 or less for plans renewed or effective before January 1, 2012; and
243 (ii) 6:1 or less for plans renewed or effective on or after January 1, 2012; and
244 (b) a tier rating structure that includes:
245 (i) four tiers that include:
246 (A) employee only;
247 (B) employee plus spouse;
248 (C) employee plus a [dependent or dependents] child or children; and
249 (D) a family, consisting of an employee plus spouse, and a [dependent or dependents]
250 child or children; [and]
251 [(d) gender of the employee or spouse.]
252 (ii) for plans renewed or effective on or after January 1, 2012, five tiers that include:
253 (A) employee only;

254 (B) employee plus spouse;
255 (C) employee plus one child;
256 (D) employee plus two or more children; and
257 (E) employee plus spouse plus one or more children; or
258 (iii) for plans renewed or effective on or after January 1, 2012, six tiers that include:
259 (A) employee only;
260 (B) employee plus spouse;
261 (C) employee plus one child;
262 (D) employee plus two or more children;
263 (E) employee plus spouse plus one child; and
264 (F) employee plus spouse plus two or more children.
265 [(7)] (10) If a health benefit plan is a health benefit plan into which the small employer
266 carrier is no longer enrolling new covered insureds, the small employer carrier shall use the
267 percentage change in the base premium rate, provided that the change does not exceed, on a
268 percentage basis, the change in the new business premium rate for the most similar health
269 benefit product into which the small employer carrier is actively enrolling new covered
270 insureds.
271 [(8)] (11) (a) A covered carrier may not transfer a covered insured involuntarily into or
272 out of a class of business.
273 (b) A covered carrier may not offer to transfer a covered insured into or out of a class
274 of business unless the offer is made to transfer all covered insureds in the class of business
275 without regard to:
276 (i) case characteristics;
277 (ii) claim experience;
278 (iii) health status; or
279 (iv) duration of coverage since issue.
280 [(9)] (12) (a) Each small employer carrier shall maintain at the small employer carrier's
281 principal place of business a complete and detailed description of its rating practices and

282 renewal underwriting practices, including information and documentation that demonstrate that
283 the small employer carrier's rating methods and practices are:
284 (i) based upon commonly accepted actuarial assumptions; and
285 (ii) in accordance with sound actuarial principles.
286 (b) (i) Each small employer carrier shall file with the commissioner on or before April
287 1 of each year, in a form and manner and containing information as prescribed by the
288 commissioner, an actuarial certification certifying that:
289 (A) the small employer carrier is in compliance with this chapter; and
290 (B) the rating methods of the small employer carrier are actuarially sound.
291 (ii) A copy of the certification required by Subsection [(9)] (12)(b)(i) shall be retained
292 by the small employer carrier at the small employer carrier's principal place of business.
293 (c) A small employer carrier shall make the information and documentation described
294 in this Subsection [(9)] (12) available to the commissioner upon request.
295 [(10)] (13) (a) The commissioner shall[, by July 1, 2010,] establish rules in accordance
296 with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, to:
297 (i) implement this chapter; and
298 (ii) assure that rating practices used by small employer carriers under this section and
299 carriers for individual plans under Section 31A-30-106 [, in effect on January 1, 2011,] are
300 consistent with the purposes of this chapter.
301 (b) The rules may:
302 (i) assure that differences in rates charged for health benefit plans by carriers are
303 reasonable and reflect objective differences in plan design, not including differences due to the
304 nature of the groups or individuals assumed to select particular health benefit plans; and
305 (ii) prescribe the manner in which case characteristics may be used by small employer
306 and individual carriers.
307 [(11)] (14) Records submitted to the commissioner under this section shall be
308 maintained by the commissioner as protected records under Title 63G, Chapter 2, Government
309 Records Access and Management Act.

310 Section 3. Section 31A-30-115 is amended to read:
311 31A-30-115. Actuarial review of health benefit plans.
312 (1) (a) The department shall conduct an actuarial review of rates submitted by small
313 employer carriers:
314 (i) prior to the publication of the premium rates on the Health Insurance Exchange;
315 (ii) except as permitted by Subsection 31A-30-207 (2), to determine if the [rates are]
316 carrier is using the same rating and underwriting practices in both the defined contribution
317 arrangement market in the Health Insurance Exchange and the defined benefit market offered
318 outside the Health Insurance Exchange, in compliance with Subsection 31A-30-202.5 (1)(b);
319 (iii) to verify the validity of the rates, underwriting and risk factors, and premiums of
320 plans both in and outside of the Health Insurance Exchange;
321 (iv) to verify that insurers are pricing similar health benefit plans and groups the same
322 in and out of the exchange, except as permitted by Subsection 31A-30-207 (2); and
323 (v) as the department determines is necessary to oversee market conduct.
324 (b) The actuarial review by the department shall be funded from a fee:
325 (i) established by the department in accordance with Section 63J-1-504 ; and
326 (ii) paid by all small employer carriers participating in the defined contribution
327 arrangement market and small employer carriers offering health benefit plans under [Chapter
328 30,] Part 1, Individual and Small Employer Group.
329 (c) The department shall:
330 (i) report aggregate data from the actuarial review to the risk adjuster board created in
331 Section 31A-42-201 ; and
332 (ii) contact carriers, if the department determines it is appropriate, to:
333 (A) inform a carrier of the department's findings regarding the rates of a particular
334 carrier; and
335 (B) request a carrier to recalculate or verify base rates, rating factors, and premiums.
336 (d) A carrier shall comply with the department's request under Subsection (1)(c)(ii).
337 (2) (a) There is created in the General Fund a restricted account known as the "Health

338 Insurance Actuarial Review Restricted Account."
339 (b) The Health Insurance Actuarial Review Restricted Account shall consist of money
340 received by the commissioner under this section.
341 (c) The commissioner shall administer the Health Insurance Actuarial Review
342 Restricted Account. Subject to appropriations by the Legislature, the commissioner shall use
343 money deposited into the Health Insurance Actuarial Review Restricted Account to pay for the
344 actuarial review conducted by the department under this section.
345 Section 4. Section 31A-30-202.5 is amended to read:
346 31A-30-202.5. Insurer participation in defined contribution arrangement market.
347 (1) A small employer carrier who chooses to participate in the defined contribution
348 arrangement market:
349 (a) shall offer the defined contribution arrangement health benefit plans required by
350 Section 31A-30-205 ;
351 (b) may:
352 (i) offer additional defined contribution arrangement health benefit plans in the Health
353 Insurance Exchange as permitted by Section 31A-30-205 ;
354 (ii) offer a defined benefit plan in the Health Insurance Exchange if the small employer
355 carrier offers a defined contribution arrangement health benefit plan that is actuarially
356 equivalent to the defined benefit plan that is offered in the Health Insurance Exchange; and
357 (iii) continue to offer defined benefit plans outside of the Health Insurance Exchange
358 and the defined contribution arrangement market, if, except as provided in Subsection
359 31A-30-207 (2), the carrier uses the same rating and underwriting practices in both the defined
360 contribution arrangement market in the Health Insurance Exchange and the defined benefit
361 market outside the Health Insurance Exchange.
362 (2) A carrier that does not elect to participate in the defined contribution arrangement
363 market by January 1, 2011, may not participate in the defined contribution arrangement market
364 in the Health Insurance Exchange until January 1, 2013.
365 Section 5. Section 31A-30-207 is amended to read:

366 31A-30-207. Rating and underwriting restrictions for health plans in the defined
367 contribution arrangement market.
368 (1) [The] Except as provided in Subsection (2), rating and underwriting restrictions for
369 [defined benefit plans and for the] defined contribution arrangement health benefit plans
370 offered in the Health Insurance Exchange [defined contribution arrangement market] shall be in
371 accordance with Section 31A-30-106.1 , and the plan adopted under Chapter 42, Defined
372 Contribution Risk Adjuster Act.
373 (2) Notwithstanding the provisions of Subsections 31A-30-106.1 (9)(b)(ii) and (iii), a
374 carrier offering a defined contribution arrangement in the Health Insurance Exchange under
375 this part:
376 (a) shall calculate rates based on a family tier rating structure that includes four tiers in
377 compliance with Subsection 31A-30-106.1 (9)(b)(i); and
378 (b) may not calculate rates based on a family tier rating structure that includes five or
379 six tiers as described in Subsection 31A-30-106 (9)(b)(ii) or (iii).
380 [(2)] (3) All insurers who participate in the defined contribution market shall:
381 (a) participate in the risk adjuster mechanism developed under Chapter 42, Defined
382 Contribution Risk Adjuster Act for all defined contribution arrangement health benefit plans;
383 (b) provide the risk adjuster board with:
384 (i) an employer group's risk factor; and
385 (ii) carrier enrollment data; and
386 (c) submit rates to the exchange that are net of commissions.
387 [(3)] (4) When an employer group enters the defined contribution arrangement market
388 [for either a defined contribution arrangement health benefit plan, or a defined benefit plan,]
389 and the employer group has a health plan with an insurer who is participating in the defined
390 contribution arrangement market, the risk factor applied to the employer group when it enters
391 the defined contribution arrangement market may not be greater than the employer group's
392 renewal risk factor for the same group of covered employees and the same effective date, as
393 determined by the employer group's insurer.

394 Section 6. Section 31A-30-211 is amended to read:
395 31A-30-211. Insurer disclosure.
396 (1) The Health Insurance Exchange shall provide an [employer and an] employer's
397 producer with the group's risk factor used to calculate the employer group's premium at the
398 time of:
399 (a) the initial offering of a health benefit plan; and
400 (b) the renewal of a health benefit plan.
401 (2) For health benefit plans that renew on or after March 1, 2012:
402 (a) a carrier [in the small employer market under Part 1, Individual and Small
403 Employer Group,] shall provide an employer and the employer's producer with premium
404 renewal rates at least 60 days prior to the group's renewal date for a plan offered under Part 1,
405 Individual and Small Employer Group; and
406 (b) the Health Insurance Exchange shall provide [an employer who is participating in
407 the defined contribution arrangement market of the Health Insurance Exchange and the] an
408 employer and the employer's producer with premium renewal rates at least 60 days prior to [a]
409 the group's renewal date for a plan offered under Part 2, Defined Contribution Arrangements.
410 (3) An insurer does not have to provide additional notice of premium renewal rates to
411 the employer or the employer's producer if the Health Insurance Exchange provides notice in
412 accordance with Subsection (2)(b).
413 Section 7. Appropriation.
414 Under the terms and conditions of Utah Code Title 63J, Chapter 1, Budgetary
415 Procedures Act, the following sums of money are appropriated one-time only from the funds or
416 fund accounts indicated for the use and support of the government of the state for the fiscal
417 year beginning July 1, 2011, and ending June 30, 2012.
418 To the Insurance Department - Risk Adjuster
419 From General Fund, One-time $35,000
420 Schedule of Programs:
421 Risk Adjuster $35,000