THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY DeLUCA, BELFANTI, CALTAGIRONE, CASORIO, D. COSTA, DALEY, DONATUCCI, GRUCELA, HARKINS, JOSEPHS, McILVAINE SMITH, MUNDY, OLIVER, PASHINSKI, PAYTON, READSHAW AND K. SMITH, SEPTEMBER 24, 2010

REFERRED TO COMMITTEE ON INSURANCE, SEPTEMBER 24, 2010  

AN ACT

Amending the act of May 17, 1921 (P.L.682, No.284), entitled "An

act relating to insurance; amending, revising, and

consolidating the law providing for the incorporation of

insurance companies, and the regulation, supervision, and

protection of home and foreign insurance companies, Lloyds

associations, reciprocal and inter-insurance exchanges, and

fire insurance rating bureaus, and the regulation and

supervision of insurance carried by such companies,

associations, and exchanges, including insurance carried by

the State Workmen's Insurance Fund; providing penalties; and

repealing existing laws," providing for affordable small

group health care coverage; and making inconsistent repeals.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  The act of May 17, 1921 (P.L.682, No.284), known

as The Insurance Company Law of 1921, is amended by adding an

article to read:

ARTICLE XLII

AFFORDABLE SMALL GROUP HEALTH CARE COVERAGE

Section 4201.  Scope of article.

This article relates to health care reform.

Section 4202.  Definitions.

The following words and phrases when used in this article

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Accident and Health Filing Reform Act."  The act of December

18, 1996 (P.L.1066, No.159), known as the Accident and Health

Filing Reform Act.

"Commissioner."  The Insurance Commissioner of the

Commonwealth.

"Commonwealth Attorneys Act."  The act of October 15, 1980

(P.L.950, No.164), known as the Commonwealth Attorneys Act.

"Commonwealth Documents Law."  The act of July 31, 1968

(P.L.769, No.240), referred to as the Commonwealth Documents

Law.

"Creditable coverage."  As defined in section 2701 of the

Health Insurance Portability and Accountability Act of 1996

(Public Law 104-191, 42 U.S.C. § 300gg).

"Department."  The Insurance Department of the Commonwealth.

"Eligible employee."  A person employed by a large employer

or a small employer on a regularly scheduled basis, with a

normal work week of 17.5 hours or more, but does not include

persons who work on a temporary, seasonal or substitute basis.

"Health benefit plan."  Any individual or group health

insurance policy, subscriber contract, certificate or plan which

provides health or sickness and accident coverage which is

offered by an insurer. The term shall not include any of the

following:

(1)  An accident only policy.

(2)  A credit only policy.

(3)  A long-term or disability income policy.

(4)  A long-term care policy.

(5)  A specified disease policy.

(6)  A Medicare supplement policy.

(7)  A Civilian Health and Medical Program of the

Uniformed Services (CHAMPUS) supplement policy.

(8)  A fixed indemnity policy.

(9)  A dental only policy.

(10)  A vision only policy.

(11)  A workers' compensation policy.

(12)  An automobile medical payment policy under 75

Pa.C.S. (relating to vehicles).

(13)  Any other similar policy providing for limited

benefits.

"Individual market."  The health insurance market for

individuals as defined in section 2791 of the Health Insurance

Portability and Accountability Act of 1996 (Public Law 104-191,

42 U.S.C. § 300gg-91).

"Insurer."  A company or health insurance entity licensed in

this Commonwealth to issue any individual or group health,

sickness or accident policy or subscriber contract or

certificate or plan that provides medical or health care

coverage by a health care facility or licensed health care

provider that is offered or governed under this act or any of

the following:

(1)  The act of December 29, 1972 (P.L.1701, No.364),

known as the Health Maintenance Organization Act.

(2)  The act of May 18, 1976 (P.L.123, No.54), known as

the Individual Accident and Sickness Insurance Minimum

Standards Act.

(3)  40 Pa.C.S. Ch. 61 (relating to hospital plan

corporations) or 63 (relating to professional health services

plan corporations).

(4)  Article XXIV.

"Large employer."  In connection with a group health plan

with respect to a calendar year and a plan year, an employer who

employs an average of 51 or more eligible employees on business

days during the preceding calendar year and who employs at least

51 eligible employees on the first day of the plan year. In the

case of an employer which was not in existence throughout the

preceding calendar year, the determination whether an employer

is a large employer shall be based on the average number of

eligible employees that it is reasonably expected that the

employer will employ on business days in the current calendar

year.

"Large group market."  The health insurance market for large

employers.

"Medical loss ratio."  As defined in the Patient Protection

and Affordable Care Act (Public Law 111-148, 124 Stat. 119).

"NAIC."  The National Association of Insurance Commissioners.

"Plan year."  The 12-consecutive-month period beginning on

the first day of coverage under a health benefit plan.

"Preexisting condition exclusion."  As defined in section

2701 of the Health Insurance Portability and Accountability Act

of 1996 (Public Law 104-191, 42 U.S.C. § 300gg). Pregnancy and

conditions for which medical advice, diagnosis, care or

treatment was recommended or received before birth or within the

first 60 days after birth or within the first 60 days after

adoption of a minor child shall not be treated as conditions

described in the definition in section 2701.

"Small employer."  In connection with a group health plan

with respect to a calendar year and a plan year, an employer who

employs an average of at least two but not more than 50 eligible

employees on business days during the preceding calendar year

and who employs at least two eligible employees on the first day

of the plan year. In the case of an employer which was not in

existence throughout the preceding calendar year, the

determination whether an employer is a small employer shall be

based on the average number of eligible employees that it is

reasonably expected that the employer will employ on business

days in the current calendar year.

"Small group health benefit plan."  A health benefit plan

offered to a small employer.

"Small group market."  The health insurance market for small

employers.

"Standard plan."  One of the health benefit packages

established by the Insurance Department in accordance with

section 4204.

Section 4203.  Health insurance premium rates.

(a)  Applicability.--This section shall apply to all small

group health benefit plans that are issued, made effective,

delivered or renewed in this Commonwealth after the effective

date of this section.

(b)  Premium rates.--

(1)  The premium for a small group health benefit plan

shall not be adjusted by an insurer more than once each year,

except that rates may be changed more frequently to reflect:

(i)  Changes to the enrollment of the small employer

group.

(ii)  Changes to a small group health benefit plan

that have been requested by the small employer.

(iii)  Changes pursuant to a government order or

judicial proceeding.

(2)  An insurer shall base its rating methods and

practices on commonly accepted actuarial assumptions and

sound actuarial principles. Rates shall not be excessive,

inadequate or unfairly discriminatory.

(c)  Additional rate review and prior approval.--

(1)  In conjunction with and in addition to the standards

set forth in the Accident and Health Filing Reform Act, and

all other applicable statutory and regulatory requirements,

all rate filings shall be subject to prior approval by the

department within the 45-day period provided under section

3(f) of the Accident and Health Filing Reform Act.

(2)  In conjunction with and in addition to the standards

set forth under the Accident and Health Filing Reform Act,

and all other applicable statutory and regulatory

requirements, the department may disapprove a rate filing

based upon any of the following:

(i)  The rate is not actuarially sound.

(ii)  The increase is requested because the insurer

has factored in experience that conflicts with recognized

best practices in the health care industry, including the

allocation of administrative expenses to the plan on a

less favorable basis than expenses are allocated to other

health benefit plans.

(iii)  The increase is requested because the insurer

has incurred costs due to failure to follow best

practices for cost control, including efforts to promote

a reduction in hospital-acquired infections and serious

preventable adverse events.

(iv)  The medical loss ratio for a plan violates the

Patient Protection and Affordable Care Act (Public Law

111-148, 124 Stat. 119).

(3)  In the event a plan has a medical loss ratio that

violates the Patient Protection and Affordable Care Act

(Public Law 111-148, 124 Stat. 119), the department may, in

addition to any other remedies available under law, require

the insurer to refund the difference to policyholders on a

pro rata basis as soon as practicable following receipt of

notice from the department of the requirement but in no event

later than 120 days following receipt of the notice. The

department shall establish procedures under which such

refunds will be made.

(d)  Procedures.--The filing and review procedures set forth

under the Accident and Health Filing Reform Act shall apply to

any filing conducted under this section, except that no filing

deemed to meet the requirements of this act shall take effect

unless the department receives written notice of the insurer's

intent to exercise the right granted under this section at least

ten calendar days prior to implementation of rates authorized by

this act.

Section 4204.  Fair marketing standards.

Every insurer and producer must meet the following standards,

as appropriate:

(1)  An insurer that offers small group health benefit

plans shall offer to small employers all of the small group

health benefit plans that the insurer actively markets in

this Commonwealth. An insurer shall be considered to be

actively marketing a small group health benefit plan if it

offers that plan to any small group not currently covered by

that insurer.

(2)  The following shall apply:

(i)  Except as provided in subparagraph (ii), a

producer or an insurer that provides small group health

benefit plans shall not encourage or direct a small

employer to refrain from filing an application for

coverage with the insurer or seek coverage from another

insurer because of a health status-related factor or the

nature of the industry, occupation or geographic location

of the small employer.

(ii)  The provisions of subparagraph (i) shall not

apply with respect to information provided by an insurer

or producer to a small employer regarding an established

geographic service area or a restricted network provision

of an insurer.

(3)  An insurer that provides small group health benefit

plans shall not enter into a contract, agreement or

arrangement that provides for or results in a producer's

compensation being varied because of a health status-related

factor or the nature of the industry or occupation of the

small employer.

(4)  An insurer that provides small group health benefit

plans shall not terminate, fail to renew or limit its

contract or agreement with a producer for a reason or reasons

related to a health status-related factor or occupation of

the small employer.

(5)  A producer or insurer that provides small group

health benefit plans shall not induce or encourage a small

employer to exclude an employee or the employee's dependents

from health coverage or benefits available under the plan.

Section 4205.  Reporting requirements.

(a)  Health insurance market reports.--Not less frequently

than March 1 of every calendar year, the department may require

each insurer and each insurer group to file the following

reports with the department:

(1)  Aggregate financial information for the preceding

year derived from each insurer's NAIC annual statement blank

or, if not available from the annual statement blank, from

other certifiable records:

(i)  Total amount of general administrative expenses,

including identification of the five largest nonmedical

administrative expenses.

(ii)  Total amount of surplus maintained.

(iii)  Total amount of reserves maintained for unpaid

claims.

(iv)  Total net underwriting gain or loss.

(v)  Insurer's net income after taxes.

(2)  Market information for the preceding calendar year,

derived from each insurer's NAIC annual statement blank or,

if not available from the annual statement blank, from other

certifiable records that are segmented Statewide and

segregated for the individual market, the small group market

and the large group market:

(i)  Total number of members as of December 31.

(ii)  Total number of member months.

(iii)  Premiums earned.

(iv)  Incurred medical claims costs.

(v)  Medical loss ratio.

(vi)  Average premium per member per month for the

reporting year, derived by dividing earned premiums by

member months.

(vii)  Average premium per member per month for the

preceding reporting year, derived by dividing earned

premiums by member months.

(viii)  A description of each rating method used to

determine rates indicating the specific group size for

which each method was used.

(ix)  A listing of all factors used in the rating for

each market and the range of these factors.

(3)  Aggregate market information for the preceding year

derived from each insurer's NAIC annual statement blank or,

if not available there, from other certifiable records, for

covered lives in Pennsylvania by individual market, small

group market and large group market:

(i)  Total number of members covered by entities with

administrative services contracts or administrative

services-only arrangements.

(ii)  Total number of members covered by associations

or out-of-State trusts covering lives in Pennsylvania.

(b)  Submission.--Each report required by this section shall

be electronically submitted in a format and according to

instructions prescribed by the department.

(c)  Public access.--The department shall make the

information reported under this section available to the public

through a searchable public Internet website.

(d)  Data calls.--The department may issue data calls as

necessary to fulfill the requirements of this article. Any data

calls issued under this section shall be published in the

Pennsylvania Bulletin.

(e)  Limitation.--The department shall have discretion to

modify the reporting requirements of this section by

transmitting notice to the Legislative Reference Bureau for

publication in the Pennsylvania Bulletin.

(f)  Compliance.--For failure to comply with any reports or

data calls required under this section, the commissioner shall

impose an administrative penalty of $1,000 against each insurer

for every day that the report or data is not provided in

accordance with this section.

(g)  Definition.--As used in this section, specifically for

purposes of the reporting required in subsection (a), "member"

means an individual person covered by a health benefit plan, an

association or an out-of-State trust. The term includes

dependents.

Section 4206.  Regulations.

The department and the Department of Education shall 

promulgate regulations as necessary for the implementation and

administration of this article. The department may promulgate

regulations as necessary for the implementation of this article.

Section 4207.  Small employer groups.

(a)  Formation authority.--A group of two or more small

employers may form a purchasing group for the purpose of

purchasing a small group health benefit plan provided for under

this article from an insurer.

(b)  Certification.--No insurance policy may be issued,

delivered or renewed to a purchasing group unless that

purchasing group has a valid certification from the department.

(c)  Certification subject to criteria.--Unless certification

requirements are promulgated, certification under this

subsection shall be subject to the criteria set forth in section

621.2(a)(5.1).

(d)  Applicability.--The provisions of this section shall

apply notwithstanding the provisions of section 621.2(a)(2).

Section 4208.  Enforcement.

(a)  Determination of violation.--Upon a determination that a

person licensed by the department has violated any provision of

this article, the commissioner may, subject to 2 Pa.C.S. Chs. 5

Subch. A (relating to practice and procedure of Commonwealth

agencies) and 7 Subch. A (relating to judicial review of

Commonwealth agency action), do any of the following:

(1)  Issue an order requiring the person to cease and

desist from engaging in the violation.

(2)  Suspend or revoke or refuse to issue or renew the

certificate or license of the offending party or parties.

(3)  Impose an administrative penalty of up to $5,000 for

each violation.

(4)  Seek restitution.

(b)  Other remedies.--The enforcement remedies imposed under

this section shall be in addition to any other remedies or

penalties that may be imposed by any other statute, including:

(1)  The act of July 22, 1974 (P.L.589, No.205), known as

the Unfair Insurance Practices Act. A violation by any person

of this article is deemed an unfair method of competition and

an unfair or deceptive act or practice under the Unfair

Insurance Practices Act.

(2)  The Accident and Health Filing Reform Act.

Section 2.  Repeals are as follows:

(1)  The General Assembly declares that the repeal under

paragraph (2) is necessary to effectuate the addition of

Article XLII of the act.

(2)  Section 3 of the act of December 18, 1996 (P.L.1066,

No.159), known as the Accident and Health Filing Reform Act,

is repealed insofar as it applies to small group health

benefit plan rates.

(3)  All other acts and parts of acts are repealed

insofar as they are inconsistent with the addition of Article

XLII of the act.

Section 3.  This act shall take effect immediately.