PRINTER'S NO. 761
No. 671 Session of 2003
INTRODUCED BY WONDERLING, MOWERY, JUBELIRER, M. WHITE, ERICKSON,
BOSCOLA, PICCOLA, WOZNIAK, TARTAGLIONE, RHOADES AND
C. WILLIAMS, APRIL 24, 2003
REFERRED TO BANKING AND INSURANCE, APRIL 24, 2003
AN ACT
1 Imposing restrictions relating to premium rates for health
2 benefit plans; providing for renewability and availability of
3 coverage; establishing standards to assure fair marketing;
4 and providing for the powers and duties of the Insurance
5 Commissioner.
6 The General Assembly of the Commonwealth of Pennsylvania
7 hereby enacts as follows:
8 Section 1. Short title.
9 This act shall be known and may be cited as the Pennsylvania
10 Health Care Security Act.
11 Section 2. Purpose.
12 The purpose and intent of this act is to promote the
13 availability of health insurance coverage to individuals and
14 small employers regardless of their health status in order to
15 prevent abusive rating practices, to spread health insurance
16 risk more broadly, to establish rules regarding renewability of
17 coverage and to establish limitations on the use of preexisting
18 condition exclusions.
19 Section 3. Definitions.
1 The following words and phrases when used in this act shall
2 have the meanings given to them in this section unless the
3 context clearly indicates otherwise:
4 "Carrier." A health insurance entity subject to the act of
5 May 17, 1921 (P.L.682, No.284), known as The Insurance Company
6 Law of 1921, insurance laws and regulations of this Commonwealth
7 or subject to the jurisdiction of the Insurance Commissioner
8 that contracts or offers to contract to provide, deliver,
9 arrange for, pay for or reimburse any of the costs of health
10 care services, including a sickness and accident insurance
11 company, a health maintenance organization as defined in the act
12 of December 29, 1972 (P.L.1701, No.364), known as the Health
13 Maintenance Organization Act, a hospital plan corporation as
14 defined in 40 Pa.C.S. Ch. 61 (relating to hospital plan
15 corporations), a professional health service plan corporation as
16 defined in 40 PA.C.S. Ch. 63 (relating to professional health
17 services plan corporations), a fraternal benefit society
18 organized and operating under Article XXIV of the act of May 17,
19 1921 (P.L.682, No.284), known as The Insurance Company Law of
20 1921, or any other entity providing a plan of health insurance,
21 health benefits or health services.
22 "Commissioner." The Insurance Commissioner of the
23 Commonwealth.
24 "Community rating." A rating method used to develop a
25 carrier's premium that spreads financial risk across the
26 carrier's small group population, which results in a community-
27 rated premium rate that may be based on a geographic community's
28 rate experience for small group policies and in which counties
29 are the smallest permissible rating territory.
30 "Creditable coverage." With respect to an individual, health
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1 benefits or coverage provided under any of the following:
2 (1) A group health plan.
3 (2) A health plan.
4 (3) Medicare under Part A or Part B of Title XVIII of
5 the Social Security Act (49 Stat. 620, 42 U.S.C. § 301 et
6 seq.).
7 (4) Medicaid under Title XIX of the Social Security Act
8 (49 Stat. 620, 42 U.S.C. § 301 et seq.), other than coverage
9 consisting solely of benefits under section 1928 of that act.
10 (5) CHAMPUS, under 10 U.S.C. Ch. 55, where "uniformed
11 services" means the armed forces and the Commissioned Corps
12 of the National Oceanic and Atmospheric Administration and of
13 the Public Health Services.
14 (6) A health plan offered under 5 U.S.C. Ch. 89.
15 (7) A health insurance program administered by the
16 Insurance Department.
17 "Department." The Insurance Department of the Commonwealth.
18 "Dependent." Subject to applicable terms of a health
19 benefits plan:
20 (1) the spouse of an eligible employee; or
21 (2) an unmarried child who is under 19 years of age of
22 an eligible employee.
23 "Eligible employee." An employee who works on a full-time
24 basis with a normal work week of 30 or more hours, except that
25 at the employer's sole discretion, the term shall also include
26 an employee who works on a full-time basis with a normal work
27 week of anywhere between at least 17.5 and 30 hours, as long as
28 this eligibility criterion is applied uniformly among all of the
29 employer's employees and without regard to any health status-
30 related factor. The term shall include a self-employed
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1 individual, a sole proprietor, a partner of a partnership and an
2 independent contractor if the self-employed individual, sole
3 proprietor, partner or independent contractor is included as an
4 employee under a health benefit plan of a small employer. The
5 term does not include an employee who works on a temporary or
6 substitute basis or who works less than 17.5 hours per week.
7 "Health benefit plan." A hospital or medical expense
8 insurance policy offered by a carrier for medical care delivered
9 or issued for delivery for a subscriber. The term does not
10 include one or more or any combination of the following:
11 (1) Coverage only for accident or disability income
12 insurance or any combination thereof.
13 (2) Coverage issued as a supplement to liability
14 insurance.
15 (3) Liability insurance, including general liability
16 insurance and automobile liability insurance.
17 (4) Stop-loss or excess-risk insurance.
18 (5) Workers' compensation or similar insurance.
19 (6) Automobile medical payment insurance.
20 (7) Credit-only insurance.
21 (8) Other similar insurance coverage as specified in
22 Federal regulations under which benefits for medical care are
23 secondary or incidental to other insurance benefits.
24 The term shall not include Medicare supplemental health
25 insurance as defined under section 1882(g)(1) of the Social
26 Security Act (49 Stat. 620, 42 U.S.C. § 1395ss(g)(1)).
27 "Health status-related." Any of the following factors:
28 (1) Health status.
29 (2) Medical condition, including both physical and
30 mental illness.
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1 (3) Substance abuse.
2 (4) Claims experience.
3 (5) Receipt of health care.
4 (6) Medical history.
5 (7) Genetic information.
6 (8) Evidence of insurability, including conditions
7 arising out of acts of domestic violence.
8 (9) Disability.
9 "Preexisting condition." A condition, regardless of the
10 cause of the condition, for which medical advice, diagnosis,
11 care or treatment was recommended or received during the six
12 months immediately preceding the enrollment date of coverage.
13 "Restricted network provision." Any provision of a health
14 benefit plan that conditions the payment of benefits, in whole
15 or in part, on the use of health care providers that have
16 entered into a contractual arrangement with the carrier to
17 provide health care services to covered individuals.
18 "Significant break in coverage." A period of 90 consecutive
19 days during which an individual does not have any creditable
20 coverage, excluding any waiting period or affiliation period.
21 "Small employer." A person, firm, corporation, partnership,
22 association or political subdivision that is located in this
23 Commonwealth and is actively engaged in business that on at
24 least 50% of its working days during the preceding calendar
25 quarter, employed a combination of no more than 100 eligible
26 employees and part-time employees and is not formed primarily
27 for the purposes of buying health insurance and in which a bona
28 fide employer-employee relationship exists.
29 "Small group health benefit plan." A health benefit plan for
30 groups of two to 100 eligible persons.
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1 Section 3. Applicability.
2 This act shall apply to any health benefit plan offered by a
3 carrier that provides coverage to the employees of a small
4 employer in this Commonwealth.
5 Section 4. Restrictions relating to premium rates.
6 (a) General rule.--Premium rates for a health benefit plan
7 subject to this act shall be subject to the following
8 provisions:
9 (1) A carrier offering health benefit plans to small
10 employers shall develop a community rate for each health
11 benefit plan and may only vary the community rate for
12 geographic area and family composition.
13 (2) No form of medical underwriting is permitted,
14 including use of any of the following factors:
15 (i) medical condition or health status-related
16 factors including both physical and mental illness;
17 (ii) claims experience;
18 (iii) genetic information;
19 (iv) Evidence of insurability, including conditions
20 arising out of acts of domestic violence; or
21 (v) Disability.
22 (b) Premium adjustment.--The premium for a health benefit
23 plan may not be adjusted by a carrier more frequently than
24 annually, except that the rates may be changed to reflect:
25 (1) Changes to the enrollment of the small employer
26 group.
27 (2) Changes to the health benefit plan requested by a
28 small employer.
29 (3) Changes to the family composition of employees.
30 (4) Government order or judicial proceeding.
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1 (c) Application of rating factors.--Rating factors for
2 health benefit plans shall produce premiums for identical groups
3 which differ only in the amounts attributable to plan design and
4 do not reflect differences due to the nature of the groups
5 assumed to select particular health benefit plans.
6 (d) Construction.--For the purposes of this section, a
7 health benefit plan that contains a restricted network provision
8 shall not be construed as having similar coverage as a health
9 benefit plan that does not contain such a provision.
10 (e) Regulations.--The commissioner shall establish
11 regulations to implement the provisions of this section and to
12 assure that rating practices used by small employer group
13 carriers are consistent with the purposes of this act.
14 Section 5. Renewability of coverage.
15 A small employer's health benefit plan subject to this act
16 shall be renewable with respect to all eligible employees or
17 dependents, at the option of the small employer, except in any
18 of the following cases:
19 (1) The small employer has failed to pay premiums or
20 contributions in accordance with the terms of the health
21 benefit plan or the carrier has not received timely premium
22 payments.
23 (2) The small employer has performed an act or practice
24 that constitutes fraud or made an intentional
25 misrepresentation of material fact.
26 (3) Noncompliance by the small employer with the
27 carrier's minimum participation requirements.
28 (4) Noncompliance by the small employer with the
29 carrier's employer contribution requirements.
30 (5) The carrier elects to discontinue offering some or
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1 all of its health benefit plans delivered or issued for
2 delivery to small employers in this Commonwealth, if the
3 carrier provides notice of the decision to:
4 (i) All affected small employers and covered
5 employees.
6 (ii) The commissioner at least 180 days prior to the
7 nonrenewal of any health benefit plans by the carrier.
8 Section 6. Availability of coverage.
9 (a) General rule.--As a condition of transacting business in
10 this Commonwealth, a small employer carrier shall actively offer
11 to small employers all health benefit plans that it actively
12 markets to small groups.
13 (b) Small groups.--A health benefit plan covering small
14 groups shall not deny, exclude or limit benefits for a covered
15 individual for losses incurred more than six months following
16 the enrollment day of the individual's coverage due to a
17 preexisting condition or the first date of the waiting period
18 for enrollment if that date is earlier than the enrollment date.
19 Section 7. Standards to assure fair marketing.
20 (a) General rule.--A small employer group carrier shall
21 actively market all health benefit plans sold by the carrier to
22 eligible small employers in this Commonwealth.
23 (b) Prohibited conduct.--Except as provided in subsection
24 (c), no small employer group carrier or producer shall, directly
25 or indirectly, engage in the following conduct:
26 (1) Encouraging or directing a small employer group to
27 refrain from filing an application for coverage with the
28 small employer carrier or producer because of any health
29 status factor, industry, occupation or geographic location of
30 a small employer.
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1 (2) Encouraging or directing a small employer to seek
2 coverage from another carrier because of any health status
3 factor, industry, occupation or geographic location of the
4 small employer.
5 (c) Exception.--The provisions of subsection (b) shall not
6 apply with respect to information provided by a carrier or
7 producer to a small employer regarding the established
8 geographic service area or a restricted network provision of a
9 carrier.
10 (d) Entrance into contracts.--No small employer group
11 carrier shall, directly or indirectly, enter into any contract,
12 agreement or arrangement with a producer that provides for or
13 results in the compensation paid to a producer for the sale of a
14 health benefit plan to be varied because of any initial or
15 renewal health status-related factor, industry or occupation of
16 the small employer.
17 (e) Termination of contracts.--No small employer group
18 carrier may terminate, fail to renew or limit its contract or
19 agreement of representation with a producer for any reason
20 related to any initial or renewal health status-related factor
21 or occupation of the small employer carrier.
22 (f) Separation or exclusion from coverage or benefits.--A
23 small employer group carrier or producer may not induce or
24 otherwise encourage a small employer to separate or otherwise
25 exclude an employee or dependent from health coverage or
26 benefits provided in connection with the employee's employment.
27 (g) Regulations.--The commissioner may establish regulations
28 setting forth additional standards to provide for the fair
29 marketing and broad availability of health benefit plans to
30 small employers in this Commonwealth.
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1 Section 8. Effective date.
2 This act shall take effect January 1, 2004.
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