PRINTER'S NO. 974
No. 845 Session of 2001
INTRODUCED BY SCHWARTZ, KITCHEN, RHOADES, KUKOVICH, BODACK,
TARTAGLIONE, LOGAN, MUSTO AND STACK, MAY 7, 2001
REFERRED TO BANKING AND INSURANCE, MAY 7, 2001
AN ACT
1 Requiring all health insurers, health service corporations and
2 health maintenance organizations to provide individual health
3 benefits coverage on an open enrollment basis; and
4 establishing the Individual Health Coverage Program.
5 TABLE OF CONTENTS
6 Chapter 1. General Provisions
7 Section 101. Short title.
8 Section 102. Definitions.
9 Chapter 3. Individual Health Insurance
10 Section 301. Individual health benefits plans required.
11 Section 302. Guarantee of coverage and renewal of policy.
12 Section 303. Duties of board.
13 Section 304. Exceptions to required coverage.
14 Section 305. Rates and filings.
15 Section 306. Individual Health Coverage Program and board.
16 Section 307. Powers and authority of program and board.
17 Section 308. Program losses; immunity; payments; and nongroup
18 persons.
1 Section 309. Statement of net paid losses and reimbursement.
2 Section 310. Determination of carriers with disproportionate
3 share of substandard risks and recommendations
4 for remedial action.
5 Section 311 Sale of plan.
6 Section 312. Rate filings.
7 Section 313. Action by board.
8 Section 314. Prohibition.
9 Section 315. Applicability; duplicative coverage; penalties;
10 rates.
11 Chapter 7. Miscellaneous Provisions
12 Section 701. Effective date.
13 The General Assembly of the Commonwealth of Pennsylvania
14 hereby enacts as follows:
15 CHAPTER 1
16 GENERAL PROVISIONS
17 Section 101. Short title.
18 This act shall be known and may be cited as the Individual
19 Health Insurance Act.
20 Section 102. Definitions.
21 The following words and phrases when used in this act shall
22 have the meanings given to them in this section unless the
23 context clearly indicates otherwise:
24 "Board." The board of directors of the Individual Health
25 Coverage Program.
26 "Carrier." An insurance company, health service corporation
27 or health maintenance organization authorized to issue health
28 benefits plans in this Commonwealth. For purposes of this act,
29 carriers that are affiliated companies shall be treated as one
30 carrier.
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1 "Commissioner." The Insurance Commissioner of the
2 Commonwealth.
3 "Community rating." A rating system in which the premium for
4 all persons covered by a contract is the same, based on the
5 experience of all persons covered by that contract, without
6 regard to age, sex, health status, occupation and geographical
7 location.
8 "Department." The Insurance Department of the Commonwealth.
9 "Dependent." The spouse or child of an eligible person,
10 subject to applicable terms of the individual health benefits
11 plan.
12 "Eligible person." A person who is a resident of this
13 Commonwealth who is not eligible to be insured under a group
14 health insurance policy, Medicare or Medicaid.
15 "Financially impaired." A carrier which, after the effective
16 date of this act, is not insolvent but is deemed by the
17 Insurance Commissioner to be potentially unable to fulfill its
18 contractual obligations or a carrier which is placed under an
19 order of rehabilitation or conservation by a court of competent
20 jurisdiction.
21 "Group health benefits plan." A health benefits plan for
22 groups of two or more persons.
23 "Health benefits plan." A hospital and medical expense
24 insurance policy, health service corporation contract or health
25 maintenance organization subscriber contract delivered or issued
26 for delivery in this Commonwealth. The term does not include the
27 following plans, policies or contracts: accident only, credit,
28 disability, long-term care, Medicare supplement coverage,
29 CHAMPUS supplement coverage, coverage for Medicare services
30 pursuant to a contract with the Federal Government, coverage for
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1 Medicaid services pursuant to a contract with the Commonwealth,
2 coverage arising out of a workers' compensation or similar law,
3 automobile medical payment insurance or hospital confinement
4 indemnity coverage.
5 "Hospital expenses." Any charges billed by and payable
6 directly by a carrier to a hospital.
7 "Individual health benefits plans." Includes:
8 (1) A health benefits plan for eligible persons and
9 their dependents.
10 (2) A certificate issued to an eligible person which
11 evidences coverage under a policy or contract issued to a
12 trust or association, regardless of the situs of delivery of
13 the policy or contract, if the eligible person pays the
14 premium and is not being covered under the policy or contract
15 pursuant to continuation of benefits provisions applicable
16 under Federal or State law.
17 The term does not include a certificate issued under a policy or
18 contract issued to a trust or to the trustees of a fund, which
19 trust or fund is established or adopted by two or more
20 employers, by one or more labor unions or similar employee
21 organizations or by one or more employers and one or more labor
22 unions or similar employee organizations, to insure employees of
23 the employers or members of the unions or organizations.
24 "Licensed producer." As defined in section 701 of the act of
25 May 17, 1921 (P.L.789, No.285), known as The Insurance
26 Department Act of 1921.
27 "Member." A carrier that is a member of the Individual
28 Health Coverage Program under this act.
29 "Modified community rating." A rating system in which the
30 premium for all persons covered by a contract is formulated
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1 based on the experience of all persons covered by that contract,
2 without regard to age, sex, occupation and geographical
3 location, but which may differ by health status. The term
4 applies to contracts and policies issued prior to the effective
5 date of this act which are subject to section 315.
6 "Net earned premium." The premiums earned in this
7 Commonwealth on health benefits plans, less return premiums
8 thereon and dividends paid or credited to policy or contract
9 holders on the health benefits plan business. The term includes
10 the aggregate premiums earned on the carrier's insured group and
11 individual business and health maintenance organization
12 business, including premiums from any Medicare or Medicaid
13 contracts with the Federal or State government, but shall not
14 include any excess or stop-loss coverage issued by a carrier in
15 connection with any self-insured health benefits plan, or
16 Medicare supplement policies or contracts.
17 "Open enrollment." The offering of an individual health
18 benefits plan to any eligible person on a guaranteed issue
19 basis, pursuant to procedures established by the board of
20 directors of the Individual Health Coverage Program.
21 "Plan of operation." The plan of operation of the Individual
22 Health Coverage Program adopted by the board under this act.
23 "Preexisting condition." A condition that, during a
24 specified period of not more than six months immediately
25 preceding the effective date of coverage, had manifested itself
26 in such a manner as would cause an ordinarily prudent person to
27 seek medical advice, diagnosis, care or treatment, or for which
28 medical advice, diagnosis, care or treatment was recommended or
29 received as to that condition or as to a pregnancy existing on
30 the effective date of coverage.
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1 "Program." The Individual Health Coverage Program
2 established under this act.
3 CHAPTER 3
4 INDIVIDUAL HEALTH INSURANCE
5 Section 301. Individual health benefits plans required.
6 (a) Plans required to be offered.--No later than 180 days
7 after the effective date of this act, a carrier shall, as a
8 condition of issuing health benefits plans in this Commonwealth,
9 offer individual health benefits plans. The plans shall be
10 offered on an open enrollment, community-rated basis, pursuant
11 to the provisions of this act, except that a carrier shall be
12 deemed to have satisfied its obligation to provide the
13 individual health benefits plans by paying an assessment or
14 receiving an exemption pursuant to section 308.
15 (b) Choice of plans.--A carrier shall offer to an eligible
16 person a choice of five individual health benefits plans, any of
17 which may contain provisions for managed care. One plan shall be
18 a basic health benefits plan, one plan shall be a managed care
19 plan and three plans shall include enhanced benefits of
20 proportionally increasing actuarial value. A carrier may elect
21 to convert any individual contract or policy forms in force on
22 the effective date of this act to any of the five benefit plans,
23 except that the carrier may not convert more than 25% of
24 existing contracts or policies each year, and the replacement
25 plan shall be of no less actuarial value than the policy or
26 contract being replaced. Notwithstanding the provisions of this
27 subsection to the contrary, at any time after three years after
28 the effective date of this act, the board, by regulation, may
29 reduce the number of plans required to be offered by a carrier.
30 Notwithstanding the provisions of this subsection to the
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1 contrary, a health maintenance organization which is a qualified
2 health maintenance organization pursuant to the Health
3 Maintenance Organization Act of 1973 (Public Law 93-222, 87
4 Stat. 914) shall be permitted to offer a basic health benefits
5 plan in accordance with the provisions of that law in lieu of
6 the five plans required under this subsection.
7 (c) Benefits of plan.--
8 (1) A basic health benefits plan shall provide, at a
9 minimum, the following:
10 (i) Inpatient hospital services.
11 (ii) Emergency outpatient hospital services.
12 (iii) Routine and emergency physician services,
13 including those provided in health clinics but excluding
14 those provided in nursing care or intermediate care
15 facilities.
16 (iv) Prenatal, delivery and postpartum care.
17 (v) Laboratory and diagnostic X-ray services.
18 (vi) X-ray, radium and radioactive isotope therapy.
19 (vii) Services of a nurse midwife.
20 (viii) Home health services in cases where it is
21 determined that the coverage of such services is cost
22 effective.
23 (ix) Ambulatory and institutional services.
24 (x) Drugs or biologicals that are provided as part
25 of any inpatient hospital services.
26 (2) Notwithstanding the provisions of this subsection or
27 any other law to the contrary, a carrier may, with the
28 approval of the board, modify the coverage provided for under
29 paragraph (1) or provide alternative benefits or services
30 from those required by this subsection if they are within the
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1 intent of this act or if the board changes the benefits
2 included in the basic health benefits plan.
3 (3) A contract or policy for a basic health benefits
4 plan provided for in this section may contain or provide for
5 coinsurance or deductibles, or both, except that no
6 deductible shall be payable in excess of a total of $250 by
7 an individual or $500 by a family unit during any benefit
8 year, and no coinsurance shall be payable in excess of a
9 total of $500 by an individual or by a family unit during any
10 benefit year. Any person previously covered under a group or
11 individual health benefits plan may apply deductibles paid
12 under the previous plan to annual limits under the basic
13 health benefits plan.
14 (4) Notwithstanding the provisions of paragraph (3) or
15 any other law to the contrary, a carrier may provide for
16 increased deductibles or coinsurance for a basic health
17 benefits plan if approved by the board or if the board
18 increases deductibles or coinsurance included in the basic
19 health benefits plan.
20 (d) Application.--Every group conversion contract or policy
21 issued after the effective date of this act shall be issued
22 pursuant to this section, except that this requirement shall not
23 apply to any group conversion contract or policy in which a
24 portion of the premium is chargeable to or subsidized by the
25 group policy from which the conversion is made.
26 (e) Contingency.--If all five of the individual health
27 benefits plans are not established by the board by January 1,
28 2002, a carrier may phase in the offering of the five health
29 benefits plans by offering each health benefits plan as it is
30 established by the board. However, once the board establishes
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1 all five plans, the carrier shall be required to offer the five
2 plans in accordance with this act.
3 Section 302. Guarantee of coverage and renewal of policy.
4 An individual health benefits plan issued pursuant to section
5 301 is subject to the following provisions:
6 (1) The health benefits plan shall guarantee coverage
7 for an eligible person and his dependents on a community-
8 rated basis.
9 (2) A health benefits plan shall be renewable with
10 respect to an eligible person and his dependents at the
11 option of the policy or contract holder except under the
12 following circumstances:
13 (i) nonpayment of the required premiums by the
14 policy or contract holder;
15 (ii) fraud or misrepresentation by the policy or
16 contract holder, including equitable fraud, with respect
17 to coverage of eligible individuals or their dependents;
18 (iii) termination of eligibility of the policy or
19 contract holder; or
20 (iv) cancellation or amendment by the board of the
21 specific individual health benefits plan.
22 Section 303. Duties of board.
23 (a) Board to establish policy and contract forms and benefit
24 levels.--The board shall establish the policy and contract forms
25 and benefit levels to be made available by all carriers for the
26 policies required to be issued pursuant to section 301. The
27 board shall provide the commissioner with an informational
28 filing of the policy and contract forms and benefit levels it
29 establishes.
30 (b) Cost containment measures.--The individual health
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1 benefits plans established by the board may include cost
2 containment measures such as, but not limited to:
3 (1) utilization review of health care services,
4 including review of medical necessity of hospital and
5 physician services;
6 (2) case management benefit alternatives;
7 (3) selective contracting with hospitals, physicians and
8 other health care providers;
9 (4) reasonable benefit differentials applicable to
10 participating and nonparticipating providers; and
11 (5) other managed-care provisions.
12 (c) Limitation on coverage for preexisting conditions.--An
13 individual health benefits plan offered pursuant to section 301
14 shall contain a limitation of no more than six months on
15 coverage for preexisting conditions, except that the limitation
16 shall not apply to an individual who has, under a prior group or
17 individual health benefits plan, with no intervening lapse in
18 coverage, been treated or diagnosed by a physician for a
19 condition under that plan or satisfied the preexisting condition
20 limitation, if any, under the prior plan.
21 (d) Rider packages.--In addition to the five standard
22 individual health benefits plans provided for in section 301,
23 the board may develop up to five rider packages. Premium rates
24 for the rider packages shall be determined in accordance with
25 section 305.
26 (e) Certification of plans.--After the board's establishment
27 of the individual health benefits plans required pursuant to
28 section 301, and notwithstanding any law to the contrary, a
29 carrier shall file the policy or contract forms with the board
30 and certify to the board that the health benefits plans to be
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1 used by the carrier are in substantial compliance with the
2 provisions in the corresponding board-approved plans. The
3 certification shall be signed by the chief executive officer of
4 the carrier. Upon receipt by the board of the certification, the
5 certified plans may be used until the board, after notice and
6 hearing, disapproves their continued use.
7 Section 304. Exceptions to required coverage.
8 (a) Health maintenance organizations.--A health maintenance
9 organization shall not be required to offer coverage to or
10 accept an applicant pursuant to this act if the applicant is not
11 geographically located in the health maintenance organization's
12 approved service area or if the health maintenance organization
13 does not have the capacity in its facilities to enroll
14 additional members. If the health maintenance organization does
15 not have the capacity in its facilities for additional
16 individual enrollees, it also shall not offer coverage to or
17 accept any new group enrollees.
18 (b) Potential of creating financially impaired condition.--A
19 carrier shall not be required to offer coverage or accept
20 applications pursuant to this act if the commissioner finds that
21 the acceptance of applications would place the carrier in a
22 financially impaired condition.
23 Section 305. Rates and filings.
24 (a) Application for approval of discounted or reduced rates
25 of payment to hospitals.--The board shall make application on
26 behalf of all carriers for approval of discounted or reduced
27 rates of payment to hospitals for health care services provided
28 under an individual health benefits plan under this act.
29 (b) Government funding or discounts.--In addition to
30 discounted or reduced rates of hospital payment, the board shall
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1 make application on behalf of all carriers for any other
2 subsidies, discounts or funds that may be provided for under
3 Federal or State law or regulation. A carrier may include
4 discounted or reduced rates of hospital payment and other
5 subsidies or funds granted to the board to reduce its premium
6 rates for individual health benefits plans subject to this act.
7 (c) Filing of full schedule of rates.--A carrier shall not
8 issue individual health benefits plans on a new contract or
9 policy form pursuant to this act until an informational filing
10 of a full schedule of rates which applies to the contract or
11 policy form has been filed with the board. The board shall
12 forward the informational filing to the commissioner and the
13 Attorney General.
14 (d) Filing of rate changes.--A carrier shall make an
15 informational filing with the board of any change in its rates
16 for individual health benefits plans pursuant to section 301
17 prior to the date the rates become effective. The board shall
18 file the informational filing with the commissioner and the
19 Attorney General. If the carrier has filed all information
20 required by the board, the filing shall be deemed to be
21 complete.
22 (e) Anticipated loss ratio.--
23 (1) Rates shall be formulated on contracts or policies
24 required pursuant to section 301 so that the anticipated
25 minimum loss ratio for a contract or policy form shall not be
26 less than 85% of the premium. The carrier shall submit with
27 its rate filing supporting data, as determined by the board,
28 and a certification by a member of the American Academy of
29 Actuaries, or other individuals acceptable to the board and
30 to the commissioner, that the carrier is in compliance with
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1 the provisions of this subsection.
2 (2) Following the close of each calendar year, if the
3 board determines that a carrier's loss ratio was less than
4 85% for that calendar year, the carrier shall be required to
5 refund to policy or contract holders the difference between
6 the amount of net earned premium it received that year and
7 the amount that would have been necessary to achieve the 85%
8 loss ratio.
9 Section 306. Individual Health Coverage Program and board.
10 (a) Program established.--There is hereby established the
11 Individual Health Coverage Program. All carriers subject to the
12 provisions of this act shall be members of the program.
13 (b) Board.--Within 30 days of the effective date of this
14 act, the commissioner shall give notice to all members of the
15 time and place for the initial organizational meeting which
16 shall take place within 60 days of the effective date of this
17 act. The governing body of the program shall be a board which
18 shall consist of nine representatives. The commissioner or his
19 designee shall serve as an ex officio member on the board. Four
20 members of the board shall be appointed by the Governor, with
21 the advice and consent of the Senate, one of whom shall be a
22 representative of an employer, appointed upon the recommendation
23 of a business trade association, who is a person with experience
24 in the management or administration of an employee health
25 benefit plan; one of whom shall be a representative of organized
26 labor, appointed upon the recommendation of the AFL-CIO, who is
27 a person with experience in the management or administration of
28 an employee health benefit plan; and two of whom shall be
29 consumers of a health benefits plan who are reflective of the
30 population of this Commonwealth. Four board members who
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1 represent carriers shall be elected by the members, subject to
2 the approval of the commissioner. To the extent there is an
3 entity licensed in this Commonwealth that is willing to have a
4 representative serve on the board, a representative from each of
5 the following entities shall be elected:
6 (1) A health service corporation.
7 (2) A health maintenance organization.
8 (3) A mutual health insurer of this Commonwealth.
9 (4) A foreign health insurance company authorized to do
10 business in this Commonwealth.
11 In approving the selection of the carrier representatives of the
12 board, the commissioner shall assure that all members of the
13 program are fairly represented.
14 (c) Term of office.--Initially, two of the Governor's
15 appointees and two of the carrier representatives shall serve
16 for a term of three years, one of the Governor's appointees and
17 one of the carrier representatives shall serve for a term of two
18 years, and one of the Governor's appointees and one of the
19 carrier representatives shall serve for a term of one year.
20 Thereafter, all board members shall serve for a term of three
21 years. Vacancies shall be filled in the same manner as the
22 original appointments.
23 (d) Initial carrier members.--If the initial carrier
24 representatives to the board are not elected at the
25 organizational meeting, the commissioner shall appoint those
26 members to the initial board within 15 days of the
27 organizational meeting.
28 (e) Plan of operation.--Within 90 days after the appointment
29 of the initial board, the board shall submit to the commissioner
30 a plan of operation and thereafter, any amendments to the plan
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1 necessary or suitable to assure the fair, reasonable and
2 equitable administration of the program. The commissioner may
3 disapprove the plan of operation if the commissioner determines
4 that it is not suitable to assure the fair, reasonable and
5 equitable administration of the program and that it does not
6 provide for the sharing of program losses on an equitable and
7 proportionate basis in accordance with section 308. The plan of
8 operation or amendments thereto shall become effective unless
9 disapproved in writing by the commissioner within 45 days of
10 receipt by the commissioner.
11 (f) Failure to submit plan of operation.--If the board fails
12 to submit a suitable plan of operation within 90 days after its
13 appointment, the commissioner shall adopt a temporary plan of
14 operation. The commissioner shall amend or rescind a temporary
15 plan adopted under this subsection at the time a plan of
16 operation is submitted by the board.
17 (g) Plan components.--The plan of operation shall establish
18 procedures for:
19 (1) The handling and accounting of assets and moneys of
20 the program and an annual fiscal reporting to the
21 commissioner.
22 (2) Collecting assessments from members to provide for
23 sharing program losses in accordance with the provisions of
24 section 308 and administrative expenses incurred or estimated
25 to be incurred during the period for which the assessment is
26 made.
27 (3) Approving the coverage, benefit levels and contract
28 forms for individual health benefits plans in accordance with
29 the provisions of section 301.
30 (4) The imposition of an interest penalty for late
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1 payment of an assessment pursuant to section 308.
2 (5) Any additional matters at the discretion of the
3 board.
4 (h) Appointment of insurance producer.--The board shall
5 appoint a licensed producer to advise the board on issues
6 related to sales of individual health benefits plans issued
7 pursuant to this act.
8 Section 307. Powers and authority of program and board.
9 The program shall have the general powers and authority
10 granted under the laws of this Commonwealth to insurance
11 companies, health service corporations and health maintenance
12 organizations licensed or approved to transact business in this
13 Commonwealth, except that the program shall not have the power
14 to issue health benefits plans directly to either groups or
15 individuals. The board shall have the specific authority to:
16 (1) Assess members their proportionate share of program
17 losses and administrative expenses in accordance with the
18 provisions of section 308 and make advance interim
19 assessments, as may be reasonable and necessary for
20 organizational and reasonable operating expenses and
21 estimated losses. An interim assessment shall be credited as
22 an offset against any regular assessment due following the
23 close of the fiscal year.
24 (2) Establish rules, conditions and procedures
25 pertaining to the sharing of program losses and
26 administrative expenses among the members of the program.
27 (3) Review rate applications and form filings submitted
28 by carriers in accordance with this act.
29 (4) Define the provisions of individual health benefits
30 plans in accordance with the requirements of this act.
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1 (5) Enter into contracts which are necessary or proper
2 to carry out the provisions and purposes of this act.
3 (6) Establish a procedure for the joint distribution of
4 information on individual health benefits plans issued
5 pursuant to section 301.
6 (7) Establish, at the board's discretion, standards for
7 the application of a means test for individual health
8 benefits plans issued pursuant to section 301.
9 (8) Establish, at the board's discretion, reasonable
10 guidelines for the purchase of new individual health benefits
11 plans by persons who already are enrolled in or insured by
12 another individual health benefits plan.
13 (9) Establish minimum requirements for performance
14 standards for carriers that are reimbursed for losses
15 submitted to the program and provide for performance audits
16 from time to time.
17 (10) Sue or be sued, including taking any legal actions
18 necessary or proper for recovery of an assessment for, on
19 behalf of or against the program or a member.
20 (11) Appoint from among its members appropriate legal,
21 actuarial and other committees as necessary to provide
22 technical and other assistance in the operation of the
23 program, in policy and other contract design and any other
24 function within the authority of the program.
25 (12) Borrow money to effect the purposes of the program.
26 Any notes or other evidence of indebtedness of the program
27 not in default shall be legal investments for carriers and
28 may be carried as admitted assets.
29 (13) Contract for an independent actuary and any other
30 professional services the board deems necessary to carry out
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1 its duties under this act.
2 Section 308. Program losses; immunity; payments; and nongroup
3 persons.
4 (a) Equitable sharing of program losses.--The board shall
5 establish procedures for the equitable sharing of program losses
6 among all members in accordance with their total market share as
7 follows:
8 (1) (i) By March 1, 2003, and following the close of
9 each calendar year thereafter, on a date established by
10 the board:
11 (A) every carrier issuing health benefits plans
12 in this Commonwealth shall file with the board its
13 net earned premium for the preceding calendar year
14 ending December 31; and
15 (B) every carrier issuing individual health
16 benefits plans in this Commonwealth shall file with
17 the board the net earned premium on policies or
18 contracts issued under section 301 and the claims
19 paid and the administrative expenses attributable to
20 those policies or contracts. If the claims paid and
21 reasonable administrative expenses for that calendar
22 year exceed the net earned premium and any investment
23 income thereon, the amount of the excess shall be the
24 net paid loss for the carrier that shall be
25 reimbursable under this act. For the purposes of this
26 subparagraph, "reasonable administrative expenses"
27 shall be actual expenses or a maximum of 25% of
28 premium, whichever amount is less.
29 (ii) Every member shall be liable for an assessment
30 to reimburse carriers issuing individual health benefits
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1 plans in this Commonwealth which sustain net paid losses
2 for the previous year, unless the member has received an
3 exemption from the board under subsection (d) and has
4 written a minimum number of nongroup persons as provided
5 for in that subsection. The assessment of each member
6 shall be in the proportion that the net earned premium of
7 the member for the calendar year preceding the assessment
8 bears to the net earned premium of all members for the
9 calendar year preceding the assessment.
10 (2) A member that is financially impaired may seek from
11 the commissioner a deferment in whole or in part from any
12 assessment issued by the board. The commissioner may defer,
13 in whole or in part, the assessment of the member if, in the
14 opinion of the commissioner, the payment of the assessment
15 would endanger the ability of the member to fulfill its
16 contractual obligations. If an assessment against a member is
17 deferred in whole or in part, the amount by which the
18 assessment is deferred may be assessed against the other
19 members in a manner consistent with the basis for assessment
20 set forth in this section. The member receiving the deferment
21 shall remain liable to the program for the amount deferred.
22 (b) Immunity from liability.--The participation in the
23 program as a member, the establishment of rates, forms or
24 procedures, or any other joint or collective action required by
25 this act shall not be the basis of any legal action, criminal or
26 civil liability, or penalty against the program, a member of the
27 board or a member of the program either jointly or separately
28 except as otherwise provided in this act.
29 (c) Payment of assessment.--Payment of an assessment made
30 under this section shall be a condition of issuing health
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1 benefits plans in this Commonwealth for a carrier. Failure to
2 pay the assessment shall be grounds for forfeiture of a
3 carrier's authorization to issue health benefits plans of any
4 kind in this Commonwealth, as well as any other penalties
5 permitted by law.
6 (d) Exemption and enrollment of nongroup persons under
7 managed care or indemnity plan.--
8 (1) Notwithstanding the provisions of this act to the
9 contrary, a carrier may apply to the board, by a date
10 established by the board, for an exemption from the
11 assessment and reimbursement for losses provided for in this
12 section. A carrier which applies for an exemption shall agree
13 to enroll or insure a minimum number of nongroup persons on
14 an open enrollment community-rated basis, under a managed
15 care or indemnity plan, as specified in this subsection,
16 provided that any indemnity plan so issued conforms with
17 sections 301 through 304 and 315. For the purposes of this
18 subsection, nongroup persons include individually enrolled
19 persons, conversion policies issued pursuant to this act,
20 Medicare cost and risk lives and Medicaid recipients. In
21 determining whether the carrier meets the minimum number of
22 nongroup persons required pursuant to this subsection, the
23 number of Medicaid recipients and Medicare cost and risk
24 lives shall not exceed 50% of the total.
25 (2) Notwithstanding the provisions of paragraph (1) to
26 the contrary, a health maintenance organization qualified
27 pursuant to the Health Maintenance Organization Act of 1973,
28 (Public Law 93-222, 87 Stat. 914) and tax exempt under
29 section 501(c)(3) of the Internal Revenue Code of 1986
30 (Public Law 99-514, 26 U.S.C. § 1 et seq.) may include up to
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1 one-third Medicaid recipients and up to one-third Medicare
2 recipients in determining whether it meets its minimum
3 number.
4 (3) The minimum number of nongroup persons, as
5 determined by the board, shall equal the total number of
6 community-rated and modified community-rated, individually
7 enrolled or insured persons, including Medicare cost and risk
8 lives and enrolled Medicaid lives, of all carriers subject to
9 this act as of the end of the calendar year, multiplied by
10 the proportion that that carrier's net earned premium bears
11 to the net earned premium of all carriers for that calendar
12 year, including those carriers that are exempt from the
13 assessment.
14 (4) Within 180 days after the effective date of this act
15 and on or before March 1 of each year thereafter, every
16 carrier seeking an exemption pursuant to this subsection
17 shall file with the board a statement of its net earned
18 premium for the preceding calendar year. The board shall
19 determine each carrier's minimum number of nongroup persons
20 in accordance with this subsection.
21 (5) On or before March 1 of each year, every carrier
22 that was granted an exemption for the preceding calendar year
23 shall file with the board the number of nongroup persons, by
24 category, enrolled or insured as of December 31 of the
25 preceding calendar year. To the extent that the carrier has
26 failed to enroll the minimum number of nongroup persons
27 established by the board, the carrier shall be assessed by
28 the board on a pro rata basis for any differential between
29 the minimum number established by the board and the actual
30 number enrolled or insured by the carrier.
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1 (6) A carrier that applies for the exemption shall be
2 deemed to be in compliance with the requirements of this
3 subsection if:
4 (i) by the end of calendar year 2002, it has
5 enrolled or insured at least 40% of the minimum number of
6 nongroup persons required;
7 (ii) by the end of calendar year 2003, it has
8 enrolled or insured at least 75% of the minimum number of
9 nongroup persons required; and
10 (iii) by the end of calendar year 2004, it has
11 enrolled or insured 100% of the minimum number of
12 nongroup persons required.
13 (7) Any carrier that writes both managed care and
14 indemnity business that is granted an exemption pursuant to
15 this subsection may satisfy its obligation to write a minimum
16 number of nongroup persons by writing either managed care or
17 indemnity business, or both.
18 (e) Limitation.--Notwithstanding the provisions of this
19 section to the contrary, no carrier shall be liable for an
20 assessment to reimburse any carrier pursuant to this section in
21 an amount which exceeds 35% of the aggregate net paid losses of
22 all carriers filing pursuant to subsection (a)(1)(i). To the
23 extent that this limitation results in any unreimbursed paid
24 losses to any carrier, the unreimbursed net paid losses shall be
25 distributed among carriers:
26 (1) which owe assessments pursuant to subsection
27 (a)(1)(ii);
28 (2) whose assessments do not exceed 35% of the aggregate
29 net paid losses of all carriers; and
30 (3) who have not received an exemption pursuant to
20010S0845B0974 - 22 -
1 subsection (d).
2 For the purposes of paragraph (3), a carrier shall be deemed to
3 have received an exemption notwithstanding the fact that the
4 carrier failed to enroll or insure the minimum number of
5 nongroup persons required for that calendar year.
6 Section 309. Statement of net paid losses and reimbursement.
7 (a) Statement of net paid losses.--No later than March 1,
8 2003, any carrier issuing individual health benefits plans in
9 this Commonwealth shall file with the board a statement of any
10 net paid losses for the calendar year ending December 31, 2002,
11 as calculated pursuant to section 308, along with any supporting
12 information required by the board.
13 (b) Reimbursement.--The losses filed pursuant to subsection
14 (a) shall be reimbursed in an amount up to $10,000,000 or 50% of
15 the paid losses, whichever amount is less, to the carrier filing
16 the losses. The assessment shall be made as a separate
17 assessment from those required pursuant to section 308, but
18 shall be assessed in the same manner and at the same time as the
19 first assessment made after the effective date of this act as
20 provided for in section 308, except that the carrier filing for
21 the reimbursement shall not be subject to an assessment under
22 this section.
23 Section 310. Determination of carriers with disproportionate
24 share of substandard risks and recommendations
25 for remedial action.
26 The board shall determine whether any carrier has a
27 disproportionate share of substandard risks insured or enrolled
28 under its individual health benefits plans and shall make
29 recommendations to the Governor and the General Assembly for
30 remedial action to minimize the losses sustained by the carrier
20010S0845B0974 - 23 -
1 as a result of insuring these risks.
2 Section 311. Sale of plan.
3 A health benefits plan issued pursuant to section 301 may be
4 sold through a licensed producer.
5 Section 312. Rate filings.
6 Notwithstanding the provisions of any other insurance law of
7 this Commonwealth to the contrary, a health maintenance
8 organization shall not be required to submit any rate filings
9 with the commissioner for an individual health benefits plan
10 that is subject to the provisions of this act, but shall be
11 subject to the minimum loss ratio provisions of section 305.
12 Section 313. Action by board.
13 (a) General rule.--All actions adopted by the board shall be
14 subject to the provisions of this section, notwithstanding any
15 provisions of law to the contrary.
16 (b) Notice requirements.--
17 (1) Prior to the adoption of an action of the board, the
18 board shall publish notice of its intended action in three
19 newspapers of general circulation in this Commonwealth and
20 may publish the notice of intended action in any trade or
21 professional publication which it deems necessary. The notice
22 of intended action shall include procedures for obtaining a
23 detailed description of the intended action and the time,
24 place and manner by which interested persons may present
25 their views. The board shall provide the notice of intended
26 action and a detailed description of the intended action by
27 mail, or otherwise, to affected trade and professional
28 associations, carriers subject to this act and such other
29 interested persons or organizations which may request
30 notification. The board shall forward the notice of intended
20010S0845B0974 - 24 -
1 action and the detailed description of the intended action
2 concurrently to the Legislative Reference Bureau for
3 publication in the Pennsylvania Bulletin.
4 (2) The board shall not charge any fee for placement
5 upon the mailing list of associations, carriers or other
6 persons to be notified, but the board may charge a fee to an
7 association, carrier or other person requesting a copy of the
8 text of the intended action, which fee shall not be in excess
9 of the actual cost of reproducing and mailing the copy.
10 (3) A copy of the text of the intended action shall be
11 available in the department.
12 (c) Public hearing.--The board shall hold a public hearing
13 on the establishment and modification of health benefits plans,
14 and the board may hold a public hearing on any other intended
15 action. Notice of a hearing shall be given in the notice of
16 intended action provided for in subsection (b).
17 (d) Opportunity to comment in writing.--
18 (1) Whether or not a public hearing is held, the board
19 shall afford all interested persons an opportunity to comment
20 in writing on the intended action. Written comments shall be
21 submitted to the board within the time established by the
22 board in the notice of intended action, which time shall not
23 be less than 20 calendar days from the date of notice.
24 (2) The board shall give due consideration to all
25 comments received. Within a reasonable period of time
26 following submission of the comments pursuant to this
27 subsection, the board shall prepare for public distribution a
28 report listing all parties who provided written submissions
29 concerning the intended action, summarizing the content of
30 the submissions and providing the board's response to the
20010S0845B0974 - 25 -
1 data, views and arguments contained in the submissions. A
2 copy of the report shall be filed with the Legislative
3 Reference Bureau for publication in the Pennsylvania
4 Bulletin.
5 (e) Final action.--The board may adopt the intended action
6 immediately following the expiration of the public comment
7 period provided in subsection (d) or the hearing provided for in
8 subsection (c), whichever date is later. The final action
9 adopted by the board shall be submitted for publication in the
10 Pennsylvania Bulletin and shall be effective on the date of the
11 submission or such later date as the board may establish.
12 (f) Construction.--Nothing in this section shall be
13 construed to prohibit the commissioner from adopting any rule or
14 regulation pursuant to the act of July 31, 1968 (P.L.769,
15 No.240), referred to as the Commonwealth Documents Law, or from
16 taking any other action required or authorized by this act.
17 (g) Definition.--As used in this section, the term "action"
18 includes, but is not limited to:
19 (1) The establishment and modification of health
20 benefits plans.
21 (2) Procedures and standards for the:
22 (i) assessment of members and the apportionment
23 thereof;
24 (ii) filing of policy forms;
25 (iii) making of rate filings;
26 (iv) evaluation of material submitted by carriers
27 with respect to loss ratios; and
28 (v) establishment of refunds to policy or contract
29 holders.
30 (3) The promulgation or modification of policy forms.
20010S0845B0974 - 26 -
1 The term shall not include the hearing and resolution of
2 contested cases, personnel matters and applications for
3 withdrawal or exemptions.
4 Section 314. Prohibition.
5 A carrier shall not require an eligible person to purchase
6 any other insurance coverage, including, but not limited to,
7 life insurance, accident insurance or disability insurance, as a
8 condition of or in conjunction with the purchase of a health
9 benefits plan under this act.
10 Section 315. Applicability; duplicative coverage; penalties;
11 rates.
12 (a) Plan issued on or after effective date of act.--An
13 individual health benefits plan issued on or after the effective
14 date of this act shall be subject to the provisions of this act.
15 (b) Plans issued prior to effective date of act.--
16 (1) An individual health benefits plan issued on an open
17 enrollment, modified community-rated basis or community-rated
18 basis prior to the effective date of this act shall not be
19 subject to sections 301 through 305, unless otherwise
20 specified therein.
21 (2) An individual health benefits plan issued other than
22 on an open enrollment basis prior to the effective date of
23 this act shall not be subject to the provisions of this act,
24 except that the plan shall be liable for assessments made
25 pursuant to section 308.
26 (3) A group conversion contract or policy issued prior
27 to the effective date of this act that is not issued on a
28 modified community-rated basis or community-rated basis shall
29 not be subject to the provisions of this act, except that the
30 contract or policy shall be liable for assessments made
20010S0845B0974 - 27 -
1 pursuant to section 308.
2 (c) Duplicative coverage prohibited.--After the effective
3 date of this act, an individual who is eligible to participate
4 in a group health benefits plan that provides coverage for
5 hospital or medical expenses shall not be covered by an
6 individual health benefits plan which provides benefits for
7 hospital and medical expenses that are the same or similar to
8 coverage provided in the group health benefits plan, except that
9 an individual who is eligible to participate in a group health
10 benefits plan but is currently covered by an individual health
11 benefits plan may continue to be covered by that plan until the
12 first anniversary date of the group plan occurring on or after
13 January 1, 2002.
14 (d) Penalties.--Except as otherwise provided in subsection
15 (c), after the effective date of this act, a person who is
16 covered by an individual health benefits plan who is a
17 participant in or is eligible to participate in a group health
18 benefits plan that provides the same or similar coverages as the
19 individual health benefits plan and a person, including an
20 employer or insurance producer, who causes another person to be
21 covered by an individual health benefits plan which person is a
22 participant in or who is eligible to participate in a group
23 health benefits plan that provides the same or similar coverages
24 as the individual health benefits plan shall be subject to a
25 fine by the commissioner in an amount not less than twice the
26 annual premium paid for the individual health benefits plan,
27 together with any other penalties permitted by law.
28 (e) Rates.--Every individual health benefits plan issued
29 prior to the effective date of this act shall be rated as
30 follows:
20010S0845B0974 - 28 -
1 (1) No later than 180 days after the effective date of
2 this act, the premium rate charged by a carrier to the
3 highest rated individual who purchased an individual health
4 benefits plan prior to the effective date of this act shall
5 not be greater than 150% of the premium rate charged to the
6 lowest rated individual purchasing that same or a similar
7 health benefits plan.
8 (2) During the period July 1, 2003, to June 30, 2004,
9 the premium rate charged by a carrier to the highest rated
10 individual who purchased an individual health benefits plan
11 prior to the effective date of this act shall not be greater
12 than 125% of the premium rate charged to the lowest rated
13 individual purchasing that same or a similar health benefits
14 plan.
15 (3) On and after July 1, 2004, every individual health
16 benefits plan which was issued before the effective date of
17 this act shall be community rated upon the date of its
18 renewal.
19 (4) A carrier that issues an individual health benefits
20 plan with modified community rating subject to the provisions
21 of this subsection shall make an informational filing with
22 the board whenever it adjusts or modifies its rates.
23 CHAPTER 7
24 MISCELLANEOUS PROVISIONS
25 Section 701. Effective date.
26 This act shall take effect in 60 days.
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