PRINTER'S NO. 1453
No. 1240 Session of 2005
INTRODUCED BY SCHRODER, TURZAI, WALKO, ADOLPH, BELFANTI,
BIANCUCCI, BROWNE, BUXTON, CALTAGIRONE, CAPPELLI, CLYMER,
CRAHALLA, DALLY, DeLUCA, DENLINGER, EACHUS, FICHTER, FLEAGLE,
GANNON, GEORGE, GILLESPIE, GINGRICH, HARHART, HENNESSEY,
HERSHEY, M. KELLER, KENNEY, MARKOSEK, MILLARD, S. MILLER,
MUNDY, PRESTON, QUIGLEY, RUBLEY, SCAVELLO, SHANER, B. SMITH,
STERN, T. STEVENSON, STURLA, TANGRETTI, E. Z. TAYLOR, THOMAS,
TIGUE, WANSACZ, WATERS, WATSON, WRIGHT, YOUNGBLOOD AND
WHEATLEY, MARCH 30, 2005
REFERRED TO COMMITTEE ON INSURANCE, MARCH 30, 2005
AN ACT
1 Amending the act of May 17, 1921 (P.L.682, No.284), entitled "An
2 act relating to insurance; amending, revising, and
3 consolidating the law providing for the incorporation of
4 insurance companies, and the regulation, supervision, and
5 protection of home and foreign insurance companies, Lloyds
6 associations, reciprocal and inter-insurance exchanges, and
7 fire insurance rating bureaus, and the regulation and
8 supervision of insurance carried by such companies,
9 associations, and exchanges, including insurance carried by
10 the State Workmen's Insurance Fund; providing penalties; and
11 repealing existing laws," providing for small group health
12 plan rates, for coverage requirements and for marketing
13 requirements; and making a repeal.
14 The General Assembly of the Commonwealth of Pennsylvania
15 hereby enacts as follows:
16 Section 1. The act of May 17, 1921 (P.L.682, No.284), known
17 as The Insurance Company Law of 1921, is amended by adding an
18 article to read:
19 ARTICLE XXII
20 SMALL GROUP HEALTH PLAN REQUIREMENTS
1 Section 2201. Scope of article.
2 This article relates to any health benefit plan offered by an
3 insurance carrier that provides insurance coverage to employees
4 of a small employer.
5 Section 2202. Definitions.
6 The following words and phrases when used in this article
7 shall have the meanings given to them in this section unless the
8 context clearly indicates otherwise:
9 "Carrier." A health insurance entity licensed in this
10 Commonwealth to issue group health insurance, subscriber
11 contracts, certificates or plans that provide medical or health
12 care coverage by a health care facility or licensed health care
13 provider that is offered or governed under this act or any of
14 the following:
15 (1) The act of December 29, 1972 (P.L.1701, No.364),
16 known as the Health Maintenance Organization Act.
17 (2) The act of May 18, 1976 (P.L.123, No.54), known as
18 the Individual Accident and Sickness Insurance Minimum
19 Standards Act.
20 (3) A nonprofit corporation subject to 40 Pa.C.S. Chs.
21 61 (relating to hospital plan corporations) and 63 (relating
22 to professional health services plan corporations).
23 "Commissioner." The Insurance Commissioner of the
24 Commonwealth.
25 "Department." The Insurance Department of the Commonwealth.
26 "Eligible employee." An employee who works on a full-time
27 basis with a normal work week of 30 or more hours. The term
28 shall also include an employee who, at the employer's
29 discretion, works on a full-time basis with a normal work week
30 of at least 17.5 hours if this eligibility criterion is applied
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1 uniformly among all of the employer's employees and without
2 regard to a health status-related factor. The term includes, but
3 is not limited to, a self-employed individual, a sole proprietor
4 and a partner of a partnership, and may include an independent
5 contractor if the self-employed individual, sole proprietor,
6 partner of a partnership or independent contractor is included
7 as an employee under the health benefit plan of the employer.
8 The term does not include an employee who works on a temporary
9 or substitute basis or who works fewer than 17.5 hours per week.
10 "Health benefit plan." A hospital or medical expense
11 insurance policy that is offered, executed, issued, renewed or
12 delivered by a carrier for medical care for a subscriber. The
13 term shall not include any of the following:
14 (1) Accident only policy.
15 (2) Limited benefit policy.
16 (3) Credit policy.
17 (4) Long-term or disability income policy.
18 (5) Specified disease policy.
19 (6) Medicare supplement policy.
20 (7) Civilian Health and Medical Program of the Uniformed
21 Services (CHAMPUS) supplement.
22 (8) Workers' compensation policy.
23 (9) Automobile medical payment policy.
24 "Health status-related factor." Any of the following:
25 (1) Health status.
26 (2) Medical condition, including both physical and
27 mental illness.
28 (3) Substance abuse.
29 (4) Claims experience.
30 (5) Receipt of health care.
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1 (6) Medical history.
2 (7) Genetic information.
3 (8) Evidence of insurability, including conditions
4 arising out of acts of domestic violence.
5 (9) Disability
6 (10) Occupation.
7 "Modified demographic rating." A rating method used to
8 develop a carrier's premium that spreads financial risk across
9 the carrier's small group population that results in a small
10 group premium rate that may be modified based on rate class
11 factors such as age, gender, family composition, industry and
12 geographic area. The geographic area for small group policies
13 shall have counties as the smallest permissible rating
14 territory.
15 "Preexisting condition." A condition, regardless of its
16 cause, for which medical advice, diagnosis, care or treatment
17 was recommended or received during the six months immediately
18 preceding the enrollment date of coverage.
19 "Producer." An individual who is licensed by the Insurance
20 Department as an insurance producer and who sells, solicits or
21 negotiates insurance contracts.
22 "Restricted network provision." A provision of a health
23 benefit plan that conditions the payment of benefits on the use
24 of health care providers that have entered into a contractual
25 arrangement with the insurance carrier to provide health care
26 services to covered individuals.
27 "Small employer." A person, firm, corporation, partnership
28 or political subdivision that:
29 (1) is actively engaged in business;
30 (2) has a bona fide employer-employee relationship;
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1 (3) is not formed primarily for the purpose of buying
2 health insurance; and
3 (4) on at least 50% of its working days during the
4 preceding calendar quarter, employed 50 or fewer eligible
5 employees.
6 "Small group health benefit plan." A health benefit plan for
7 groups of two to 50 eligible persons, whether issued directly to
8 small employers or made available to small employers through
9 membership in an association.
10 Section 2203. Premium rates.
11 (a) General rule.--Premium rates for a small group health
12 benefit plan shall be based on modified demographic rating and
13 shall be subject to the following provisions:
14 (1) A carrier offering small group health benefit plans
15 to small employers shall develop a base rate for each small
16 group health benefit plan and shall modify the base rate only
17 by rate class factors of:
18 (i) geographic area;
19 (ii) industry;
20 (iii) age;
21 (iv) gender; and
22 (v) family composition-coverage type selected by the
23 eligible employee.
24 (2) Rate adjustment factors used to modify the small
25 group base rate will have the following restrictions:
26 (i) age and gender adjustment factors shall be
27 combined and shall not exceed plus or minus 35%; and
28 (ii) the industry adjustment factor shall not exceed
29 plus or minus 10%.
30 (3) Medical underwriting that uses any of the following
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1 factors is prohibited:
2 (i) Health status.
3 (ii) Medical condition, including both physical and
4 mental illness, including the use of group or individual
5 medical questionnaires.
6 (iii) Claims experience.
7 (iv) Genetic information.
8 (v) Evidence of insurability, including conditions
9 arising out of acts of domestic violence.
10 (vi) Disability.
11 (b) Adjustment of premiums.--The premium for a small group
12 health benefit plan shall not be adjusted by a carrier more than
13 once each year, except that rates may be changed more frequently
14 to reflect:
15 (1) Changes to the enrollment of the small employer
16 group.
17 (2) Changes to a small group health benefit plan that
18 have been requested by the small employer.
19 (3) Changes to the family composition of employees.
20 (4) Changes pursuant to a government order or judicial
21 proceeding.
22 (c) Premium rates produced by rating factors.--Rating
23 factors for small group health benefit plans shall produce
24 premium rates for identical groups that differ only as to the
25 amounts attributable to plan design.
26 (d) Restricted network provision.--A small group health
27 benefit plan that contains a restricted network provision or
28 operates in a limited service area shall not be considered
29 similar coverage to a small group health benefit plan that does
30 not contain such a provision.
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1 (e) Filing requirements.--A carrier offering small group
2 health benefit plans shall place on file with the department all
3 small group base rates and modifying factors. Rates for a
4 specific group may not deviate by more than 15% from the rate
5 developed utilizing the filed small group base rates or base
6 rate formulas and modifying factors, unless the specific group
7 rates are placed on file with the department.
8 (f) Regulations.--The commissioner shall establish
9 regulations to implement the provisions of this section and to
10 ensure that rating practices used by carriers offering small
11 employer group insurance plans are consistent with the
12 provisions of this article.
13 Section 2204. Renewability of coverage.
14 A small group health benefit plan shall, at the option of the
15 employer, be renewable with respect to all eligible employees
16 and their dependents except in the following cases:
17 (1) The small employer fails to pay premiums or make
18 contributions in accordance with the terms of the small group
19 health benefit plan or the carrier has not received timely
20 payments.
21 (2) The small employer has made an intentional
22 misrepresentation of material fact or done anything which
23 constitutes fraud with respect to the small group health
24 benefit plan.
25 (3) The small employer has not complied with the
26 carrier's minimum participation requirements or employer
27 contribution requirements.
28 (4) The carrier elects to discontinue offering a small
29 group health benefit plan. If such an election is made, the
30 carrier shall provide notice of the election as follows:
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1 (i) At least 90 days before the plan expires, the
2 carrier shall give notice to the commissioner.
3 (ii) At least 30 days before the plan expires, the
4 carrier shall give notice to all affected small
5 employers.
6 Section 2205. Availability of coverage.
7 (a) Uniformity.--As a condition of transacting business in
8 this Commonwealth, a carrier that offers small group health
9 benefit plans shall offer to small employers all of the small
10 group health benefit plans that the carrier markets.
11 (b) Preexisting conditions.--Small group health benefit
12 plans shall not deny, exclude or limit benefits to a covered
13 individual for losses incurred more than 12 months following
14 either the coverage enrollment date or the first day of the
15 waiting period for enrollment, whichever is earlier, due to a
16 preexisting condition.
17 Section 2206. Fair marketing standards.
18 The commissioner shall determine that the following standards
19 have been met by a carrier or producer, as appropriate:
20 (1) A carrier that provides small group health benefit
21 plans shall actively market all small group health benefit
22 plans sold by the carrier to eligible small employers in this
23 Commonwealth.
24 (2) (i) Except as provided in subparagraph (ii), a
25 producer or a carrier that provides small group health
26 benefit plans shall not encourage or direct a small
27 employer to refrain from filing an application for
28 coverage with the carrier or seek coverage from another
29 carrier because of a health status-related factor or the
30 nature of the industry, occupation or geographic location
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1 of the small employer.
2 (ii) The provisions of subparagraph (i) shall not
3 apply with respect to information provided by a carrier
4 or producer to a small employer regarding an established
5 geographic service area or a restricted network provision
6 of a carrier.
7 (3) A carrier that provides small group health benefit
8 plans shall not enter into a contract, agreement or
9 arrangement that provides for or results in a producer's
10 compensation being varied because of an initial or renewal
11 health status-related factor or the nature of the industry or
12 occupation of the small employer.
13 (4) A carrier that provides small group health benefit
14 plans shall not terminate, fail to renew or limit its
15 contract or agreement with a producer for a reason related to
16 an initial or renewal health status-related factor or
17 occupation of the small employer.
18 (5) A producer or carrier that provides small group
19 health benefit plans shall not induce or encourage a small
20 employer to exclude an employee or the employee's dependents
21 from health coverage or benefits available under the plan.
22 Section 2207. Filing of annual actuarial certification.
23 A carrier offering small group health benefit plans shall
24 file with the commissioner on or before March 1 of each year an
25 actuarial certification that the carrier is in compliance with
26 this act and that the rating methods of the carrier are
27 actuarially sound. A copy of the certification shall be retained
28 by the carrier at its principal place of business.
29 Section 2208. Transition period.
30 The commissioner may establish a phase-in period for renewal
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1 rates of no less than one year and no more than two years in
2 duration for carriers to implement rate adjustments. Any
3 transition period shall be applied uniformly to all carriers.
4 Section 2. The following parts of the act of December 18,
5 1996 (P.L.1066, No.159), known as the Accident and Health Filing
6 Reform Act, are repealed insofar as they provide for required
7 rate filings, review procedures and related matters for small
8 group health benefit plans or are otherwise inconsistent with
9 the requirements of this act:
10 (1) Section 3(e)(1), (2), (3), (4), (5) and (6) and (f).
11 (2) Section 4(a), (b), (c), (d), (e) and (f).
12 (3) Section 5.
13 (4) Section 6.
14 (5) Section 7.
15 (6) Section 8(a), (c) and (e).
16 Section 3. This act shall take effect in 180 days.
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