PRINTER'S NO. 2040
No. 1601 Session of 2007
INTRODUCED BY EACHUS, JUNE 21, 2007
REFERRED TO COMMITTEE ON INSURANCE, JUNE 21, 2007
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 benefits.
13 The General Assembly of the Commonwealth of Pennsylvania
14 hereby enacts as follows:
15 Section 1. The act of May 17, 1921 (P.L.682, No.284), known
16 as The Insurance Company Law of 1921, is amended by adding an
17 article to read:
18 ARTICLE XXII
19 SMALL GROUP HEALTH BENEFITS
20 Section 2201. Scope of article.
21 This article relates to health benefit plans offered by an
22 insurer to employees of a small employer.
1 Section 2202. Definitions.
2 The following words and phrases when used in this article
3 shall have the meanings given to them in this section unless the
4 context clearly indicates otherwise:
5 "Community rate." An insurer's rating methodology that is
6 based on the experience of all risks covered by that plan
7 without regard to health status, occupation or any other factor.
8 An insurer may adjust its community rate for age, geographic
9 region as approved by the Insurance Department and family
10 composition.
11 "Department." The Insurance Department of the Commonwealth.
12 "Health benefit plan." Any individual or group health
13 insurance policy, subscriber contract, certificate or plan which
14 provides health or sickness and accident coverage which is
15 offered by an insurer. The term shall not include any of the
16 following:
17 (1) Accident only policy.
18 (2) Limited benefit policy.
19 (3) Credit only policy.
20 (4) Long-term or disability income policy.
21 (5) Specified disease policy.
22 (6) Medicare supplement policy.
23 (7) Civilian Health and Medical Program of the Uniformed
24 Services (CHAMPUS) supplement.
25 (8) Fixed indemnity.
26 (9) Dental only.
27 (10) Vision only.
28 (11) Workers' compensation policy.
29 (12) Automobile medical payment policy under 75 Pa.C.S.
30 (relating to vehicles).
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1 "Insurer." A company or health insurance entity licensed in
2 this Commonwealth to issue any individual or group health,
3 sickness or accident policy or subscriber contract or
4 certificate or plan that provides medical or health care
5 coverage by a health care facility or licensed health care
6 provider that is offered or governed under this act or any of
7 the following:
8 (1) The act of December 29, 1972 (P.L.1701, No.364),
9 known as the Health Maintenance Organization Act.
10 (2) The act of May 18, 1976 (P.L.123, No.54), known as
11 the Individual Accident and Sickness Insurance Minimum
12 Standards Act.
13 (3) 40 Pa.C.S. Ch. 61 (relating to hospital plan
14 corporations) or 63 (relating to professional health services
15 plan corporations).
16 "Medical loss ratio." The ratio of incurred medical claim
17 costs to earned premiums.
18 "Preexisting condition." A disease or physical condition for
19 which medical advice or treatment has been recommended or
20 received prior to the effective date of coverage.
21 "Small employer." In connection with a group health plan
22 with respect to a calendar year and a plan year, an employer who
23 employs an average of at least two but not more than 50
24 employees on business days during the preceding calendar year
25 and who employs at least two such employees on the first day of
26 the plan year. In the case of an employer which was not in
27 existence throughout the preceding calendar year, the
28 determination whether an employer is a small employer shall be
29 based on the average number of employees that it is reasonably
30 expected that the employer will employ on business days in the
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1 current calendar year.
2 "Small group health benefit plan." A health benefit plan
3 offered to a small employer.
4 "Standard plan." The health benefit package established by
5 the Insurance Department in accordance with section 2203(d).
6 Section 2203. Health insurance rate increases and standard
7 plan.
8 (a) Applicability.--This section shall apply to all small
9 group health benefit plans and individual health benefit plans
10 issued, made effective, delivered or renewed in this
11 Commonwealth after the effective date of this section.
12 (b) Premium rates.--
13 (1) All insurers shall establish community rates for
14 plans subject to this section and shall file the rates with
15 the department as required by law.
16 (2) An insurer shall apply all risk adjustment factors
17 under subsection (c)(1)(i), (ii) and (iii) consistently with
18 respect to all plans subject to this section.
19 (3) An insurer shall not charge a rate that is more than
20 33% above or below the community rate, as adjusted as
21 permitted under paragraph (1).
22 (4) An insurer shall base its rating methods and
23 practices on commonly accepted actuarial assumptions and
24 sound actuarial principles. Rates shall not be excessive,
25 inadequate or unfairly discriminatory.
26 (c) Additional rate review.--
27 (1) In conjunction with and in addition to the standards
28 set forth under the act of December 18, 1996 (P.L.1066,
29 No.159), known as the Accident and Health Filing Reform Act,
30 and all other applicable statutory and regulatory
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1 requirements, the department may disapprove a rate filing
2 based upon the following:
3 (i) The rate is not actuarially sound.
4 (ii) The increase is requested because the insurer
5 has not operated efficiently or has factored in
6 experience that conflicts with recognized best practices
7 in the health care industry.
8 (iii) The increase is requested because the insurer
9 has incurred costs of additional care due to avoidable
10 hospital-acquired infections and avoidable
11 hospitalizations due to ineffective chronic care
12 management, after data for the incidents has become
13 available to and can be analyzed by the insurer and the
14 department.
15 (iv) For small group health plans, the medical loss
16 ratio is less than 85%.
17 (2) In the event a small group health benefit plan has a
18 medical loss ratio of less than 85%, the department may, in
19 addition to any other remedies available under law, require
20 the insurer to refund the difference to policyholders on a
21 pro rata basis as soon as practicable following receipt of
22 notice from the department of such requirement but in no
23 event later than 120 days following receipt of the notice.
24 The department shall establish procedures for the
25 circumstances under which the refunds will be required.
26 (3) The filing and review procedures set forth under the
27 Accident and Health Filing Reform Act shall apply to any
28 filing conducted under this section.
29 (d) Standard plan required.--
30 (1) An insurer shall not offer a plan that does not meet
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1 the minimum benefits specified in the standard plan developed
2 by the department in accordance with the following criteria:
3 (i) Plans offered by an insurer on an expense-
4 incurred basis shall be actuarially equivalent to at
5 least the minimum benefits required to be offered under
6 the standard plan.
7 (ii) The standard plan shall at least include all of
8 the benefits of the basic benefit package except that it
9 shall not include coverage for drug and alcohol treatment
10 and mental health care services.
11 (iii) The standard plan shall not contain
12 preexisting condition exclusion.
13 (2) The standard plan may include options for deductible
14 and cost-sharing provisions if the department determines that
15 the provisions meet all of the following:
16 (i) Dissuade consumers from seeking unnecessary
17 services.
18 (ii) Balance the effect of cost-sharing in reducing
19 premiums and in effecting utilization of appropriate
20 services.
21 (iii) Limit the total cost-sharing that may be
22 incurred by an individual in a year.
23 (3) Each individual in this Commonwealth who applies to
24 an insurer for enrollment in a plan offered by the insurer
25 shall be accepted as an enrollee.
26 (4) The department shall forward a notice of the
27 elements of the standard plan to the Legislative Reference
28 Bureau for publication in the Pennsylvania Bulletin. Insurers
29 subject to the provisions of this section shall be required
30 to begin offering the standard plan as soon as practicable
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1 following the publication but in no event later than 120 days
2 following the publication.
3 (e) Optional additional coverage.--
4 (1) An insurer may offer benefits in addition to those
5 in the standard plan if the additional benefits meet all of
6 the following:
7 (i) Are offered and priced separately from benefits
8 specified in the standard plan.
9 (ii) Do not have the effect of duplicating any of
10 the benefits in the standard plan.
11 (iii) Are clearly specified as enhancements to the
12 standard plan.
13 (2) Each benefit offered in addition to the standard
14 plan that increases health care choices or lowers the cost-
15 sharing arrangement is subject to all of the provisions of
16 this section applicable to the standard plan.
17 (3) The department may prohibit an insurer from offering
18 an additional benefit under this section if the department
19 finds that the additional benefit will be sold in conjunction
20 with the standard plan of the insurer in a manner designed to
21 promote risk selection or underwriting practices otherwise
22 prohibited by this section or other statute.
23 (f) Regulations.--The department may promulgate regulations
24 necessary for the implementation and administration of this
25 article.
26 Section 2. This act shall take effect in 120 days.
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