H 3708 Session 110 (1993-1994)
H 3708 General Bill, By J.J. Bailey, R.S. Corning, J.T. McElveen, Quinn and
Scott
Similar(S 541)
A Bill to enact the "Small Employer Health Insurance Availability Act",
including amending Sections 38-71-920, Code of Laws of South Carolina, 1976,
relating to definitions for small group health insurance purposes, so as to
make certain changes to the definitions of "small employer" and "health
insurance plan" or "plan", and to provide a definition for "late enrollee";
38-71-730, as amended, relating to requirements for group accident, group
health, and group accident and health insurance policies, so as to delete
certain language and provisions, including the provision that, for groups of
ten or less persons, evidence of individual insurability may be required for
persons first becoming eligible for insurance after the effective date of the
policy, and add certain provisions; 38-70-10, relating to definitions for the
provisions of law on utilization reviews and private review agents in
connection with the allocation of health care resources and services for a
patient or group of patients, so as to delete certain language and provisions
from the definition of "private review agent"; 38-70-15, relating to the
applicability of Chapter 70 of Title 38 (Utilization Reviews and Private
Review Agents), so as to provide that the Chapter applies to insurance
companies, administrators of insurance benefit plans, and health maintenance
organizations licensed and regulated by the Department of Insurance, and
provide that such insurance companies, administrators, and health maintenance
organizations are exempt from certain provisions of law; and 38-71-940,
relating to small group health insurance and premium rates, rating factors,
and the prohibition on the involuntary transfer of a small employer into or
out of a class of business, so as to delete certain provisions, provide that
small employer insurers shall not use case characteristics, other than age,
gender, industry, geographic area, family composition,and group size without
prior approval of the Chief Insurance Commissioner, and provide that if a
small employer insurer uses industry as a case characteristic in establishing
premium rates, the highest rate factor associated with any industry
classification shall not exceed the lowest rate factor associated with any
industry classification by more than fifteen percent; and to provide for the
severability of the provisions of this Act.
03/15/93 House Introduced and read first time HJ-5
03/15/93 House Referred to Committee on Labor, Commerce and
Industry HJ-6
A BILL
TO ENACT THE "SMALL EMPLOYER HEALTH
INSURANCE AVAILABILITY ACT", INCLUDING
AMENDING SECTIONS 38-71-920, CODE OF LAWS OF SOUTH
CAROLINA, 1976, RELATING TO DEFINITIONS FOR SMALL
GROUP HEALTH INSURANCE PURPOSES, SO AS TO MAKE
CERTAIN CHANGES TO THE DEFINITIONS OF "SMALL
EMPLOYER" AND "HEALTH INSURANCE
PLAN" OR "PLAN", AND TO PROVIDE A
DEFINITION FOR "LATE ENROLLEE"; 38-71-730, AS
AMENDED, RELATING TO REQUIREMENTS FOR GROUP
ACCIDENT, GROUP HEALTH, AND GROUP ACCIDENT AND
HEALTH INSURANCE POLICIES, SO AS TO DELETE CERTAIN
LANGUAGE AND PROVISIONS, INCLUDING THE PROVISION
THAT, FOR GROUPS OF TEN OR LESS PERSONS, EVIDENCE OF
INDIVIDUAL INSURABILITY MAY BE REQUIRED FOR
PERSONS FIRST BECOMING ELIGIBLE FOR INSURANCE AFTER
THE EFFECTIVE DATE OF THE POLICY, AND ADD
CERTAIN PROVISIONS; 38-70-10, RELATING TO DEFINITIONS
FOR THE PROVISIONS OF LAW ON UTILIZATION REVIEWS
AND PRIVATE REVIEW AGENTS IN CONNECTION WITH THE
ALLOCATION OF HEALTH CARE RESOURCES AND SERVICES
FOR A PATIENT OR GROUP OF PATIENTS, SO AS TO DELETE
CERTAIN LANGUAGE AND PROVISIONS FROM THE
DEFINITION OF "PRIVATE REVIEW AGENT";
38-70-15, RELATING TO THE APPLICABILITY OF CHAPTER 70
OF TITLE 38 (UTILIZATION REVIEWS AND PRIVATE REVIEW
AGENTS), SO AS TO PROVIDE THAT THE CHAPTER APPLIES
TO INSURANCE COMPANIES, ADMINISTRATORS OF
INSURANCE BENEFIT PLANS, AND HEALTH MAINTENANCE
ORGANIZATIONS LICENSED AND REGULATED BY THE
DEPARTMENT OF INSURANCE, AND PROVIDE THAT SUCH
INSURANCE COMPANIES, ADMINISTRATORS, AND HEALTH
MAINTENANCE ORGANIZATIONS ARE EXEMPT FROM
CERTAIN PROVISIONS OF LAW; AND 38-71-940, RELATING TO
SMALL GROUP HEALTH INSURANCE AND PREMIUM RATES,
RATING FACTORS, AND THE PROHIBITION ON THE
INVOLUNTARY TRANSFER OF A SMALL EMPLOYER INTO OR
OUT OF A CLASS OF BUSINESS, SO AS TO DELETE CERTAIN
PROVISIONS, PROVIDE THAT SMALL EMPLOYER INSURERS
SHALL NOT USE CASE CHARACTERISTICS, OTHER THAN AGE,
GENDER, INDUSTRY, GEOGRAPHIC AREA, FAMILY
COMPOSITION, AND GROUP SIZE WITHOUT PRIOR APPROVAL
OF THE CHIEF INSURANCE COMMISSIONER, AND PROVIDE
THAT IF A SMALL EMPLOYER INSURER USES INDUSTRY AS
A CASE CHARACTERISTIC IN ESTABLISHING PREMIUM
RATES, THE HIGHEST RATE FACTOR ASSOCIATED WITH ANY
INDUSTRY CLASSIFICATION SHALL NOT EXCEED THE
LOWEST RATE FACTOR ASSOCIATED WITH ANY INDUSTRY
CLASSIFICATION BY MORE THAN FIFTEEN PERCENT; AND TO
PROVIDE FOR THE SEVERABILITY OF THE PROVISIONS OF
THIS ACT.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. This act shall be known and may be cited as the
"Small Employer Health Insurance Availability Act".
SECTION 2. The purpose and intent of this act is to promote the
availability of health insurance coverage to small employers regardless
of their health status or claims experience, to provide for development
of "basic" and "standard" health insurance plans
to be offered to all small employers, to provide for establishment of a
reinsurance program, and to improve the overall fairness and efficiency
of the small group health insurance market.
SECTION 3. As used in this act:
(A) "Basic health insurance plan" means a lower cost
health insurance plan developed pursuant to Section 12.
(B) "Board" means the board of directors of the program
established pursuant to Section 11.
(C) "Commissioner" means the Chief Insurance
Commissioner of this State.
(D) "Committee" means the Governor's Committee on
Basic Health Services referred to in Section 12.
(E) "Dependent" means a spouse; an unmarried child
under the age of nineteen years; an unmarried child who is a full-time
student between the ages of nineteen and twenty-two and who is
financially dependent upon the parent; and an unmarried child of any
age who is medically certified as disabled and dependent upon the
parent.
(F) "Eligible employee" means an employee as defined
in Section 38-71-710(1) of the 1976 Code of Laws who works on a
full-time basis and has a normal work week of thirty or more hours.
(G) "Health insurance plan" means any hospital or
medical policy or certificate, major medical expense insurance, or health
maintenance organization subscriber contract. Health insurance plan
does not include accident-only, credit, dental, vision, Medicare
supplement, long-term care, or disability income insurance, coverage
issued as a supplement to liability insurance, workers' compensation or
similar insurance, or automobile medical payment insurance.
(H) "Insurer" means any entity that provides health
insurance in this State. For the purposes of this act, insurer includes an
insurance company, a health maintenance organization, and any other
entity providing a plan of health insurance or health benefits subject to
state insurance regulation, including multiple employer self-insured
health plans licensed pursuant to Section 38-41-10, et seq.
(I) "Late enrollee" means an eligible employee or
dependent who requests enrollment in a health insurance plan of a small
employer following the initial enrollment period during which the
individual is entitled to enroll under the terms of the health insurance
plan, provided that the initial enrollment period is a period of at least
thirty days. However, an eligible employee or dependent shall not be
considered a late enrollee if:
(1) the individual meets each of the following:
(a) the individual was covered under qualifying previous
coverage at the time of the initial enrollment;
(b) the individual lost coverage under qualifying previous
coverage as a result of termination of employment or eligibility, the
involuntary termination of the qualifying previous coverage, death of a
spouse, or divorce; and
(c) the individual requests enrollment within thirty days after
termination of the qualifying previous coverage; or
(2) the individual is employed by an employer which offers
multiple health insurance plans and the individual elects a different plan
during an open enrollment period; or
(3) a court has ordered that coverage be provided for a spouse or
minor or dependent child under a covered employee's health insurance
plan and request for enrollment is made within thirty days after issuance
of the court order.
(J) "Plan of operation" means the plan of operation of
the program established pursuant to Section 11.
(K) "Program" means the South Carolina Small
Employer Insurer Reinsurance Program created by Section 11.
(L) "Qualifying previous coverage" means benefits or
coverage provided under:
(1) Medicare or Medicaid; or
(2) an employer-based health insurance or health benefit
arrangement that provides benefits similar to or exceeding benefits
provided under the basic health insurance plan; or
(3) an individual health insurance policy, including coverage
issued by a health maintenance organization, that provides benefits
similar to or exceeding the benefits provided under the basic health
insurance plan, provided that such policy has been in effect for at least
one year.
(M) "Reinsuring insurer" means a small employer insurer
participating in the reinsurance program pursuant to Section 11.
(N) "Risk-assuming insurer" means a small employer
insurer whose application is approved by the commissioner pursuant to
Section 9.
(0) "Small employer" means any person, firm,
corporation, partnership, or association that is actively engaged in
business that, on at least fifty percent of its working days during the
preceding calendar year employed no more than fifty eligible employees.
In determining the number of eligible employees, companies that are
affiliated companies, or that are eligible to file a combined tax return for
purposes of state taxation, shall be considered one employer.
(P) "Small employer insurer" means an insurer that
offers health insurance plans covering eligible employees of one or more
small employers in this State.
(Q) "Standard health insurance plan" means a health
insurance plan developed pursuant to Section 12.
SECTION 4. (A) Except as provided in subsection (B), the provisions
of this act apply to any health insurance plan which provides coverage
to one or more employees of a small employer.
(B) The provisions of this act do not apply to individual health
insurance policies which are subject to policy form and premium rate
approval as may be provided in Title 38 of the 1976 Code of Laws.
SECTION 5. Premium rates for health insurance plans subject to this
act are governed by the rating restrictions contained in
Section 38-71-910, et seq., of the 1976 Code of Laws and the following
provisions:
(1) Adjustments in rates for claim experience, health status and
duration of coverage shall not be charged to individual employees or
dependents. Any such adjustment shall be applied uniformly to the rates
charged for all employees and dependents of the small employer.
(2) Premium rates for health insurance plans shall comply with
the requirements of this section notwithstanding any reinsurance
premiums or assessments paid or payable by small employer insurers
pursuant to Section 11.
(3) The small employer insurer shall not use case characteristics,
other than age, gender, industry, geographic area, family composition
and group size without prior approval of the commissioner.
(4) If a small employer insurer utilizes industry as a case
characteristic in establishing premium rates, the highest rate factor
associated with any industry classification shall not exceed the lowest
rate factor associated with any industry classification by more than
fifteen percent.
(5) Small employer insurers shall apply rating factors, including
case characteristics, consistently with respect to all small employers in
a class of business. Rating factors shall produce premiums for identical
groups which differ only by the amounts attributable to plan design and
do not reflect differences due to the nature of the groups assumed to
select particular health insurance plans.
SECTION 6. (A) (1) Every small employer insurer shall, as a
condition of transacting business in this State with small employers,
fairly market to small employers at least two health insurance plans.
One health insurance plan offered by each small employer insurer must
be a basic health insurance plan and one plan must be a standard health
insurance plan.
(2) Coverage under the basic or standard health insurance plan
must be offered to all eligible employees of a small employer and their
dependents. A small employer insurer may not offer coverage only to
certain individuals in a small employer group, or to only part of the
group, except as provided in Section 7B.
(3) Except with respect to applicable preexisting condition
limitation periods or late enrollees as provided in Section 7B, a small
employer insurer shall not modify a health insurance plan with respect
to a small employer or any eligible employee or dependent through rider,
endorsements, or otherwise, to restrict or exclude coverage or benefits
for specific diseases, medical conditions or services otherwise covered
under the plan.
(4) (a) A small employer insurer shall issue a basic health
insurance plan or a standard health insurance plan to any eligible small
employer that applies for either such plan and agrees to make the
required premium payments and to satisfy the other reasonable
provisions of the health insurance plan not inconsistent with this act.
(b) In the case of a small employer insurer that establishes more
than one class of business pursuant to Section 38-71-920(11) of the 1976
Code of Laws, the small employer insurer shall maintain and issue to
eligible small employers at least one basic health insurance plan and at
least one standard health insurance plan in each class of business so
established. A small employer insurer may apply reasonable criteria in
determining whether to accept a small employer into a class of business,
provided that:
(i) The criteria are not intended to discourage or prevent
acceptance of small employers applying for a basic or standard health
insurance plan;
(ii) The criteria are not related to the health status or claim
experience of the small employer;
(iii) The criteria are applied consistently to all small
employers applying for coverage in the class of business; and
(iv) The small employer insurer provides for the acceptance
of all eligible small employers into one or more classes of business.
The requirement to offer at least two health insurance plans to small
employers shall not apply to a class of business into which the small
employer insurer is no longer enrolling new small businesses.
(5) The provisions of this subsection A of this Section shall be
effective one hundred eighty days after the commissioner's approval of
the basic health insurance plan and the standard health insurance plan
developed pursuant to Section 12; provided, that if the Small Employer
Insurer Reinsurance Program created pursuant to Section 11 is not yet
operative on that date, the provisions of this paragraph shall be effective
on the date that the program begins operation.
(B) (1) After the commissioner's approval of the basic health
insurance plan and the standard health insurance plan developed
pursuant to Section 12, a small employer insurer shall file with the
commissioner, in the form and manner prescribed by the commissioner,
the basic and standard health insurance plans to be used by the insurer.
The insurer shall certify to the commissioner that the plans as filed are
in substantial compliance with the provisions as approved by the
commissioner. Upon the commissioner's receipt of the certification, the
insurer may use the certified plans unless their use is disapproved by the
commissioner.
(2) The commissioner may, at any time, after providing notice and
an opportunity for hearing, disapprove the continued use by a small
employer insurer of a basic or standard health insurance plan on the
grounds that the plan does not meet the requirements of this act.
(C) (1) A health maintenance organization shall not be required to
offer coverage or accept applications pursuant to subsection (A) in the
case of the following:
(a) to a small employer, where the small employer is not
physically located in the health maintenance organization's established
geographic service area;
(b) to an employee, when the employee does not work or reside
within the health maintenance organization's established geographic
service area; or
(c) within an area where the health maintenance organization
reasonably anticipates, and demonstrates to the satisfaction of the
commissioner, that it will not have the capacity within its established
geographic service area to deliver service adequately to the members of
such groups because of its obligations to existing group policyholders
and enrollees.
(2) A health maintenance organization that cannot offer coverage
pursuant to paragraph (1)(c) may not offer coverage in the applicable
area to new cases of employer groups with more than fifty eligible
employees or to any small employer groups until the later of one
hundred eighty days following each such refusal or the date on which
the health maintenance organization notifies the commissioner that it has
regained capacity to deliver services to small employer groups.
(D) A small employer insurer may not be required to provide
coverage to small employers pursuant to subsection (A) for any period
of time for which the commissioner determines that requiring the
acceptance of small employers in accordance with the provisions of
subsection (A) would place the small employer insurer in a financially
impaired condition.
SECTION 7. (A) Except to the extent inconsistent with specific
provisions of this act, all provisions of Article 5 of Chapter 71 of Title
38 of the 1976 Code of Laws are applicable to the basic and standard
health insurance plans required to be offered by small employer insurers.
(B) Late enrollees may be excluded from coverage for the greater of
eighteen months or an eighteen-month preexisting condition exclusion;
provided that if both a period of exclusion from coverage and a
preexisting condition exclusion are applicable to a late enrollee, the
combined period shall not exceed eighteen months.
SECTION 8. (A) (1) Within sixty days after the plan of operation
is approved by the commissioner under Section 11, each small employer
insurer shall notify the commissioner of the insurer's intention to operate
as a risk-assuming insurer or a reinsuring insurer. A small employer
insurer seeking to operate as a risk-assuming insurer shall make an
application pursuant to Section 9.
(2) The decision shall be binding for a five-year period except
that the initial decision shall be binding for two years. The
commissioner may permit an insurer to modify its decision at any time
for good cause shown.
(3) The commissioner shall establish an application process for
small employer insurers seeking to change their status under this
subsection. In the case of a small employer insurer that has been
acquired by another such insurer, the commissioner may waive or
modify the time periods established in paragraph (2).
(B) A reinsuring insurer that applies and is approved to operate as a
risk-assuming insurer shall not be permitted to continue to reinsure any
health insurance plan with the program. Such an insurer shall pay a
prorated assessment based upon business issued as a reinsuring insurer
for any portion of the year that the business was reinsured.
SECTION 9. (A) Any small employer insurer may elect to become a
risk-assuming insurer upon application to and approval by the
commissioner. A small employer insurer shall not be approved as a
risk-assuming insurer if the commissioner finds that the insurer is not
capable of assuming that status pursuant to the criteria set forth in
subsection (B) of this section. The insurer shall provide public notice of
its application to become a risk-assuming insurer. A small employer
insurer's application to be a risk-assuming insurer shall be approved
unless disapproved by the commissioner within sixty days after the
insurer's application. A small employer insurer that has had its
application to be a risk-assuming insurer disapproved may request and
shall be granted a public hearing within sixty days after the disapproval.
(B) In determining whether or not to approve an application by a
small employer insurer to become a risk-assuming insurer, the
commissioner shall consider the insurer's financial condition and the
financial condition of its parent or guaranteeing corporation, if any; its
history of assuming and managing risk; its ability to assume and manage
the risk of enrolling small employers without the protection of the
reinsurance provided in Section 11; and its commitment to fairly market
to all small employers.
SECTION 10. (A) A small employer insurer may elect to become a
reinsuring insurer and operate under the provisions of this section and
Section 11.
(B) Each reinsuring insurer shall conduct business with its members
and subscribers, and administer claims for coverage reinsured by the
program, in the same manner as it would administer health claims that
it writes without reinsurance.
SECTION 11. (A) There is hereby created a nonprofit entity to be
known as the South Carolina Small Employer Insurer Reinsurance
Program, which shall become operational on January 1, 1995.
(B) (1) The program shall operate subject to the supervision and
control of the board. Subject to the provisions of paragraph (2), the
board shall consist of eight members appointed by the commissioner
plus the commissioner or his or her designated representative, who shall
serve as an ex officio member of the board.
(2) In selecting the members of the board, the commissioner shall
include representatives of small employers and small employer insurers
and such other individuals determined to be qualified by the
commissioner. At least five members of the board shall be
representatives of insurers and shall be selected from individuals
nominated in this State pursuant to procedures and guidelines developed
by the commissioner.
(3) The initial board members shall be appointed as follows: two
of the members to serve a term of two years; three of the members to
serve a term of four years; and three (3) of the members to serve a term
of six years. Subsequent board members shall serve for a term of three
years. A board member's term shall continue until his or her successor
is appointed.
(4) A vacancy in the board shall be filled by the commissioner.
A board member may be removed by the commissioner for cause.
(C) Within sixty days of the effective date of this act, each small
employer insurer shall make a filing with the commissioner containing
the insurer's net health insurance premium derived from health insurance
plans delivered or issued for delivery to small employers in this State in
the previous calendar year.
(D) Within one hundred eighty days after the appointment of the
initial board, the board shall submit to the commissioner a plan of
operation and thereafter any amendments thereto necessary or suitable
to assure the fair, reasonable and equitable administration of the
program. The commissioner may, after notice and hearing, approve the
plan of operation if the commissioner determines it to be suitable to
assure the fair, reasonable, and equitable administration of the program,
and to provide for the sharing of program gains or losses on an equitable
and proportionate basis in accordance with the provisions of this section.
The plan of operation shall become effective upon written approval by
the commissioner.
(E) If the board fails to submit a suitable plan of operation within
one hundred eighty days after its appointment, the commissioner shall,
after notice and hearing, adopt and promulgate a temporary plan of
operation. The commissioner shall amend or rescind any plan adopted
under this subsection at the time a plan of operation is submitted by the
board and approved by the commissioner.
(F) The plan of operation shall:
(1) establish procedures for handling and accounting of program
assets and monies and for an annual fiscal reporting to the
commissioner;
(2) establish procedures for selecting an administering insurer and
setting forth the powers and duties of the administering insurer;
(3) establish procedures for reinsuring risks in accordance with
the provisions of this section;
(4) establish procedures for collecting assessments from
reinsuring insurers to fund claims and administrative expenses incurred
or estimated to be incurred by the program;
(5) establish a methodology for applying the dollar thresholds
contained in this section in the case of insurers that pay or reimburse
health care providers though capitation or salary; and
(6) provide for any additional matters necessary for the
implementation and administration of the program.
(G) The program shall have the general powers and authority granted
under the laws of this State to insurance companies and health
maintenance organizations licensed to transact business, except the
power to issue health insurance plans directly to either groups or
individuals. In addition thereto, the program shall have the specific
authority to:
(1) enter into contracts as are necessary or proper to carry out the
provisions and purposes of this act, including the authority, with the
approval of the commissioner, to enter into contracts with similar
programs of other states for the joint performance of common functions
or with persons or other organizations for the performance of
administrative functions;
(2) sue or be sued, including taking any legal actions necessary
or proper to recover any assessments and penalties for, on behalf of, or
against the program or any reinsuring insurers;
(3) take any legal action necessary to avoid the payment of
improper claims against the program;
(4) define the health insurance plans for which reinsurance will
be provided, and to issue reinsurance policies, in accordance with the
requirements of this act;
(5) establish rules, conditions, and procedures for reinsuring risks
under the program;
(6) establish actuarial functions as appropriate for the operation
of the program;
(7) assess reinsuring insurers in accordance with the provisions
of subsection (K), and to make advance interim assessments as may be
reasonable and necessary for organizational and interim operating
expenses. Any interim assessments shall be credited as offsets against
any regular assessments due following the close of the fiscal year;
(8) appoint appropriate legal, actuarial, and other committees as
necessary to provide technical assistance in the operation of the
program, policy and other contract design, and any other function within
the authority of the program;
(9) borrow money to effect the purposes of the program. Any
notes or other evidence of indebtedness of the program not in default
shall be legal investments for insurers and may be carried as admitted
assets;
(H) A reinsuring insurer may reinsure with the program as provided
for in this subsection:
(1) With respect to a basic health insurance plan or a standard
health insurance plan, the program shall reinsure the level of coverage
provided.
(2) A small employer insurer may reinsure an entire employer
group within sixty days of the commencement of the group's coverage
under a health insurance plan.
(3) A reinsuring insurer may reinsure an eligible employee or
dependent within a period of sixty days following the commencement
of the coverage with the small employer. A newly eligible employee or
dependent of the reinsured small employer may be reinsured within sixty
days of the commencement of his or her coverage.
(4) (a) The program shall not reimburse a reinsuring insurer
with respect to the claims of a reinsured employee or dependent until the
insurer has incurred an initial level of claims for such employee or
dependent of five thousand dollars in a calendar year for benefits
covered by the program. In addition, the reinsuring insurer shall be
responsible for ten percent of the next fifty thousand dollars of benefit
payments during a calendar year and the program shall reinsure the
remainder. A reinsuring insurers' liability under this subparagraph shall
not exceed a maximum limit of ten thousand dollars in any one calendar
year with respect to any reinsured individual.
(b) The board annually shall adjust the initial level of claims
and the maximum limit to be retained by the insurer to reflect increases
in costs and utilization within the standard market for health insurance
plans within the State. The adjustment shall not be less than the annual
change in the medical component of the "Consumer Price Index
for All Urban Consumers" of the Department of Labor, Bureau of
Labor Statistics, unless the board proposes and the commissioner
approves a lower adjustment factor.
(5) A small employer insurer may terminate reinsurance with the
program for one or more of the reinsured employees or dependents of a
small employer on any anniversary of the health insurance plan.
(6) A reinsuring insurer shall apply all managed care and claims
handling techniques, including utilization review, individual case
management, preferred provider provisions, and other managed care
provisions or methods of operation consistently with respect to reinsured
and nonreinsured business.
(I) (1) The board, as part of the plan of operation, shall establish
a methodology for determining premium rates to be charged by the
program for reinsuring small employers and individuals pursuant to this
section. The methodology must contain a provision surcharging the
reinsurance premium rate of a small employer insurer which does not
employ effective cost containment and managed care arrangements
including, but not limited to:
(a) preferred provider organizations;
(b) utilization review;
(c) case management;
(d) other.
The methodology shall include a system for classification of small
employers that reflects the types of case characteristics commonly used
by small employer insurers in the State. The methodology shall provide
for the development of base reinsurance premium rates which shall be
multiplied by the factors set forth in paragraph (2) to determine the
premium rates for the program. The base reinsurance premium rates
shall be established by the board, subject to the approval of the
commissioner, and shall be set at levels which reasonably approximate
gross premiums charged to small employers by small employer insurers
for health insurance plans with benefits similar to the standard health
insurance plan.
(2) Premiums for the program shall be as follows:
(a) An entire small employer group may be reinsured for a rate
that is one and one-half times the base reinsurance premium rate for the
group established pursuant to this paragraph.
(b) An eligible employee or dependent may be reinsured for a
rate that is five times the base reinsurance premium rate for the
individual established pursuant to this paragraph.
(3) The board periodically shall review the methodology
established under paragraph (1), including the system of classification
and any rating factors, to assure that it reasonably reflects the claims
experience of the program. The board may propose changes to the
methodology which shall be subject to the approval of the
commissioner.
(J) If a health insurance plan for a small employer is entirely or
partially reinsured with the program, the premium charged to the small
employer for any rating period for the coverage issued shall meet the
requirements relating to premium rates set forth in Section 38-71-910,
et seq. of the 1976 Code of Laws.
(K) (1) Prior to March first of each year, the board shall determine
and report to the commissioner the program net loss for the previous
calendar year, including administrative expenses and incurred losses for
the year, taking into account investment income and other appropriate
gains and losses.
(2) Any net loss for the year shall be recouped by assessments of
reinsuring insurers.
(a) The board shall establish, as part of the plan of operation,
a formula by which to make assessments against reinsuring insurers.
The assessment formula shall be based on:
(i) each reinsuring insurer's share of the total premiums
earned in the preceding calendar year from health insurance plans
delivered or issued for delivery to small employers in this State by
reinsuring insurers; and
(ii) each reinsuring insurer's share of the premiums earned
in the preceding calendar year from newly issued health insurance plans
delivered or issued for delivery during the calendar year to small
employers in this State by reinsuring insurers.
(b) The formula established pursuant to Subparagraph (a) shall
not result in any reinsuring insurer having an assessment share that is
less than fifty percent nor more than one hundred fifty percent of an
amount which is based on the proportion of
(i) the reinsuring insurer's total premiums earned in the
preceding calendar year from health insurance plans delivered or issued
for delivery to small employers in this State by reinsuring insurers to
(ii) the total premiums earned in the preceding calendar year
from health insurance plans delivered or issued for delivery to small
employers in this State by all reinsuring insurers.
(c) The board may, with approval of the commissioner, change
the assessment formula established pursuant to subparagraph (a) from
time to time as appropriate. The board may provide for the shares of the
assessment base attributable to total premium and to the previous year's
premium to vary during a transition period.
(d) Subject to the approval of the commissioner, the board shall
make an adjustment to the assessment formula for reinsuring insurers
that are approved health maintenance organizations which are federally
qualified under 42 U.S.C. Sec. 300, et seq., to the extent, if any, that
restrictions are placed on them that are not imposed on other small
employer insurers.
(3) (a) Prior to March first of each year, the board shall
determine and file with the commissioner an estimate of the assessments
needed to fund the losses incurred by the program in the previous
calendar year.
(b) If the board determines that the assessments needed to fund
the losses incurred by the program in the previous calendar year will
exceed the amount specified in subparagraph (c), the board shall
evaluate the operation of the program and report its findings, including
any recommendations for changes to the plan of operation, to the
commissioner within ninety days following the end of the calendar year
in which the losses were incurred. The evaluation shall include an
estimate of future assessments and consideration of the administrative
costs of the program, the appropriateness of the premiums charged, the
level of insurer retention under the program and the costs of coverage
for small employers. If the board fails to file a report with the
commissioner within ninety days following the end of the applicable
calendar year, the commissioner may evaluate the operations of the
program and implement such amendments to the plan of operation the
commissioner considers necessary to reduce future losses and
assessments.
(c) For any calendar year, the amount specified in this
subparagraph is five percent of total premiums earned in the previous
calendar year from health insurance plans delivered or issued for
delivery to small employers in this State by reinsuring insurers.
(4) If assessments exceed net losses of the program, the excess
shall be held at interest and used by the board to offset future losses or
to reduce program premiums. As used in this paragraph, "future
losses" includes reserves for incurred but not reported claims.
(5) Each reinsuring insurer's proportion of the assessment shall be
determined annually by the board based on annual statements and other
reports considered necessary by the board and filed by the reinsuring
insurers with the board.
(6) The plan of operation shall provide for the imposition of an
interest penalty for late payment of assessments.
(7) A reinsuring insurer may seek from the commissioner a
deferment from all or part of an assessment imposed by the board. The
commissioner may defer all or part of the assessment of a reinsuring
insurer if the commissioner determines that the payment of the
assessment would place the reinsuring insurer in a financially impaired
condition. If all or part of an assessment against a reinsuring insurer is
deferred, the amount deferred shall be assessed against the other
participating insurers in a manner consistent with the basis for
assessment set forth in this subsection. The reinsuring insurer receiving
the deferment shall remain liable to the program for the amount deferred
and shall be prohibited from reinsuring any individuals or groups with
the program until such time as it pays the assessments.
(L) Neither the participation in the program as reinsuring insurers,
the establishment of rates, forms, or procedures, nor any other joint or
collective action required by this act shall be the basis of any legal
action, criminal or civil liability, or penalty against the program or any
of its reinsuring insurers either jointly or separately.
(M) The board, as part of the plan of operation, shall develop
standards setting forth the manner and levels of compensation, if any, to
be paid to agents for the sale of basic and standard health insurance
plans. In establishing such standards, the board shall take into
consideration the need to assure the broad availability of coverages, the
objectives of the program, the time and effort expended in placing the
coverage, the need to provide on-going service to the small employer,
the levels of compensation currently used in the industry, and the overall
costs of coverage to small employers selecting these plans.
(N) The program shall be exempt from any and all taxes.
SECTION 12. (A) The Governor's Committee on Basic Health
Services shall recommend the form and level of coverages to be made
available by small employer insurers pursuant to Section 6.
(B) The committee shall recommend benefit levels, cost-sharing
levels, exclusions and limitations for the basic health insurance plan and
the standard health insurance plan. The committee shall specifically
recommend which, if any, mandated coverages of health care services
or health care providers should be included in the basic and standard
health insurance plans and shall recommend as well whether the plans
should be exempt from any other statutory provisions otherwise
applicable to group health insurance policies. The committee shall also
design a basic health insurance plan and a standard health insurance plan
which contain benefit and cost-sharing levels that are consistent with the
basic method of operation and the benefit plans of health maintenance
organizations, including any restrictions imposed by federal law.
(1) The plans recommended by the committee may include cost
containment features such as:
(a) utilization review of health care services, including review
of medical necessity of hospital and physician services;
(b) case management;
(c) selective contracting with hospitals, physicians, and other
health care providers;
(d) reasonable benefit differentials applicable to providers that
participate or do not participate in arrangements using restricted network
provisions; and
(e) other managed care provisions.
(2) The committee shall submit the health insurance plans
described in paragraphs (A) and (B) to the commissioner for approval
within one hundred eighty days after the passage of this act. If, for any
reason, the committee does not provide the commissioner with a
recommendation as to the form and level of coverages to be made
available pursuant to this act, the board shall make such
recommendation to the commissioner. If, subsequent to the approval of
the benefit levels of the basic and standard health insurance plans,
amendments to the plans should become necessary, the board shall make
such recommendations to the commissioner for his approval.
SECTION 13. The board, in consultation with members of the
committee, shall study and report at least every three years to the
commissioner on the effectiveness of this act. The report shall analyze
the effectiveness of the act in promoting rate stability, product
availability, and coverage affordability. The report may contain
recommendations for actions to improve the overall effectiveness,
efficiency, and fairness of the small group health insurance marketplace.
The report shall address whether insurers and agents are fairly marketing
or issuing health insurance plans to small employers in fulfillment of the
purposes of the act. The report may contain recommendations for
market conduct or other regulatory standards or action.
SECTION 14. (A) Each small employer insurer shall fairly market
health insurance plan coverage, including the basic and standard health
insurance plans, to eligible small employers in the State. If a small
employer insurer denies coverage to a small employer on the basis of the
health status or claims experience of the small employer or its employees
or dependents, the small employer insurer shall offer the small employer
the opportunity to purchase a basic health insurance plan and a standard
health insurance plan.
(B) (1) Except as provided in paragraph (2), no small employer
insurer or its agent shall, directly or indirectly, engage in the following
activities:
(a) encouraging or directing small employers to refrain from
filing an application for coverage with the small employer insurer
because of the health status, claims experience, industry, occupation, or
geographic location of the small employer;
(b) encouraging or directing small employers to seek coverage
from another insurer because of the health status, claims experience,
industry, occupation, or geographic location of the small employer.
(2) The provisions of paragraph (1) shall not apply with respect
to information provided by a small employer insurer or agent to a small
employer regarding the established geographic service area or a
restricted network provision of a small employer insurer or health
maintenance organization.
(C) (1) Except as provided in paragraph (2), no small employer
insurer shall, directly or indirectly, enter into any contract, agreement,
or arrangement with an agent that provides for or results in the
compensation paid to an agent for the sale of a health insurance plan to
be varied because of the health status, claims experience, industry,
occupation, or geographic location of the small employer.
(2) Paragraph (1) shall not apply with respect to a compensation
arrangement that provides compensation to an agent on the basis of
percentage of premium, provided that the percentage shall not vary
because of the health status, claims experience, industry, occupation, or
geographic area of the small employer.
(D) A small employer insurer shall provide reasonable compensation,
if provided under the plan of operation of the program, to an agent, if
any, for the sale of a basic or standard health insurance plan.
(E) No small employer insurer may terminate, fail to renew, or limit
its contract or agreement of representation with an agent for any reason
related to the health status, claims experience, occupation, or geographic
location of the small employers placed by the agent with the small
employer insurer.
(F) No small employer insurer or agent may induce or otherwise
encourage a small employer to separate or otherwise exclude an
employee from health coverage or benefits provided in connection with
the employee's employment.
(G) Denial by a small employer insurer of an application for
coverage from a small employer shall be in writing and shall state the
reason or reasons for the denial.
(H) If a small employer insurer enters into a contract, agreement, or
other arrangement with a third-party administrator to provide
administrative, marketing, or other services related to the offering of
health insurance plans to small employers in this State, the third-party
administrator shall be subject to this act as if it were a small employer
insurer.
SECTION 15. Sections 38-71-920(1) and (3)of the 1976 Code, as
added by Act 131 of 1991, are amended to read:
"(1) `mall employer' means any person, firm, corporation,
partnership, or association actively engaged in business,
who, on at least fifty percent of its working days during the preceding
year, employed no more than twenty-five fifty eligible
employees. In determining the number of eligible employees,
companies which are affiliated companies or which are eligible to file
a combined tax return for purposes of state taxation must be considered
one employer.
(3) `Health insurance plan' or `plan' means any hospital or medical
expense incurred policy or certificate, hospital, or medical service plan
contract, or health maintenance organization subscriber contract. Health
insurance plan does not include accident-only, credit, dental, vision,
Medicare supplement, long-term care, or disability-income
insurance; coverage issued as a supplement to liability insurance;
workers' compensation or similar insurance; or automobile medical
payment insurance."
SECTION 16. Section 32-71-920 of the 1976 Code, as added by Act
131 of 1991, is amended by adding:
(14) `Late enrollee' means an eligible employee or dependent who
requests enrollment in a health insurance plan of a small employer
following the initial enrollment period during which the individual is
entitled to enroll under the terms of the health insurance plan, provided
that the initial enrollment period is a period of at least thirty days.
However, an eligible employee or dependent shall not be considered a
late enrollee if:
(1) The individual meets each of the following:
(a) the individual was covered under qualifying previous
coverage at the time of the initial enrollment;
(b) the individual lost coverage under qualifying previous
coverage as a result of termination of employment or eligibility, the
involuntary termination of the qualifying previous coverage, death of a
spouse or divorce; and
(c) the individual requests enrollment within thirty days after
termination of the qualifying previous coverage; or
(2) The individual is employed by an employer which offers
multiple health insurance plans and the individual elects a different plan
during an open enrollment period; or
(3) A court has ordered that coverage be provided for a spouse or
minor or dependent child under a covered employee's health insurance
plan and request for enrollment is made within thirty days after issuance
of the court order."
Section 17. Section 38-71-730(3) and (4) of the 1976 Code, both as
last amended by Act 131 of 1991, are further amended to read:
"(3) Except as hereinafter provided, For all groups, no
evidence of individual insurability may be required at the time the
person first becomes eligible for insurance or within thirty-one days
thereafter. Nothing in this section precludes the obtaining of medical
information with respect to the members of the group for use in
determining the insurability of the group, but the information may not
be used to exclude an individual from coverage. However, for
groups of ten or less persons, evidence of individual insurability may be
required for persons first becoming eligible for insurance after the
effective date of the policy. An insurer may exclude these persons from
coverage or may impose those condition riders, preexisting condition
limitations, or waiting periods as are in accordance with law.
(4) The policies may contain a provision limiting coverage for
preexisting conditions. The preexisting conditions must be covered no
later than twelve months without medical care, treatment, or supplies
ending after the effective date of the coverage or twelve months after
the effective date of the coverage, whichever occurs first.
Preexisting conditions are defined as `those conditions for which
medical advice or treatment was received or recommended no more than
twelve months before the effective date of a person's coverage'.
However, whenever a covered person moves from one insured group to
another, and is neither excluded from coverage nor subject to the
imposition of preexisting condition limitations as permitted by
Section 38-71-730(3), the insurer of the group to which the covered
person moves shall give credit for the satisfaction of the preexisting
condition period or portion thereof already served under the prior plan
if the coverage is selected when the person first becomes eligible and the
coverage is continuous to a date not more than thirty days prior to
the effective date of the new coverage. Service under a
probationary waiting period required by the employer is not
considered to interrupt continuous service."
SECTION 18. Section 38-70-10(2) of the 1976 Code, as added by
Act 311 of 1990, is amended to read:
"(2) `Private review agent' means a person performing
utilization reviews who is either under contract with or acting on behalf
of, but not employed by:
(a) a South Carolina business entity;
(b) the State of South Carolina; or
(c) a hospital;.
(d) a third party that provides or administers health care
benefits to citizens of this State. These third parties include but are not
limited to:
(i) a health maintenance organization to which this chapter
applies; or
(ii) a health insurer, hospital service corporation or preferred
provider organization to which this chapter applies offering health
benefits in this State."
SECTION 19. Section 38-70-15 of the 1976 Code, as added by Act
311 of 1990, is amended to read:
"Section 38-70-15. This chapter does not apply
applies to insurance companies, administrators of
insurance benefit plans, and health maintenance organizations
licensed and regulated by the South Carolina Department of Insurance.
Insurance companies, administrators of insurance benefit plans, and
health maintenance organizations so regulated are exempt from the
provisions of Sections 38-70-20(A) and (B), 38-70-30, and
38-70-50."
SECTION 20. Section 38-71-940(B) of the 1976 Code, as added by
Act 131 of 1991, is amended to read:
"(B) Nothing in this section is intended to affect the use by
a small employer insurer of legitimate rating factors other than claim
experience, health status or duration of coverage in the determination of
premium rates. Small employer insurers shall apply rating factors,
including case characteristics, consistently with respect to all small
employers in a class of business.
Small employer insurers shall not use case characteristics, other
than age, gender, industry, geographic area, family composition, and
group size without prior approval of the commissioner. If a small
employer insurer uses industry as a case characteristic in establishing
premium rates, the highest rate factor associated with any industry
classification shall not exceed the lowest rate factor associated with any
industry classification by more than fifteen percent."
SECTION 21. If any provision of this act or the application thereof
to any person or circumstances is for any reason held to be invalid, the
remainder of the act and the application of its provisions to other persons
or circumstances shall not be affected thereby.
SECTION 22. Except as may otherwise be provided in this act, this
act takes effect January 1, 1995.
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