Current Status Introducing Body:Senate Bill Number:671 Primary Sponsor:Fielding Committee Number:02 Type of Legislation:GB Subject:Insurance, small employers, provisions Current Committee:Banking and Insurance Computer Document Number:BBM/9124.JM Introduced Date:Feb 19, 1991 Last History Body:Senate Last History Date:Feb 19, 1991 Last History Type:Introduced, read first time, referred to Committee Scope of Legislation:Statewide All Sponsors:Fielding Type of Legislation:General Bill
Bill Body Date Action Description CMN
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671 Senate Feb 19, 1991 Introduced, read first time, 02
referred to Committee
View additional legislative information at the LPITS web site.
TO ENACT LEGISLATION PROMOTING THE AVAILABILITY OF HEALTH INSURANCE COVERAGE TO SMALL EMPLOYERS.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. The intent of this act is to promote the availability of health insurance coverage to small employers, to prevent abusive rating practices, to require disclosure of rating practices to purchasers, to establish rules for continuity of coverage for employers and covered individuals, and to improve the efficiency and fairness of the small group health insurance marketplace.
SECTION 2. As used in this act:
( 1) "Small 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 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.
( 2) "Insurer" means any person who provides health insurance in this State. For the purposes of this act, insurer includes a licensed insurance company, a prepaid hospital or medical service plan, a health maintenance organization, a multiple employer welfare arrangement, or any other person providing a plan of health insurance subject to state insurance regulation.
( 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, or disability-income insurance; coverage issued as a supplement to liability insurance; worker's compensation or similar insurance; or automobile medical-payment insurance.
( 4) "Small employer insurer" means an insurer which offers health insurance plans covering the employees of a small employer.
( 5) "Case characteristics" means demographic or other relevant characteristics of a small employer, as determined by a small employer insurer, which are considered by the insurer in the determination of premium rates for the small employer. Claim experience, health status, and duration of coverage since issue are not case characteristics for the purposes of this act.
( 6) "Commissioner" means the Chief Insurance Commissioner.
( 7) "Department" means the Department of Insurance.
( 8) "Base premium rate" means, for each class of business as to a rating period, the lowest premium rate charged or which could have been charged under a rating system for that class of business, by the small employer insurer to small employers with similar case characteristics for health insurance plans with the same or similar coverage.
( 9) "New business premium rate" means, for each class of business as to a rating period, the premium rate charged or offered by the small employer insurer to small employers with similar case characteristics for newly issued health insurance plans with the same or similar coverage.
(10) "Index rate" means for each class of business for small employers with similar case characteristics the arithmetic average of the applicable base premium rate and the corresponding highest premium rate.
(11) "Class of business" means all or a distinct grouping of small employers as shown on the records of the small employer insurer.
(a) A distinct grouping may be established only by the small employer insurer on the basis that the applicable health insurance plans:
( i) are marketed and sold through individuals and organizations which are not participating in the marketing or sale of other distinct groupings of small employers for such small employer insurer;
( ii) have been acquired from another small employer insurer as a distinct grouping of plans;
(iii) are provided through an association with membership of not less than fifty small employers which have been formed for purposes other than obtaining insurance; or
( iv) are in a class of business that meets the requirements for exception to the restrictions related to premium rates provided in Section 4(A)(1)(a).
(b) A small employer insurer may establish no more than two additional groupings under each of the subparagraphs in subitem (a) on the basis of underwriting criteria which are expected to produce substantial variation in the health care costs.
(c) The commissioner may approve the establishment of additional distinct groupings upon application to the commissioner and a finding by the commissioner that that action would enhance the efficiency and fairness of the small employer insurance marketplace.
(12) "Actuarial certification" means a written statement by a member of the American Academy of Actuaries that a small employer insurer is in compliance with the provisions of Section 4, based upon the person's examination, including a review of the appropriate records and of the actuarial assumptions and methods utilized by the insurer in establishing premium rates for applicable health insurance plans.
(13) "Rating period" means the calendar period for which premium rates established by a small employer insurer are assumed to be in effect, as determined by the small employer insurer.
SECTION 3. (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.
SECTION 4. (A) Premium rates for health insurance plans subject to this act are subject to: (1) The index rate for a rating period for any class of business may not exceed the index rate for any other class of business by more than twenty percent.
The provisions of this item do not apply to a class of business if all of the following apply:
(a) the class of business is one for which the insurer does not reject, and never has rejected, small employers included within the definition of employers eligible for the class of business or otherwise eligible employees and dependents who enroll on a timely basis, based upon their claim experience or health status.
(b) The insurer does not transfer involuntarily, and never has involuntarily transferred, a health insurance plan into or out of the class of business.
(c) The class of business is currently available for purchase.
(2) For a class of business, the premium rates charged during a rating period to small employers with similar case characteristics for the same or similar coverage, or the rates which could be charged to these employers under the rating system for that class of business, may not vary from the index rate by more than twenty-five percent of the index rate.
(3) The percentage increase in the premium rate charged to a small employer for a new rating period may not exceed the sum of the following:
(a) The percentage change in the new business premium rate measured from the first day of the prior rating period to the first day of the new rating period. In the case of a class of business for which the small employer insurer is not issuing new policies, the insurer shall use the percentage change in the base premium rate.
(b) An adjustment, not to exceed fifteen percent annually and adjusted pro rata for rating periods of less than one year, due to the claim experience, health status, or duration of coverage of the employees or dependents of the small employer as determined from the insurer's rate manual for the class of business.
(c) Any adjustment due to change in coverage or change in the case characteristics of the small employer as determined from the insurer's rate manual for the class of business.
(4) In the case of health insurance plans issued prior to the effective date of this act, a premium rate for a rating period may exceed the ranges described in subsection (A)(1) or (2) for five years following the effective date of this act. In that case, the percentage increase in the premium rate charged to a small employer in such a class of business for a new rating period may not exceed the sum of the following:
(a) The percentage change in the new business premium rate measured from the first day of the prior rating period to the first day of the new rating period. In the case of a class of business for which the small employer insurer is not issuing new policies, the insurer shall use the percentage change in the base premium rate.
(b) Any adjustment due to change in coverage or change in the case characteristics of the small employer as determined from the insurer's rate manual for the class of business.
(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.
(C) A small employer insurer may not transfer involuntarily a small employer into or out of a class of business. A small employer insurer may not offer to transfer involuntarily a small employer into or out of a class of business, unless the offer is made to transfer all small employers in the class of business without regard to case characteristics, claim experience, health status, or duration since issue.
SECTION 5. (A) Except as provided in subsection (B), a health insurance plan subject to this act is renewable to all eligible employees and dependents at the option of the small employer, except for:
(1) nonpayment of required premiums;
(2) fraud or misrepresentation of the small employer, or, with respect to coverage of an insured individual, fraud, or misrepresentation by the insured individual or the individual's representative;
(3) noncompliance with plan provisions;
(4) the number of individuals covered under the plan is less than the number or percentage of eligible individuals required by percentage requirements under the plan; or
(5) the small employer is no longer actively engaged in the business in which it was engaged on the effective date of the plan.
(B) A small employer insurer may cease to renew all plans under a class of business. The insurer shall provide notice to all affected health insurance plans and to the commissioner in each state in which an affected insured individual is known to reside at least ninety days before termination of coverage. An insurer which exercises its right to cease to renew all plans in a class of business may not:
(1) establish a new class of business for a period of five years after the nonrenewal of the plans without prior approval of the commissioner; or
(2) transfer or otherwise provide coverage to any of the employers from the nonrenewed class of business unless the insurer offers to transfer or provide coverage to all affected employers and eligible employees and dependents without regard to case characteristics, claim experience, health status, or duration of coverage.
SECTION 6. Each small employer insurer shall make reasonable disclosure in solicitation and sales materials provided to small employers of the following:
(1) the extent to which premium rates for a specific small employer are established or adjusted due to the claim experience, health status, or duration of coverage of the employees or dependents of the small employer;
(2) the provisions concerning the insurer's right to change premium rates and the factors, including case characteristics, which affect changes in premium rates;
(3) a description of the class of business in which the small employer is or will be included, including the applicable grouping of plans;
(4) the provisions relating to renewability of coverage.
SECTION 7. (A) A small employer insurer shall maintain at its principal place of business a complete and detailed description of its rating practices and renewal underwriting practices, including information and documentation which demonstrate that its rating methods and practices are based upon commonly accepted actuarial assumptions and are in accordance with sound actuarial principles.
(B) Each small employer insurer shall file each March with the commissioner an actuarial certification certifying that the insurer is in compliance with this section and that the rating methods of the insurer are actuarially sound. A copy of the certification must be retained by the insurer at its principal place of business.
(C) A small employer insurer shall make the information and documentation described in subsection (A) available to the commissioner upon request. The information must be considered proprietary and trade secret information and is not subject to disclosure by the commissioner to persons outside of the department except as agreed to by the insurer or as ordered by a court of competent jurisdiction.
SECTION 8. The commissioner may suspend all or any part of Section 4 as to the premium rates applicable to one or more small employers for one or more rating periods upon a filing by the small employer insurer and a finding by the commissioner that either the suspension is reasonable in light of the financial condition of the insurer or that the suspension would enhance the efficiency and fairness of the marketplace for small employer health insurance.
SECTION 9. The provisions of this act apply to each health insurance plan for a small employer that is delivered, issued for delivery, renewed, or continued in this State after the effective date of this act. For purposes of this section, the date a plan is continued is the first rating period which commences after the effective date of this act.
SECTION 10. This act takes effect one hundred twenty days after approval by the Governor.