Current Status Bill Number:
260Type of Legislation: General Bill GBIntroducing Body: SenateIntroduced Date: 19970128Primary Sponsor: McConnellAll Sponsors: McConnellDrafted Document Number: gjk\23265ac.97Residing Body: SenateCurrent Committee: Banking and Insurance Committee 02 SBISubject: Health insurance, medical; rates, small group definitions, small employers, to use index rate
Body Date Action Description Com Leg Involved ______ ________ _______________________________________ _______ ____________ Senate 19970128 Introduced, read first time, 02 SBI referred to CommitteeView additional legislative information at the LPITS web site.
TO AMEND SECTION 38-71-920, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO DEFINITIONS USED IN CONNECTION WITH SMALL GROUP HEALTH INSURANCE, SO AS TO REVISE CERTAIN DEFINITIONS AND ADD NEW DEFINITIONS; TO AMEND SECTION 38-71-940, AS AMENDED, RELATING TO PREMIUM RATES AND RATING FACTORS FOR HEALTH INSURANCE PLANS AND THE PROHIBITION OF INVOLUNTARY BUSINESS CLASS TRANSFER, SO AS TO USE AN INDEX RATE VERSUS AN ACTUARIAL BASE RATE AS A MEASURE OF THE "AVERAGE RATE", TO STRENGTHEN ACTUARIAL CERTIFICATION REQUIREMENTS, TO ALLOW RATE VARIATION FROM THE INDEX RATE, TO LIMIT THE INDEX RATE VARIATION FOR A CLASS OF BUSINESS, TO CHANGE THE PROVISIONS FOR PREMIUM RATE INCREASES TO ALLOW AN ANNUAL ADJUSTMENT DUE TO CLAIM EXPERIENCE, HEALTH STATUS, OR DURATION OF COVERAGE, TO ADD GROUP SIZE AS A CASE CHARACTERISTIC AND DELETE IT AS MEANS OF CREATING A CLASS OF NEW BUSINESS; AND TO AMEND SECTION 38-71-960, AS AMENDED, RELATING TO DISCLOSURE TO SMALL EMPLOYERS IN SOLICITATION AND SALES MATERIAL FOR HEALTH INSURANCE, SO AS TO EXPAND INFORMATION REQUIRED TO BE DISCLOSED.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 38-71-920(5), (9), (10)(b), and (11) of the 1976 Code, as last amended by Section 15, Act 339 of 1994, is further amended to read:
"(5) 'Case characteristics' means the following 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: age, gender, geographic area, industry, group size, and family composition. Geographic areas smaller than a county may not be used without prior approval of the director or his designee. Claim experience, health status, and duration of coverage since issue are not case characteristics for the purposes of this subarticle. The adjustment for case characteristics must be objective and meet sound actuarial practices.
(9) 'Actuarial base rate' means the current estimated premium rate for a health insurance plan, based solely on the claim experience for all small employers insured by the insurer, on plan design, and without regard to the nature of the groups assumed to select particular health insurance plans. The insurer must be able to demonstrate a reasonable actuarial relationship between the estimated premium rate and the plan design. 'New business premium rate' means, for each class of business as to a rating period, the lowest premium charged or offered, or which could have been 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)(b) A small employer insurer may establish no more than two additional groupings on the basis of criteria, such as except group size, which are expected to produce substantial variation in administrative and marketing costs.
(11) 'Actuarial certification' means a written statement by a member of the American Academy of Actuaries or other individual acceptable to the director or his designee that a small employer insurer is in compliance with the provisions of Section 38-71-940, and that the rating methods used in establishing premium rates for applicable health insurance plans are objective and based on sound actuarial practices. This statement must be 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."
SECTION 2. Section 38-71-920 of the 1976 Code, as last amended by Section 15, Act 339 of 1994, is further amended by adding the following appropriately numbered items:
"( ) '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.
( ) '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.
( ) 'Restricted network provision' means any provision of a health insurance plan that conditions the payment of benefits, in whole or in part, on the use of health care providers that have entered into a contractual arrangement with the insurer pursuant to the laws and regulations of the State to provide health care services to covered individuals."
SECTION 3. Section 38-71-940 of the 1976 Code, as last amended by Section 20, Act 339 of 1994, is further amended to read:
"Section 38-71-940. (A) Premium rates for health insurance plans subject to this subarticle are subject to the following requirements:
(1) The small employer insurer shall determine the actuarial base rate for each health insurance plan it offers to small employers in the State. In determining the premium rates to be charged to a small employer for a health insurance plan, the actuarial base rate for the plan may be adjusted only to reflect case characteristics and family composition of the small employer, and the class of business to which the small employer is assigned. The adjustments to the base rate must be objective and meet sound actuarial standards.
(a) Small employer insurers shall apply case characteristics consistently with respect to all small employers within a class of business.
(b) Adjustments due to family composition shall be applied consistently with respect to all small employers across all classes of business.
(c) The maximum adjustment to the actuarial base rate, plus or minus, due to class of business is ten percent of the actuarial base rate. The index rate for a rating period for a class of business may not exceed the index rate for any other class of business by more than twenty percent.
(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.
(2)(3) The percentage increase in the renewal premium rate charged to a small employer for a new rating period may not exceed the sum of:
(a) the percentage change in the actuarial base new business premium rate measured from the first day of the prior rating period to the first day of the new rating period; and. 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. However, in the case of health insurance plans issued prior to the effective date of this act, if the change in the new business premium rate used to determine the maximum percentage increase in the premium rate is less than zero percent, then zero percent may be used as the percentage change in the new business premium rate during the first twelve-month period from the effective date of this act.
(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, family composition, or change in the case characteristics of the small employer, subject to the limitations imposed by item (1) of this section and as determined from the insurer's rate manual for the class of business.
(3) In the case of health insurance plans issued before January 1, 1995, the percentage increase in the renewal premium rate for a new rating period may also include an adjustment for claim experience, health status, or duration of coverage, not to exceed:
(a) twenty percent of the actuarial base rate for plans renewed during the calendar year 1995; and
(b) ten percent of the actuarial base rate for plans renewed during calendar year 1996.
Effective January 1, 1997, all renewal premium rates must comply with the provisions of item (1) of this subsection.
(4) A health insurance plan that contains a restricted network provision shall not be considered similar coverage to a health insurance plan that does not contain such a provision, provided that the restriction of benefits to network providers results in substantial differences in claim costs.
(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 within a class of business.
(C) Unless the small employer no longer meets the criteria established for its existing class of business:
(1) a small employer insurer may not transfer involuntarily a small employer into or out of a class of business; and
(2) a small employer insurer may not offer to transfer 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.
(C) The commissioner may approve wellness incentives developed by small employer insurers that allow premium reductions from the rating limitations of this section. Wellness incentives to be considered may include, but are not limited to, smoking status, participation in physical fitness activities, dietary habits."
SECTION 4. Section 38-71-960 of the 1976 Code, as last amended by Section 16, Act 339 of 1994, is further amended to read:
"Section 38-71-960. Each In connection with offering any health insurance plans to small employers, each small employer insurer shall make reasonable disclosure in solicitation and sales materials provided to small employers of:
(1) the extent to which premium rates for a specific small employer are established or adjusted due to case characteristics, family composition, and class of business, and 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 5. If a provision of this act or the application of the provision to any person or circumstance is held to be unconstitutional, the remainder of this act and the application of the provisions of the act to any person or circumstance shall not be affected.
SECTION 6. This act takes effect upon approval by the Governor.