Current Status Bill Number:
458Ratification Number: 130Act Number: 70Type of Legislation: General Bill GBIntroducing Body: SenateIntroduced Date: 19970304Primary Sponsor: Banking and Insurance Committee SBI 02All Sponsors: Banking and Insurance CommitteeDrafted Document Number: res1309.eesDate Bill Passed both Bodies: 19970527Date of Last Amendment: 19970515Governor's Action: SDate of Governor's Action: 19970610Subject: Health insurance, small group; index rates, class of new business, small employers in solicitation, medical
Body Date Action Description Com Leg Involved ______ ________ _______________________________________ _______ ____________ ------ 19970630 Act No. A70 ------ 19970610 Signed by Governor ------ 19970604 Ratified R130 Senate 19970527 Concurred in House amendment, enrolled for ratification House 19970523 Read third time, returned to House with amendment House 19970522 Read second time, unanimous consent for third reading on the next Legislative day House 19970521 Request for debate withdrawn by Representative Neal Scott Moody- Lawrence M. Hines Gourdine House 19970515 Request for debate by Representative Moody- Lawrence Scott Neal Gourdine M. Hines House 19970515 Amended House 19970514 Committee report: Favorable with 26 HLCI amendment House 19970319 Introduced, read first time, 26 HLCI referred to Committee Senate 19970318 Read third time, sent to House Senate 19970311 Read second time, notice of general amendments Senate 19970304 Introduced, read first time, placed on Calendar without referenceView additional legislative information at the LPITS web site.
(A70, R130, S458)
AN ACT TO AMEND SECTION 38-71-920, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO SMALL EMPLOYER GROUP HEALTH INSURANCE AND DEFINITIONS, SO AS TO, AMONG OTHER THINGS, PROVIDE CHANGES FOR THE DEFINITIONS OF "CASE CHARACTERISTICS", "CLASS OF BUSINESS", AND "ACTUARIAL CERTIFICATION", DELETE THE DEFINITION OF "ACTUARIAL BASE RATE", AND PROVIDE DEFINITIONS FOR "NEW BUSINESS PREMIUM RATE", "BASE PREMIUM RATE", "INDEX RATE", AND "RESTRICTED NETWORK PROVISION"; TO AMEND SECTION 38-71-940, AS AMENDED, RELATING TO SMALL EMPLOYER GROUP HEALTH INSURANCE PREMIUM RATES FOR HEALTH INSURANCE PLANS, RATING FACTORS, INVOLUNTARY BUSINESS CLASS TRANSFER, AND WELLNESS INCENTIVES, SO AS TO DELETE CERTAIN LANGUAGE AND PROVISIONS, AND PROVIDE, AMONG OTHER THINGS, THAT 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; TO AMEND SECTION 38-71-960, AS AMENDED, RELATING TO SMALL EMPLOYER GROUP HEALTH INSURANCE AND REQUIRED DISCLOSURE IN SOLICITATION AND SALES MATERIALS, SO AS TO PROVIDE THAT 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 THE EXTENT TO WHICH PREMIUM RATES FOR A SPECIFIC SMALL EMPLOYER ARE ESTABLISHED OR ADJUSTED DUE TO CASE CHARACTERISTICS, FAMILY COMPOSITION, CLASS OF BUSINESS, AND THE CLAIM EXPERIENCE, HEALTH STATUS, OR DURATION OF COVERAGE OF THE EMPLOYEES OR DEPENDENTS OF THE SMALL EMPLOYER; TO PROVIDE THAT 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; AND TO AMEND SECTION 12-6-1140, RELATING TO THE SOUTH CAROLINA INCOME TAX ACT AND DEDUCTIONS FROM INDIVIDUAL TAXABLE INCOME, SO AS TO PROVIDE A DEDUCTION FOR THE PORTION OF INSURANCE PREMIUMS NOT DEDUCTIBLE PURSUANT TO INTERNAL REVENUE CODE SECTION 162(L) BECAUSE THE "APPLICABLE PERCENTAGE" AS DEFINED IN THAT SECTION IS LESS THAN ONE HUNDRED PERCENT.
Be it enacted by the General Assembly of the State of South Carolina:
Definitions changed, deleted, added
SECTION 1. Section 38-71-920(5), (8), (9)(b), and (10) of the 1976 Code, as last amended by Act 5 of 1997, are 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.
(8) '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.
(9)(b) A small employer insurer may establish no more than two additional groupings on the basis of criteria, except group size, which are expected to produce substantial variation in administrative and marketing costs.
(10) '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 Act 5 of 1997, 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."
Index rate; other rating factors; etc.
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 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.
(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 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. 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 or change in the case characteristics of the small employer as determined from the insurer's rate manual for the class of business.
(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.
(5) If group size is used as a case characteristic by a small employer insurer, the highest rate factor associated with a group size classification may not exceed the lowest rate factor associated with such a classification by more than twenty percent.
(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."
Claim experience, health status, duration of coverage
SECTION 4. Section 38-71-960 of the 1976 Code, as last amended by Act 5 of 1997, is further amended to read:
"Section 38-71-960. 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, 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;
(5) the provisions relating to any preexisting condition exclusion; and
(6) the benefits and premiums available under all health insurance plans for which the employer is qualified.
Information under this section must be provided to small employers in a manner determined to be understandable by the average small employer and must be sufficient to reasonably inform small employers of their rights and obligations under the health insurance coverage.
An insurer is not required under this section to disclose any information that is proprietary or trade secret information under applicable law."
New income tax deduction provided
SECTION 5. (A) Section 12-6-1140 of the 1976 Code, as added by Act 76 of 1995, is amended by adding:
"(8) the portion of premiums not deductible pursuant to Internal Revenue Code Section 162(L) because the 'applicable percentage' as defined in that section is less than one hundred percent."
(B) This section is effective for taxable years beginning after 1997.
SECTION 6. 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 7. Except as otherwise specifically provided in this act, this act takes effect upon approval by the Governor.
Approved the 10th day of June, 1997.