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TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING CHAPTER 60 TO TITLE 38 SO AS TO ENACT THE "SOUTH CAROLINA HEALTHNET PROGRAM"; TO PROVIDE FOR THE CREATION OF A FIVE-YEAR PILOT PROGRAM TO PROMOTE THE AVAILABILITY OF HEALTH INSURANCE COVERAGE TO EMPLOYEES REGARDLESS OF HEALTH STATUS OR CLAIMS EXPERIENCE, PREVENT ABUSIVE RATING PRACTICES AND REQUIRE DISCLOSURE OF RATING PRACTICES TO PURCHASERS, ESTABLISH RULES REGARDING RENEWAL OF COVERAGE, LIMITATIONS ON THE USE OF PREEXISTING CONDITIONS EXCLUSIONS, ASSURE FAIR ACCESS TO HEALTH PLANS AND IMPROVE OVERALL FAIRNESS AND EFFICIENCY OF THE GROUP HEALTH INSURANCE MARKET; TO PROVIDE FOR DEFINITIONS; TO PROVIDE FOR THE COMPOSITION AND AUTHORITY OF THE BOARD OF DIRECTORS; TO PROVIDE FAIR MARKETING STANDARDS; TO PROVIDE FOR THE ESTABLISHMENT OF CRITERIA FOR PLAN ADMINISTRATION IN THE PLAN OF OPERATION; TO PROVIDE FOR RATES; TO PROVIDE FOR PROVIDER PARTICIPATION; TO PROVIDE FOR THE APPLICABILITY AND SCOPE OF THE CHAPTER; TO PROVIDE THAT HEALTH INSURERS SHALL OFFER AND MARKET PLANS DEVELOPED BY THE SOUTH CAROLINA HEALTHNET PROGRAM WHO ARE ELIGIBLE; TO PROVIDE FOR HEALTH BENEFIT PLAN STANDARDS AND PROVIDE AN EXCEPTION; TO PROVIDE FOR ELIGIBILITY STANDARDS; TO PROVIDE FOR TERMINATION AND NONRENEWAL OF COVERAGE; TO PROVIDE FOR LOSS DATA TO BE REPORTED TO THE PROGRAM; AND TO AUTHORIZE THE DIRECTOR OF THE STATE DEPARTMENT OF INSURANCE TO PROMULGATE REGULATIONS TO IMPLEMENT THE PROVISIONS OF CHAPTER 60, TITLE 38 ADDED BY THIS ACT.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 38 of the 1976 Code is amended by adding:
Section 38-60-10. This chapter may be cited as the 'South Carolina HealthNet Program'.
Section 38-60-20. The purpose and intent of this chapter is to establish under the regulatory jurisdiction of the State Department of Insurance project designed to:
(1) promote the availability of health insurance coverage to employees regardless of their health status or claims experience;
(2) prevent abusive rating practices and require disclosure of rating practices to purchasers;
(3) establish rules regarding the renewal of coverage and establish limitations on the use of preexisting condition exclusions;
(4) assure fair access to health plans; and
(5) improve the overall fairness and efficiency of the group health insurance market.
Section 38-60-30. As used in this chapter, unless the context otherwise requires:
(1) 'Board' means the board of directors of the South Carolina HealthNet Program.
(2) 'Insurer' means an entity that provides health insurance in this State. For the purposes of this chapter, 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 Chapter 41 of this title.
(3) 'Covered person' means sole proprietor or eligible employee and his dependents who meet the requirements for eligibility to participate in South Carolina HealthNet as specified in Section 38-60-120.
(4) 'Dependent' means an individual who is the:
(a) legal spouse or unmarried child under the age of twenty-five and who is financially dependent upon the employee;
(b) a child under the age of eighteen for whom the employee is required to pay child support; or
(c) a child, parent, grandparent, brother, or sister of any age who is dependent upon the employee as defined by the Internal Revenue Service guidelines.
(5) 'Director or his designee' means the director of State Department of Insurance or the person designated to act on his behalf.
(6) 'Eligible employee' means an employee as defined in Section 38-71-710(1) or Section 38-71-840 who works on a full-time basis and has a normal workweek of thirty or more hours.
(7) 'Eligibility' means that a person meets the criteria provided in Section 38-60-120.
(8) 'Health insurance coverage' means benefits consisting of medical care provided directly, through insurance or reimbursement, or otherwise and including items and services paid for as medical care under any hospital or medical service policy or certificate, hospital or medical service plan contract, or health maintenance organization contract offered by a health insurance issuer, except:
(a) coverage only for accident or disability income insurance or any combination of these;
(b) coverage issued as a supplement to liability insurance;
(c) liability insurance, including general liability insurance and automobile liability insurance;
(d) workers' compensation or similar insurance;
(e) automobile medical payment insurance;
(f) credit only insurance;
(g) coverage for on-site medical clinics;
(h) other similar insurance coverage, specified in regulations, under which benefits for medical care are secondary or incidental to other insurance benefits;
(i) if offered separately:
(i) limited scope dental or vision benefits;
(ii) benefits for long-term care, nursing home care, home health care, community-based care, or any combination of these; and
(iii) other similar, limited benefits as are specified in regulations;
(j) if offered as independent, noncoordinated benefits:
(i) coverage only for a specified disease or illness; and
(ii) hospital indemnity or other fixed indemnity insurance;
(k) if offered as a separate insurance policy:
(i) Medicare supplemental health insurance, as defined under Section 1882(g)(1) of the Social Security Act;
(ii) coverage supplemental to the coverage provided under Chapter 55, Title 10 of the United States Code; and
(iii) similar supplemental coverage under a group health plan.
(9) 'Plan of operation' means the plan of operation for the program established pursuant to this chapter and includes the operating rules of the program as well as the underwriting and rating guidelines that are adopted by the board and approved by the director or his designee.
(10) 'Plan' means the plan or plans or insurance coverages developed and approved by the South Carolina HealthNet Program.
(11) 'Program' means the South Carolina HealthNet Program.
(12) 'Resident' means an individual who is a legal resident of the State of South Carolina as that term is defined by state law.
(13) 'Premium' means all monies paid by the covered person or his employer as a condition of receiving coverage from the program, including any fees or other contributions associated with obtaining health insurance coverage.
Section 38-60-40. (A) The director or his designee shall give notice of the date, time, and place for the initial organizational meeting.
(B) The board of directors consists of eleven voting members. The director or his designee shall serve in an ex officio capacity for the duration of the pilot project. The consumer advocate also serves as member of the board for the duration of the pilot project. The other members of the board must be selected as follows:
(1) the chairman must be appointed by the Governor for a three-year term.
(2) the director shall appoint:
(a) two representatives from the hospital community from a list of nominees submitted by the South Carolina Hospital Association. One must be appointed for a two-year term and the other for a three-year term. Subsequent terms are for three years.
(b) three representatives from the insurance industry. One appointee must be from the South Carolina Association of Health Underwriters appointed to a one-year term, one from a domestic insurer authorized to write health insurance coverage appointed to a two-year term, and one must be from a 'foreign' insurer authorized to write health insurance coverage to a three-year term. Subsequent terms are for three years.
(c) two members of the medical community from a list of nominees provided by the South Carolina Medical Association. One must be appointed for a two-year term and one for a three-year term. Subsequent terms are for three years.
(3) one consumer representative must be appointed by the President Pro Tempore of the Senate and one consumer representative must be appointed by the Speaker of the House of Representatives. These consumer representatives must be members of the general public who are not employed by or affiliated with an insurance company or plan, group hospital, or other health care provider. One appointee must be an individual consumer appointed to a one-year term and the other must be an employer appointed to a two-year term. Subsequent terms are for three years.
(C) A board member may not serve more than two consecutive terms. The board shall conduct its business and meetings in accordance with the requirements of Chapter 23, Title 1 (the South Carolina Freedom of Information Act).
(D) If there is a tie vote of the board on any matter, the issue must be presented to the director or his designee for his approval or disapproval.
(E) If, within sixty days of the organizational meeting the board is not selected, the director shall appoint the initial board.
(F) The board shall submit to the director or his designee a plan of operation for the program and any amendments necessary or suitable to assure the fair, reasonable, and equitable administration of the program. The director or his designee shall approve the plan of operation provided it is determined to be suitable to assure the fair, reasonable, and equitable administration of the program and provides for the sharing of program gains or losses on an equitable basis. The plan of operation is effective upon approval in writing by the director or his designee consistent with the date on which the coverage under this chapter must be made available. If the board fails to submit a suitable plan of operation within one hundred twenty days after the appointment of the board of directors, or at any time after that fails to submit suitable amendments to the plan, the department may develop the plan of operation or operating rules necessary to effectuate the provisions of this chapter. The plan of operation or operating rules continue in force until modified by the department or superseded by a plan submitted by the board and approved by the director or his designee.
(G) The plan of operation must:
(1) establish procedures for the handling and accounting of assets and monies of the program;
(2) establish procedures for filling vacancies on the board of directors;
(3) develop and implement a program to publicize the existence of the plan, the eligibility requirements and procedures for enrollment, plans to maintain public awareness of the plan;
(4) develop underwriting and rating guidelines as well as guidelines for provider networks;
(5) develop the health plans which may include basic, standard, full catastrophic, limited catastrophic, and a plan compatible with a medical savings account; and
(6) require producers to market the plan and the commissions, if any, to be paid.
(H) The program through its board has the general powers granted under the laws of this State to insurance companies licensed to transact accident and health insurance including, but not limited to, the specific authority to:
(1) enter into contracts necessary to carry out the provisions of this chapter, including the authority, with the approval of the director or his designee, to enter into contracts with similar programs or nonprofit entities of other states or the federal government, such as Medicaid, for the joint performance of common administrative functions, or with persons or other organizations for the performance of administrative functions;
(2) sue or be sued, including taking legal actions necessary or proper for recovery of funds for the program;
(3) take legal action as necessary to protect the interests and assets of the program;
(4) establish appropriate rates, rate schedules, rate adjustments, expense allowances, claim reserve formulas, and other actuarial function appropriate to the operation of the program;
(5) issue policies of insurance subject to the approval of the director or his designee and in accordance with the requirements of this chapter;
(6) appoint from among members 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;
(7) apply for and accept grants, monetary and other donations, or other funding to cover the costs of administering the program;
(8) borrow money to effectuate the purposes of this chapter. Notes or other evidence of indebtedness of the program not in default are legal investments for domestic insurers and may be carried as admitted assets. The program may not borrow money unless there is a net loss of the operation of the program which exhausts the assessments of the program for that year. Money may not be borrowed in excess of the loss after assessments have been exhausted. No more than three million dollars may be borrowed in any one year, and the total amount borrowed at any one time may not exceed five million dollars; and
(9) cause to be audited on an independent basis every two years the finances of the program and submit the report of audit to the department who shall submit it to the chairman of the Senate Finance Committee and the chairman of the House Ways and Means Committee with recommendations on the operations of the program.
(I) In addition to its general powers, the board may take measures to contain insurance costs subject to the approval of the director or his designee including, but not limited to:
(1) provide for and employ cost containment measures and requirements including, but not limited to, preadmission screening, second surgical opinion, concurrent utilization review, and individual case management for the purpose of making the benefit plan more cost effective;
(2) design, utilize, contract, or otherwise arrange for delivery of cost-effective health care services, including establishing or contracting with preferred provider organizations, health maintenance organizations, or other limited network provider arrangements including pharmacy benefit management services; or
(3) hire the staff necessary for the effective administration of the program.
(J) Nothing in this plan prohibits the board from entering public-private partnerships with Medicaid or other government-sponsored programs as a means of providing insurance coverage to the most people possible.
Section 38-60-50. (A) Except as provided in subsection (B), the provisions of this chapter apply to an insurer which provides group accident and health insurance coverage to groups of two or more.
(B) The provisions of this chapter do not apply to individual health insurance policies which are subject to policy form and premium rate approval as may be provided in this title.
(C) A sole proprietor and a small employer group that contains fewer than two eligible employees may participate in the program to the extent they meet the eligibility requirements provided in Section 38-60-120. A sole proprietor is subject to the medical underwriting requirements and policies of the program.
Section 38-60-60. (A) An insurer writing group health insurance coverage in this State shall offer and actively market the plans developed by the program to covered persons who meet the eligibility requirements for the program. An insurer shall file with the director or his designee, in the form and manner prescribed by the director or his designee, the plans and rates established by the board and approved by the department. A plan and the rate filed pursuant to this subsection may be used by an insurer beginning thirty days after it is filed.
(B) The director or his designee, at any time after providing notice and an opportunity for a hearing to the insurer, may disapprove the continued use by an insurer of a plan or rate authorized by the program on the grounds that neither the plan nor the rate meet the requirements of this chapter.
(C) A policy, contract, certificate, or other evidence of coverage issued through this program conspicuously must display 'South Carolina HealthNet' on the declarations page of the policy.
Section 38-60-70. The board of directors of the program, with the approval of the director or his designee, shall develop the form and level of coverage for the plans or insurance coverages offered through the program. Benefits and plan design must be determined by the board and submitted to the director or his designee for review and approval before they may be offered for sale in this State. A plan authorized under this chapter and approved by the director or his designee are exempt from insurance mandates of this State. Except coverage issued to a sole proprietor, a policy is guaranteed issue and must be issued without regard to the applicant's physical, mental condition, or medical history.
Section 38-60-80. (A) An insurer or an agent may not encourage or direct an employer to:
(1) refrain from filing an application for coverage with the insurer because of the health status, claims experience, industry, occupation, or geographic location of an individual; or
(2) seek coverage from another insurer because of the health status, claims experience, industry, occupation, or geographic location of an individual.
(B) The provisions of subsection (A)(1) do not apply with respect to information provided by an insurer or an agent to an employee regarding the established geographic service area of the insurer or the restricted network provision of the insurer.
(C) An insurer, directly or indirectly, may not enter into any contract, agreement, or arrangement with an agent that provides for, or results in, the compensation paid to an agent for a sale of a plan to vary because of the health status or permitted rating characteristics of the covered person.
(D) The provisions of subsection (C) do not apply with respect to the compensation paid to an agent on the basis of percentage of premium, provided that the percentage does not vary because of the health status or other permitted rating characteristics of the individual or the individual's dependents.
(E) Denial by an insurer of an application for coverage from an individual must be in writing and must state the reason or reasons for the denial.
(F) A violation of this section by an insurer or an agent is an unfair trade practice under Chapters 55 and 57 of this title.
(G) If an 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 these plans in this State, the third-party administrator is subject to the provisions of this section as if it were a insurer.
Section 38-60-90. The board shall set forth the criteria for plan administration in the plan of operation.
Section 38-60-100. All rates and rate schedules must be determined by the board and approved by the director or his designee. A rate must be self-sustaining and actuarially sound. A rate and rate schedule must be submitted to the director or his designee for approval. For purposes of determining compliance with Section 38-71-940, an insurer does not have to include small employers provided coverage under this program.
Section 38-60-110. A provider willing to accept the reimbursement rates developed and adopted by the board also may provide services for the program.
Section 38-60-120. The following persons are eligible for coverage through the program:
(1) an employer in this State, its eligible employees, their dependents, and a sole proprietor who has been a legal resident of this State for a minimum of six months as well as a citizen of the United States;
(2) an eligible employee who has been a legal resident of this State for a minimum of six months as well as a citizen of the United States and
(a) who is eligible for COBRA or state continuation coverage and elects plan coverage as an alternative; or
(b) who is eligible for Medicaid coverage or the Medicaid premium payment option and elects plan coverage as an alternative.
Section 38-60-130. (A) Plan coverage shall cease:
(1) on the date a person is no longer a resident of this State, except for a child who is a student under the age of twenty-five years and who is financially dependent upon the employee, a child for whom a person is obligated to pay child support, or a child of any age who is disabled and dependent upon the parent;
(2) on the date an employee or employer requests coverage to end;
(3) upon the death of the covered person, except that dependents must be offered COBRA or state continuation as required by law;
(4) on the date scheduled for termination of the pilot project;
(5) on the date that the person attains Medicare eligibility;
(6) at such time as the person ceases to meet the eligibility requirements of this section; and
(7) upon nonpayment of premium.
(B) Coverage of a person ceases on the date he no longer meets the eligibility requirements of this section. Termination or nonrenewal of health insurance coverage must comply with the requirements of the Health Insurance Portability and Accountability Act as provided in Section 38-71-870.
Section 38-60-140. An insurer participating in the program shall report loss data to the program in the manner prescribed by the board. This data must be used for the purpose of reviewing and establishing rates. The department, by bulletin, may specify the requirements for reporting loss data and other required information to the department.
Section 38-60-150. The director, by order or regulation, may promulgate the rules necessary for implementation of this chapter."
SECTION 3. Upon approval by the Governor, this act takes effect no earlier than January 1, 2009, but not later than July 1, 2010. This plan terminates five years from the date of its first date of operation unless extended by action of the General Assembly.
This web page was last updated on Monday, June 22, 2009 at 2:25 P.M.