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Public Act 91-0510
HB2271 Enrolled LRB9104872JSpc
AN ACT to create the Small Employer Health Insurance
Rating Act.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 1. Short title. This Act may be cited as the
Small Employer Health Insurance Rating Act.
Section 5. Purpose. The legislature recognizes that all
too often, small employers are forced to increase employee
co-pays and deductibles or drop health insurance coverage
altogether because of unexpected rate increases as a result
of one major medical problem. It is the intent of this Act
to improve the efficiency and fairness of the small group
health insurance marketplace.
Section 10. Definitions. For purposes of this Act:
"Actuarial certification" means a written statement by a
member of the American Academy of Actuaries or other
individual acceptable to the Director that a small employer
carrier is in compliance with the provisions of Section 25 of
this Act, based upon an examination which includes a review
of the appropriate records and of the actuarial assumptions
and methods utilized by the small employer carrier in
establishing premium rates for the applicable health benefit
plans.
"Base premium rate" means for each class of business as
to a rating period, the lowest premium rate charged or which
could be charged under a rating system for that class of
business by the small employer carrier to small employers
with similar case characteristics for health benefit plans
with the same or similar coverage.
"Carrier" means any entity which provides health
insurance in this State. For the purposes of this Act,
carrier includes a licensed insurance company, a prepaid
hospital or medical service plan, a health maintenance
organization, or any other entity providing a plan of health
insurance or health benefits subject to state insurance
regulation.
"Case characteristics" means demographic, geographic or
other objective characteristics of a small employer, that are
considered by the small employer carrier, in the
determination of premium rates for the small employer. Claim
experience, health status, and duration of coverage shall not
be characteristics for the purposes of the Small Employer
Health Insurance Rating Act.
"Class of business" means all or a separate grouping of
small employers established pursuant to Section 20.
"Director" means the Director of Insurance.
"Department" means the Department of Insurance.
"Health benefit plan" or "plan" shall mean any hospital
or medical expense-incurred policy, hospital or medical
service plan contract, or health maintenance organization
subscriber contract. Health benefit plan shall not include
individual, accident-only, credit, dental, vision, medicare
supplement, hospital indemnity, long term care, specific
disease, stop loss or disability income insurance, coverage
issued as a supplement to liability insurance, workers'
compensation or similar insurance, or automobile medical
payment insurance.
"Index rate" means, for each class of business as to a
rating period for small employers with similar case
characteristics, the arithmetic mean of the applicable base
premium rate and the corresponding highest premium rate.
"Late enrollee" has the meaning given that term in the
Illinois Health Insurance Portability and Accountability Act.
"New business premium rate" means, for each class of
business as to a rating period, the lowest premium rate
charged or offered or which could have been charged or
offered by the small employer carrier to small employers with
similar case characteristics for newly issued health benefit
plans with the same or similar coverage.
"Objective characteristics" means measurable or
observable phenomena. An example of a measurable
characteristic would be the number of employees who were late
enrollees. Examples of observable characteristics would be
geographic location of the employer or gender of the
employee.
"Premium" means all monies paid by a small employer and
eligible employees as a condition of receiving coverage from
a small employer carrier, including any fees or other
contributions associated with the health benefit plan.
"Rating period" means the calendar period for which
premium rates established by a small employer carrier are
assumed to be in effect.
"Small employer" has the meaning given that term in the
Illinois Health Insurance Portability and Accountability Act.
"Small employer carrier" means a carrier that offers
health benefit plans covering employees of one or more small
employers in this State.
Section 15. Applicability and Scope.
(a) This Act shall apply to each health benefit plan for
a small employer that is delivered, issued for delivery,
renewed or continued in this State after July 1, 2000. For
purposes of this Section, the date a plan is continued shall
be the first rating period which commences after July 1,
2000.
The Act shall apply to any such health benefit plan which
provides coverage to employees of a small employer, except
that the Act shall not apply to individual health insurance
policies.
Section 20. Establishment of Class of Business.
(a) A small employer carrier may establish a separate
class of business only to reflect substantial differences in
expected claims experience or administrative costs related to
the following reasons:
(1) the small employer carrier uses more than one
type of system for the marketing and sale of health
benefit plans to small employers;
(2) the small employer carrier has acquired a class
of business from another small employer carrier; or
(3) the small employer carrier provides coverage to
one or more association groups.
(b) A small employer carrier may establish up to 4
separate classes of business under subsection (a).
(c) The Director may approve the establishment of
additional classes of business upon application to the
Director and a finding by the Director that such action would
enhance the efficiency and fairness of the small employer
marketplace.
Section 25. Premium Rates.
(a) Premium rates for health benefit plans subject to
this Act shall be subject to all of the following provisions:
(1) The index rate for a rating period for any
class of business shall not exceed the index rate for any
other class of business by more than 20%.
(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 that could be charged to such
employers under the rating system for that class of
business, shall not vary from the index rate by more than
25% of the index rate.
(3) The percentage increase in the premium rate
charged to a small employer for a new rating period shall
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 health benefit plan
into which the small employer carrier is no longer
enrolling new small employers, the small employer
carrier shall use the percentage change in the base
premium rate;
(B) an adjustment, not to exceed 15% annually
and adjusted pro rata for rating periods of less
than one year, due to claim experience, health
status, or duration of coverage of the employees or
dependents of the small employer as determined from
the small employer carrier's rate manual for the
class of business; and
(C) any adjustment due to change in coverage
or change in the case characteristics of the small
employer as determined from the small employer
carrier's rate manual for the class of business.
(4) Adjustments in rates for a new rating period
due to 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.
(5) In the case of health benefit plans delivered
or issued for delivery prior to the effective date of
this Act, a premium rate for a rating period may exceed
the ranges set forth in items (1) and (2) of subsection
(a) for a period of 3 years following the effective date
of this Act. In such case, the percentage increase in
the premium rate charged to a small employer for a new
rating period shall 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
into which the small employer carrier is no longer
enrolling new small employes, the small employer
carrier shall use the percentage change in the base
premium rate, provided that such change does not
exceed, on a percentage basis, the change in the new
business premium rate for the most similar class of
business into which the small employer carrier is
actively enrolling new small employers; and
(B) any adjustment due to change in coverage
or change in the case characteristics of the small
employer as determined from the carrier's rate
manual for the class of business.
(6) Small employer carriers shall apply rating
factors, including case characteristics, consistently
with respect to all small employers in a class of
business. A small employer carrier shall treat all health
benefit plans issued or renewed in the same calendar
month as having the same rating period.
(7) For the purposes of this subsection, a health
benefit plan that contains a restricted network provision
shall not be considered similar coverage to a health
benefit 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) A small employer carrier shall not transfer a small
employer involuntarily into or out of a class of business. A
small employer carrier shall not offer to transfer a small
employer into or out of a class of business unless such offer
is made to transfer all small employers in the class of
business without regard to case characteristics, claim
experience, health status or duration of coverage since
issue.
Section 30. Rating and underwriting records.
(a) A small employer carrier 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 that
demonstrates that its rating methods and practices are based
upon commonly accepted actuarial assumptions and are in
accordance with sound actuarial principles.
(b) A small employer carrier shall file with the
Director annually on or before May 15, an actuarial
certification certifying that the carrier is in compliance
with this Act, and that the rating methods of the small
employer carrier are actuarially sound. Such certification
shall be in a form and manner, and shall contain such
information, as specified by the Director. A copy of the
certification shall be retained by the small employer carrier
at its principal place of business for a period of three
years from the date of certification. This shall include any
work papers prepared in support of the actuarial
certification.
(c) A small employer carrier shall make the information
and documentation described in subsection (a) available to
the Director upon request. Except in cases of violations of
this Act, the information shall be considered proprietary and
trade secret information and shall not be subject to
disclosure by the Director to persons outside of the
Department except as agreed to by the small employer carrier
or as ordered by a court of competent jurisdiction.
Section 35. Suspension of Rate Requirements. The
Director may suspend all or any part of Section 25 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 carrier and a finding by the Director that either
the suspension is reasonable in light of the financial
viability of the carrier or the suspension would enhance the
efficiency and fairness of the small employer health
insurance marketplace.
Section 40. Director's Regulatory Authority. The
Director may adopt and promulgate rules and regulations to
carry out the provisions of this Act.
Section 99. Effective date. This Act takes effect
January 1, 2000.
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