Senate Bill No. 554
(By Senators Minard and Helmick)
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[Introduced March 22, 1993; referred to the Committee
on Banking and Insurance.]
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A BILL to amend and reenact sections two, three, four, five,
six, seven, eight, nine, ten and twelve, article sixteen-d,
chapter thirty-three of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, relating to
marketing and rate practices for small employer accident and
sickness insurance policies; revising certain definitions
and eliminating others; substituting the term "carrier" for
"insurer"; applying the provisions of article sixteen-d,
chapter thirty-three of said code to any health benefit plan
described therein that covers one or more employees of a
small employer situate in West Virginia; specifying
additional premium rating restrictions; eliminating
provisions on the insurance commissioner conducting a public
hearing before increasing the anticipated loss ratio for a
small employer carrier; eliminating enumerated rule-making
mandates; granting permissive rule-making authority to the
insurance commissioner; requiring disclosure of preexisting
conditions limitations in such health benefit plans;
requiring certification of compliance with statutory premium
rating provisions; and making technical corrections.
Be it enacted by the Legislature of West Virginia:
That sections two, three, four, five, six, seven, eight,
nine, ten and twelve, article sixteen-d, chapter thirty-three of
the code of West Virginia, one thousand nine hundred thirty-one,
as amended, be amended and reenacted to read as follows:
ARTICLE 16D. MARKETING AND RATE PRACTICES FOR SMALL EMPLOYER
ACCIDENT AND SICKNESS INSURANCE POLICIES.
§33-16D-2. Definitions.
As used in this article:
(a) "Actuarial certification" means a written statement by
an actuary, or other individual acceptable to the commissioner,
that a small employer insurer carrier is in compliance with the
provisions of section five of this article, based upon that
person's examination, including a review of the appropriate
records and of the actuarial assumptions and methods utilized by
the insurer carrier in establishing premium rates for applicable
health benefit plans.
(b) "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 carrier to small
employers with similar case characteristics for health benefit
plans within with the same or similar coverage.
(c) "Carrier" means any person who provides accident and
sickness insurance in this state. For purposes of this article,
carrier includes a licensed insurance company; a hospital service
corporation, medical service corporation or health service
corporation organized pursuant to article twenty-four of this
chapter; a health care corporation organized pursuant to article
twenty-five of this chapter; a health maintenance organization
organized pursuant to article twenty-five-a of this chapter; a
multiple-employer trust or multiple-employer welfare arrangement;
or any other person providing a plan of accident and sickness
insurance subject to state insurance regulations.
(c) (d) "Case characteristics" mean demographic or other
relevant characteristics of a small employer, as determined by a
small employer insurer carrier, which are considered by the
insurer carrier in the determination of premium rates for the
small employer. Claim experience, health status and duration of
coverage since issue shall not be are not case characteristics
for the purposes of this article.
(d) (e) "Class of business" means all or any distinct
grouping of small employers as shown on the records of the small
employer insurer carrier.
(1) A distinct grouping may only be established by the small
employer carrier on the basis that the applicable health benefit
plans:
(A) Are marketed and sold through individuals and
organizations which are not participating in the marketing orsale of other distinct groupings of small employers for such
small employer carrier;
(B) Have been acquired from another small employer carrier
as a distinct grouping of plans;
(C) Are provided through an association with membership of
not less than two small employers which has been formed for
purposes other than obtaining insurance; or
(D) Are in a class of business that meets the requirements
for exception to the restrictions related to premium rates
provided in paragraph (A), subdivision (1), subsection (a) of
section five of this article.
(2) A small employer carrier may establish no more than two
additional groupings under subdivision (1) of this subsection on
the basis of underwriting criteria which are expected to produce
substantial variation in the health care costs.
(3) The commissioner may approve the establishment of
additional distinct groupings upon application to the
commissioner and a finding by the commissioner that such action
would enhance the efficiency and fairness of the small employer
insurance marketplace.
(e) (f) "Commissioner" means the insurance commissioner of
West Virginia.
(f) (g) "Department" means the department of insurance.
(g) "Duration rating" means the practice of rating a policy
or a group of policies by the length of time they have been in
force.
(h) "Health benefit plan" means any hospital or medical
expense incurred policy; health, hospital or medical service
corporation contract; plan provided by a multiple-employer trust
or a multiple-employer welfare arrangement; health maintenance
organization contract offered by an employer; or any other policy
or plan issued by an insurer a carrier which provides health
related benefits to small employers:
Provided,
That for purposes
of this article, a health benefit plan shall not include accident
only, credit, dental, or disability income insurance; coverage
issued as a supplement to liability insurance; insurance arising
out of a workers' compensation or similar law; automobile
medical-payment insurance, or insurance under which benefits are
payable with or without regard to fault and which is statutorily
required to be contained in any liability insurance policy or
equivalent self-insurance.
(i) "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.
(j) "Insurer" or "carrier" means any entity which holds a
valid certificate of authority from the commissioner and which
offers or sells health benefit plans to small employers situate
in the state of West Virginia, regardless of where the policy or
plan is drafted, issued or mailed, including, but not limited to,
any insurance company authorized to transact accident and
sickness insurance; a hospital service corporation, medicalservice corporation or health service corporation organized
pursuant to article twenty-four of this chapter; a health care
corporation organized pursuant to article twenty-five of this
chapter; a health maintenance organization organized pursuant to
article twenty-five-a of this chapter; or any multiple-employer
trust or multiple-employer welfare arrangement.
(k) "Multiple-employer trust" means an insured health
benefit plan organized as a trust which offers benefits to small
employers and is partially or fully insured by an insurer, which
such underwriting insurer shall be deemed to be transacting
insurance as defined in section four, article one of this
chapter, and is subject to this article regardless of where the
policy or plan is delivered, issued for delivery, renewed or
continued.
(l) "Multiple-employer welfare arrangement" means an
employee welfare benefit plan, or any other arrangement which is
not fully insured and which is established or maintained for the
purpose of offering or providing any insurance or other benefit
to employees of two or more employers, and may include multiple
employer trusts as defined in subsection (k) herein: Provided,
That such term does not include any such plan or other
arrangement which is established or maintained under or pursuant
to one or more agreements found, under federal law, to be
collective bargaining agreements, or by a rural electric
cooperative, and is subject to this article regardless of where
the policy or plan is delivered, issued for delivery, renewed orcontinued.
(m) (j) "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 carrier to small employers
with similar case characteristics for newly issued health benefit
plans with the same or similar coverage.
(n) (k) "Rating period" means the calendar period of at
least twelve months for which premium rates established by a
small employer insurer carrier are assumed to be in effect, as
determined by the small employer insurer carrier.
(o) (l) "Small employer" means any person, firm,
corporation, partnership or association actively engaged in
business in the state of West Virginia for at least one year who,
on at least fifty percent of its working days during the
preceding year, employed no more than forty-nine or not less
fewer than two eligible employees: Provided, That companies
which are affiliated companies or which are eligible to file a
combined tax return for state tax purposes shall be considered
one employer.
(p) (m) "Small employer insurer carrier" means any insurer
carrier which offers health benefit plans covering the employees
of a small employer situate within the state of West Virginia.
(q) "Tier rating" means the division of insureds to reflect
risk and the subsequent selection by the insurer of only those
groups which are financially attractive:
§33-16D-3. Health insurance plans subject to this article.
The provisions of this article apply to any health benefit
plan which provides coverage to two one or more eligible
employees of a small employer situate in the state of West
Virginia: Provided, That the provisions of this article shall
not apply to individual health insurance policies which are
subject to policy form and premium rate approval as required by
article sixteen-b of this chapter.
§33-16D-4. Discrimination in marketing prohibited; annual filing
with commissioner; violations and penalties.
(a) All insurers carriers subject to this article are
strictly prohibited from marketing their product to a specific
group, legal occupation, locale, zip code, neighborhood, race,
religion, or any discriminatory group.
(b) All insurers carriers subject to this article shall file
any marketing information upon request of the commissioner. The
commissioner shall review said information and shall have the
authority to take appropriate action to eliminate discriminatory
marketing practices, including imposing fines on violators of
this section of not more than ten thousand dollars. Upon a
second violation of this section, the commissioner shall have the
authority to revoke the violator's license to transact insurance.
§33-16D-5. Premium rates for small employers; classes; maximum
rates; eligibility for rate increases.
(a) Premium rates for health benefit plans subject to this
article shall be subject to the following provisions:
(1) The index rate for a rating period for any class ofbusiness shall not exceed the index rate for any other class of
business by more than twenty percent: Provided, That this
subdivision shall not apply to a class of business if all of the
following apply:
(A) The class of business is one for which the carrier 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 carrier does not involuntarily transfer, and never
has involuntarily transferred, a health benefits plan into or out
of the class of business; and
(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 such employers under the rating system
for that class of business, shall 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 thefirst day of the new rating period. In the case of a class of
business for which the small employer carrier is not issuing new
policies, the carrier 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 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 carrier's rate manual for the class of business.
(4) In the case of health benefit plans issued prior to the
effective date of this article, a premium rate for a rating
period may exceed the ranges described in subdivision (1) or (2),
subsection (a) of this section for a period of five years
following the effective date of this article. 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 carrier is not issuing new
policies, the carrier shall use the percentage change in the basepremium rate; 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.
(b) Nothing in this section is intended to affect the use by
a small employer carrier of legitimate rating factors other than
claim experience, health status or duration of coverage in the
determination of premium rates. Small employer carriers shall
apply rating factors, including case characteristics,
consistently with respect to all small employers in a class of
business.
(c) Adjustments in rates for claim experience, health status
and duration of coverage may 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.
(d) A small employer carrier may utilize industry as a case
characteristic in establishing premium rates: Provided, That the
highest rate factor associated with any industry classification
may not exceed the lowest rate factor associated with any
industry classification by more than fifteen percent.
(e) Small employer carriers shall apply rating factors,
including case characteristics, consistently with respect to all
small employers in a class of business. Rating factors shall
produce premiums for identical groups which differ only by
amounts attributable to plan design and do not reflectdifferences due to the nature of the groups assumed to select
particular health benefit plans.
(c) (f) A small employer carrier shall may not involuntarily
transfer a small employer into or out of a class of business. A
small employer carrier shall may 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 since issue.
(d) (g) To be eligible to make a rate increase request after
the first day of July, one thousand nine hundred ninety-one, an
insurer must ninety-three, a carrier shall have a minimum
anticipated loss ratio of sixty-five seventy-five percent.
(e) (h) All insurers carriers subject to this article,
effective the first day of July, one thousand nine hundred
ninety-three, shall be prohibited from distinguishing more than
four classes of businesses within its small group insurance
coverage.
(f) Prior to any increase of the anticipated loss ratio, the
insurance commissioner must conduct a public hearing as required
by section thirteen, article two of this chapter.
(g) (i) If any health benefit plan is provided by an insurer
a carrier through an association of small employers not in the
business of selling insurance and with not less fewer than two
hundred cumulative employees, and if such association is rated on
the basis of the number of employees and not on the basis of theindividual small employers, such association or group is exempt
from the provisions of this article.
§33-16D-6. Insurance commissioner to promulgate rules.
(a) Pursuant to chapter twenty-nine-a of this code, the
insurance commissioner shall may promulgate rules and regulations
necessary to implement the provisions of this article.
(b) The rules and regulations promulgated by the
commissioner shall include, but not be limited to, the following:
(1) Rules and regulations regarding the regulation of
administrative costs incurred by the insurers;
(2) Rules and regulations regarding the commissioner's
authority to increase the anticipated loss ratio and for the
collection of data on which to base said increase, including, but
not limited to, information obtained from the health care cost
review authority and the national insurance commissioners
association;
(3) Rules and regulations setting forth the procedures for
filing rate applications; and
(4) Rules and regulations eliminating tier and duration
ratings of small group insurers which are used to create
artificial rates or unfair trade practices.
§33-16D-7. Renewability of coverage; exceptions.
(a) A health benefit plan subject to this article shall be
renewable to all eligible employees at the option of the small
employer: Provided, That an insurer a carrier may refuse to
renew a health benefit plan for any of the following reasons:
(1) Nonpayment of required premiums;
(2) Fraud or misrepresentation by the small employer or by
the insured individual;
(3) Noncompliance with plan provisions;
(4) The number of individuals covered under the plan is less
fewer than the number or less than the percentage of eligible
individuals necessary pursuant to the 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 carrier may cease to renew all
plans under a class of business. Upon the small employer's
election of nonrenewal, the insurer carrier shall provide notice
of such election not to renew to all affected health benefit
plans and to the commissioner in each state in which an affected
insured individual is known to reside at least ninety days prior
to termination of coverage.
(c) An insurer A carrier which exercises its right to cease
to renew all plans in a class of business shall 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 carrier offers to transfer or provide coverage to allaffected employers and eligible employees without regard to case
characteristics, claim experience, health status or duration of
coverage.
§33-16D-8. Disclosure of rating practices and renewability
provisions.
(a) Each small employer insurer carrier 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 of the
small employer;
(2) The provisions concerning the insurer's carrier'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; and
(5) The provisions relating to any preexisting conditions
limitations; and
(5) (6) An explanation, if applicable, that the small
employer is purchasing a minimum benefits plan issued pursuant to
article sixteen-c of this chapter.
(b) All disclosure statements shall be presented in clear
and understandable form and format and shall be separate from anypolicy, certificate or evidence of coverage otherwise provided.
§33-16D-9. Maintenance of records.
(a) Each small employer insurer 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 which
demonstrate that its rating methods and practices are based upon
commonly accepted actuarial principles.
(b) Each small employer insurer carrier shall file each
first day of March with the commissioner an actuarial
certification that the insurer carrier is in compliance with the
provisions of section five of this article and that the rating
methods of the insurer carrier are actuarially sound. A copy of
such certification shall be retained by the insurer carrier at
its principal place of business.
(c) A small employer insurer carrier shall make the
information and documentation described in subsection (a) of this
section available to the commissioner upon request.
§33-16D-10. Suspension of requirements.
The insurance commissioner may suspend all or part of the
requirements of this article applicable to one or more health
benefit plans for one or more rating periods upon a filing by the
small employer insurer carrier and a finding by the commissioner
that either the suspension is reasonable in light of the
financial condition of the insurer carrier or that the suspension
would enhance the efficiency and fairness of the marketplace forsmall employer health insurance.
§33-16D-12. Equality of terms; preexisting conditions;
continuous coverage restrictions.
Health benefit plans and, to the extent permitted by the
federal Employee Retirement Income Security Act (ERISA), other
benefit arrangements covering small employers shall be subject to
the following provisions:
(a) Preexisting conditions provisions shall may not exclude
coverage for a period beyond twelve months following an
individual's effective date of coverage and may only relate to
conditions which had, during the twelve months immediately
preceding the effective date of coverage, manifested themselves
in such a manner as would cause an ordinarily prudent person to
seek medical advice, diagnosis, care or treatment or for which
medical advice, diagnosis, care or treatment was recommended or
received, or as to a pregnancy existing on the effective date of
coverage.
(b) In determining whether a preexisting condition
limitation provision applies to an eligible employee or
dependent, all health benefit plans shall credit the time such
person was covered under a previous employer-based health benefit
plan, a comparable individual health benefit plan, or a
self-insured plan if the previous coverage was continuous to a
date not more than thirty days prior to the effective date of the
new coverage, exclusive of any applicable waiting period under
such plan.
(c) Subject to subsections (a) and (b) of this section, when
a small group employer converts its health insurance benefit plan
from one health insurance benefit plan to another health
insurance benefit plan or from one insurer carrier to another
insurer carrier, all eligible employees who at the time of
conversion are covered by the health benefit plan must be offered
health benefits coverage under the subsequent plan, and no
employee who at the time of conversion is covered by a health
benefit plan offered by said employer may be treated any
differently relative to other covered employees under the new
health benefit plan than he or she is treated under the current
health benefit plan.
NOTE: The purpose of this bill is to amend existing West
Virginia Code Chapter 33, Article 16D to track more closely the
language in the National Association of Insurance Commissioners'
(NAIC) Model Act entitled "Premium Rates and Renewability of
Coverage for Health Insurance Sold to Small Groups." The bill
also makes certain minor technical corrections in the aforesaid
article.
The bill eliminates provisions of existing West Virginia
Code Chapter 33, Article 16D that are not included in the NAIC
Model Act, such as specified rulemaking mandates in existing West
Virginia Code §33-16D-6. It provides instead for permissive
rulemaking by the Insurance Commissioner.
The bill deletes the definition of "insurer" in West
Virginia Code §33-16D-2 and substitutes "carrier" instead
throughout Chapter 33, Article 16D. It also eliminates the
definitions of "duration rating," "multiple-employer trust,"
"multiple-employer welfare arrangement" and "tier rating." The
bill expands the definition of "class of business," adopting the
wording of the NAIC Model Act.
The bill adds certain premium rating restrictions and
disclosure provisions that are favorable to policyholders in West
Virginia Code §33-16D-5 and §33-16D-8. It also eliminatesexisting statutory provisions on the Insurance Commissioner
conducting a public hearing before increasing the anticipated
loss ratio for a small employer carrier. These provisions are
being eliminated because they are inconsistent with existing West
Virginia Code §33-16D-10.
Strike-throughs indicate language that would be stricken
from present law, and underscoring indicates new language that
would be added.