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Substitute Senate Bill No. 480

Public Act No. 04-163

AN ACT CONCERNING ADMINISTRATIVE COST SAVINGS UNDER SMALL EMPLOYER HEALTH PLANS.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Subdivision (27) of section 38a-564 of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2004):

(27) "Case characteristics" means demographic or other objective characteristics of a small employer, including age, sex, family composition, location, size of group, administrative cost savings resulting from the administration of an association group plan or a plan written pursuant to section 5-259, as amended, and industry classification, as determined by a small employer carrier, 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 since issue are not case characteristics for the purpose of sections 38a-564 to 38a-572, inclusive, as amended.

Sec. 2. Subdivision (5) of section 38a-567 of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2004):

(5) (A) With respect to plans or arrangements issued on or after July 1, 1995, the premium rates charged or offered to small employers shall be established on the basis of a community rate, adjusted to reflect one or more of the following classifications:

(i) Age, provided age brackets of less than five years shall not be utilized;

(ii) Gender;

(iii) Geographic area, provided an area smaller than a county shall not be utilized;

(iv) Industry, provided the rate factor associated with any industry classification shall not vary from the arithmetic average of the highest and lowest rate factors associated with all industry classifications by greater than fifteen per cent of such average, and provided further, the rate factors associated with any industry shall not be increased by more than five per cent per year;

(v) Group size, provided the highest rate factor associated with group size shall not vary from the lowest rate factor associated with group size by a ratio of greater than 1. 25 to 1. 0; [and]

(vi) Administrative cost savings resulting from the administration of an association group plan or a plan written pursuant to section 5-259, as amended, provided the savings reflect a reduction to the small employer carrier's overall retention that is measurable and specifically realized on items such as marketing, billing or claims paying functions taken on directly by the plan administrator or association, except that such savings may not reflect a reduction realized on commissions; and

[(vi)] (vii) Family composition, provided the small employer carrier shall utilize only one or more of the following billing classifications: [(a)] (I) Employee; [(b)] (II) employee plus family; [(c)] (III) employee and spouse; [(d)] (IV) employee and child; [(e)] (V) employee plus one dependent; and [(f)] (VI) employee plus two or more dependents.

(B) The small employer carrier shall quote premium rates to small employers after receipt of all demographic rating classifications of the small employer group. No small employer carrier may inquire regarding health status or claims experience of the small employer or its employees or dependents prior to the quoting of a premium rate.

(C) The provisions of subparagraphs (A) and (B) of this subdivision shall apply to plans or arrangements issued on or after July 1, 1995. The provisions of subparagraphs (A) and (B) of this subdivision shall apply to plans or arrangements issued prior to July 1, 1995, as of the date of the first rating period commencing on or after that date, but no later than July 1, 1996.

Approved June 1, 2004