You asked for an explanation of Section 20 of Public Act 07-185 concerning special health care plans for small employers and the Health Reinsurance Association.

SUMMARY

PA 07-185 (§ 20) removes a sunset provision that prohibits the sale of special health care plans to small employers after January 1, 1995. By removing the sunset provision, existing statutes once again take effect.

By law, a “special health care plan” is a health insurance plan for previously uninsured small employers established by the Connecticut Small Employer Health Reinsurance Pool board of directors (“the board”) or the Health Reinsurance Association (“HRA”) in accordance with statutory requirements (CGS § 38a-564(11)). A small employer (a business that employs 50 or fewer employees, including a self-employed individual) is (1) eligible to purchase a special health care plan if it has not maintained health insurance for its employees for a one-year period and (2) prohibited from purchasing the plan for more than three years (CGS § 38a-565(b)(2)).

The law requires the board to develop special health care plans as a lower-cost health insurance coverage option for uninsured small employers. Once the board has developed and received the Insurance Department's approval for such coverage plans, each small employer carrier (i. e. , any insurer or insurance arrangement that offers or maintains group health insurance plans to cover eligible employees of one or more small employers) must offer a special health care plan to small employers.  However, a carrier may choose not to offer a plan to a small employer with 10 or fewer employees, most of whom are low-income. In such an instance, the carrier must refer the employer to HRA, which will offer the employer a special health care plan (CGS § 38a-565). Effective July 1, 2007, PA 07-185 raises the income eligibility limit for a “low-income eligible employee” from 200% to 300% of the federal poverty level (FPL) (PA 07-185, § 18).

The board is in the process of developing special health care plans for small employers.  Once they are developed and approved by the Connecticut Insurance Department, small employer insurers and HRA will make them available to eligible small employers.

HEALTH REINSURANCE ASSOCIATION

The legislature created HRA to provide comprehensive health insurance to high risk individuals (The Connecticut Health Care Act of 1975, CGS § 38a-556). HRA continues to be Connecticut's insurer of last resort for many high-risk individuals.

HRA is administered by Pool Administrators, Inc. , which is located in Wethersfield, Connecticut. By law, all Connecticut health insurers and health maintenance organizations (HMOs) are members of HRA and are assessed for plan losses. HRA's board of directors is composed of nine individuals selected by the participating member companies.

HRA serves as the state's acceptable alternative mechanism for complying with the guaranteed issue option in the individual market required under federal law (the Health Insurance Portability and Accountability Act, or HIPAA). The federal government has granted its approval for HRA to serve this role, finding that HRA is in compliance with HIPAA.

Under small group insurance reform laws that the legislature adopted in 1990, HRA and small employer carriers must offer special health care plans to uninsured small employers, but are prohibited from doing so after January 1, 1995 (CGS § 38a-565(c)). HRA offers special health care plans to low-income individuals, as the law requires. Carriers are permitted, but not required, to do the same.

SPECIAL HEALTH CARE PLANS FOR SMALL EMPLOYERS

Effective July 1, 2007, PA 07-185 (§ 20) repeals the provision that prohibits the sale of special health care plans to small employers after January 1, 1995. Thus, certain existing statutes once again are operative, including CGS § 38a-565. Under that law, the board is required to develop lower-cost health insurance coverage for “uninsured small employers. ” In developing the coverage, the board must take into consideration (1) the coverage levels health care plans provide in Connecticut and (2) any appropriate medical and economic factors. It must establish benefit levels, deductibles, coinsurance factors, maximum copayment obligations, and exclusions and limitations that it considers appropriate for uninsured small employers.

Benefit plans may include cost containment features such as (1) preferred provider provisions; (2) utilization review, including a review of medical necessity of hospital and physician services; (3) case management benefit alternatives; and (4) other managed care provisions. The board must submit the benefit plan to the Insurance Department for approval.

Availability

Within 90 days after the department approves the board's special health care plans, every small employer carrier must, as a condition of transacting business in this state, offer a special health care plan for small employers (CGS § 38a-565(b)(1)). An insurer may certify to the insurance commissioner that the special health care plans the carrier has developed are in substantial compliance with the provisions in an approved board plan. When the department receives such a certification, the carrier may offer and sell the certified plans until such time as the commissioner, after notice and hearing, disapproves their continued use (CGS § 38a-565(a)(2)).

However, a carrier does not have to offer a special health care plan to a small employer that has 10 or fewer eligible employees, the majority of whom are low-income eligible employees (i. e. , employees whose annual wages from the small employer are less than 300% FPL). If the carrier chooses not to, it must refer the employer to HRA, which will offer the employer a special health care plan (CGS § 38a-565(b)(1)).

An HMO is not required to offer a special health care plan:

1. to a small employer located outside the HMO's approved service area;

2. to an employee who does not work or reside within the approved service area;

3. if it demonstrates to the commissioner's satisfaction that its provider network is not adequate to provide quality services to new groups because of obligations to existing group contract holders and enrollees (in which case, the HMO is prohibited from offering coverage for 90 days to groups with more than 25 eligible employees);

4. if the commissioner determines it would put the HMO in an impaired financial condition; or

5. to a small employer with fewer than three eligible employees if the HMO does not use preexisting condition provisions in plans it issues to any small employers (CGS § 38a-565(b)(5)).

Except as discussed above, the law requires carriers and HRA to issue a special health care plan to any eligible small employer that (1) elects to be covered under a special health care plan and (2) agrees to make the required premium payments and satisfy any other plan provisions (CGS § 38a-565(b)(1)).

Eligibility

A small employer is eligible to purchase a special health care plan if it did not maintain health insurance coverage for its employees at any time during the one-year period before applying for the special health care plan. Also, a small employer is prohibited from purchasing a special health care plan for more than three years (CGS § 38a-565(2)).

Premiums and Loss Ratios

Carriers. In addition to any other requirements regarding a small employer carrier's development of premium rates, a carrier's premiums for special health care plans must include an anticipated loss ratio of at least 75% (i. e. , at least 75 cents of each premium dollar must be used for paying claims). To help the Insurance Department monitor compliance with this loss ratio requirement, small employer carriers must annually file by March 31 information regarding special health care plans for small employers for the prior calendar year, including:

1. number of plans issued;

2. anticipated loss ratio;

3. premiums earned;

4. paid and estimated outstanding (i. e. , incurred but not reported) claims;

5. expenses charged; and

6. any other information the commissioner deems necessary.

HRA. For special health care plans that HRA issues to small employers with 10 or fewer eligible employees, the majority of whom are low-income eligible employees, HRA's board of directors must establish premium rates based on recommendations of its actuarial committee. When developing its recommendations, the committee must consider the premiums other insurers are, or would be, charging for similar insurance, among other pertinent information (CGS § 38a-570(1)).

For the purpose of establishing the premium rates, the law permits the HRA board to consider any relevant factors impacting premium, claims, and expenses that other insurers may consider when setting premium rates, including characteristics of small employers and insureds. It also:

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