PA 15-247—sSB 1023

Insurance and Real Estate Committee

AN ACT CONCERNING REVISIONS TO THE HEALTH INSURANCE STATUTES

SUMMARY: This act makes numerous changes in the insurance statutes.

The act requires health insurers to file small employer group health insurance premium rates with the insurance commissioner and prohibits them from issuing or delivering policies or certificates in Connecticut to small employers unless the commissioner approves the rates ( 7). By law, the commissioner already must review and approve rates for individual health insurance policies, HMO contracts, and hospital and medical service corporation contracts.

The act requires insurers, HMOs, and hospital and medical service corporations to include in their rate filings an actuarial memorandum, including pricing assumptions, claims experience, and premium rates and loss ratios from the policy's or contract's inception ( 1, 3, 5, & 7). It defines “loss ratio” as the ratio of incurred claims to earned premiums by the number of years of policy duration for all combined durations.

Under the act, when the insurance commissioner disapproves a group health insurance policy form, she must (1) notify the insurer in writing of the disapproval and reasons for it and (2) prohibit the insurer from issuing the form to anyone in the state ( 7).

The act also prohibits individual and group health insurance policies from reducing a person's coverage because he or she is eligible for Medicare due to age, disability, or end-stage renal disease ( 6 & 23). It allows a coverage reduction when a person is actually enrolled in Medicare, but only to the extent Medicare provides coverage. Prior law prohibited group health insurance policies issued to employers with (1) fewer than 20 employees from reducing coverage when a person, because of age, was eligible for but not enrolled in Medicare and (2) 20 or more employees from discriminating against a person in terms of benefits because he or she turned age 65.

Additionally, the act makes numerous changes in the insurance statutes to conform state law to the federal Patient Protection and Affordable Care Act (ACA, P. L. 111-148, as amended). It redefines “small employer” to mean, as of January 1, 2016, an employer with between one and 100 employees, not including a sole proprietor ( 17). Prior law defined it as an employer with one to 50 employees, including a self-employed person. The act allows the commissioner to postpone the January 1, 2016 date if the U. S. Health and Human Services secretary postpones the change in definition under the ACA.

The act:

1. expands the prohibition on preexisting condition provisions ( 8);

2. requires insurers, HMOs, and similar entities (“entities”) to make individual and small employer group health insurance policies and contracts available on a guaranteed issue basis (i. e. , the entity must accept every applicant) ( 6 & 19);

3. eliminates a requirement for entities to offer people covered under a group policy a right to convert to individual coverage upon termination of group coverage (i. e. , conversion privilege), which is no longer necessary because of guaranteed issue requirements ( 9-12);

4. prohibits entities from using gender, industry, and group size as rating factors for small employer group health insurance policies ( 19);

5. allows entities to use (a) provider networks and administrative expenses as rating factors for individual and small employer group health insurance policies and (b) tobacco use as a rating factor for individual health insurance policies ( 6, 19, & 20);

6. requires small employer group health insurance policies to provide a special enrollment period for certain eligible employees and dependents, similar to the prior law regarding late enrollees ( 19); and

7. eliminates requirements that insurers, the Health Reinsurance Association (HRA), and the Connecticut Small Employer Health Reinsurance Pool (CSHERP) offer certain statutory benefit plans ( 13-17, 21-22, & 38).

Lastly, the act eliminates obsolete provisions and makes other minor, technical, and conforming changes ( 24-38).

EFFECTIVE DATE: Upon passage, except for a provision that allows insurers to vary premium rates for certain small employer health insurance policies to reflect the policies' different provider networks and administrative expenses ( 20), which is effective January 1, 2016.

8 — PREEXISTING CONDITION PROVISIONS

The act broadens the prohibition on the inclusion of preexisting condition provisions in individual and group health insurance plans or arrangements issued by insurers, HMOs, fraternal benefit societies, and hospital or medical service corporations. It prohibits their inclusion for anyone, including adults. The law already prohibits preexisting condition provisions for children under age 19. Prior law allowed preexisting condition provisions for adults that did not extend beyond the first 12 months of coverage.

A “preexisting condition provision” limits or excludes coverage for a condition that existed before the coverage effective date for which any medical advice, diagnosis, care, or treatment was recommended or received before the effective date.

6, 19, & 20 — RATING HEALTH INSURANCE POLICIES

Grandfathered and Non-grandfathered Plans

The act distinguishes between grandfathered and non-grandfathered plans with regard to permissible rating practices for individual and small employer group health insurance policies or plans. A “grandfathered plan” is a health insurance policy or plan that was in existence on March 23, 2010 (before the ACA took effect) and has not been changed in ways that substantially reduce benefits or increase costs for consumers.

Individual Rating

The act sets out rating provisions for individual health insurance policies or plans written by insurers, HMOs, and hospital and medical service corporations. It specifies that health insurance issued to an association or other insurance arrangement not made up solely of employer groups must be treated as individual health insurance.

Under the act, grandfathered individual health insurance policies and plans must be community rated (i. e. , the premium rates offered or charged must be set based on a single pool of all grandfathered plans).

The act requires non-grandfathered individual health insurance policies and plans to be rated using modified community rating. Thus, premiums offered or charged must be set based on a single pool of all non-grandfathered plans but may then be adjusted to reflect the covered person's age, geographic area, and tobacco use. A rate factoring in tobacco use may not vary by a ratio of more than 1. 5 to 1. 0 and may only be applied with respect to people who may legally use tobacco. “Tobacco use” means using tobacco four or more times a week on average within the preceding six-month period, but excludes religious or ceremonial use.

Under the act, total premium rates for family coverage under non-grandfathered plans must be determined by adding the premiums for each family member, but for children under age 21, only the premiums for the three oldest children may be added.

The act permits premium rates for grandfathered or non-grandfathered plans to vary based on actuarially justified amounts to reflect differences in the plans' benefit designs, provider networks, and administrative expenses.

Small Employer Rating

The act sets out rating provisions for small employer group health insurance policies or plans written by insurers, HMOs, and hospital and medical service corporations. It specifies that associations of small employers, as well as health insurance plans and other arrangements covering small employers, are subject to its provisions.

The act retains existing law with respect to rating grandfathered plans. Thus, it allows the entities to charge rates for grandfathered small employer group plans that are based on a community rate (i. e. , single pool of plans) and adjusted to reflect various classifications, such as age, gender, geographic area, industry, group size, family composition, and administrative savings for certain associations.

For non-grandfathered plans, the act eliminates gender, industry, group size, and administrative savings as permissible rating factors. Upon passage, the act allows rates for non-grandfathered small employer group plans to be based on a community rate and adjusted to reflect only age, geographic area, and plan design. Beginning January 1, 2016, it also allows the rates to vary by actuarially justified amounts to reflect the plan's provider network and administrative expense differences.

Under the act:

1. total premium rates for family coverage under non-grandfathered plans must be determined by adding the premiums for each family member, but for children under age 21, only the premiums for the three oldest children may be added and

2. premium rates for a small employer group must be determined by calculating the premium rate for each covered employee and dependent and totaling the premiums attributable to each.

19 — SPECIAL ENROLLMENT PERIOD

The act requires small employer group health insurance plans to provide a special enrollment period for eligible employees and dependents in accordance with federal regulation. This is similar to state law regarding late enrollees.

Under federal regulations, a health insurance issuer may restrict enrollment to (1) an open enrollment period when people may purchase health insurance and (2) special enrollment periods when people who experience qualifying life-changing events may purchase health insurance (45 CFR 147. 104). Qualifying events include changes in marriage status, dependents, or employment status, among other things. The plans must give a person 30 days from the date of a qualifying event to elect coverage.

The act also requires plans to provide a special enrollment period for an employee whom a court has ordered to provide coverage for a spouse or minor child. The employee must request enrollment within 30 days after the court's order.

13-17, 21-22, & 38 — HEALTH REINSURANCE ASSOCIATION (HRA) AND CONNECTICUT SMALL EMPLOYER HEALTH REINSURANCE POOL (CSEHRP)

HRA is a nonprofit entity whose members include insurers and HMOs doing business in Connecticut. It serves as the state's insurer of last resort. CSEHRP is a reinsurance pool through which member insurers purchase reinsurance coverage for an entire small group or for certain eligible employees or dependents in a group, generally those the insurer believes are high risk (i. e. , likely to have high claim costs).

The act eliminates the requirement that HRA make individual and group comprehensive health care plans available to people unable to obtain insurance coverage through other means. The ACA instead requires insurers to offer plans that cover essential health benefits on a guarantee issue basis. Under prior law, individual and group comprehensive health care plans included specified minimum benefits, including coverage for catastrophic illness and a lifetime maximum coverage of $1 million.

The act also eliminates the requirement that CSEHRP make special health care plans available to previously uninsured small employers. Prior law required the CSEHRP board of directors to develop these plans as a lower-cost health insurance coverage option for uninsured small employers.

The act retains HRA and CSEHRP as the entities that will provide reinsurance in the individual and small employer group markets, respectively. Under the act, HRA may administer state or federal programs that may be required or permitted, with the insurance commissioner's approval. The act also requires the CSEHRP board of directors to develop a family health statement, instead of an underwriting plan, for insurers to use to determine whether to cede covered lives to the reinsurance pool. The insurance commissioner must approve the statement.

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