No. 27150: R590-167. Individual Small Employer, and Group Health Insurance Rule

DAR File No.: 27150
Filed: 08/16/2004, 03:35
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The changes noted in this CPR are a result of comments received by the Insurance Department during the previous comment period and the department's decision to no longer require three reports required by the rule.

 

Summary of the rule or change:

The changes in the rule are as follows: Subsection R590-167-6(3)(a) broadens smoker status to include all persons using any type of tobacco. Also clarified that tobacco use can be rated by the insurance company as a risk characteristic. The change in Subsection R590-167-11(1)(a)(i) eliminates the reference to the Interpretative Opinion 3 and instead requires compliance with applicable standards of practice as promulgated by the Actuarial Standards Board. The change in Subsection R590-167-11(2)(a)(i) requires actuary to certify that the rates filing is in compliance with Utah's rules and laws. Subsections R590-167-11(3), (4), and (6) are deleted thus removing three reporting requirements to the Department. A new Section R590-167-12 identifies as protected records those filings submitted as a requirement of this rule. (DAR NOTE: This change in proposed rule has been filed to make additional changes to a proposed amendment that was published in the June 1, 2004, issue of the Utah State Bulletin, on page 60. Underlining in the rule below indicates text that has been added since the publication of the proposed rule mentioned above; strike-out indicates text that has been deleted. You must view the change in proposed rule and the proposed amendment together to understand all of the changes that will be enforceable should the agency make this rule effective.)

 

State statutory or constitutional authorization for this rule:

Sections 31A-2-201 and 31A-30-106

 

Anticipated cost or savings to:

the state budget:

The deletion of the filing requirement of three reports will reduce the workload of the Health Insurance Division. The changes will not result in the addition or elimination of jobs or increase or decrease revenue to the department.

 

local governments:

These changes will not affect local government. The changes deal only with the relationship between the department and their licensees.

 

other persons:

The addition of the wording regarding tobacco use as an allowable risk characteristic is just putting in writing what is already allowed in the code and in the marketplace. As a result of the elimination of the requirement to file the reports in Subsections R590-167-11(3), (4), and (6), 11 the work load will be reduced for those insurers selling health plans. The impact of this change should not warrant the reduction in personnel by these insurers. The change regarding actuarial certification in Section R590-167-11 will create no change in what the actuary is already doing in regards to this rule. Since there is no cost impact to the insurer regarding these changes, there should be no financial impact on purchasers of health plan policies.

 

Compliance costs for affected persons:

The addition of the wording regarding tobacco use as an allowable risk characteristic is just putting in writing what is already allowed in the code and in the marketplace. As a result of the elimination of the requirement to file the reports in Subsections R590-167-11(3), (4), and (6), the work load will be reduced for those insurers selling health plans. The impact of this change should not warrant the reduction in personnel by these insurers. The change regarding actuarial certification in Section R590-167-11 will create no change in what the actuary is already doing in regards to this rule. Since there is no cost impact to the insurer regarding these changes, there should be no financial impact on purchasers of health plan policies.

 

Comments by the department head on the fiscal impact the rule may have on businesses:

The changes in this rule will have no fiscal impact on insurance business in Utah.

 

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Insurance
Administration
Room 3110 STATE OFFICE BLDG
450 N MAIN ST
SALT LAKE CITY UT 84114-1201

 

Direct questions regarding this rule to:

Jilene Whitby at the above address, by phone at 801-538-3803, by FAX at 801-538-3829, or by Internet E-mail at [e-mail]

 

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

10/01/2004

 

This rule may become effective on:

10/02/2004

 

Authorized by:

Jilene Whitby, Information Specialist

 

 

RULE TEXT

R590. Insurance, Administration.

R590-167. Individual, Small Employer, and Group Health [Insurance]Benefit Plan Rule.

R590-167-6. Restrictions Relating to Premium Rates.

(1) A covered carrier shall develop a separate rate manual for each class of business. Base premium rates and new business premium rates charged to individuals and small employers by the covered carrier shall be computed solely from the applicable rate manual developed pursuant to this subsection. To the extent that a portion of the premium rates charged by a covered carrier is based on the carrier's discretion, the manual shall specify the criteria and factors considered by the carrier in exercising such discretion.

(2)(a) A covered carrier may not modify the rating method, as defined in Section R590-167-2, used in the rate manual for a class of business until the change has been approved as provided in this subsection. The commissioner may approve a change to a rating method if the commissioner finds that the change is reasonable, actuarially appropriate, and consistent with the purposes of the Act and this rule.

(b) A carrier may modify the rating method for a class of business only after filing an actuarial certification. The filing shall clearly request approval for a change in rating method and contain at least the following information:

(i) the reasons the change in rating method is being requested;

(ii) a complete description of each of the proposed modifications to the rating method;

(iii) a description of how the change in rating method would affect the premium rates currently charged to individuals and small employers in the class of business, including an estimate from a qualified actuary of the number of groups or individuals, and a description of the types of groups or individuals, whose premium rates may change by more than 10% due to the proposed change in rating method, not including general increases in premium rates applicable to all individuals and small employers in a health benefit plan;

(iv) a certification from a qualified actuary that the new rating method would be based on objective and credible data and would be actuarially sound and appropriate; and

(v) a certification from a qualified actuary that the proposed change in rating method would not produce premium rates for individuals and small employers that would be in violation of Sections 31A-30-106 and 31A-30-106.5.

(3) The rate manual developed pursuant to Subsections 31A-30-106(4) and R590-167-6(1) shall specify the case characteristics and rate factors to be applied by the covered carrier in establishing premium rates for the class of business.

(a) A covered carrier may not use case characteristics other than those specified in Subsection 31A-30-106(1)(h) without the prior approval of the commissioner. A covered carrier seeking such an approval shall make a filing with the commissioner for a change in rating method under Subsection R590-167-6(2)(b). [Smoker status]Tobacco use is not an allowable case characteristic. Tobacco use is an allowable risk characteristic when utilized in compliance with Section 31A-30-106(1)(b).

(b) A covered carrier shall use the same case characteristics in establishing premium rates for each health benefit plan in a class of business and shall apply them in the same manner in establishing premium rates for each such health benefit plan. Case characteristics shall be applied without regard to the risk characteristics of an individual or small employer.

(c) The rate manual shall clearly illustrate the relationship among the base premium rates charged for each health benefit plan in the class of business. If the new business premium rate is different than the base premium rate for a health benefit plan, the rate manual shall illustrate the difference.

(d) Differences among base premium rates for health benefit plans shall be based solely on the reasonable and objective differences in the design and benefits of the health benefit plans and may not be based in any way on the nature of an individual or small employer that choose or are expected to choose a particular health benefit plan. A covered carrier shall apply case characteristics and rate factors within a class of business in a manner that assures that premium differences among health benefit plans for identical individuals or small employers vary only due to reasonable and objective differences in the design and benefits of the health benefit plans and are not due to the nature of the individuals or small employers that choose or are expected to choose a particular health benefit plan.

(e) The rate manual shall provide for premium rates to be developed in a two step process.

(i) In the first step, a base premium rate shall be developed for the individual or small employer without regard to any risk characteristics.

(ii) In the second step, the resulting base premium rate may be adjusted by a risk load, subject to the provisions of Sections 31A-30-106 and 31A-30-106.5, to reflect the risk characteristics.

(f) Each rate manual developed pursuant to Subsection R590-167-6(1) shall be maintained by the carrier for a period of six years. Updates and changes to the manual shall be maintained with the manual.

(4)(a) Except as provided in Subsection R590-167-6(4)(b), a premium charged to an individual or small employer for a health benefit plan may not include a separate application fee, underwriting fee, or any other separate fee or charge.

(b) A carrier may charge a separate fee with respect an individual or small employer health benefit plan, but only one fee with respect to such plan, provided the fee is no more than $5 per month per individual or employee and is applied in a uniform manner to each health benefit plan in a class of business.

(5) If group size is used as a case characteristic by a covered carrier, the highest rate factor associated with a group size classification may not exceed the lowest rate factor associated with such a classification by more than 20% without prior approval of the commissioner.

(6) The restrictions related to changes in premium rates in Subsections 31A-30-106(1)(c) and 31A-30-106(1)(f) shall be applied as follows:

(a) A covered carrier shall revise its rate manual each rating period to reflect changes in base premium rates and changes in new business premium rates.

(b)(i) If, for any health benefit plan with respect to any rating period, the percentage change in the new business premium rate is less than or the same as the percentage change in the base premium rate, the change in the new business premium rate shall be deemed to be the change in the base premium rate for the purposes of Subsections 31A-30-106(1)(c) and 31A-30-106(1)(f).

(ii) If, for any health benefit plan with respect to any rating period, the percentage change in the new business premium rate exceeds the percentage change in the base premium rate, the health benefit plan shall be considered a health benefit plan into which the covered carrier is no longer enrolling new individuals or small employers for the purposes of Subsections 31A-30-106(1)(c) and 31A-30-106(1)(f).

(c) If, for any rating period, the change in the new business premium rate for a health benefit plan differs from the change in the new business premium rate for any other health benefit plan in the same class of business by more than 20%, the carrier shall make a filing with the commissioner containing a complete explanation of how the respective changes in new business premium rates were established and the reason for the difference. The filing shall be made 30 days before the beginning of the rating period.

(d) A covered carrier shall keep on file for a period of at least six years the calculations used to determine the change in base premium rates and new business premium rates for each health benefit plan for each rating period.

(7)(a) Except as provided in Subsection R590-167-6(7)(b), a change in premium rate for an individual or small employer shall produce a revised premium rate that is no more than the following:

(i) the base premium rate for the individual or small employer, as shown in the rate manual as revised for the rating period, multiplied by:

(ii) one plus the sum of:

(iii) the risk load applicable to the individual or small employer during the previous rating period; and

(iv) 15% prorated for periods of less than one year.

(b) In the case of a health benefit plan into which a covered carrier is no longer enrolling new individuals or small employers, a change in premium rate for an individual or small employer shall produce a revised premium rate that is no more than the following:

(i) the base premium rate for the individual or small employer, given its present composition and as shown in the rate manual in effect for the individual or small employer at the beginning of the previous rating period, multiplied by:

(ii) one plus the lesser of:

(A) the change in the base rate; or

(B) the percentage change in the new business premium for the most similar health benefit plan into which the covered carrier is enrolling new individuals or small employers, multiplied by:

(iii) one plus the sum of:

(A) the risk load applicable to the individual or small employer during the previous rating period; and

(B) 15%, prorated for periods of less than one year.

(c) Notwithstanding the provisions of Subsections R590-167-6(7)(a) and (b), a change in premium rate for an individual or small employer may not produce a revised premium rate that would exceed the limitations on rates provided in Subsection 31A-30-106(1)(b).

(8)(a) A representative of a Taft Hartley trust, including a carrier upon the written request of such a trust, may file in writing with the commissioner a request for the waiver of application of the provisions of Subsection 31A-30-106(1) with respect to such trust.

(b) A request made under Subsection R590-167-6(8)(a) shall identify the provisions for which the trust is seeking the waiver and shall describe, with respect to each provision, the extent to which application of such provision would:

(i) adversely affect the participants and beneficiaries of the trust; and

(ii) require modifications to one or more of the collective bargaining agreements under or pursuant to which the trust was or is established or maintained.

(c) A waiver granted under Subsection 31A-30-104(5) shall not apply to an individual who participates in the trust because the individual is an associate member of an employee organization or the beneficiary of such an individual.

 

R590-167-11. Actuarial Certification and Additional Filing Requirements.

(1) Actuarial Certification.

(a) An actuarial certification shall be filed annually and meet the requirements of Section 31A-30-106(4)(b) and the following:

(i) the actuarial certification shall be a written statement that meets the requirements of Title 31A Chapter 30, R590-167, and the applicable standards of practice as promulgated by the Actuarial Standards Board[ including the provisions of Interpretative Opinion 3: Professional Communications of Actuaries regarding Actuarial Reports];

(ii) the actuary must state that he or she meets the qualifications of Subsection 31A-30-103(1);

(iii) the actuarial certification shall contain the following statement: "I, (name), certify that (name of covered carrier) is in compliance with the provisions of Title 31A Chapter 30, and R590-167, based upon the examination of (name of covered carrier), including review of the appropriate records and of the actuarial assumptions and methods utilized by (name of covered carrier) in establishing premium rates for applicable health benefit plans;" and

(iv) the actuarial certification shall list and describe each written demonstration used by the actuary to establish compliance with Title 31A Chapter 30 and R590-167.

(b) The actuarial certification shall be filed no later than April 1 of each year.

(2) Rating Manual.

(a) For every health benefit plan subject to the Act and this rule, the carrier shall file with the commissioner a copy of the applicable rating manual, for both new business and renewal rates, which includes:

(i) [an actuarial certification that includes the information described in Subsection R590-167-11(1)]signed certification by an actuary that to the best of the actuary's knowledge and judgment the rate filing is in compliance with the applicable laws and rules of the State of Utah;

(ii) a complete and detailed description of how the final premium, including any fees, is calculated from the rating manual;

(iii) all changes and updates, which includes a complete and detailed description of how the final premium, including any fees, is calculated from the rating manual; and

(iv) a description of the carriers classes of business as described in Subsection R590-167-4(1).

(b) The rate manual shall be filed:

(i) with an initial product filing; or

(ii) within 30 days prior to use for an existing health benefit plan

(3) [List of Health Benefit Plan Forms.

(a) The carrier shall file annually with the commissioner a list of every form to which the rule applies, that includes a description of how to find the applicable information in Subsection R590-167-11(2) for each form.

(b) The information described in Subsection R590-167-11(3)(a) shall be filed no later than April 1 of each year.

(4) Statistical Report.

(a) A covered carrier shall file annually the following information with the commissioner related to health benefit plans issued by the covered carrier to individuals or small employers in this state:

(i) number of individuals and small employers that were issued health benefit plans in the previous calendar year, separated as to newly issued plans and renewals;

(ii) number of individuals that were not issued due to underwriting rules;

(iii) number of individual and small employer health benefit plans terminated or nonrenewed in the previous calendar year categorized as:

(A) fraud or misrepresentation of the employer or insureds;

(B) noncompliance with the carrier's minimum participation requirements;

(C) noncompliance with the carrier's employer contribution requirements;

(D) nonpayment of premium; or

(E) carrier's election to nonrenew all health benefit plans issued to individuals and small employers in this state; and

(iv) Total number of natural covered lives, including the insured, spouse and dependents, for individual market health benefit plans and small employer market health benefit plans as of December 31 of the previous calendar year.

(b) The information described in Subsection R590-167-11(4) shall be filed no later than April 1 of each year in the format provided in Appendix I, Statistical Report, published July 1, 2004. This appendix is available at the Insurance Department and on their website.

(5)](3) Index Premium Rates.

(a) A small employer carrier shall file annually the index premium rate information required by Section 31A-29-117(2). The report shall include:

(i) the small employer index premium rate as of March 1 of the previous year;

(ii) the small employer index premium rate as of March 1 of the current year; and

(iii) the average percentage change in the index premium rate as of March 1, of the current and preceding year.

(b) The information described in Subsection R590-167-11[(5)](4)(a) shall be filed no later than April 1 of each year.

[(6) Midyear Coverage Count.

(a) A covered carrier shall file annually the total number of natural covered lives, including the insured, spouse and dependents, for individual market health benefit plans and small employer market health benefit plans as of June 30 of the current calendar year, in the format provided in Appendix II, Midyear Report, published July 1, 2004, which is available at the Insurance Department and on their website.

(b) The information described in Subsection R590-167-11(6)(a) shall be filed no later than August 1 of each year.]

 

R590-167-12. Records.

Records submitted to the commissioner under this rule shall be maintained by the commissioner as protected records under Title 63, Chapter 2, Government Records Access and Management Act.

 

R590-167-[12]13. Penalties.

A person found, after a hearing or other regulatory process, to be in violation of this rule shall be subject to penalties as provided under Section 31A-2-308.

 

R590-167-[13]14. Enforcement Date.

The commissioner will begin enforcing the revised provisions of this rule 45 days from the rule's effective date.

 

R590-167-[14]15. Severability.

If any provision of this rule or the application of it to any person or circumstance is, for any reason, held to be invalid, the remainder of the rule and the application of the provision to other persons or circumstances will not be affected by the invalid provision.

 

KEY: health insurance

2004

Notice of Continuation December 14, 1999

31A-30-106