SB 173: "An Act relating to health insurance for small employers; and providing for an effective date."
00SENATE BILL NO. 173 01 "An Act relating to health insurance for small employers; and providing for an 02 effective date." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. PURPOSE. (a) The purpose of this Act is to 05 (1) promote the availability of health insurance coverage to small employers 06 regardless of their health status or claims experience; 07 (2) prevent abusive rating practices; 08 (3) require disclosure of rating practices to purchasers; 09 (4) establish rules regarding renewability of coverage; 10 (5) establish limitations on the use of preexisting condition exclusions; 11 (6) provide for development of "basic" and "standard" health benefit plans to 12 be offered to all small employers; 13 (7) provide for establishment of a reinsurance program; and 14 (8) improve the overall fairness and efficiency of the small group health
01 insurance market. 02 (b) It is not the purpose of this Act to shift the cost of providing health insurance to 03 small employers, to other insured persons, or to the state. 04 * Sec. 2. AS 21.36 is amended by adding a new section to read: 05 Sec. 21.36.025. UNFAIR MARKETING PRACTICES PROHIBITED. A 06 person may not violate the applicable provisions of AS 21.56.180. 07 * Sec. 3. AS 21.36.090(d) is amended to read: 08 (d) Except to the extent necessary to comply with AS 21.42.365 and 09 AS 21.56, a person may not practice or permit unfair discrimination against a person 10 who provides a service covered under a group disability policy that extends coverage 11 on an expense incurred basis, or under a group service or indemnity type contract 12 issued by a nonprofit corporation, if the service is within the scope of the provider's 13 occupational license. In this subsection, "provider" means a state licensed physician, 14 dentist, osteopath, optometrist, chiropractor, nurse midwife, advanced nurse 15 practitioner, naturopath, physical therapist, occupational therapist, psychologist, 16 psychological associate, or licensed clinical social worker. 17 * Sec. 4. AS 21.36.090(d) is repealed and reenacted to read: 18 (d) Except to the extent necessary to comply with AS 21.42.365, a person may 19 not practice or permit unfair discrimination against a person who provides a service 20 covered under a group disability policy that extends coverage on an expense incurred 21 basis, or under a group service or indemnity type contract issued by a nonprofit 22 corporation, if the service is within the scope of the provider's occupational license. 23 In this subsection, "provider" means a state licensed physician, dentist, osteopath, 24 optometrist, chiropractor, nurse midwife, advanced nurse practitioner, naturopath, 25 physical therapist, occupational therapist, psychologist, psychological associate, or 26 licensed clinical social worker. 27 * Sec. 5. AS 21 is amended by adding a new chapter to read: 28 CHAPTER 56. SMALL EMPLOYER HEALTH INSURANCE. 29 ARTICLE 1. SMALL EMPLOYER HEALTH REINSURANCE ASSOCIATION. 30 Sec. 21.56.010. CREATION; MEMBERSHIP. A nonprofit incorporated legal 31 entity to be known as the Small Employer Health Reinsurance Association is
01 established. Membership consists of all insurers licensed to transact health insurance 02 in the state that offer a health benefit plan. All members shall maintain membership 03 in the association as a condition of doing health insurance business, or being able to 04 offer subscriber contracts, in the state. 05 Sec. 21.56.020. BOARD OF DIRECTORS; ORGANIZATION. (a) The board 06 of directors of the association consists of nine individuals selected by participating 07 members, subject to approval by the director. The director shall endeavor to appoint 08 at least six board members who are also small employer insurers. If the director is 09 unable to appoint six board members who are also small employer insurers, the 10 director may fill the remaining seats with any insurer. In selecting members of the 11 board, the director shall consider, among other things, whether all types of 12 participating members are fairly represented. 13 (b) To the extent possible, one board member shall represent a health 14 maintenance organization, one board member shall represent a hospital or medical 15 service corporation, one board member's principal health insurance business shall be 16 in the small employer market, and one board member's principal health insurance 17 business shall be in the large employer market. Members of the board may be 18 reimbursed from the association for expenses incurred by them as members, but may 19 not otherwise be compensated by the association for their services. The costs of 20 conducting meetings of the association and its board of directors shall be borne by the 21 association. 22 (c) A member of the board serves for a term of three years and may be 23 reappointed to an unlimited number of terms. The term of a board member shall 24 continue until a successor is appointed. A vacancy on the board shall be filled by 25 participating members, subject to approval by the director. A board member may be 26 removed by the director for cause. 27 Sec. 21.56.030. GENERAL POWERS. The association may 28 (1) exercise the powers granted to insurers under the laws of the state, 29 except that the association may not issue insurance; 30 (2) sue or be sued; 31 (3) enter into contracts with insurers, similar associations in other
01 states, or with other persons for the performance of administrative functions; 02 (4) establish administrative and accounting procedures for the operation 03 of the association; 04 (5) take legal action as necessary to avoid the payment of improper 05 claims against the association; 06 (6) define the array of health coverage products for which reinsurance 07 will be provided and issue reinsurance policies; 08 (7) establish rules, conditions, and procedures pertaining to the 09 reinsurance of members' risks by the association; 10 (8) establish actuarial functions appropriate to the operation of the 11 association; 12 (9) assess members under the provisions of this chapter and make 13 advance interim assessments as may be reasonable and necessary for organizational 14 and interim operating expenses; interim assessments shall be credited as offsets against 15 regular assessments due following the close of the calendar year; 16 (10) appoint appropriate legal, actuarial, and other committees as are 17 necessary to provide technical assistance in the operation of the association, design of 18 a policy or contract, or to assist in other functions of the association; 19 (11) borrow money to accomplish the purposes of the association; notes 20 or other evidence of indebtedness of the association that are not in default are 21 investments for insurers and may be carried as admitted assets. 22 Sec. 21.56.040. PLAN OF OPERATION. (a) The association shall submit 23 to the director a plan of operation and amendments necessary or suitable to assure the 24 fair, reasonable, and equitable administration of the association. The director may, 25 after notice and hearing, approve the plan of operation if the director determines it to 26 be suitable to assure the fair, reasonable, and equitable administration of the program 27 on a proportionate basis under the provisions of this section and it does not shift 28 program costs to other insured persons or the state. The plan of operation and 29 amendments become effective upon approval in writing by the director. 30 (b) All members of the association shall comply with the plan of operation. 31 (c) The plan of operation must establish procedures for
01 (1) handling and accounting of program assets and money of the 02 association and for an annual fiscal report to the director; 03 (2) reinsuring risks under the provisions of this section; 04 (3) collecting assessments from all members to provide for claims 05 reinsured by the association and for administrative expenses incurred or estimated to 06 be incurred by the association; 07 (4) selection of an administering insurer and establish the administering 08 insurer's powers and duties; 09 (5) effectuating a methodology for applying the dollar thresholds 10 contained in this section for insurers that pay or reimburse health care providers by 11 capitation or salary; and 12 (6) provisions necessary or proper for the execution of the powers and 13 duties of the association. 14 Sec. 21.56.050. HEALTH CARE REINSURANCE. (a) A member may 15 reinsure health care coverage of an eligible employee of a small employer or a 16 dependent of an eligible employee of a small employer with the association only under 17 the following provisions: 18 (1) regarding a small employer basic or standard health benefit plan, 19 the association shall reinsure the level of coverage provided; 20 (2) regarding a health care plan other than a small employer health 21 benefit plan, the association shall reinsure the level of coverage provided up to, but not 22 exceeding, the level of coverage provided in a small employer basic or standard health 23 benefit plan; 24 (3) a small employer insurer may reinsure an entire employer group 25 within 60 days of the commencement of the group's coverage under a health benefit 26 plan; 27 (4) a small employer insurer may reinsure an eligible employee or 28 dependent within a period of 60 days following the commencement of the coverage 29 with the small employer; a newly eligible employee or dependent of a reinsured small 30 employer may be reinsured within 60 days of the commencement of coverage; 31 (5) the association may not reimburse a reinsuring insurer regarding the
01 claims of a reinsured employee or dependent until the insurer has paid an initial level 02 of claims for the employee or dependent of $5,000 in a calendar year for benefits 03 covered by the association; 04 (6) a small employer insurer may terminate reinsurance for one or more 05 of the reinsured employees or dependents of a small employer on any plan anniversary. 06 (b) Premium rates charged for coverage reinsured by the association shall be 07 established as required under (e) of this section and adjusted as follows: 08 (1) for whole group small employer reinsurance coverage, 1.5 09 multiplied by the base premium rate established by the association for eligible 10 employees, and dependents of eligible employees, of a small employer all of whose 11 health insurance coverage is reinsured with the association; 12 (2) for eligible employee or dependent health reinsurance coverage, 5.0 13 multiplied by the base premium rate established by the association. 14 (c) If a health benefit plan coverage for a small employer is entirely or 15 partially reinsured with the association, the premium charged to the small employer for 16 a rating period for the coverage issued under this section shall meet the premium rate 17 requirements established under AS 21.56.120. 18 (d) On or before March 1 of each year, the board shall determine and report 19 to the director the association's net loss for the previous calendar year, including 20 administrative expenses and incurred losses for the year, taking into account 21 investment income and other appropriate gains and losses. A net loss for the year 22 shall be recovered by assessments collected from reinsuring insurers. The board shall 23 establish, as part of the plan of operation, a formula by which to make assessments 24 against reinsuring insurers. The assessment formula must be based on each reinsuring 25 insurer's share of the total premiums earned in the preceding calendar year from health 26 benefit plans delivered or issued for delivery to small employers in this state by 27 reinsuring carriers and each reinsuring insurer's share of the premiums earned in the 28 preceding calendar year from newly issued health benefit plans delivered or issued for 29 delivery during the calendar year to small employers in this state by reinsuring 30 insurers. In determining an assessment, if any, that is collected from a member, the 31 following provisions apply:
01 (1) the formula established under this subsection may not result in a 02 reinsuring insurer having an assessment share that is less than 50 percent or more than 03 150 percent of an amount that is based on the proportion of the reinsuring insurer's 04 total premiums earned in the preceding calendar year from health benefit plans 05 delivered or issued for delivery to small employers in this state by reinsuring insurers 06 to total premiums earned in the preceding calendar year from health benefit plans 07 delivered or issued for delivery to small employers in this state by all reinsuring 08 carriers; 09 (2) the board may, with approval of the director, change the assessment 10 formula established under this section from time to time as appropriate; the board may 11 provide for the shares of the assessment base attributable to premiums from all health 12 benefit plans and to premiums from newly issued health benefit plans to vary during 13 a transition period; 14 (3) subject to the approval of the director, the board shall make an 15 adjustment to the assessment formula for reinsuring carriers that are approved health 16 maintenance organizations that are federally qualified under 42 U.S.C. 300, to the 17 extent, if any, that restrictions are imposed on those organizations that are not imposed 18 on other small employer carriers; 19 (4) annually before March 1, the board shall determine and file with 20 the director an estimate of the assessments needed to fund losses incurred by the 21 association in the previous calendar year; 22 (5) if the board determines that the assessments needed to fund the 23 losses incurred by the association in the previous calendar year will exceed five 24 percent of total premiums earned in the previous year from health benefit plans 25 delivered or issued for delivery to small employers in this state by reinsuring insurers, 26 the board shall evaluate the operation of the program and report its findings, including 27 any recommendations for changes to the plan of operation, to the director within 90 28 days following the end of the calendar year in which the losses were incurred; the 29 evaluation must include an estimate of future assessments, the administrative costs of 30 the program, the appropriateness of the premiums charged, and the level of insurer 31 retention under the program and the costs of coverage for small employers; if the
01 board fails to file a report with the director within 90 days following the end of the 02 applicable calendar year, the director may evaluate the operations of the program and 03 implement amendments to the plan of operation the director determines necessary to 04 reduce future losses and assessments; 05 (6) if assessments exceed net losses of the association, the excess shall 06 be held in an interest bearing account and used by the board to offset future losses or 07 to reduce association premiums; in this paragraph, "future losses" include a reserve for 08 incurred but not reported claims; 09 (7) the board shall annually determine a member's proportion of 10 participation in the association based on annual statements and other reports 11 determined necessary by the board and filed by the member with the board; an insurer 12 shall report to the board a claim payment made and administrative expense incurred 13 in this state on a semi-annual basis on a form prescribed by the director; 14 (8) the plan of operation must include a provision for the imposition 15 of an interest penalty for late payment of assessments; 16 (9) a member may request a deferment from the director, in whole or 17 in part, from an assessment issued by the board; the director may defer, in whole or 18 in part, the assessment of a member if, in the opinion of the director payment of the 19 assessment would endanger the ability of the member to fulfill the member's 20 contractual obligations; 21 (10) in the event an assessment against a member is deferred in whole 22 or in part, the amount by which the assessment is deferred may be assessed against the 23 other members in a manner consistent with the basis for assessments set out in this 24 subsection; the member receiving a deferment shall remain liable to the association for 25 the amount deferred; the director may attach conditions to a deferment; a member 26 receiving a deferment may not reinsure an individual or group as provided under this 27 section until the assessment is paid. 28 (e) The board, as part of the plan of operation, shall establish a methodology 29 for determining premium rates to be charged by the program for reinsuring small 30 employers and individuals under this section. The methodology must include a system 31 for classification of small employers that reflects the types of case characteristics
01 commonly used by small employer insurers in the state. The methodology must 02 provide for the development of base reinsurance premium rates that shall be multiplied 03 by the factors set out in (b) of this section to determine the premium rates for the 04 association. The base reinsurance premium rates shall be established by the board, 05 subject to the approval of the director, and shall be set at levels that reasonably 06 approximate gross premiums charged to small employers by small employer insurers 07 for health benefit plans with benefits similar to the standard health benefit plan. The 08 board shall review the methodology established under this subsection to ensure that the 09 methodology reasonably reflects the claims experience of the program. Changes to the 10 methodology may be proposed by the board, and are subject to approval by the 11 director. 12 Sec. 21.56.060. HEALTH BENEFIT PLAN COMMITTEE. (a) The health 13 benefit plan committee is established in the association. The committee is composed 14 of seven members selected by the director as follows: 15 (1) three members who are representatives of participating insurers; 16 (2) one member who represents small employers; 17 (3) one member who represents employees of small employers; and 18 (4) one member who represents health care providers; and 19 (5) one member who represents agents or brokers. 20 (b) The committee shall recommend benefit levels, cost sharing levels, 21 exclusions and limitations for the basic and standard health benefit plan offered under 22 AS 21.56.140. The committee shall also design a basic health benefit plan and a 23 standard health benefit plan that contain benefit and cost sharing levels that are 24 consistent with the basic method of operation and the benefit plans of health 25 maintenance organizations, including restrictions imposed by federal law. The plans 26 recommended by the committee may include the following cost containment features: 27 (1) utilization review of health care services, including review of the 28 medical necessity of hospital and physician services; 29 (2) case management; 30 (3) selective contracting with hospitals, physicians, and other health 31 care providers;
01 (4) reasonable benefit differentials applicable to providers that 02 participate or do not participate in arrangements using restricted network provisions; 03 and 04 (5) other managed care provisions. 05 Sec. 21.56.070. REQUIRED REPORT. The board shall study and report at 06 least once every two years to the director and to the legislature on the effectiveness 07 of this chapter. The report must analyze the effectiveness of the chapter in promoting 08 rate stability, product availability, and coverage affordability. The report may contain 09 recommendations for actions to improve the overall effectiveness, efficiency, and 10 fairness of the small group health insurance marketplace. The report must address 11 whether insurers, agents, brokers, managing general agents, and third-party 12 administrators are fairly and actively marketing or issuing health benefit plans to small 13 employers in fulfillment of the purposes of the chapter. The report may contain 14 recommendations for market conduct or other regulatory standards or action. 15 Sec. 21.56.080. ADMINISTRATIVE PROCEDURE ACT. The association is 16 exempt from AS 44.62 (Administrative Procedure Act). 17 Sec. 21.56.090. TAX EXEMPTION. The association is exempt from the 18 payment of fees and taxes levied by the state or any of its political subdivisions except 19 taxes levied on real or personal property. 20 Sec. 21.56.100. LIMITATION OF LIABILITY. A member of the association 21 is not liable for civil damages resulting from an act or omission of the member on 22 behalf of the association unless the member acts with gross negligence or intentional 23 misconduct. 24 ARTICLE 2. SMALL EMPLOYER HEALTH INSURANCE PLANS. 25 Sec. 21.56.110. APPLICABILITY. (a) An individual or group health benefit 26 plan is subject to the provisions of this chapter if the plan provides health care benefits 27 covering employees of a small employer and if one of the following conditions are 28 met: 29 (1) any portion of the premium or benefits is paid by a small employer; 30 (2) a covered individual or dependent is reimbursed, through wage 31 adjustments or otherwise, by or on behalf of a small employer for all or a portion of
01 the premium; or 02 (3) the health benefit plan is treated by the employer or any of the 03 eligible employees or dependents as part of a plan or program for the purposes of 26 04 U.S.C. 106 or 26 U.S.C. 162 (Internal Revenue Code). 05 (b) Except as provided in this chapter, other provisions of law requiring the 06 coverage or the offer of coverage of a health care service or benefit and other 07 provisions of law requiring the reimbursement, utilization, or consideration of a 08 specific category of a licensed or certified health care practitioner do not apply to a 09 health benefit plan offered or delivered to a small employer. 10 (c) Except as provided in this subsection, for purposes of this chapter insurers 11 that are affiliated companies or that are eligible to file a consolidated tax return shall 12 be treated as one insurer and a restriction or limitation imposed under this chapter shall 13 apply as if all health benefit plans delivered or issued for delivery to a small employer 14 in this state by an affiliated insurer were issued by one insurer. An affiliated insurer 15 that is a health maintenance organization having a certificate of authority under 16 AS 21.86 may be considered to be a separate insurer for the purposes of this chapter. 17 (d) This chapter does not apply to a policy or certificate of insurance that 18 covers a specified disease or to a hospital indemnity or limited benefit health insurance 19 policy if the insurer offering the policy or certificate files with the director on or 20 before March 1 of each year a statement that (1) certifies that the policy or certificate 21 described in this subsection is being offered and marketed as supplemental health 22 insurance and not as a substitute for hospital or medical expense insurance, or major 23 medical expense insurance and (2) includes a summary description of each policy or 24 certificate, including the average annual premium rate or range of rates, charged for 25 the policy or certificate in this state. An insurer who offers a policy or certificate 26 described in this subsection in this state for the first time shall provide the information 27 described in this subsection not less than 30 days before the policy or certificate is 28 issued or delivered in this state. 29 Sec. 21.56.120. PREMIUM RATE RESTRICTIONS DISCLOSURES; 30 REPORTS; CONFIDENTIALITY. (a) A premium rate for a health benefit plan 31 subject to this chapter is subject to the following provisions:
01 (1) the premium rate charged or offered during a rating period to small 02 employers with similar case characteristics as determined by the insurer for the same 03 or similar coverage may not vary from the applicable index rate by more than 35 04 percent of the applicable index rate; 05 (2) regarding a health benefit plan issued before July 1, 1993, if 06 premium rates charged or offered for the same or similar coverage under a health 07 benefit plan covering a small employer with similar case characteristics as determined 08 by the insurer exceeds the applicable index rate by more than 35 percent, an increase 09 in premium rates for a new rating period may not exceed the sum of 10 (A) a percentage change in the base premium rate measured 11 from the first day of the prior rating period to the first day of the new rating 12 period; plus 13 (B) adjustments due to changes in case characteristics or plan 14 design of the small employer, as determined by the insurer; 15 (3) the percentage increase in the premium rate charged to a small 16 employer for a new rating period may not exceed the sum of the following: 17 (A) the percentage change in the new business premium rate 18 measured from the first day of the prior rating period to the first day of the 19 new rating period; in the case of a health benefit plan into which the small 20 employer insurer is no longer enrolling new small employers, the small 21 employer insurer shall use the percentage change in the base premium rate, 22 provided that the change does not exceed, on a percentage basis, the change in 23 the new business premium rate for the most similar health benefit plan into 24 which the small employer insurer is actively enrolling new small employers; 25 (B) any adjustment, not to exceed 15 percent annually and 26 adjusted pro rata for rating periods of less than one year, due to the claim 27 experience, health status, or duration of coverage of the employees or 28 dependents of the small employer as determined from the small employer 29 insurer's rate manual; and 30 (C) any adjustment due to change in coverage or change in the 31 case characteristics of the small employer, as determined from the small
01 employer insurer's rate manual; 02 (4) adjustments in rates for claim experience, health status, and duration 03 of coverage may not be charged to individual employees or dependents; any 04 adjustment must be applied uniformly to the rates charged for all employees and 05 dependents of the small employer; 06 (5) a premium rate for a health benefit plan shall comply with the 07 requirements of this section notwithstanding an assessment paid or payable by small 08 employer insurers under AS 21.56.050(d); 09 (6) a small employer insurer may utilize industry as a case 10 characteristic in establishing premium rates, provided that the rate factor associated 11 with an industry classification may not vary by more than 15 percent from the 12 arithmetic average of the highest and lowest rate factors associated with all industry 13 classifications; 14 (7) a small employer insurer shall 15 (A) apply rating factors, including case characteristics, 16 consistently with respect to all small employers; rating factors must produce 17 premiums for identical groups that differ only by amounts attributable to plan 18 design and do not reflect differences due to the nature of the groups assumed 19 to select particular health benefit plans; and 20 (B) treat all health benefit plans issued or renewed in the same 21 calendar month as having the same rating period; 22 (8) for the purposes of this subsection, a health benefit plan that 23 contains a restricted provider network may not be considered similar coverage to a 24 health benefit plan that does not utilize a restricted provider network if the restriction 25 of benefits to network providers results in substantial differences in claim costs; 26 (9) a small employer insurer may not use case characteristics, other 27 than age, sex, industry, geographic area, family composition, and group size without 28 prior approval of the director. 29 (b) In connection with the offering for sale of a health benefit plan to a small 30 employer, a small employer insurer shall make a reasonable disclosure, as part of its 31 solicitation and sales materials, of the following:
01 (1) the extent that premium rates for a specified small employer are 02 established or adjusted based upon the actual or expected variation in claims costs or 03 actual or expected variation in health status of the employees of the small employer 04 and their dependents; and 05 (2) the provisions of the health benefit plan 06 (A) concerning the small employer insurer's right to change 07 premium rates and factors, other than claim experience, that affect changes in 08 premium rates; 09 (B) relating to renewability of policies and contracts; and 10 (C) relating to any preexisting condition provision. 11 (c) A small employer insurer shall 12 (1) maintain at its principal place of business a complete and detailed 13 description of its rating practices and renewal underwriting practices, including 14 information and documentation that demonstrate that its rating methods and practices 15 are based upon commonly accepted actuarial assumptions and are in accordance with 16 sound actuarial principles; 17 (2) file with the director annually, on or before March 15, an actuarial 18 certification certifying that the insurer is in compliance with this chapter and that the 19 rating methods of the small employer insurer are actuarially sound; the certification 20 shall be in a form and manner, and must contain information, as specified by the 21 director; a copy of the certification shall be retained by the small employer insurer at 22 its principal place of business; 23 (3) make the information and documentation described in (1) of this 24 subsection available to the director upon request; the information is confidential and 25 not subject to disclosure, except 26 (A) as agreed to by the small employer insurer; 27 (B) as ordered by a court of competent jurisdiction; or 28 (C) the director may use the information or other discovered 29 information in a judicial or administrative proceeding. 30 (d) The director may adopt regulations to implement the provisions of this 31 section and to ensure that rating practices used by small employer insurers are
01 consistent with the purposes of this act, including ensuring that differences in rates 02 charged for health benefit plans by small employer insurers are reasonable and reflect 03 objective differences in plan design, not including differences due to the nature of the 04 groups assumed to select particular health benefit plans. 05 Sec. 21.56.130. RENEWABILITY OF COVERAGE. (a) A health benefit 06 plan subject to this chapter shall be renewable with respect to all eligible employees 07 and dependents at the option of the small employer, except for 08 (1) nonpayment of the required premiums; 09 (2) fraud or misrepresentation of the small employer or, with respect 10 to coverage of individual insureds, the insureds or their representatives; 11 (3) noncompliance with the minimum participation or employer 12 contribution requirements; 13 (4) repeated misuse of a provider network provision; or 14 (5) a small employer insurer who elects not to renew all of its health 15 benefit plans delivered or issued for delivery to small employers in this state; an 16 insurer who elects not to renew as described in this paragraph shall 17 (A) provide advance notice of the decision to the director and 18 to the director or commissioner of insurance in each state in which the insurer 19 is licensed; and 20 (B) provide notice of the decision not to renew coverage to all 21 affected small employers and to the insurance regulatory office in each state 22 in which an affected covered individual is known to reside at least 180 days 23 before the failure to renew the health benefit plan by the insurer; notice to the 24 director under this subparagraph shall be provided at least three working days 25 before the notice to the affected small employers; 26 (6) a health benefit plan for which the director finds that the 27 continuation of the coverage would 28 (A) not be in the best interests of the policyholders or certificate 29 holders; or 30 (B) impair the insurer's ability to meet its contractual 31 obligations.
01 (b) A small employer insurer that elects not to renew a health benefit plan 02 under (a)(5) of this section may not write new business in the small employer market 03 in this state for a period of five years from the date of notice to the director. 04 (c) If a small employer insurer is doing business in only one established 05 geographic service area of the state, the provisions in this section apply only to the 06 insurer's operations in that established service area. 07 Sec. 21.56.140. REQUIRED OFFER OF COVERAGE. (a) Except as 08 provided under AS 21.56.160, a small employer insurer shall, as a condition of 09 transacting business in this state with small employers, offer to small employers at 10 least two health benefit plans. One health benefit plan offered by a small employer 11 insurer shall be a basic health benefit plan and one plan shall be a standard health 12 benefit plan. A small employer insurer shall issue a basic health benefit plan or a 13 standard health benefit plan to an eligible small employer that applies for either plan, 14 agrees to make the required premium payments, and agrees to satisfy the other 15 reasonable provisions of the health benefit plan not inconsistent with this chapter. 16 (b) A small employer insurer shall file with the director, under AS 21.42, the 17 basic health benefit plans and the standard health benefit plans to be used by the 18 insurer. 19 (c) The director at any time may, after providing notice and an opportunity for 20 a hearing to a small employer insurer as provided under AS 21.06.180 - 21.06.210, 21 disapprove the continued use by the small employer insurer of a basic or standard 22 health benefit plan if the plan does not meet the requirements of this chapter. 23 Sec. 21.56.150. REQUIRED HEALTH BENEFIT PROVISIONS. A health 24 benefit plan covering a small employer must include the following provisions: 25 (1) a health benefit plan may not deny, exclude, or limit benefits for 26 a covered individual for losses incurred more than 12 months following the effective 27 date of the individual's coverage due to a preexisting condition; a health benefit plan 28 may not define a preexisting condition more restrictively than 29 (A) a condition that would have caused an ordinarily prudent 30 person to seek medical advice, diagnosis, care, or treatment during the six 31 months immediately preceding the effective date of coverage;
01 (B) a condition for which medical advice, diagnosis, care, or 02 treatment was recommended or received during the six months immediately 03 preceding the effective date of coverage; or 04 (C) a pregnancy existing on the effective date of coverage; 05 (2) a small employer insurer must waive any time period applicable to 06 a preexisting condition exclusion or limitation period with respect to particular services 07 in a health benefit plan for the period of time an individual was previously covered by 08 qualifying previous coverage that provided benefits with respect to the services, 09 provided that the qualifying previous coverage was continuous to a date not more than 10 90 days before the effective date of the new coverage; the period of continuous 11 coverage may not include a waiting period for the effective date of coverage applied 12 by the employer or insurer; this paragraph does not preclude application of a waiting 13 period applicable to all new enrollees under the health benefit plan; 14 (3) a health benefit plan may exclude coverage for late enrollees for the 15 greater of 18 months or for an 18-month preexisting condition exclusion, provided that 16 if both a period of exclusion from coverage and a preexisting condition exclusion are 17 applicable to a late enrollee, the combined period may not exceed 18 months from the 18 date the individual enrolls for coverage under the health benefit plan; 19 (4) requirements used by a small employer insurer in determining 20 whether to provide coverage to a small employer shall be applied uniformly among all 21 small employers with the same number of eligible employees applying for coverage 22 or receiving coverage from the small employer insurer, except that a small employer 23 insurer may vary application of minimum participation requirements and minimum 24 employer contribution requirements by the size of the small employer group; 25 (5) a small employer insurer may not increase a requirement for 26 minimum employee participation or a requirement for minimum employer contribution 27 applicable to a small employer at any time after the small employer has been accepted 28 for coverage, except as allowed under (4) of this section; 29 (6) if a small employer insurer offers coverage to a small employer, the 30 small employer insurer shall offer coverage to all of the eligible employees of a small 31 employer and their dependents; a small employer insurer may not offer coverage to
01 only certain individuals in a small employer group or to only part of the group, except 02 in the case of late enrollees as provided in (3) of this section; 03 (7) except as provided in (1) and (3) of this section, a small employer 04 insurer may not, by a rider or amendment applicable to a specific individual, restrict 05 or exclude coverage or benefits by type of illness, treatment, medical condition, or 06 service otherwise covered by the plan. 07 Sec. 21.56.160. EXEMPTION FROM REQUIRED OFFER OF COVERAGE. 08 (a) A small employer insurer is not required to offer coverage or accept applications 09 under AS 21.56.140(a) 10 (1) if the small employer is not physically located in the insurer's 11 established geographic service area; 12 (2) if the employee does not work or reside within the insurer's 13 established geographic service area; 14 (3) within an established geographic service area where the small 15 employer insurer reasonably anticipates, and demonstrates to the satisfaction of the 16 director, that it will not have the capacity to deliver service adequately to the members 17 of the groups because of its obligations to existing group policyholders and enrollees; 18 (4) if the small employer insurer is only maintaining in-force business 19 and has ceased enrolling new employer groups on or before January 1, 1993; this 20 paragraph does not exempt a small employer insurer from the other provisions of this 21 chapter; or 22 (5) if the certificate of authority or bylaws of the insurer do not permit 23 the insurer to issue coverage on a marketwide basis; an insurer described in this 24 paragraph shall comply with AS 21.56.140 regarding small employers that meet the 25 requirements of the insurer's certificate of authority or bylaws; this paragraph does not 26 apply to insurers who limit coverage based on health status or health risk. 27 (b) A small employer insurer that cannot offer coverage under (a)(3) of this 28 section may not offer health insurance coverage in the applicable area to new cases of 29 employer groups with more than 25 eligible employees or to small employer groups 30 until the later of 180 days following each refusal or the date on which the insurer 31 notifies the director that it has regained capacity to deliver services to small employer
01 groups. 02 (c) A small employer insurer may not be required to provide health insurance 03 coverage to small employers for any period of time for which the director determines 04 that requiring the acceptance of small employers would place the small employer 05 insurer in a financially impaired condition. 06 Sec. 21.56.170. CONDITIONS FOR CEASING TO DO BUSINESS. A small 07 employer insurer or a welfare arrangement may cease doing business in the small 08 employer market if the insurer or welfare arrangement provides notice of the decision 09 to cease doing business in the small employer market to the division, the board, the 10 policyholder or contract holder, and the employer, and coverage under a health benefit 11 plan subject to this chapter is continued for one year after the date of the notice 12 required under this section. A small employer insurer or a welfare arrangement that 13 ceases doing business in the small employer marketplace may not reenter the small 14 employer marketplace for a period of five years from the date of the notice required 15 under this section. 16 Sec. 21.56.180. FAIR MARKETING STANDARDS. (a) A small employer 17 insurer shall actively market health benefit plan coverage, including the basic and 18 standard health benefit plans, to eligible small employers in the state. If a small 19 employer insurer denies coverage to a small employer on the basis of the health status 20 or claims experience of the small employer or its employees or dependents, the small 21 employer insurer shall offer the small employer the opportunity to purchase a basic 22 health benefit plan and a standard health benefit plan. 23 (b) Except as provided in this subsection, a small employer insurer may not, 24 directly or indirectly, encourage or direct small employers to refrain from filing an 25 application for coverage with the small employer insurer because of the health status, 26 claims experience, industry, occupation, or geographic location of the small employer, 27 or encourage or direct small employers to seek coverage from another insurer because 28 of the health status, claims experience, industry, occupation, or geographic location of 29 the small employer. This subsection does not apply to information provided by a 30 small employer insurer to a small employer regarding the established geographic 31 service area or a restricted network provision of a small employer insurer.
01 (c) Except as provided in this subsection, a small employer insurer may not, 02 directly or indirectly, enter into a contract, agreement, or arrangement with an agent, 03 broker, managing general agent, or third-party administrator that provides for or results 04 in the compensation paid to an agent or broker for the sale of a health benefit plan to 05 be varied because of the health status, claims experience, industry, occupation, or 06 geographic location of the small employer. This subsection does not apply to a 07 compensation arrangement that provides compensation to an agent, broker, managing 08 general agent, or third-party administrator on the basis of a percentage of premium, 09 provided that the percentage does not vary because of the health status, claims 10 experience, industry, occupation, or geographic area of the small employer. 11 (d) A small employer insurer 12 (1) shall provide reasonable compensation, as provided under the plan 13 of operation of the program, to an agent, broker, managing general agent, or third-party 14 administrator, if any, for the sale of a basic or standard health benefit plan; 15 (2) or agent, broker, managing general agent, or third-party 16 administrator may not induce or otherwise encourage a small employer to separate or 17 otherwise exclude an employee from health coverage or benefits provided in 18 connection with the employee's employment; 19 (3) may only deny an application for coverage from a small employer 20 in writing and if the reasons for the denial are stated. 21 (e) The director may by regulation establish additional standards to provide for 22 the fair marketing and broad availability of health benefit plans to small employers in 23 this state. 24 (f) A violation of this section by a person is an unfair trade practice for 25 purposes of AS 21.36. 26 (g) If a small employer insurer enters into a contract, agreement, or other 27 arrangement with a third-party administrator to provide administrative, marketing, or 28 other services related to the offering of health benefit plans to small employers in this 29 state, the third-party administrator is subject to this section as if it were a small 30 employer insurer. 31 Sec. 21.56.190. MANDATORY REISSUE OF COVERAGE. The director
01 may adopt regulations to require small employer insurers, as a condition of transacting 02 business with small employers in this state after July 1, 1993, to reissue a health 03 benefit plan to a small employer who has had its health benefit plan terminated or not 04 renewed by the insurer after January 1, 1993. The director may prescribe the terms 05 for the reissue of coverage that the director determines are reasonable and necessary 06 to provide continuity of coverage to small employers. 07 Sec. 21.56.250. DEFINITIONS. In this chapter, 08 (1) "actuarial certification" means a written statement by a member of 09 the American Academy of Actuaries or another individual acceptable to the director 10 indicating that based on the person's examination, including a review of the 11 appropriate records, actuarial assumptions, and methods used by the insurer in 12 establishing premium rates for applicable health insurance plans that a small employer 13 insurer is in compliance with the provisions of AS 21.56.120; 14 (2) "affiliate" or "affiliated" means a person who directly or indirectly, 15 through one or more intermediaries, controls or is controlled by or is under common 16 control with, a specified person; 17 (3) "association" means the Small Employer Health Reinsurance 18 Association created in AS 21.56.010; 19 (4) "base premium rate" means the lowest premium rate charged or that 20 could have been charged under the rating system by the small employer insurer to 21 small employers with similar case characteristics for health benefit plans with the same 22 or similar coverage; 23 (5) "basic health benefit plan" means a lower cost plan offered under 24 AS 21.56.140; 25 (6) "board" means the board of directors of the association; 26 (7) "case characteristics" means demographic or other objective 27 characteristics of a small employer that are considered by the small employer insurer 28 in the determination of premium rates for the small employer, provided that claim 29 experience, health status, and duration of coverage may not be case characteristics for 30 the purposes of this chapter; 31 (8) "committee" means the health benefit plan committee established
01 in AS 21.56.060; 02 (9) "dependent" means the spouse or an unmarried child of an eligible 03 employee who is not yet 19 years of age; an unmarried child who is a full-time 04 student, who is not yet 23 years of age, and who is financially dependent upon the 05 parent; and an unmarried child of any age who is medically certified as disabled and 06 dependent upon the parent, subject to applicable terms of the health benefit plan 07 covering the employee; 08 (10) "eligible employee" means an employee who works on a full-time 09 basis, with a normal work week of 30 or more hours, and includes a sole proprietor, 10 a partner of a partnership or an independent contractor, provided the sole proprietor, 11 partner, or contractor is included as an employee under a health benefit plan of a small 12 employer, but does not include an employee who works on a part-time, temporary, or 13 substitute basis; 14 (11) "established geographic service area" means a geographic area 15 within which the insurer is authorized to provide coverage under the insurer's 16 certificate of authority as approved by the director; 17 (12) "health benefit plan" means a hospital or medical policy or 18 certificate, major medical expense insurance, health, hospital, or medical service 19 corporation contract, a plan provided by an insurer or welfare arrangement, and a 20 health maintenance organization contract offered by an employer; "health benefit plan" 21 does not include a policy covering only accident, credit, dental, disability income, 22 long-term care, hospital indemnity, fixed indemnity, Medicare supplement, specified 23 disease, vision care, coverage issued as a supplement to liability insurance, worker's 24 compensation insurance, automobile medical payment insurance if the insurer complies 25 with the provisions of AS 21.56.110(d), or a Taft-Hartley trust; 26 (13) "index rate" means for small employers with similar case 27 characteristics and plan designs as determined by the insurer for a rating period, the 28 arithmetic average of the applicable base premium rate and the corresponding highest 29 premium rate; 30 (14) "insurer" has the meaning given in AS 21.90.900 and includes a 31 welfare arrangement, a fraternal benefit society, a health maintenance organization, a
01 hospital service corporation, and a medical service corporation; 02 (15) "late enrollee" means an eligible employee or dependent who 03 requests enrollment in a small employer's health benefit plan following the initial 04 enrollment period for which the employee or dependent was eligible to enroll under 05 the terms of the health benefit plan except that an eligible employee or dependent may 06 not be considered a late enrollee if 07 (A) the individual 08 (i) was covered under qualifying previous coverage at 09 the time of the initial enrollment; 10 (ii) has lost coverage under qualifying previous coverage 11 as a result of the termination of employment or eligibility, the 12 involuntary termination of the qualifying previous coverage, death of a 13 spouse, or divorce or dissolution of marriage; and 14 (iii) requests enrollment within 30 days after the 15 termination of the qualifying previous coverage; or 16 (B) the individual is employed by an employer who offers 17 multiple health benefit plans and the individual elects a different health benefit 18 plan during an open enrollment period; or 19 (C) a court has ordered coverage to be provided for a spouse 20 or minor child under a covered employee's plan and request for enrollment is 21 made within 30 days after issuance of the court order; 22 (16) "member" means all insurers issuing health benefit plans, welfare 23 arrangements and, to the extent permitted under 29 U.S.C. 1001 - 1461 (Employee 24 Retirement Income Security Act), other benefit arrangements providing health benefit 25 plans in this state; 26 (17) "new business premium rate" means the lowest premium rate 27 charged or offered, or that could have been charged or offered, by the small employer 28 insurer to small employers with similar case characteristics for newly issued health 29 benefit plans with the same or similar coverage; 30 (18) "plan of operation" means the plan of operation of the association 31 adopted by the board under AS 21.56.040;
01 (19) "qualifying previous coverage" and "qualifying existing coverage" 02 mean benefits or coverage provided under 03 (A) Medicare or Medicaid; 04 (B) an employer-based health insurance or health benefit 05 arrangement that provides benefits similar to or exceeding benefits provided 06 under the basic health benefit plan; or 07 (C) an individual health insurance policy, including coverage 08 issued under AS 21.84, AS 21.86, or AS 21.87 that provides benefits similar 09 to or exceeding the benefits provided under the basic health benefit plan, 10 provided that the policy has been in effect for a period of at least one year; 11 (20) "rating period" means the calendar period for which premium rates 12 established by a small employer insurer are assumed to be in effect; 13 (21) "reinsuring insurer" means a small employer insurer participating 14 in the reinsurance association under AS 21.56.010; 15 (22) "restricted network provision" means a provision of a health 16 benefit plan that conditions the payment of benefits, in whole or in part, on the use of 17 health care providers that have entered into a contractual arrangement with the insurer 18 under AS 21.86 to provide health care services to covered individuals; 19 (23) "small employer" means a person, firm, corporation, partnership, 20 or association actively engaged in business whose total employed work force consisted 21 of, on at least 50 percent of its working days during the preceding 12 months, at least 22 two but not more than 25 eligible employees, the majority of whom are employed 23 within the state; in determining the number of eligible employees, companies that are 24 affiliated companies or that are eligible to file a combined tax return for purposes of 25 federal taxation, are considered one employer; except as otherwise specifically 26 provided, provisions of this chapter that apply to a small employer that has a health 27 benefit plan continue to apply until the plan anniversary following the date the 28 employer no longer meets the requirements of this definition; 29 (24) "small employer insurer" means an insurer that offers a health 30 benefit plan covering eligible employees of one or more small employers; 31 (25) "standard health benefit plan" means a health benefit plan offered
01 under AS 21.56.140 that includes benefits not offered under a basic benefit plan; 02 (26) "Taft-Hartley trust" means a jointly managed trust, as allowed by 03 29 U.S.C. 141 - 187, containing a plan of benefits for employees that is negotiated in 04 a collective bargaining agreement governing wages, hours, and working conditions of 05 employees as allowed by 29 U.S.C. 157; 06 (27) "welfare arrangement" means a multiple employer welfare 07 arrangement as defined in 29 U.S.C. 1002, but does not include a multiple employer 08 welfare arrangement that is fully insured as provided in 29 U.S.C. 1060. 09 * Sec. 6. AS 21.86.260(a) is amended to read: 10 (a) Except as provided in AS 21.56 and in this chapter, this title does not 11 apply to a health maintenance organization that obtains a certificate of authority under 12 this chapter. This subsection does not apply to an insurer licensed under AS 21.09 or 13 a hospital or medical service corporation licensed under AS 21.87 except with respect 14 to its health maintenance organization activities authorized by and regulated under this 15 chapter. 16 * Sec. 7. AS 21.86.260(a) is repealed and reenacted to read: 17 (a) Except as provided in this chapter, this title does not apply to a health 18 maintenance organization that obtains a certificate of authority under this chapter. This 19 subsection does not apply to an insurer licensed under AS 21.09 or a hospital or 20 medical service corporation licensed under AS 21.87 except with respect to its health 21 maintenance organization activities authorized by and regulated under this chapter. 22 * Sec. 8. AS 21.87.340 is amended to read: 23 Sec. 21.87.340. OTHER PROVISIONS APPLICABLE. In addition to the 24 provisions contained or referred to previously in this chapter, the following chapters 25 and provisions of this title also apply with respect to service corporations to the extent 26 applicable and not in conflict with the express provisions of this chapter and the 27 reasonable implications of the express provisions, and for the purposes of the 28 application the corporations shall be considered to be mutual "insurers": 29 (1) AS 21.03 30 (2) AS 21.06 31 (3) AS 21.09, except AS 21.09.090
01 (4) AS 21.18.010 02 (5) AS 21.18.030 03 (6) AS 21.18.040 04 (7) AS 21.18.120 05 (8) AS 21.21.321 06 (9) AS 21.36 07 (10) AS 21.42.345 - 21.42.365, 21.42.375, 21.42.380, and 21.42.385 08 (11) AS 21.51.120 09 (12) AS 21.53 10 (13) AS 21.54.020 11 (14) AS 21.56 12 (15) AS 21.69.400 13 (16) [(15)] AS 21.69.520 14 (17) [(16)] AS 21.69.600, 21.69.620, and 21.69.630 15 (18) [(17)] AS 21.78 16 (19) [(18)] AS 21.89.040 17 (20) [(19)] AS 21.89.060 18 (21) [(20)] AS 21.90. 19 * Sec. 9. AS 21.87.340 is repealed and reenacted to read: 20 Sec. 21.87.340. OTHER PROVISIONS APPLICABLE. In addition to the 21 provisions contained or referred to previously in this chapter, the following chapters 22 and provisions of this title also apply with respect to service corporations to the extent 23 applicable and not in conflict with the express provisions of this chapter and the 24 reasonable implications of the express provisions, and for the purposes of the 25 application the corporations shall be considered to be mutual "insurers": 26 (1) AS 21.03 27 (2) AS 21.06 28 (3) AS 21.09, except AS 21.09.090 29 (4) AS 21.18.010 30 (5) AS 21.18.030 31 (6) AS 21.18.040
01 (7) AS 21.18.120 02 (8) AS 21.21.321 03 (9) AS 21.36 04 (10) AS 21.42.345 - 21.42.365, 21.42.375, 21.42.380, and 21.42.385 05 (11) AS 21.51.120 06 (12) AS 21.53 07 (13) AS 21.54.020 08 (14) AS 21.69.400 09 (15) AS 21.69.520 10 (16) AS 21.69.600, 21.69.620, and 21.69.630 11 (17) AS 21.78 12 (18) AS 21.89.040 13 (19) AS 21.89.060 14 (20) AS 21.90. 15 * Sec. 10. PREMIUM RATE RESTRICTION. Regarding a health benefit plan subject to 16 AS 21.56.110, enacted in sec. 5 of this Act, that is delivered or issued for delivery before 17 July 1, 1993, a premium rate for a rating period may exceed the ranges set out in 18 AS 21.56.120(a)(1) and (2), enacted in sec. 5 of this Act, through June 30, 1996; on or after 19 July 1, 1996, the premium rate may not exceed the ranges set out in AS 21.56.120(a)(1) and 20 (2). However, through June 30, 1996, the percentage increase in the premium rate charged 21 to a small employer for a new rating period may not exceed the sum of 22 (1) the percentage change in the new business premium rate measured from 23 the first day of the prior rating period to the first day of the new rating period; in the case of 24 a health benefit plan into which the small employer insurer is no longer enrolling new small 25 employers, the small employer insurer shall use the percentage change in the base premium 26 rate, provided that the change does not exceed, on a percentage basis, the change in the new 27 business premium rate for the most similar health benefit plan into which the small employer 28 insurer is actively enrolling new small employers; and 29 (2) any adjustment due to change in coverage or change in the case 30 characteristics of the small employer, as determined from the insurer's rate manual. 31 * Sec. 11. TRANSITION. (a) Within 180 days after the board is appointed under
01 AS 21.56.020, enacted in sec. 5 of this Act, the board of directors of the Small Employer 02 Health Reinsurance Association shall submit a small employer health benefit plan to the 03 director of the division of insurance for approval. If the association fails to submit a suitable 04 plan of operation, the director may, after notice and hearing, adopt reasonable regulations 05 necessary or advisable to effectuate the provisions of this chapter. These regulations continue 06 in force until modified by the director or superseded by a plan submitted by the association 07 and approved by the director. 08 (b) Notwithstanding AS 21.56.140(a), enacted in sec. 5 of this Act, a small employer 09 insurer is not required to offer a small employer a basic or standard health benefit plan until 10 180 days after the director of the division of insurance has approved a basic and a standard 11 small employer health benefit plan under AS 21.56.140, except that, if the Small Employer 12 Health Reinsurance Association has not adopted a plan of operation, a small employer insurer 13 is not required to offer a basic or standard health benefit plan until the date a plan of operation 14 is adopted as provided under AS 21.56.040. 15 (c) By September 1, 1993, a small employer insurer shall file with the director the 16 insurer's net insurance premium earned from health benefit plans delivered or issued for 17 delivery to small employers in this state in the previous calendar year. 18 (d) The Health Benefit Plan Committee, enacted in sec. 5 of this Act, shall submit the 19 required health benefit plans within 180 days after the members of the committee are 20 appointed. 21 (e) Notwithstanding AS 21.56.070, enacted in sec. 5 of this Act, the board of directors 22 of the Small Employer Health Reinsurance Association shall provide the report required under 23 AS 21.56.070 to the director of the division of insurance annually until December 31, 1997. 24 * Sec. 12. AS 21.36.025 and AS 21.56 are repealed. 25 * Sec. 13. Sections 4, 7, 9, and 12 of this Act take effect July 1, 1997. 26 * Sec. 14. Except as provided in sec. 13 of this Act, this Act takes effect July 1, 1993.