CHAPTER 175

FORMERLY

HOUSE BILL NO. 288

AS AMENDED BY HOUSE AMENDMENT NO. 3

AN ACT TO AMEND TITLE 18 OF THE DELAWARE CODE RELATING TO HEALTH INSURANCE SOLD TO CERTAIN GROUPS.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:

Section 1. Amend Title 18, Delaware Code by creating a new Chapter 72 as follows:

"Chapter 72. Small Employer Health Insurance §7201. Purpose

The intent of this Chapter is to promote the availability of health insurance coverage to small employers, to prevent abusive rating practices, to require disclosure of rating practices to purchasers, to establish rules for continuity of coverage for employers and covered individuals, and to improve the efficiency and fairness of the small group health insurance marketplace.

§7202. Definitions

(a) "Actuarial certification" means a written statement by a member of the American Academy of Actuaries or other individual acceptable to the Commissioner that a small employer carrier is in compliance with the provisions of §7204 of this Chapter, based upon the person's examination, including a review of the appropriate records and of the actuarial assumptions and methods utilized by the carrier in establishing premium rates for applicable health benefit plans.

(b) "Based premium rate" means, for each class of business as to a rating period, the lowest premium rate charged or which could have been charged under a rating system for that class of business, by the small employer carrier to small employers with similar case characteristics for health benefit plans with the same or similar coverage.

(c) "Carrier" means any person who provides health insurance in this State. For the purposes of this Chapter, carrier includes a licensed
insurance company, a health service corporation under chapter 63 of this title, a health maintenance organization, a multiple employer welfare arrangement or any other person providing a plan of health insurance subject to state insurance regulation.

(a) "Case characteristics" mean demographic or other relevant
characteristics of a small employer, as determined by a small employer carrier, which are considered by the carrier in the determination of premium rates for the small employer. Claim experience, health status and duration of coverage since issue are not case characteristics for the purposes of this Chapter.

(a) "Class of business" means all or a distinct grouping of small
employers as shown on the records of the small employer carrier.

(1) A distinct grouping may only be established by the small employer carrier on the basis that the applicable health benefit plans:

(A) Are marketed and sold through individuals and
organizations which are not participating in the marketing or sale of other distinct groupings of small employers for such small employer carrier;

(A) Have been acquired from another small employer carrier as a distinct grouping of plans;

(A) Are provided through an association with membership of not less than 25 small employers which has been formed for purposes other than obtaining insurance; or

(D) Are in a class of business that meets the requirements for exception to the restrictions related to premium rates provided in Subsection §7204(a)(1)(A) of this chapter.

(2) A small employer carrier may establish no more than two (2) additional groupings under each of the subparagraphs in Paragraph (1) on the basis of underwriting criteria which are expected to produce substantial variation in the health care costs.

(3) The Commissioner may approve the establishment of additional distinct groupings upon application to the Commissioner and a finding by the Commissioner that such action would enhance the efficiency and fairness of the small employer insurance marketplace.

(f) "Commissioner" means the Commissioner of Insurance.

(g) "Department" means the Insurance Department.

(h) "Health benefit plan" or "plan" means any hospital or medical expense incurred policy or certificate, hospital or medical service plan contract, or health service corporation member subscriber contract and health maintenance organization subscriber contract. Health benefit plan does not
include accident—only, credit, dental or disability income insurance; coverage issued as a supplement to liability insurance; worker's compensation or similar insurance; or automobile medical—payment insurance.

(1) "Index rate" means for each class of business for small employers with similar case characteristics the arithmetic average of the applicable base premium rate and the corresponding highest premium rate.

(j) New business premium rate" means, for each class of business as
to a rating period, the premium rate charged or offered by the small employer carrier to small employers with similar case characteristics for newly issued health benefit plans with the same or similar coverage.

(a) "Rating period" means the calendar period for which premium rates established by a small employer carrier are assumed to be in effect, as determined by the small employer carrier.

(1) "Small employer" means any person, firm, corporation, partnership or association actively engaged in business who, on at least fifty percent (50%) of its working days during the preceding year, employed at least two (2) but no more than twenty—five (25) eligible employees. In determining the number of eligible employees, companies which are affiliated companies or which are eligible to file a combined tax return for purposes of state taxation shall be considered one employer.

(m) "Small employer carrier" means any carrier which offers health benefit plans covering the employees of a small employer.

§7203. Health Insurance Plans Subject to this Chapter

(a) Except as provided in subsection (b) of this section, the
provisions of this Chapter apply to any health benefit plan which provides coverage to one or more employees of a small employer.

(b) The provisions of this Chapter shall not apply to individual health insurance policies which are subject to policy form as provided in Chapter 36 of this Title.

§7204. Restrictions Relating to Premium Rates

(a) Premium rates for health benefit plans subject to this Chapter shall be subject to the following provisions:

(1) The index rate for a rating period for any class of business shall not exceed the index rate for any other class of business by more than twenty percent (20%).

(2) Paragraph (1) of this subsection shall not apply to a class of business if all of the following apply:

(A)  The class of business is one for which the carrier does not reject, and never has rejected, small employers included within the definition of employers eligible for the class of business or otherwise eligible employees and dependents who enroll on a timely basis, based upon their claim experience or health status;

(B) The carrier does not involuntarily transfer, and never has involuntarily transferred, a health benefit plan into or out of the class of business; and

(C) The class of business Is currently available for purchase.

(3) For a class of business, the premium rates charged during a rating period to small employers with similar case characteristics for the same or similar coverage, or the rates which could be charged to such employers under the rating system for that class of business, shall not vary from the index rate by more than twenty—five percent (25%) of the index rate.

(4) The percentage increase in the premium rate charged to a small employer for a new rating period may not exceed the sum of the following:

(A) The percentage change in the new business premium rate measured from the first day of the prior rating period to the first day of the new rating period. In the case of a class of business for which the small employer carrier is not issuing new policies, the carrier shall use the percentage change in the base premium rate;

(A) An adjustment, not to exceed fifteen percent (15%)
annually and adjusted pro rata for rating periods of less than one year, due to the claim experience, health status or duration of coverage of the employees or dependents of the small employer as determined from the carrier's rate manual for the class of business; and

(B) Any adjustment due to change in coverage or change in the case characteristics of the small employer as determined from the carrier's rate manual for the class of business.

(5) In the case of health benefit plans issued prior to the

effective date of this Chapter, a premium rate for a rating period may exceed the ranges described in paragraph (1) or (3) of this subsection for a period of five (5) years following the effective date of this Chapter. In that case, the percentage increase in the premium rate charged to a small employer in such a class of business for a new rating period may not exceed the sum of the following:

(A) The percentage change in the new business premium rate measured from the first day of the prior rating period to the first day of the new rating period. In the case of a class of business for which the small employer carrier is not issuing new policies, the carrier shall use the percentage change in the base premium rate; and

(B) Any adjustment due to change in coverage or change in the case characteristics of the small employer as determined from the carrier's rate manual for the class of business.

(b) Nothing in this section is intended to affect the use by a small employer carrier of legitimate rating factors other than claim experience, health status or duration of coverage in the determination of premium rates. Small employer carriers shall apply rating factors, including case
characteristics, consistently with respect to all small employers in a class of business.

(c) A small employer carrier shall not involuntarily transfer a small employer Into or out of a class of business. A small employer carrier shall not offer to transfer a small employer into or out of a class of business unless such offer is made to transfer all small employers in the class of business without regard to case characteristics, claim experience, health status or duration since issue.

§7205. Provisions on Renewability of Coverage

(D) Are in a class of business that meets the requirements for exception to the restrictions related to premium rates provided in Subsection §7204(a)(1)(A) of this chapter.

(2) A small employer carrier may establish no more than two (2) additional groupings under each of the subparagraphs in Paragraph (1) on the basis of underwriting criteria which are expected to produce substantial variation in the health care costs.

(3) The Commissioner may approve the establishment of additional distinct groupings upon application to the Commissioner and a finding by the Commissioner that such action would enhance the efficiency and fairness of the small employer insurance marketplace.

(f) "Commissioner" means the Commissioner of Insurance.

(g) "Department" means the Insurance Department.

(h) "Health benefit plan" or "plan" means any hospital or medical expense incurred policy or certificate, hospital or medical service plan contract, or health service corporation member subscriber contract and health maintenance organization subscriber contract. Health benefit plan does not
include accident-only, credit, dental or disability income insurance; coverage issued as a supplement to liability insurance; worker's compensation or similar insurance; or automobile medical-payment insurance.

(I) "Index rate" means for each class of business for small employers with similar case characteristics the arithmetic average of the applicable base premium rate and the corresponding highest premium rate.

(j) New business premium rate" means, for each class of business as
to a rating period, the premium rate charged or offered by the small employer carrier to small employers with similar case characteristics for newly issued health benefit plans with the same or similar coverage.

(a) "Rating period" means the calendar period for which premium rates established by a small employer carrier are assumed to be in effect, as determined by the small employer carrier.

(1) "Small employer" means any person, firm, corporation, partnership or association actively engaged in business who, on at least fifty percent (50%) of its working days during the preceding year, employed at least two (2) but no more than twenty-five (25) eligible employees. In determining the number of eligible employees, companies which are affiliated companies or which are eligible to file a combined tax return for purposes of state taxation shall be considered one employer.

(m) "Small employer carrier" means any carrier which offers health benefit plans covering the employees of a small employer.

§7203. Health Insurance Plans Subject to this Chapter

(a) Except as provided in subsection (b) of this section, the
provisions of this Chapter apply to any health benefit plan which provides coverage to one or more employees of a small employer.

(b) The provisions of this Chapter shall not apply to individual health insurance policies which are subject to policy form as provided in Chapter 36 of this Title.

§7204. Restrictions Relating to Premium Rates

(a) Premium rates for health benefit plans subject to this Chapter shall be subject to the following provisions:

(1) The index rate for a rating period for any class of business shall not exceed the index rate for any other class of business by more than twenty percent (20%).

(2) Paragraph (1) of this subsection shall not apply to a class of business if all of the following apply:

(A)  The class of business is one for which the carrier does not reject, and never has rejected, small employers included within the definition of employers eligible for the class of business or otherwise eligible employees and dependents who enroll on a timely basis, based upon their claim experience or health status;

(B) The carrier does not involuntarily transfer, and never has involuntarily transferred, a health benefit plan into or out of the class of business; and

(A) The class of business is currently available for purchase.

(3) For a class of business, the premium rates charged during a rating period to small employers with similar case characteristics for the same or similar coverage, or the rates which could be charged to such employers under the rating system for that class of business, shall not vary from the index rate by more than twenty—five percent (25%) of the index rate.

(4) The percentage increase in the premium rate charged to a small employer for a new rating period may not exceed the sum of the following:

(A) The percentage change in the new business premium rate measured from the first day of the prior rating period to the first day of the new rating period. In the case of a class of business for which the small employer carrier is not issuing new policies, the carrier shall use the percentage change in the base premium rate;

(A) An adjustment, not to exceed fifteen percent (15%)
annually and adjusted pro rata for rating periods of less than one year, due to the claim experience, health status or duration of coverage of the employees or dependents of the small employer as determined from the carrier's rate manual for the class of business; and

(B) Any adjustment due to change in coverage or change in the case characteristics of the small employer as determined from the carrier's rate manual for the class of business.

(5) In the case of health benefit plans issued prior to the

effective date of this Chapter, a premium rate for a rating period may exceed the ranges described in paragraph (1) or (3) of this subsection for a period of five (5) years following the effective date of this Chapter. In that case, the percentage increase in the premium rate charged to a small employer in such a class of business for a new rating period may not exceed the sum of the following:

(A) The percentage change in the new business premium rate measured from the first day of the prior rating period to the first day of the new rating period. In the case of a class of business for which the small employer carrier is not issuing new policies, the carrier shall use the percentage change in the base premium rate; and

(B) Any adjustment due to change in coverage or change in the case characteristics of the small employer as determined from the carrier's rate manual for the class of business.

(b) Nothing in this section is intended to affect the use by a small employer carrier of legitimate rating factors other than claim experience, health status or duration of coverage in the determination of premium rates. Small employer carriers shall apply rating factors, including case
characteristics, consistently with respect to all small employers in a class of business.

(c) A small employer carrier Shall not involuntarily transfer a small employer into or out of a class of business. A small employer carrier shall not offer to transfer a small employer into or out of a class of business unless such offer is made to transfer all small employers in the class of business without regard to case characteristics, claim experience, health status or duration since issue.

§7205. Provisions on Renewability of Coverage

(a) Except as provided in subsection (b) of this section, a health benefit plan subject to this Chapter shall be renewable to all eligible employees and dependents at the option of the small employer, except for the following reasons:

(1) Nonpayment of required premiums;

(2) Fraud or misrepresentation of the small employer, or with respect to coverage of an insured individual, fraud or misrepresentation by the insured individual or such individual's representative;

(3) Noncompliance with plan provisions;

(4) The number of individuals covered under the plan is less than the number or percentage of eligible individuals required by percentage requirements under the plan, provided that if an employee presents satisfactory evidence that he or she has coverage through a spouse, such employee's non—participation in the plan shall not be counted towards a failure to meet such number or percentage requirement; or

(5) The small employer is no longer actively engaged in the business in which it was engaged on the effective date of the plan.

(b) A small employer carrier may cease to renew all plans under a class of business. The carrier shall provide notice to all affected health benefit plans and to the Commissioner in each state in which an affected insured individual is known to reside at least ninety (90) days prior to termination of coverage. A carrier which exercises its right to cease to renew all plans in a class of business shall not:

(1) Establish a new class of business for a period of five (5) years after the nonrenewal of the plans without prior approval of the Commissioner; or

(1) Transfer or otherwise provide coverage to any of the
employers from the nonrenewed class of business unless the carrier offers to transfer or provide coverage to all affected employers and eligible employees and dependents without regard to case characteristics, claim experience, health status or duration of coverage.

§7206. Disclosure of Rating Practices and Renewability Provisions

Each small employer carrier shall make reasonable disclosure in

solicitation and sales materials provided to small employers of the following:

(1) The extent to which premium rates for a specific small employer are established or adjusted due to the claim experience, health status or duration of coverage of the employees or dependents of the small employer;

(2) The provisions concerning the carrier's right to change premium rates and the factors, including case characteristics, which affect changes in premium rates;

(1) A description of the class of business in which the small
employer is or will be included, including the applicable grouping of plans; and

(2) The provisions relating to renewability of coverage. §7207. Maintenance of Records

(a) Each small employer carrier shall maintain at its principal place of business a complete and detailed description of its rating practices and renewal underwriting practices, including information and documentation which demonstrate that its rating methods and practices are based upon commonly accepted actuarial assumptions and are in accordance with sound actuarial principles.

(b) Each small employer carrier shall file each March 1 with the Commissioner an actuarial certification that the carrier is in compliance with this section and that the rating methods of the carrier are actuarially

 sound. A copy of such certification shall be retained by the carrier at its principal place of business.

(c) A small employer carrier shall make the Information and

documentation described in subsection (a) of this section available to the Commissioner upon request. The information shall be considered proprietary and trade secret information and shall not be subject to disclosure by the Commissioner to persons outside of the Department except as agreed to by the carrier or as ordered by a court of competent jurisdiction.

§7208. Discretion of the Commissioner

The Commissioner may suspend all or any part of §7204 of this Chapter as to the premium rates applicable to one or more small employers for one or more rating periods upon a filing by the small employer carrier and a finding by the Commissioner that either the suspension is reasonable in light of the financial condition of the carrier or that the suspension would enhance the efficiency and fairness of the marketplace for small employer health insurance."

Section 2. This Act shall be effective January 1, 1992, or 6 months after enactment into law, whichever is later.

Section 3. Scope of the Act

The provisions of this Act shall apply to each health benefit plan for a small employer that is delivered, issued for delivery, renewed or continued in this state after the effective date of this Act. For purposes of this section, the date a plan is continued is the first rating period which commences after the effective date of this Act.

Section 4. Severability Clause

If any provision of this Act, or the application thereof to any person, thing or circumstances is held invalid, such invalidity shall not affect the provisions or application of this Act that can be given effect without the invalid provisions or application, and to this end the provisions of this Act are declared to be severable.

Approved July 16, 1991.