PRINTER'S NO. 974
No. 845 Session of 2001
INTRODUCED BY SCHWARTZ, KITCHEN, RHOADES, KUKOVICH, BODACK, TARTAGLIONE, LOGAN, MUSTO AND STACK, MAY 7, 2001
REFERRED TO BANKING AND INSURANCE, MAY 7, 2001
AN ACT 1 Requiring all health insurers, health service corporations and 2 health maintenance organizations to provide individual health 3 benefits coverage on an open enrollment basis; and 4 establishing the Individual Health Coverage Program. 5 TABLE OF CONTENTS 6 Chapter 1. General Provisions 7 Section 101. Short title. 8 Section 102. Definitions. 9 Chapter 3. Individual Health Insurance 10 Section 301. Individual health benefits plans required. 11 Section 302. Guarantee of coverage and renewal of policy. 12 Section 303. Duties of board. 13 Section 304. Exceptions to required coverage. 14 Section 305. Rates and filings. 15 Section 306. Individual Health Coverage Program and board. 16 Section 307. Powers and authority of program and board. 17 Section 308. Program losses; immunity; payments; and nongroup 18 persons.
1 Section 309. Statement of net paid losses and reimbursement. 2 Section 310. Determination of carriers with disproportionate 3 share of substandard risks and recommendations 4 for remedial action. 5 Section 311 Sale of plan. 6 Section 312. Rate filings. 7 Section 313. Action by board. 8 Section 314. Prohibition. 9 Section 315. Applicability; duplicative coverage; penalties; 10 rates. 11 Chapter 7. Miscellaneous Provisions 12 Section 701. Effective date. 13 The General Assembly of the Commonwealth of Pennsylvania 14 hereby enacts as follows: 15 CHAPTER 1 16 GENERAL PROVISIONS 17 Section 101. Short title. 18 This act shall be known and may be cited as the Individual 19 Health Insurance Act. 20 Section 102. Definitions. 21 The following words and phrases when used in this act shall 22 have the meanings given to them in this section unless the 23 context clearly indicates otherwise: 24 "Board." The board of directors of the Individual Health 25 Coverage Program. 26 "Carrier." An insurance company, health service corporation 27 or health maintenance organization authorized to issue health 28 benefits plans in this Commonwealth. For purposes of this act, 29 carriers that are affiliated companies shall be treated as one 30 carrier. 20010S0845B0974 - 2 -
1 "Commissioner." The Insurance Commissioner of the 2 Commonwealth. 3 "Community rating." A rating system in which the premium for 4 all persons covered by a contract is the same, based on the 5 experience of all persons covered by that contract, without 6 regard to age, sex, health status, occupation and geographical 7 location. 8 "Department." The Insurance Department of the Commonwealth. 9 "Dependent." The spouse or child of an eligible person, 10 subject to applicable terms of the individual health benefits 11 plan. 12 "Eligible person." A person who is a resident of this 13 Commonwealth who is not eligible to be insured under a group 14 health insurance policy, Medicare or Medicaid. 15 "Financially impaired." A carrier which, after the effective 16 date of this act, is not insolvent but is deemed by the 17 Insurance Commissioner to be potentially unable to fulfill its 18 contractual obligations or a carrier which is placed under an 19 order of rehabilitation or conservation by a court of competent 20 jurisdiction. 21 "Group health benefits plan." A health benefits plan for 22 groups of two or more persons. 23 "Health benefits plan." A hospital and medical expense 24 insurance policy, health service corporation contract or health 25 maintenance organization subscriber contract delivered or issued 26 for delivery in this Commonwealth. The term does not include the 27 following plans, policies or contracts: accident only, credit, 28 disability, long-term care, Medicare supplement coverage, 29 CHAMPUS supplement coverage, coverage for Medicare services 30 pursuant to a contract with the Federal Government, coverage for 20010S0845B0974 - 3 -
1 Medicaid services pursuant to a contract with the Commonwealth, 2 coverage arising out of a workers' compensation or similar law, 3 automobile medical payment insurance or hospital confinement 4 indemnity coverage. 5 "Hospital expenses." Any charges billed by and payable 6 directly by a carrier to a hospital. 7 "Individual health benefits plans." Includes: 8 (1) A health benefits plan for eligible persons and 9 their dependents. 10 (2) A certificate issued to an eligible person which 11 evidences coverage under a policy or contract issued to a 12 trust or association, regardless of the situs of delivery of 13 the policy or contract, if the eligible person pays the 14 premium and is not being covered under the policy or contract 15 pursuant to continuation of benefits provisions applicable 16 under Federal or State law. 17 The term does not include a certificate issued under a policy or 18 contract issued to a trust or to the trustees of a fund, which 19 trust or fund is established or adopted by two or more 20 employers, by one or more labor unions or similar employee 21 organizations or by one or more employers and one or more labor 22 unions or similar employee organizations, to insure employees of 23 the employers or members of the unions or organizations. 24 "Licensed producer." As defined in section 701 of the act of 25 May 17, 1921 (P.L.789, No.285), known as The Insurance 26 Department Act of 1921. 27 "Member." A carrier that is a member of the Individual 28 Health Coverage Program under this act. 29 "Modified community rating." A rating system in which the 30 premium for all persons covered by a contract is formulated 20010S0845B0974 - 4 -
1 based on the experience of all persons covered by that contract, 2 without regard to age, sex, occupation and geographical 3 location, but which may differ by health status. The term 4 applies to contracts and policies issued prior to the effective 5 date of this act which are subject to section 315. 6 "Net earned premium." The premiums earned in this 7 Commonwealth on health benefits plans, less return premiums 8 thereon and dividends paid or credited to policy or contract 9 holders on the health benefits plan business. The term includes 10 the aggregate premiums earned on the carrier's insured group and 11 individual business and health maintenance organization 12 business, including premiums from any Medicare or Medicaid 13 contracts with the Federal or State government, but shall not 14 include any excess or stop-loss coverage issued by a carrier in 15 connection with any self-insured health benefits plan, or 16 Medicare supplement policies or contracts. 17 "Open enrollment." The offering of an individual health 18 benefits plan to any eligible person on a guaranteed issue 19 basis, pursuant to procedures established by the board of 20 directors of the Individual Health Coverage Program. 21 "Plan of operation." The plan of operation of the Individual 22 Health Coverage Program adopted by the board under this act. 23 "Preexisting condition." A condition that, during a 24 specified period of not more than six months immediately 25 preceding the effective date of coverage, had manifested itself 26 in such a manner as would cause an ordinarily prudent person to 27 seek medical advice, diagnosis, care or treatment, or for which 28 medical advice, diagnosis, care or treatment was recommended or 29 received as to that condition or as to a pregnancy existing on 30 the effective date of coverage. 20010S0845B0974 - 5 -
1 "Program." The Individual Health Coverage Program 2 established under this act. 3 CHAPTER 3 4 INDIVIDUAL HEALTH INSURANCE 5 Section 301. Individual health benefits plans required. 6 (a) Plans required to be offered.--No later than 180 days 7 after the effective date of this act, a carrier shall, as a 8 condition of issuing health benefits plans in this Commonwealth, 9 offer individual health benefits plans. The plans shall be 10 offered on an open enrollment, community-rated basis, pursuant 11 to the provisions of this act, except that a carrier shall be 12 deemed to have satisfied its obligation to provide the 13 individual health benefits plans by paying an assessment or 14 receiving an exemption pursuant to section 308. 15 (b) Choice of plans.--A carrier shall offer to an eligible 16 person a choice of five individual health benefits plans, any of 17 which may contain provisions for managed care. One plan shall be 18 a basic health benefits plan, one plan shall be a managed care 19 plan and three plans shall include enhanced benefits of 20 proportionally increasing actuarial value. A carrier may elect 21 to convert any individual contract or policy forms in force on 22 the effective date of this act to any of the five benefit plans, 23 except that the carrier may not convert more than 25% of 24 existing contracts or policies each year, and the replacement 25 plan shall be of no less actuarial value than the policy or 26 contract being replaced. Notwithstanding the provisions of this 27 subsection to the contrary, at any time after three years after 28 the effective date of this act, the board, by regulation, may 29 reduce the number of plans required to be offered by a carrier. 30 Notwithstanding the provisions of this subsection to the 20010S0845B0974 - 6 -
1 contrary, a health maintenance organization which is a qualified 2 health maintenance organization pursuant to the Health 3 Maintenance Organization Act of 1973 (Public Law 93-222, 87 4 Stat. 914) shall be permitted to offer a basic health benefits 5 plan in accordance with the provisions of that law in lieu of 6 the five plans required under this subsection. 7 (c) Benefits of plan.-- 8 (1) A basic health benefits plan shall provide, at a 9 minimum, the following: 10 (i) Inpatient hospital services. 11 (ii) Emergency outpatient hospital services. 12 (iii) Routine and emergency physician services, 13 including those provided in health clinics but excluding 14 those provided in nursing care or intermediate care 15 facilities. 16 (iv) Prenatal, delivery and postpartum care. 17 (v) Laboratory and diagnostic X-ray services. 18 (vi) X-ray, radium and radioactive isotope therapy. 19 (vii) Services of a nurse midwife. 20 (viii) Home health services in cases where it is 21 determined that the coverage of such services is cost 22 effective. 23 (ix) Ambulatory and institutional services. 24 (x) Drugs or biologicals that are provided as part 25 of any inpatient hospital services. 26 (2) Notwithstanding the provisions of this subsection or 27 any other law to the contrary, a carrier may, with the 28 approval of the board, modify the coverage provided for under 29 paragraph (1) or provide alternative benefits or services 30 from those required by this subsection if they are within the 20010S0845B0974 - 7 -
1 intent of this act or if the board changes the benefits 2 included in the basic health benefits plan. 3 (3) A contract or policy for a basic health benefits 4 plan provided for in this section may contain or provide for 5 coinsurance or deductibles, or both, except that no 6 deductible shall be payable in excess of a total of $250 by 7 an individual or $500 by a family unit during any benefit 8 year, and no coinsurance shall be payable in excess of a 9 total of $500 by an individual or by a family unit during any 10 benefit year. Any person previously covered under a group or 11 individual health benefits plan may apply deductibles paid 12 under the previous plan to annual limits under the basic 13 health benefits plan. 14 (4) Notwithstanding the provisions of paragraph (3) or 15 any other law to the contrary, a carrier may provide for 16 increased deductibles or coinsurance for a basic health 17 benefits plan if approved by the board or if the board 18 increases deductibles or coinsurance included in the basic 19 health benefits plan. 20 (d) Application.--Every group conversion contract or policy 21 issued after the effective date of this act shall be issued 22 pursuant to this section, except that this requirement shall not 23 apply to any group conversion contract or policy in which a 24 portion of the premium is chargeable to or subsidized by the 25 group policy from which the conversion is made. 26 (e) Contingency.--If all five of the individual health 27 benefits plans are not established by the board by January 1, 28 2002, a carrier may phase in the offering of the five health 29 benefits plans by offering each health benefits plan as it is 30 established by the board. However, once the board establishes 20010S0845B0974 - 8 -
1 all five plans, the carrier shall be required to offer the five 2 plans in accordance with this act. 3 Section 302. Guarantee of coverage and renewal of policy. 4 An individual health benefits plan issued pursuant to section 5 301 is subject to the following provisions: 6 (1) The health benefits plan shall guarantee coverage 7 for an eligible person and his dependents on a community- 8 rated basis. 9 (2) A health benefits plan shall be renewable with 10 respect to an eligible person and his dependents at the 11 option of the policy or contract holder except under the 12 following circumstances: 13 (i) nonpayment of the required premiums by the 14 policy or contract holder; 15 (ii) fraud or misrepresentation by the policy or 16 contract holder, including equitable fraud, with respect 17 to coverage of eligible individuals or their dependents; 18 (iii) termination of eligibility of the policy or 19 contract holder; or 20 (iv) cancellation or amendment by the board of the 21 specific individual health benefits plan. 22 Section 303. Duties of board. 23 (a) Board to establish policy and contract forms and benefit 24 levels.--The board shall establish the policy and contract forms 25 and benefit levels to be made available by all carriers for the 26 policies required to be issued pursuant to section 301. The 27 board shall provide the commissioner with an informational 28 filing of the policy and contract forms and benefit levels it 29 establishes. 30 (b) Cost containment measures.--The individual health 20010S0845B0974 - 9 -
1 benefits plans established by the board may include cost 2 containment measures such as, but not limited to: 3 (1) utilization review of health care services, 4 including review of medical necessity of hospital and 5 physician services; 6 (2) case management benefit alternatives; 7 (3) selective contracting with hospitals, physicians and 8 other health care providers; 9 (4) reasonable benefit differentials applicable to 10 participating and nonparticipating providers; and 11 (5) other managed-care provisions. 12 (c) Limitation on coverage for preexisting conditions.--An 13 individual health benefits plan offered pursuant to section 301 14 shall contain a limitation of no more than six months on 15 coverage for preexisting conditions, except that the limitation 16 shall not apply to an individual who has, under a prior group or 17 individual health benefits plan, with no intervening lapse in 18 coverage, been treated or diagnosed by a physician for a 19 condition under that plan or satisfied the preexisting condition 20 limitation, if any, under the prior plan. 21 (d) Rider packages.--In addition to the five standard 22 individual health benefits plans provided for in section 301, 23 the board may develop up to five rider packages. Premium rates 24 for the rider packages shall be determined in accordance with 25 section 305. 26 (e) Certification of plans.--After the board's establishment 27 of the individual health benefits plans required pursuant to 28 section 301, and notwithstanding any law to the contrary, a 29 carrier shall file the policy or contract forms with the board 30 and certify to the board that the health benefits plans to be 20010S0845B0974 - 10 -
1 used by the carrier are in substantial compliance with the 2 provisions in the corresponding board-approved plans. The 3 certification shall be signed by the chief executive officer of 4 the carrier. Upon receipt by the board of the certification, the 5 certified plans may be used until the board, after notice and 6 hearing, disapproves their continued use. 7 Section 304. Exceptions to required coverage. 8 (a) Health maintenance organizations.--A health maintenance 9 organization shall not be required to offer coverage to or 10 accept an applicant pursuant to this act if the applicant is not 11 geographically located in the health maintenance organization's 12 approved service area or if the health maintenance organization 13 does not have the capacity in its facilities to enroll 14 additional members. If the health maintenance organization does 15 not have the capacity in its facilities for additional 16 individual enrollees, it also shall not offer coverage to or 17 accept any new group enrollees. 18 (b) Potential of creating financially impaired condition.--A 19 carrier shall not be required to offer coverage or accept 20 applications pursuant to this act if the commissioner finds that 21 the acceptance of applications would place the carrier in a 22 financially impaired condition. 23 Section 305. Rates and filings. 24 (a) Application for approval of discounted or reduced rates 25 of payment to hospitals.--The board shall make application on 26 behalf of all carriers for approval of discounted or reduced 27 rates of payment to hospitals for health care services provided 28 under an individual health benefits plan under this act. 29 (b) Government funding or discounts.--In addition to 30 discounted or reduced rates of hospital payment, the board shall 20010S0845B0974 - 11 -
1 make application on behalf of all carriers for any other 2 subsidies, discounts or funds that may be provided for under 3 Federal or State law or regulation. A carrier may include 4 discounted or reduced rates of hospital payment and other 5 subsidies or funds granted to the board to reduce its premium 6 rates for individual health benefits plans subject to this act. 7 (c) Filing of full schedule of rates.--A carrier shall not 8 issue individual health benefits plans on a new contract or 9 policy form pursuant to this act until an informational filing 10 of a full schedule of rates which applies to the contract or 11 policy form has been filed with the board. The board shall 12 forward the informational filing to the commissioner and the 13 Attorney General. 14 (d) Filing of rate changes.--A carrier shall make an 15 informational filing with the board of any change in its rates 16 for individual health benefits plans pursuant to section 301 17 prior to the date the rates become effective. The board shall 18 file the informational filing with the commissioner and the 19 Attorney General. If the carrier has filed all information 20 required by the board, the filing shall be deemed to be 21 complete. 22 (e) Anticipated loss ratio.-- 23 (1) Rates shall be formulated on contracts or policies 24 required pursuant to section 301 so that the anticipated 25 minimum loss ratio for a contract or policy form shall not be 26 less than 85% of the premium. The carrier shall submit with 27 its rate filing supporting data, as determined by the board, 28 and a certification by a member of the American Academy of 29 Actuaries, or other individuals acceptable to the board and 30 to the commissioner, that the carrier is in compliance with 20010S0845B0974 - 12 -
1 the provisions of this subsection. 2 (2) Following the close of each calendar year, if the 3 board determines that a carrier's loss ratio was less than 4 85% for that calendar year, the carrier shall be required to 5 refund to policy or contract holders the difference between 6 the amount of net earned premium it received that year and 7 the amount that would have been necessary to achieve the 85% 8 loss ratio. 9 Section 306. Individual Health Coverage Program and board. 10 (a) Program established.--There is hereby established the 11 Individual Health Coverage Program. All carriers subject to the 12 provisions of this act shall be members of the program. 13 (b) Board.--Within 30 days of the effective date of this 14 act, the commissioner shall give notice to all members of the 15 time and place for the initial organizational meeting which 16 shall take place within 60 days of the effective date of this 17 act. The governing body of the program shall be a board which 18 shall consist of nine representatives. The commissioner or his 19 designee shall serve as an ex officio member on the board. Four 20 members of the board shall be appointed by the Governor, with 21 the advice and consent of the Senate, one of whom shall be a 22 representative of an employer, appointed upon the recommendation 23 of a business trade association, who is a person with experience 24 in the management or administration of an employee health 25 benefit plan; one of whom shall be a representative of organized 26 labor, appointed upon the recommendation of the AFL-CIO, who is 27 a person with experience in the management or administration of 28 an employee health benefit plan; and two of whom shall be 29 consumers of a health benefits plan who are reflective of the 30 population of this Commonwealth. Four board members who 20010S0845B0974 - 13 -
1 represent carriers shall be elected by the members, subject to 2 the approval of the commissioner. To the extent there is an 3 entity licensed in this Commonwealth that is willing to have a 4 representative serve on the board, a representative from each of 5 the following entities shall be elected: 6 (1) A health service corporation. 7 (2) A health maintenance organization. 8 (3) A mutual health insurer of this Commonwealth. 9 (4) A foreign health insurance company authorized to do 10 business in this Commonwealth. 11 In approving the selection of the carrier representatives of the 12 board, the commissioner shall assure that all members of the 13 program are fairly represented. 14 (c) Term of office.--Initially, two of the Governor's 15 appointees and two of the carrier representatives shall serve 16 for a term of three years, one of the Governor's appointees and 17 one of the carrier representatives shall serve for a term of two 18 years, and one of the Governor's appointees and one of the 19 carrier representatives shall serve for a term of one year. 20 Thereafter, all board members shall serve for a term of three 21 years. Vacancies shall be filled in the same manner as the 22 original appointments. 23 (d) Initial carrier members.--If the initial carrier 24 representatives to the board are not elected at the 25 organizational meeting, the commissioner shall appoint those 26 members to the initial board within 15 days of the 27 organizational meeting. 28 (e) Plan of operation.--Within 90 days after the appointment 29 of the initial board, the board shall submit to the commissioner 30 a plan of operation and thereafter, any amendments to the plan 20010S0845B0974 - 14 -
1 necessary or suitable to assure the fair, reasonable and 2 equitable administration of the program. The commissioner may 3 disapprove the plan of operation if the commissioner determines 4 that it is not suitable to assure the fair, reasonable and 5 equitable administration of the program and that it does not 6 provide for the sharing of program losses on an equitable and 7 proportionate basis in accordance with section 308. The plan of 8 operation or amendments thereto shall become effective unless 9 disapproved in writing by the commissioner within 45 days of 10 receipt by the commissioner. 11 (f) Failure to submit plan of operation.--If the board fails 12 to submit a suitable plan of operation within 90 days after its 13 appointment, the commissioner shall adopt a temporary plan of 14 operation. The commissioner shall amend or rescind a temporary 15 plan adopted under this subsection at the time a plan of 16 operation is submitted by the board. 17 (g) Plan components.--The plan of operation shall establish 18 procedures for: 19 (1) The handling and accounting of assets and moneys of 20 the program and an annual fiscal reporting to the 21 commissioner. 22 (2) Collecting assessments from members to provide for 23 sharing program losses in accordance with the provisions of 24 section 308 and administrative expenses incurred or estimated 25 to be incurred during the period for which the assessment is 26 made. 27 (3) Approving the coverage, benefit levels and contract 28 forms for individual health benefits plans in accordance with 29 the provisions of section 301. 30 (4) The imposition of an interest penalty for late 20010S0845B0974 - 15 -
1 payment of an assessment pursuant to section 308. 2 (5) Any additional matters at the discretion of the 3 board. 4 (h) Appointment of insurance producer.--The board shall 5 appoint a licensed producer to advise the board on issues 6 related to sales of individual health benefits plans issued 7 pursuant to this act. 8 Section 307. Powers and authority of program and board. 9 The program shall have the general powers and authority 10 granted under the laws of this Commonwealth to insurance 11 companies, health service corporations and health maintenance 12 organizations licensed or approved to transact business in this 13 Commonwealth, except that the program shall not have the power 14 to issue health benefits plans directly to either groups or 15 individuals. The board shall have the specific authority to: 16 (1) Assess members their proportionate share of program 17 losses and administrative expenses in accordance with the 18 provisions of section 308 and make advance interim 19 assessments, as may be reasonable and necessary for 20 organizational and reasonable operating expenses and 21 estimated losses. An interim assessment shall be credited as 22 an offset against any regular assessment due following the 23 close of the fiscal year. 24 (2) Establish rules, conditions and procedures 25 pertaining to the sharing of program losses and 26 administrative expenses among the members of the program. 27 (3) Review rate applications and form filings submitted 28 by carriers in accordance with this act. 29 (4) Define the provisions of individual health benefits 30 plans in accordance with the requirements of this act. 20010S0845B0974 - 16 -
1 (5) Enter into contracts which are necessary or proper 2 to carry out the provisions and purposes of this act. 3 (6) Establish a procedure for the joint distribution of 4 information on individual health benefits plans issued 5 pursuant to section 301. 6 (7) Establish, at the board's discretion, standards for 7 the application of a means test for individual health 8 benefits plans issued pursuant to section 301. 9 (8) Establish, at the board's discretion, reasonable 10 guidelines for the purchase of new individual health benefits 11 plans by persons who already are enrolled in or insured by 12 another individual health benefits plan. 13 (9) Establish minimum requirements for performance 14 standards for carriers that are reimbursed for losses 15 submitted to the program and provide for performance audits 16 from time to time. 17 (10) Sue or be sued, including taking any legal actions 18 necessary or proper for recovery of an assessment for, on 19 behalf of or against the program or a member. 20 (11) Appoint from among its members appropriate legal, 21 actuarial and other committees as necessary to provide 22 technical and other assistance in the operation of the 23 program, in policy and other contract design and any other 24 function within the authority of the program. 25 (12) Borrow money to effect the purposes of the program. 26 Any notes or other evidence of indebtedness of the program 27 not in default shall be legal investments for carriers and 28 may be carried as admitted assets. 29 (13) Contract for an independent actuary and any other 30 professional services the board deems necessary to carry out 20010S0845B0974 - 17 -
1 its duties under this act. 2 Section 308. Program losses; immunity; payments; and nongroup 3 persons. 4 (a) Equitable sharing of program losses.--The board shall 5 establish procedures for the equitable sharing of program losses 6 among all members in accordance with their total market share as 7 follows: 8 (1) (i) By March 1, 2003, and following the close of 9 each calendar year thereafter, on a date established by 10 the board: 11 (A) every carrier issuing health benefits plans 12 in this Commonwealth shall file with the board its 13 net earned premium for the preceding calendar year 14 ending December 31; and 15 (B) every carrier issuing individual health 16 benefits plans in this Commonwealth shall file with 17 the board the net earned premium on policies or 18 contracts issued under section 301 and the claims 19 paid and the administrative expenses attributable to 20 those policies or contracts. If the claims paid and 21 reasonable administrative expenses for that calendar 22 year exceed the net earned premium and any investment 23 income thereon, the amount of the excess shall be the 24 net paid loss for the carrier that shall be 25 reimbursable under this act. For the purposes of this 26 subparagraph, "reasonable administrative expenses" 27 shall be actual expenses or a maximum of 25% of 28 premium, whichever amount is less. 29 (ii) Every member shall be liable for an assessment 30 to reimburse carriers issuing individual health benefits 20010S0845B0974 - 18 -
1 plans in this Commonwealth which sustain net paid losses 2 for the previous year, unless the member has received an 3 exemption from the board under subsection (d) and has 4 written a minimum number of nongroup persons as provided 5 for in that subsection. The assessment of each member 6 shall be in the proportion that the net earned premium of 7 the member for the calendar year preceding the assessment 8 bears to the net earned premium of all members for the 9 calendar year preceding the assessment. 10 (2) A member that is financially impaired may seek from 11 the commissioner a deferment in whole or in part from any 12 assessment issued by the board. The commissioner may defer, 13 in whole or in part, the assessment of the member if, in the 14 opinion of the commissioner, the payment of the assessment 15 would endanger the ability of the member to fulfill its 16 contractual obligations. If an assessment against a member is 17 deferred in whole or in part, the amount by which the 18 assessment is deferred may be assessed against the other 19 members in a manner consistent with the basis for assessment 20 set forth in this section. The member receiving the deferment 21 shall remain liable to the program for the amount deferred. 22 (b) Immunity from liability.--The participation in the 23 program as a member, the establishment of rates, forms or 24 procedures, or any other joint or collective action required by 25 this act shall not be the basis of any legal action, criminal or 26 civil liability, or penalty against the program, a member of the 27 board or a member of the program either jointly or separately 28 except as otherwise provided in this act. 29 (c) Payment of assessment.--Payment of an assessment made 30 under this section shall be a condition of issuing health 20010S0845B0974 - 19 -
1 benefits plans in this Commonwealth for a carrier. Failure to 2 pay the assessment shall be grounds for forfeiture of a 3 carrier's authorization to issue health benefits plans of any 4 kind in this Commonwealth, as well as any other penalties 5 permitted by law. 6 (d) Exemption and enrollment of nongroup persons under 7 managed care or indemnity plan.-- 8 (1) Notwithstanding the provisions of this act to the 9 contrary, a carrier may apply to the board, by a date 10 established by the board, for an exemption from the 11 assessment and reimbursement for losses provided for in this 12 section. A carrier which applies for an exemption shall agree 13 to enroll or insure a minimum number of nongroup persons on 14 an open enrollment community-rated basis, under a managed 15 care or indemnity plan, as specified in this subsection, 16 provided that any indemnity plan so issued conforms with 17 sections 301 through 304 and 315. For the purposes of this 18 subsection, nongroup persons include individually enrolled 19 persons, conversion policies issued pursuant to this act, 20 Medicare cost and risk lives and Medicaid recipients. In 21 determining whether the carrier meets the minimum number of 22 nongroup persons required pursuant to this subsection, the 23 number of Medicaid recipients and Medicare cost and risk 24 lives shall not exceed 50% of the total. 25 (2) Notwithstanding the provisions of paragraph (1) to 26 the contrary, a health maintenance organization qualified 27 pursuant to the Health Maintenance Organization Act of 1973, 28 (Public Law 93-222, 87 Stat. 914) and tax exempt under 29 section 501(c)(3) of the Internal Revenue Code of 1986 30 (Public Law 99-514, 26 U.S.C. § 1 et seq.) may include up to 20010S0845B0974 - 20 -
1 one-third Medicaid recipients and up to one-third Medicare 2 recipients in determining whether it meets its minimum 3 number. 4 (3) The minimum number of nongroup persons, as 5 determined by the board, shall equal the total number of 6 community-rated and modified community-rated, individually 7 enrolled or insured persons, including Medicare cost and risk 8 lives and enrolled Medicaid lives, of all carriers subject to 9 this act as of the end of the calendar year, multiplied by 10 the proportion that that carrier's net earned premium bears 11 to the net earned premium of all carriers for that calendar 12 year, including those carriers that are exempt from the 13 assessment. 14 (4) Within 180 days after the effective date of this act 15 and on or before March 1 of each year thereafter, every 16 carrier seeking an exemption pursuant to this subsection 17 shall file with the board a statement of its net earned 18 premium for the preceding calendar year. The board shall 19 determine each carrier's minimum number of nongroup persons 20 in accordance with this subsection. 21 (5) On or before March 1 of each year, every carrier 22 that was granted an exemption for the preceding calendar year 23 shall file with the board the number of nongroup persons, by 24 category, enrolled or insured as of December 31 of the 25 preceding calendar year. To the extent that the carrier has 26 failed to enroll the minimum number of nongroup persons 27 established by the board, the carrier shall be assessed by 28 the board on a pro rata basis for any differential between 29 the minimum number established by the board and the actual 30 number enrolled or insured by the carrier. 20010S0845B0974 - 21 -
1 (6) A carrier that applies for the exemption shall be 2 deemed to be in compliance with the requirements of this 3 subsection if: 4 (i) by the end of calendar year 2002, it has 5 enrolled or insured at least 40% of the minimum number of 6 nongroup persons required; 7 (ii) by the end of calendar year 2003, it has 8 enrolled or insured at least 75% of the minimum number of 9 nongroup persons required; and 10 (iii) by the end of calendar year 2004, it has 11 enrolled or insured 100% of the minimum number of 12 nongroup persons required. 13 (7) Any carrier that writes both managed care and 14 indemnity business that is granted an exemption pursuant to 15 this subsection may satisfy its obligation to write a minimum 16 number of nongroup persons by writing either managed care or 17 indemnity business, or both. 18 (e) Limitation.--Notwithstanding the provisions of this 19 section to the contrary, no carrier shall be liable for an 20 assessment to reimburse any carrier pursuant to this section in 21 an amount which exceeds 35% of the aggregate net paid losses of 22 all carriers filing pursuant to subsection (a)(1)(i). To the 23 extent that this limitation results in any unreimbursed paid 24 losses to any carrier, the unreimbursed net paid losses shall be 25 distributed among carriers: 26 (1) which owe assessments pursuant to subsection 27 (a)(1)(ii); 28 (2) whose assessments do not exceed 35% of the aggregate 29 net paid losses of all carriers; and 30 (3) who have not received an exemption pursuant to 20010S0845B0974 - 22 -
1 subsection (d). 2 For the purposes of paragraph (3), a carrier shall be deemed to 3 have received an exemption notwithstanding the fact that the 4 carrier failed to enroll or insure the minimum number of 5 nongroup persons required for that calendar year. 6 Section 309. Statement of net paid losses and reimbursement. 7 (a) Statement of net paid losses.--No later than March 1, 8 2003, any carrier issuing individual health benefits plans in 9 this Commonwealth shall file with the board a statement of any 10 net paid losses for the calendar year ending December 31, 2002, 11 as calculated pursuant to section 308, along with any supporting 12 information required by the board. 13 (b) Reimbursement.--The losses filed pursuant to subsection 14 (a) shall be reimbursed in an amount up to $10,000,000 or 50% of 15 the paid losses, whichever amount is less, to the carrier filing 16 the losses. The assessment shall be made as a separate 17 assessment from those required pursuant to section 308, but 18 shall be assessed in the same manner and at the same time as the 19 first assessment made after the effective date of this act as 20 provided for in section 308, except that the carrier filing for 21 the reimbursement shall not be subject to an assessment under 22 this section. 23 Section 310. Determination of carriers with disproportionate 24 share of substandard risks and recommendations 25 for remedial action. 26 The board shall determine whether any carrier has a 27 disproportionate share of substandard risks insured or enrolled 28 under its individual health benefits plans and shall make 29 recommendations to the Governor and the General Assembly for 30 remedial action to minimize the losses sustained by the carrier 20010S0845B0974 - 23 -
1 as a result of insuring these risks. 2 Section 311. Sale of plan. 3 A health benefits plan issued pursuant to section 301 may be 4 sold through a licensed producer. 5 Section 312. Rate filings. 6 Notwithstanding the provisions of any other insurance law of 7 this Commonwealth to the contrary, a health maintenance 8 organization shall not be required to submit any rate filings 9 with the commissioner for an individual health benefits plan 10 that is subject to the provisions of this act, but shall be 11 subject to the minimum loss ratio provisions of section 305. 12 Section 313. Action by board. 13 (a) General rule.--All actions adopted by the board shall be 14 subject to the provisions of this section, notwithstanding any 15 provisions of law to the contrary. 16 (b) Notice requirements.-- 17 (1) Prior to the adoption of an action of the board, the 18 board shall publish notice of its intended action in three 19 newspapers of general circulation in this Commonwealth and 20 may publish the notice of intended action in any trade or 21 professional publication which it deems necessary. The notice 22 of intended action shall include procedures for obtaining a 23 detailed description of the intended action and the time, 24 place and manner by which interested persons may present 25 their views. The board shall provide the notice of intended 26 action and a detailed description of the intended action by 27 mail, or otherwise, to affected trade and professional 28 associations, carriers subject to this act and such other 29 interested persons or organizations which may request 30 notification. The board shall forward the notice of intended 20010S0845B0974 - 24 -
1 action and the detailed description of the intended action 2 concurrently to the Legislative Reference Bureau for 3 publication in the Pennsylvania Bulletin. 4 (2) The board shall not charge any fee for placement 5 upon the mailing list of associations, carriers or other 6 persons to be notified, but the board may charge a fee to an 7 association, carrier or other person requesting a copy of the 8 text of the intended action, which fee shall not be in excess 9 of the actual cost of reproducing and mailing the copy. 10 (3) A copy of the text of the intended action shall be 11 available in the department. 12 (c) Public hearing.--The board shall hold a public hearing 13 on the establishment and modification of health benefits plans, 14 and the board may hold a public hearing on any other intended 15 action. Notice of a hearing shall be given in the notice of 16 intended action provided for in subsection (b). 17 (d) Opportunity to comment in writing.-- 18 (1) Whether or not a public hearing is held, the board 19 shall afford all interested persons an opportunity to comment 20 in writing on the intended action. Written comments shall be 21 submitted to the board within the time established by the 22 board in the notice of intended action, which time shall not 23 be less than 20 calendar days from the date of notice. 24 (2) The board shall give due consideration to all 25 comments received. Within a reasonable period of time 26 following submission of the comments pursuant to this 27 subsection, the board shall prepare for public distribution a 28 report listing all parties who provided written submissions 29 concerning the intended action, summarizing the content of 30 the submissions and providing the board's response to the 20010S0845B0974 - 25 -
1 data, views and arguments contained in the submissions. A 2 copy of the report shall be filed with the Legislative 3 Reference Bureau for publication in the Pennsylvania 4 Bulletin. 5 (e) Final action.--The board may adopt the intended action 6 immediately following the expiration of the public comment 7 period provided in subsection (d) or the hearing provided for in 8 subsection (c), whichever date is later. The final action 9 adopted by the board shall be submitted for publication in the 10 Pennsylvania Bulletin and shall be effective on the date of the 11 submission or such later date as the board may establish. 12 (f) Construction.--Nothing in this section shall be 13 construed to prohibit the commissioner from adopting any rule or 14 regulation pursuant to the act of July 31, 1968 (P.L.769, 15 No.240), referred to as the Commonwealth Documents Law, or from 16 taking any other action required or authorized by this act. 17 (g) Definition.--As used in this section, the term "action" 18 includes, but is not limited to: 19 (1) The establishment and modification of health 20 benefits plans. 21 (2) Procedures and standards for the: 22 (i) assessment of members and the apportionment 23 thereof; 24 (ii) filing of policy forms; 25 (iii) making of rate filings; 26 (iv) evaluation of material submitted by carriers 27 with respect to loss ratios; and 28 (v) establishment of refunds to policy or contract 29 holders. 30 (3) The promulgation or modification of policy forms. 20010S0845B0974 - 26 -
1 The term shall not include the hearing and resolution of 2 contested cases, personnel matters and applications for 3 withdrawal or exemptions. 4 Section 314. Prohibition. 5 A carrier shall not require an eligible person to purchase 6 any other insurance coverage, including, but not limited to, 7 life insurance, accident insurance or disability insurance, as a 8 condition of or in conjunction with the purchase of a health 9 benefits plan under this act. 10 Section 315. Applicability; duplicative coverage; penalties; 11 rates. 12 (a) Plan issued on or after effective date of act.--An 13 individual health benefits plan issued on or after the effective 14 date of this act shall be subject to the provisions of this act. 15 (b) Plans issued prior to effective date of act.-- 16 (1) An individual health benefits plan issued on an open 17 enrollment, modified community-rated basis or community-rated 18 basis prior to the effective date of this act shall not be 19 subject to sections 301 through 305, unless otherwise 20 specified therein. 21 (2) An individual health benefits plan issued other than 22 on an open enrollment basis prior to the effective date of 23 this act shall not be subject to the provisions of this act, 24 except that the plan shall be liable for assessments made 25 pursuant to section 308. 26 (3) A group conversion contract or policy issued prior 27 to the effective date of this act that is not issued on a 28 modified community-rated basis or community-rated basis shall 29 not be subject to the provisions of this act, except that the 30 contract or policy shall be liable for assessments made 20010S0845B0974 - 27 -
1 pursuant to section 308. 2 (c) Duplicative coverage prohibited.--After the effective 3 date of this act, an individual who is eligible to participate 4 in a group health benefits plan that provides coverage for 5 hospital or medical expenses shall not be covered by an 6 individual health benefits plan which provides benefits for 7 hospital and medical expenses that are the same or similar to 8 coverage provided in the group health benefits plan, except that 9 an individual who is eligible to participate in a group health 10 benefits plan but is currently covered by an individual health 11 benefits plan may continue to be covered by that plan until the 12 first anniversary date of the group plan occurring on or after 13 January 1, 2002. 14 (d) Penalties.--Except as otherwise provided in subsection 15 (c), after the effective date of this act, a person who is 16 covered by an individual health benefits plan who is a 17 participant in or is eligible to participate in a group health 18 benefits plan that provides the same or similar coverages as the 19 individual health benefits plan and a person, including an 20 employer or insurance producer, who causes another person to be 21 covered by an individual health benefits plan which person is a 22 participant in or who is eligible to participate in a group 23 health benefits plan that provides the same or similar coverages 24 as the individual health benefits plan shall be subject to a 25 fine by the commissioner in an amount not less than twice the 26 annual premium paid for the individual health benefits plan, 27 together with any other penalties permitted by law. 28 (e) Rates.--Every individual health benefits plan issued 29 prior to the effective date of this act shall be rated as 30 follows: 20010S0845B0974 - 28 -
1 (1) No later than 180 days after the effective date of 2 this act, the premium rate charged by a carrier to the 3 highest rated individual who purchased an individual health 4 benefits plan prior to the effective date of this act shall 5 not be greater than 150% of the premium rate charged to the 6 lowest rated individual purchasing that same or a similar 7 health benefits plan. 8 (2) During the period July 1, 2003, to June 30, 2004, 9 the premium rate charged by a carrier to the highest rated 10 individual who purchased an individual health benefits plan 11 prior to the effective date of this act shall not be greater 12 than 125% of the premium rate charged to the lowest rated 13 individual purchasing that same or a similar health benefits 14 plan. 15 (3) On and after July 1, 2004, every individual health 16 benefits plan which was issued before the effective date of 17 this act shall be community rated upon the date of its 18 renewal. 19 (4) A carrier that issues an individual health benefits 20 plan with modified community rating subject to the provisions 21 of this subsection shall make an informational filing with 22 the board whenever it adjusts or modifies its rates. 23 CHAPTER 7 24 MISCELLANEOUS PROVISIONS 25 Section 701. Effective date. 26 This act shall take effect in 60 days. D30L40BIL/20010S0845B0974 - 29 -