Section 24: Insurance Age Rate Adjustment

(a) Premiums charged to every eligible small business for a health benefit plan issued or renewed on or after April 1, 1992, or eligible individuals for a health benefit plan issued or renewed on or after July 1, 2007, shall satisfy the following requirements:

(1) For every health benefit plan issued or renewed to eligible small groups on or after April 1, 1992 and to eligible individuals on or after July 1, 2007, including a certificate issued to an eligible small group or eligible individual that evidences coverage under a policy or contract issued or renewed to a trust, association or other entity that is not a group health plan, a carrier shall develop a base premium rate for a class of business. The group base premium rates charged by a carrier to each eligible group or eligible individual during a rating period shall not exceed 2 times the group base premium rate which could be charged by that carrier to the eligible group or eligible individual with the lowest group base premium rate for that rate basis type within that class of business in that group's or individual's geographic area. In calculating the premium to be charged to each eligible small group or eligible individual, a carrier shall develop a base premium rate for each rate basis type and may develop and use any of the rate adjustment factors identified in clauses (2) to (6), inclusive, provided that after multiplying any of the used rate adjustment factors by the base premium rate, the resulting product for all adjusted group base premium rate combinations fall within rate bands ranging between 0.66 and 1.32 that is required of all products offered to eligible small groups and eligible individuals. In addition, carriers may apply additional factors, identified in subsection (b) that would apply outside the 0.66 to 1. 32 rate band. All other rating adjustments are prohibited. Carriers may offer any rate basis types, but rate basis types that are offered to any eligible small employer or eligible individual shall be offered to every eligible small employer or eligible individual for all coverage issued or renewed on or after July 1, 2007. If an eligible small employer does not meet a carrier's minimum or participation contribution requirements, the carrier may separately rate each employee as an eligible individual.

(2) A carrier may establish an age rate adjustment that applies to both eligible individuals and eligible small groups; provided, however, that the carrier applies the rate adjustment on a year-to-year basis for both eligible individuals and eligible small groups.

(3) A carrier may establish an industry rate adjustment. If a carrier chooses to establish industry rate adjustments, every eligible small group in an industry shall be subject to the applicable industry rate adjustment. The industry rate adjustment applicable to an eligible individual shall be based on the industry of the eligible individual's primary employer and shall be the same adjustment applied to eligible small groups in the same industry. A carrier may not apply an industry rate to an eligible individual who is not employed.

(4) A carrier may establish participation-rate rate adjustments that apply only to eligible small groups for any health benefit plan or plans for any ranges of participation rates below the minimum participation requirements established under the definition of participation requirement in section 1, the value of which shall be expressed as a number. Alternatively, a carrier may separately rate each employee enrolling through such a group as an eligible individual. The participation-rate rate adjustments must be based upon actuarially sound analysis of the differences in the experience of groups with different participation rates. If a carrier chooses to establish participation-rate rate adjustments, every eligible small group with a participation rate within the ranges defined by the carrier shall be subject to the applicable participation-rate rate adjustment.

(5) A carrier may apply a wellness program rate discount that applies to both eligible individuals and eligible small groups who follow those wellness programs that have been approved by the commissioner. If a carrier establishes a wellness program rate discount every eligible insured following the wellness program shall be subject to the applicable wellness program rate discount.

(6) A carrier may apply a tobacco use rate discount that applies to both eligible small groups and eligible individuals who can certify, in a method approved by the commissioner, that eligible individuals and their eligible dependents or eligible small group employees and their eligible dependents have not used tobacco products within the past year.

(b)(1) A carrier may establish a benefit level rate adjustment for all eligible individuals and eligible small groups that shall be expressed as a number. The number shall represent the relative actuarial value of the benefit level, including the health care delivery network, of the health benefit plan issued to that eligible small group or eligible individual as compared to the actuarial value of other health benefit plans within that class of business. If a carrier chooses to establish benefit level rate adjustments, every eligible small group and every eligible individual shall be subject to the applicable benefit level rate adjustment.

(2) The commissioner shall establish not less than 5 distinct regions of the state for the purposes of area rate adjustments. A carrier may establish an area rate adjustment for each distinct region, the value of which shall range from eight-tenths to one and one-fifth. If a carrier chooses to establish area rate adjustments, every eligible small group and every eligible individual within each area shall be subject to the applicable area rate adjustment.

(3) A carrier shall establish a rate basis type adjustment factor for eligible individuals and eligible small groups which shall be expressed as a number. The number shall represent the relative actuarial value of the rate basis type, which shall include at least the following 4 categories: --single, 2 adults, 1 adult and children, and family.

(4) A carrier may establish a group size rate adjustment that applies to both eligible individuals and eligible small groups, the value of which shall range from 0.95 to 1.10. If a carrier chooses to establish group size rate adjustments, every eligible individual and eligible small group shall be subject to the applicable group size rate adjustment. If an eligible small business does not meet a carrier's participation or contribution requirements, the carrier may apply the group size adjustment that applies to eligible individuals to each employee who enrolls through the eligible small business.

(c)(1) A carrier that, as of the close of the calendar year 2005, had a combined total of 5,000 or more eligible employees and eligible dependents as defined by this chapter who are enrolled in health benefit plans sold, issued, delivered, made effective or renewed to qualified small businesses pursuant to its license under chapter 176G, shall be required to file a plan with the connector, for its consideration, which could attain the connector seal of approval.

(2) As of January 1, 2007, a carrier that as of the close of any preceding calendar year, has a combined total of 5,000 or more eligible individuals, eligible employees and eligible dependents, who are enrolled in health benefit plans sold, issued, delivered, made effective or renewed to qualified small businesses or eligible individuals pursuant to its license under chapter 176G, shall be required annually to file a plan with the connector for its consideration, which could attain the connector seal of approval; provided however, the plan shall be filed no later than October 1 of any calendar year.

(d)(1) A carrier that, as of the close of the calendar year 2005 had a combined total of 5,000 or more eligible employees and eligible dependents as defined by this chapter who are enrolled in health benefit plans sold, issued, delivered, made effective or renewed to qualified small businesses pursuant to its authority under chapter 175, chapter 176A or chapter 176B shall be required to file a plan with the connector for its consideration, which could attain the connector seal of approval.

(2) As of January 1, 2007, a carrier that as of the close of any preceding calendar year, has a combined total of 5,000 or more eligible individuals, eligible employees and eligible dependents, who are enrolled in health benefit plans sold, issued, delivered, made effective or renewed to qualified small businesses or eligible individuals pursuant to its authority under chapter 175, 176A or 176B, shall be required annually to file a plan with the connector for its consideration, which could attain the connector seal of approval; provided however, the plan shall be filed no later than October 1 of any calendar year.

(e) For the purposes of this section, neither an eligible individual or eligible employee, nor an eligible dependent, shall be considered to be enrolled in a health benefit plan issued pursuant to its authority under chapter 175, 176A or 176B if the health benefit plan is sold, issued, delivered, made effective or renewed to said eligible employee or eligible dependent as a supplement to a health benefit plan subject to licensure under chapter 176G.

(f) The commissioner may conduct an examination of the rating factors used in the small group health insurance market in order to identify whether any expenses or factors inappropriately increase the cost in relation to the risks of the affected small group. The commissioner may adopt changes to the small group regulation each July 1 for rates effective each subsequent January 1 to modify the derivation of group base premium rates or of any factor used to develop individual group premiums.

Summary: 
Requires that the age rate adjustment factor, used by health plans to calculate rates for eligible individuals and small groups, be applied on a year to year basis in order to more evenly distribute the rate of increase. In addition to age, an insurer may also calculate rates based on an individual’s or small group’s business industry, participation rate of members, wellness program discount, and tobacco use. The maximum premium rate offered to members cannot exceed 2 times the lowest premium rate offered to members within a particular class of business.