26.1-36.3-04. Restrictions relating to premium rates

26.1-36.3-04. Restrictions relating to premium rates

1. This section only applies to a health benefit plan offered by a small employer who

employed an average of at least two but not more than twenty-five eligible employees

on business days during the preceding calendar year and who employs at least two

employees on the first day of the plan year.

2. Premium rates for health benefit plans subject to this section and section 26.1-36-37.2

are subject to the following:

a. The index rate for a rating period for any class of business may not exceed the

index rate for any other class of business by more than fifteen percent.

b. 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 that could be charged to the employers under the rating

system for that class of business, may not vary from the index rate by more than

twenty percent of the index rate.

c. The percentage increase in the premium rate charged to a small employer for a

new rating period may not exceed the sum of:

(1) 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 health benefit plan into which the small employer carrier is

no longer enrolling new small employers, the small employer carrier shall

use the percentage change in the base premium rate, provided that the

change does not exceed, on a percentage basis, the change in the new

business premium rate for the most similar health benefit plan into which the

small employer carrier is actively enrolling new small employers;

(2) Any adjustment due to the claim experience, health status, or duration of

coverage of the employees or dependents of the small employer as

determined from the small employer carrier's rate manual for the class of

business; however, the adjustment may not exceed fifteen percent annually

and must be adjusted pro rata for rating periods of less than one year; and

(3) Any adjustment due to change in coverage or change in the case

characteristics of the small employer, as determined from the small

employer carrier's rate manual for the class of business.

d. Adjustments in rates for claim experience, health status, and duration of coverage

may not be charged to individual employees or dependents. Premium rates

charged for a health benefit plan may not vary by a ratio of greater than four to

one after January 1, 1997. Any adjustment must be applied uniformly to the rates

charged for all employees and dependents of the small employer.

e. A small employer carrier may utilize industry as a case characteristic in

establishing premium rates, but the highest rate factor associated with any

industry classification may not exceed the lowest rate factor associated with any

industry classification by more than fifteen percent.

f. In the case of health benefit plans delivered or issued for delivery before

August 1, 1993, a premium rate for a rating period may exceed the ranges set

forth in subdivisions a and b for a period of three years following August 1, 1993.

Under this subdivision, the percentage increase in the premium rate charged to a

small employer for a new rating period may not exceed the sum of:

(1) 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 health benefit plan into which the small employer carrier is

no longer enrolling new small employers, the small employer carrier shall

use the percentage change in the base premium rate, provided that the

change does not exceed, on a percentage basis, the change in the new

business premium rate for the most similar health benefit plan into which the

small employer carrier is actively enrolling new small employers.

to which the small employer carrier is

no longer enrolling new small employers, the small employer carrier shall

use the percentage change in the base premium rate, provided that the

change does not exceed, on a percentage basis, the change in the new

business premium rate for the most similar health benefit plan into which the

small employer carrier is actively enrolling new small employers.

(2) 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.

g. (1) Small employer carriers shall apply rating factors, including case

characteristics, consistently with respect to all small employers in a class of

business. Rating factors must produce premiums for identical groups which

differ only by amounts attributable to plan design and do not reflect

differences due to the nature of the groups assumed to select particular

health benefit plans.

(2) A small employer carrier shall treat all health benefit plans issued or

renewed in the same calendar month as having the same rating period.

h. For the purposes of this subsection, a health benefit plan that uses a restricted

provider network may not be considered similar coverage to a health benefit plan

that does not use a restricted provider network, if the use of the restricted

provider network results in substantial differences in claims costs.

i. A small employer carrier may not use case characteristics, other than age,

gender, industry, geographic area, family composition, and group size, without

prior approval of the commissioner. Gender may not be used as a case

characteristic after January 1, 1996.

j. The commissioner shall adopt rules to:

(1) Assure that differences in rates charged for health benefit plans by small

employer carriers are reasonable and reflect objective differences in plan

design, not including differences due to the nature of the groups assumed to

select particular health benefit plans;

(2) Prescribe the manner in which case characteristics may be used by small

employer carriers; and

(3) Otherwise implement this section.

3. A small employer carrier may not transfer a small employer involuntarily into or out of a

class of business. A small employer carrier may not offer to transfer a small employer

into or out of a class of business unless the offer is made to transfer all small

employers in the class of business without regard to case characteristics, claim

experience, health status, or duration of coverage.

4. The commissioner may suspend for a specified period the application of subdivision a

of subsection 2 as to the premium rates applicable to one or more small employers

included within a class of business of a small employer carrier for one or more rating

periods upon a filing by the small employer carrier and a finding by the commissioner

that the suspension is reasonable in light of the financial condition of the small

employer carrier or that the suspension would enhance the efficiency and fairness of

the marketplace for small employer health insurance.

5. In connection with the offering for sale of any health benefit plan to a small employer, a

small employer carrier shall make a reasonable disclosure, as part of its solicitation

and sales materials, of:

a. The extent to which premium rates for a specified small employer are established

or adjusted based upon the actual or expected variation in claims costs or actual

or expected variation in health status of the employees of the small employer and

their dependents;

b. The provisions of the health benefit plan concerning the small employer carrier's

right to change premium rates and factors, other than claim experience, that

affect changes in premium rates;

c. The provisions relating to renewability of policies and contracts; and

d. The provisions relating to any pre-existing condition exclusion.

the employees of the small employer and

their dependents;

b. The provisions of the health benefit plan concerning the small employer carrier's

right to change premium rates and factors, other than claim experience, that

affect changes in premium rates;

c. The provisions relating to renewability of policies and contracts; and

d. The provisions relating to any pre-existing condition exclusion.

6. 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 that 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 with the commissioner on or before March

fifteenth of each year an actuarial certification certifying that the carrier is in

compliance with this chapter and that the rating methods of the small employer

carrier are actuarially sound. The certification must be in a form and manner and

contain information specified by the commissioner. The small employer carrier

shall retain a copy of the certification at the carrier's principal place of business.

c. A small employer carrier shall make the information and documentation described

in subdivision a available to the commissioner upon request. Except in cases of

violations of this chapter and section 26.1-36-37.2, the information is proprietary

and trade secret information and is not subject to disclosure by the commissioner

to persons outside the department except as agreed to by the small employer

carrier or as ordered by a court of competent jurisdiction.