Joint Health Insurance Planning Committee on the Medically Uninsurable: final report

              JOINT HEALTH INSURANCE
PLANNING COMMITTEE ON THE
MEDICALLY UNINSURABLE
FINAL REPORT
JANUARY 31, 1992
JOINT HEALTH INSURANCE
PLANNING COMMITTEE ON THE
MEDICALLY UNINSURABLE
FINAL REPORT
JANUARY 31, 1992
JOINT HEALTH INSURANCE PLANNING COMMITTEE
ON THE MEDICALLY UNINSURABLE
FINAL REPORT
January 31, 1992
COMMITTEE MEMBERS
Senator Cindy Resnick, Go- chair Rep. Karen M i l l s , Co- chair
Senator James Henderson, Jr. Rep. Ruth Eskesen
Senator Jim Buster Rep. Peter Goudinoff
Susan Gal 1 i nger Dr. Len Kirschner
Steven C. Barclay P h y l l i s Ethridge, R. N.
Kathy Haake Raena Honan
Barbara Hopkins Andrea Lazar
Elizabeth McNamee
TABLE OF CONTENTS
PAGE
I . Formation and Mandate o f the Committee . . . . . . . . . . . . . . . 1
11. Summary o f Committee Meetings . . . . . . . . . . . . . . . . . . 2
I I I . Recommendations o f the Committee . . . . . . . . . . . . . . . . . 6
LIST OF APPENDICES
Appendix A JLBC Fiscal Analysis o f Financing High Risk Health Insurance Pools
w i t h L o t t e r y Revenues.
- tL,
Appendix B Summary o f Blue Cross/ Blue Shield o f Arizona's Presentation on Small
Group Markets and the A l l o c a t i o n Method.
Appendix C Summary o f Risk Pool Features o f 25 States t h a t Have Implemented a
State High Risk Pool Program.
Appendix D Summary o f the Purpose, R e s t r i c t i o n s and Requirements o f the T i t l e
I 1 HIV Care Grant Program o f the Ryan White Comprehensive AIDS
Resources Emergency Act o f 1990.
Appendix E Group A f f o r d a b i l i t y Subcommittee f i n d i n g s .
Appendix F A l l o c a t i o n Model Subcommittee f i n d i n g s
Appendix G Summary o f NAIC Small Group Health Insurance A l l o c a t i o n A v a i l a b i l i t y
Act - A1 l o c a t i o n Model .
Appendix H High Risk Pooling Subcommittee f i n d i n g s .
Appendix I Prospective Reinsurance Model Subcommittee f i n d i n g s .
Appendix J Summary o f the NAIC Prospective Reinsurance Model
Appendix K Small employer Health Insurance Avai 1 abi 1 i t y Model Act - Prospective
Reinsurance With or Without an Opt- Out.
FINAL REPORT OF THE JOINT HEALTH INSURANCE PLANNING
COMMITTEE ON THE MEDICALLY UNINSURABLE
I. Formation and Mandate of the Committee
In 1991, the 40th Arizona Legislature passed House Bill 2049, ( Chapter
258) . The bi 11 establ i shed a 15- member Joint Heal th Insurance Pl anni ng Commi ttee
on the Medically Uninsurable.
Laws 1991, Chapter 258, Section 1, required the committee to examine and
make a specific recommendation relating to:
1. the feasibility of adopting the recommendations of the National
Association of Insurance Commissioners' ( NAIC) Health Care Insurance
Access Working Group of the Accident and Health Insurance Committee.
2. the participation of medically uninsurable citizens in health insurance
benefit programs contracted for or subsidized by this state.
3. the mandatory participation of health insurance carriers 1 icensed to do
business in this state in providing coverage for the medically
uninsurable.
4. the creation of a risk pool for the medically uninsurable, including
specific consideration of medical 1 oss ratios, exclusions, 1 imitations and
solvency of exi sting state sponsored ri sk pool s.
The committee was also charged with identifying specific funding mechanisms to
accomplish any of its recommendations.
Senator Cindy Resnick and Representative Karen Mills were selected to co-chair
the 15- member committee. Other 1 egis1 ators assigned to the committee were
Senator James Henderson, Senator Jim Buster, Representative Ruth Eskesen and
Representative Peter Goudinoff. Other members appointed to the committee were:
1) Susan Gal 1 inger, Director, Az. Department of Insurance 2) Dr. Len Kirschner,
Director of Arizona Health Care Cost Containment System 3) Steven Barclay,
Attorney 4) Phyllis Ethridge, R. N., St. Mary's Hospital and Health Center 5)
Kathy Haake, Salt River Project 6) Raena Honan, Programs Analyst, Association
for Retarded Citizens of Arizona, Inc. 7) Barbara Hopkins, pub1 ic member 8)
Andrea Lazar, Az. Blue Cross/ Blue Shield, and 9) Elizabeth McNamee, Vice-
President, Northern Region, Intergroup of Arizona.
1 1 Summary of Committee Meetings
November 12. 1991 Meeting
The Joint Health Insurance Planning Committee' on the Medical ly Uninsurable
met initially to hear presentations on a1 ternatives being considered on the state
and national levels for providing access to health care insurance for the
medically uninsurable.
Susan Gallinger, Director ofthe Arizona Department of Insurance, presented
the National Association of Insurance Commissioners'( NA1C) on- going study on
methods for providing access to health coverage for the medically uninsurable.
The NAIC is considering two approaches to this health care insurance problem: the
Prospective Reinsurance Method and the Allocation Method. Ms. Gallinger informed
the Committee that the NAIC was in the process of reworking their draft
proposals. The NAIC is expected to adopt final recommendations in December,
1991. Ms. Gallinger stated that the Department of Insurance will be supplying
the Committee with a copy of these final recommendations.
The committee heard a presentation by Mr. Frank Chow, from the Joint
Legislative Budget Committee, on the feasibility of financing a health care risk
pool with lottery revenues. Research by JLBC staff revealed that:
1) Additional lottery gamer designed to finance a high risk pool would
eanni bal ize sales of existing games and t h G~ en eral Fund and the Economic
Development Fund would suffer revenue losses.
2) Lottery Pick sales are not a stable source of revenues. Lottery revenues
declined dramatically in FY 1991 and it is estimated that lottery sales
will continue to fall in the future.
Based upon these findings, JLBC staff does not recommend using lottery
revenues to supplement financing of a high risk pool. Appendix A contains
information JLBC distributed to the Committee.
Mr. Barry Wong, Regional Vice President, Governmental Affairs, Cigna
orporation, reported that Cigna supports the development of pools for the
ninsurable. Cigna believes risk pools should be viewed as the insurer of last
resort for the medically uninsurable because third parties will have to subsidize
the health care costs. Cigna also advocates that excess losses in the pools
should be funded by a broad based source, such as general tax revenues.
Mr. Wong presented the Committee with the following statistics regarding
risk pools:
1) 25 states have risk pools. Collective enrollment is 76,873 people.
2) The 17 state pools which have been active long enough to pay claims, pay
over $ 185 mi 11 ion per year for 67,972 enrollees. Average payment is
$ 2,726.30.
3) For this coverage, enrollees pay premiums of over $ 107 million. The $ 77
2
million loss is compensated by subsidies.
Andrea Lazar, Vice President, Government Re1 ations, Blue Cross/ Bl ue Shield
of Arizona, informed the Committee that 500,000 people in Arizona have no health
insurance. Forty percent of workers in businesses with fewer than 10 employees
are uninsured. Blue Cross/ Blue Shield of Arizona supports the small group
Allocation model. Attachment 8 contains a summary of Ms. Lazar's slide
presentation on the small group market and a comparison of the Allocation and
Prospective Reinsurance methods.
Finally, the committee heard a presentation by Doug Hirano, with the
Arizona Department of Health Services, on Michigan's AIDS Insurance Assistance
Pilot Program. The program is designed to assist AIDS patients who are no longer
able to work to retain health insurance coverage. Mr. Hirano informed the
Committee that the average cost for AIDS patients is about $ 30,000 per year.
Attachment D contains a summary ofthe purpose, restrictions and requirements for
obtaining federal monies for a state AIDS Insurance Assistance Pilot Program.
At the conclusion of the meeting Senator Resnick established the following
four ad hoe subcommittees and chairpersons and asked that these groups report
back to the full committee in early January:
Allocation Method - Cochairmen: Senator Cindy Resnick,
Representative Karen Mi 11 s. Members : Andrea Lazar and Barbara Hopki ns .
Reinsurance Method - Cochairmen: Senator Jim Buster and Barry
Wong. Members: Don Issacson and Henry GrosJean
High Risk Pooling - Cochairmen: Representative Ruth Eskesen and
Raena Honan. Members: Senator Jim Buster, Representative Peter Goudinoff,
Barbara Hopkins and Phyllis Ethridge, R. N..
Group Affordability - Elizabeth McNamee and Kathy Haake.
January 21, 1992 Meeting
The committee met to hear the subcommittee reports and make its
recommendations.
Subcommittee Re~ orts
The G r o u ~ Affordability Subcommittee members were unable to attend
the meeting. Instead, they provided written findings ( Appendix E). The
subcommittee members indicated that insurance reform is a step in the right
direction but is not enough in itself to assure the affordability of health care
coverage. The subcommi ttee presented the foll owing health care reform proposal s :
1) Proposals should define core benefits emphasizing
prevention, early intervention and the efficacy of
diagnostic and therapeutic services.
2) The health care industry should reduce the need for care
by promoting healthy lifestyles and providing only
necessary services.
3) Proposals should streamline administrative processes.
4) Individual s should take responsi bi 1 i ty for their health.
5) Guide1 ines should define the necessary and appropri ate
services for a certain condition. Physicians should
provide appropriate and cost effective care.
6) A1 ign the financial incentives for payors, providers and
consumers for efficient use of resources.
The Allocation Method Subcommittee recommended that the legislature
consider the NAIC Small Group Heal th Insurance Avai 1 abi 1 i ty Act, or A1 1 ocat ion
Method. ( Appendix F - Allocation Model Subcommittee findings. Appendix G -
Summary of NAIC Small Group Health Insurance Availability Act - Allocation
Model . ) The subcommi ttee found the A1 1 ocat i on Model wi 11 :
1) stabilize and moderate rate increases.
2) limit and harmonize preexisting condition limitation
periods.
3) ensure portability.
4 ) require the private health insurance market to integrate
high risk groups into their larger risk pool according
to each carrier's pro rata market share.
The Hiqh Ri sk Pool inq Cornmi ttee studied several options and made the
following recommendations ( see Appendix H):
1) Regarding a buy- in to the Health Care Group, the
subcommittee recommended:
a) the expansion of the Health Care Group statewide.
b) that Health Care Group permit businesses to
purchase Health Care Group coverage without a
waiting period when an uninsurable employee or
dependent significantly increases the business'
health insurance costs or forces the business to
purchase significantly lesser coverage.
c) that the Health Care Group not compete with
private industry.
2) Regarding a buy- in to AHCCCS, the committee recommended
that the 1 egi sl ature:
a) permit individuals and families with no other
options to purchase AHCCCS coverage.
b) prohi bit dumping of medically uninsurable
employees by employers who cover their employees
in comparable categories.
c) establ i sh benefits, coverage and premi urns
comparable to high risk pools in other states.
d) provide for medical case management for very high
risk cases.
3) Regarding high risk pools, the committee felt the
creation of another risk pool would be dupl icative. The
committee prefers including the uninsurable population
in the AHCCCS or state employee pool.
4) Regarding a buy- in to the state employee pool, the
committee recommended that the state try to save money
through bid selection, negotiations or self insurance.
The State should use the savings to subsidize health
insurance programs for the medically uninsurable.
The Pros~ ective Reinsurance Model Subcommittee recommended that the
legislature study and analyze both the Prospective Reinsurance and Allocation
Models before either is adopted. ( Appendix I - Prospective Reinsurance
Subcommittee findings. Appendix J - Summary of the Prospective Reinsurance
Mode1 . Appendix K - NAIC Small Employer Health Insurance Avai 1 abi 1 i ty Model Act
( Prospective Reinsurance With or Without an Opt- Out.)
111. Recommendations of the Committee
The committee agreed that a1 1 the subcornmi ttee proposal s merit further
debate. Instead of endorsing one proposal, the committee recommended that the
proponents of each proposal draft legislation. Senator Resnick and
Representative Mills assured that the bills would be heard,
The committee also recommended that if one of the NAIC Small Employer
Health Insurance Models is introduced, the size of the groups will increase from
3 - 25 to 3 - 50.
Appendix A
JLBC Fiscal Analysis of Financing High Risk
Insurance Pool s with Lottery Revenues.
" FINANCING HIGH RISK POOLS WITH LOTTERY REVENUES"
A PRESENTATION GUIDELINE
TO
THE JOINT HEALTH INSURANCE PLANNING COMMITTEE
ON THE MEDICALLY UNINSURABLE
November 12, 1991
by JLBC Staff
OUTLINE :
( 1) Fiscal note on House Bill 2310 as introduced during the first
regular session.
( 2) FYI990 Scratch game sales. Key point: additional games will
cannibalize sales of existing games. General Fund and Economic
Development Fund will suffer revenue losses.
( 3) Graph of INSTANT GAME SALES. Key point: sales pattern is not
stable.
( 4) Graph of LOTTERY PICK SALES. Key point: sales pattern is not
stable and is now declining.
( 5) Graph of GENERAL FUND REVENUES FROM LOTTERY SALES. Key point:
revenues declined dramatically in FYI991 and is estimated to
fall in the future.
( 6) JLBC staff does not recommend using Lottery revenues to
supplement financing of a high risk pool.
FlSCAL ANALYSIS
1
I
1;
t
II
8
a
I
Fiscal Note
B m # HB 2310 TI? ZE: high nsk health rnsurance pools
SPONSOE UMn, et . I STATUS: As Introduced
REQUESTED BY: House PREPARED BY: Brian C McNeWrank S. Chow
FISCAL YEAR
1990- 91 1991- 92 1992- 93
EWENDITURES
General Fund S - 0- Cannot be determined.
Health Insurance Risk Pool Fund S - 0- Cannot be determined.
REVENUES
General Fund - Lottery S( 1 , ~ , 0 0 0 ) S( l, m, ooo)
Commerce and Economic Development
Commission Fund ( 325,000) ( 390, ocJo)
Health Insurance Risk Pool Fund - Lottery 1,950,000* 2,193,804
Health Insurance Risk Pool Fund - Premiums a Cannot be
determined
* Represents the midpoint of a range of estimates
The legislation creates a Health Insurance Risk Pool Board that will design and direct a risk pool for uninsurable
Estimated Impact
Given the lack of any actwial work on this project, the Staff is unable to produce a sound estimate of
expenditures. Additionally, without more concrete information on the plan being proposed, we are unable to
obtain an estimate of actuarial experm& In terms of revenue, the Staff assumes that 80- 9096 of the sales from the
additional lottery instant games will occur at the expense of existing games whose proceeds are earmarked for the
General Fund and the Commerce and Economic Development Fund. The Staff is unable to determine an amount
in FY 1993 assodated with premium coUections.
Beyond claims activity, which would begin in FY 1993 and make up the largest program expenditure, the Staff
assumes that the Board will require staffkg and actuarial services at least during FY 19! 22 Based on
conversations with other states, a minimum of $ 25,000 should be budgeted for actuarial expenditures with
additional monies required if there is to & actuary involvement in the development of the plan of operation
and/ or other program tasks. The amount of stafting for the Board depends on a variety of factors, not the
least of which is how much work the Board contracts out to an actuary/ consulting firm. If a complete plan is
to be presented during the 1992 legislative session, though, we believe that there will probably have to be
some staff or consultant expenditures.
Revenue Assumptions -- A review of Lottery sales data since FY 1! 389 revealed an acute substitution pattern between the Economic
Development Fund and General Fund instant games. Concomitantly, total sales from both games have
not i n c r d significantly from the time period when only the General Fund instant game was played
This suggests that any new sales revenue from the introduction of additional games is probably minimaL -- Lottery sales from all instant games are projected to remain flat for FY 1992 and grow by 10% in
FT 1993. -- The new instant game will be marketed in the same manner as the Economic Development game in which
the first game of the fiscal year is introduced in October and ends in December, while the second game
begins in Jan- and continues until June - lasting a total of nine months. - The substitution effect from the new instant game is estimated to reduce General Fund and Economic
Development Fund Lottery revenues by 10% each. - The effective date of this bill is assumed to be October 1, 1991.
Cannot be determined from available information.
The Staff is aware of some preihmary cost estimates done by one of the groups supporting the legislation. The
estimates are not supported by any actuarial work and we believe they are, at best, problematic
FYI990 SCRATCH GAME SALES
INSTANT
ECONOMIC
DEVELOPMENT
Jul. 1989
Aug.
Sep.
Oct
Nov.
Dec.
Jan.
Feb.
Mar.
Apr.
May
Jun.
Conclusion: additional games will cannibalize existing games
INSTANT GAMES SALES
FY85 FY86 FY87 FY88 FY89 FY90 FY91
Fiscal Years
General Fund Economic Dev't
LOTTERY PICK SALES
- .
FY85 FY86 FY87 FY88 FY89 FY90 FY91
Fiscal Year
GENERAL FUND REVENUES
FROM LOTTERY SALES
Fiscal Year
Appendix B
Summary of Blue Cross/ Blue Shield of Arizona's Presentation
on Small Group Markets and the Allocation Method.
Blue Cross
Blue Shield
of Arizona
SMALL GROUP HEALTH INSURANCE
MARKET REFORM
Of the 500,000 Arizonans who are without health insurance, approximately 80 percent are employed
or are the dependents of workers. Most notably, almost 40 percent of those working in a business with
fewer than ten employees are uninsured in Arizona.
While the cost of inrmrance coverage is the primary reason small employers have not purchased an
employee benefit plan, some are unable to pgchase insurance because of factors such as the health
condition of ' their employees, occupation and geographic location. Key problems are:
The overall cost of insurance coverage.
Adverse selection.
Lack of availability of insurance tbrough~~ jedomf w hole grwps or individuals within groups.
Lack of limits on the use of a group's health status or claims experience in setting its rates.
Lack of assurance of continuity of coverage because of a cancellation of high- risk groups by some
carriers.
Blue Cross and Blue Shield of Arizona believes there are a number of private sector initiatives
that would help address these problems and ensure availability and access in the small group
market. They are:
Guaranteed avaj- . .. through the NAIC's allocation model law.
Ratine that restrict carriers' rating practices in the small group market, such as the NAIC's
model act.
Guaranteed rene- that prohibits cancellation of coverage because of poor claim experience.
E- is essential along with the inclusion of Multiple Employer Welfare Associations
( MEWAs) in any reform measures.
. .. && bb of lower cost cover= that can be achieved through exemption of state- mandated
benefits.
Blue Cross and Blue Shield of Arizona is committed to helping Arizonans receive access to
affordable health care services. For more information on these reform programs, we encourage you to
contact our Government Relations department at 864- 4506.
SMALL EMPLOYER ACCESS TO PRIVATE HEALTH INSURANCE
Blue Cross and Blue Shield of Arizona
September 1991
Of the 500,000 Arizonans who are without health insurance,
we know that approximately 80% are employed or are the
dependents of workers. Understanding that the size of the work
place has a direct relationship to uninsured status, we also
know that in Arizona almost 40% of those working in a business
with fewer than 10 employees are uninsured.
While the cost of insurance coverage is the primary reason
cited by small employers as the reason they have not purchased
an employee benefit plan, some small employers are unable to
purchase insurance coverage because of factors other than cost,
including the health condition of their employees, occupation
and geographic location.
Blue Cross and Blue Shield of Arizona believes there are a
number of private sector initiatives that, when coupled with
legislative reform, would help ensure availability and access
to coverage in the small group market.
Problems in The Small G~ OUDM arket.
The problems in the small group market can be tied to two
fundamental issues: adverse selection and the high cost of
coverage.
To understand why health insurance for small employers has
become less available and affordable in recent years, it is
necessary to understand the concept of adverse selection.
Adverse selection occurs when a carrier enrolls a
disproportionate number of people who are higher risk than
average - - that is, people who are more likely to use health
services.
The small group market is beset by adverse selection for
the following reasons:
Small employers, much more than large employers, tend
to purchase coverage because of an immediate or
anticipated need for health care services by the
employer, a family member or an employee. The
employer may drop coverage when that need has passed.
Small employers tend to contribute less toward the
cost of coverage than large employers. As a result,
not all their employees elect coverage. Those that do
elect coverage tend to have more need for health care
services than employees covered by large employers.
Typically, carriers with more liberal enrollment practices
experience an " adverse selection spiral." Their enrollment
practices attract high- risk enrollees who cannot obtain
coverage from other carriers. As a result of the increased
cost of covering these enrollees, the carrier must, in turn,
charge higher premiums. Then, the carrier's lower- risk
subscribers, who can find better- priced coverage elsewhere,
leaves the carrier. When the carrier raises premiums again to
reflect the higher cost of the higher- risk enrollees that
remain, the carrier loses the next lower- risk tier of enrollees
to its competitors. In this way, the risk pool of the carrier
gradually deteriorates over time.
In a competitive market, carriers that accept all small
groups, or have even marginally more liberal enrollment
practices, find themselves with a worse mix of risks-- and
consequently higher premiums-- than carriers than have been more
selective.
To avoid these high risks, some carriers refuse to co
certain groups or individuals within groups. While many
carriers use health status of employees as a basis for
rejection, some carriers also reject groups based on thei
occupation or geographic location, because these factors
perceived as indicators as a group's future utilization.
r
are
Concern about adverse selection has resulted in changes in
rating practices that have made it more difficult for some
small groups to purchase coverage. An early practice of Blue
Cross and Blue Shield Plans was to charge every subscriber in a
given area the same price for coverage-- a practice known as
community rating. In this way, the cost of coverage for groups
with the poorest health risk was kept at the most affordable
level possible. However, under this approach, lower risk
enrollees have only subsidized the cost of higher- risk
enrollees and paid much more than the cost of services they
received.
As competition increased in the health insurance market,
commercial carriers began to offer experience- rated coverage
for larger employers. That is, they began to set premiums for
large groups based on those groups' own costs. This meant that
for the first time, lower risk groups could purchase coverage
from other carriers at premiums more closely reflecting the
cost of their own employees.
This phenomenon occurred first among large employers who
had become increasingly unwilling to subsidize the coverage of
other groups. Experience rating represented the first step
towards segmentation of the health insurance market and the
loss of subsidies for the less stable parts of the insurance
market.
The passage of the Employee Income Retirement Security Act
of 1974 ( ERISA) gave large employers another opportunity to
lower their health benefit costs by providing incentives to
drop insurance in favor of self- funding their health benefits.
In this way, employers could avoid costs of state regulation,
including mandated benefit and provider laws, premium taxes and
subsidies of state risk pools. These incentives further
segmented the health insurance market and eliminated almost all
remaining cross subsidies. Currently, 40% of the group health
insurance market is self- funded.
Until recent years, most carriers used community rating
with demographic adjustments or limited experience rating in
setting rates for small groups. The demographic factors used
to adjust community rates include age, sex, geographic location
and sometimes occupation.
By adjusting community rates to account for these factors,
more competitive premiums could be offered to some
subscribers. For example, on average, 55- year old males cost
four times as much to cover as males under age 30. Carriers
might balance the need to keep premiums attractive for younger
subscribers with the need to keep coverage affordable for older
subscribers by setting the premiums for the younger subscribers
at half the price available to the older subscribers. These
demographic adjustments do not reflect actual health experience
of individuals or groups. Rather, they will reflect the
historical health care utilization of males and females of
younger and older people, of people living in different areas
and engaged in different occupations.
Carriers with a disproportionate number of high- risk
enrollees need to make these kinds of adjustments to be able to
offer competitive premiums. And by attracting and keeping a
good mix of risks in the insurance pool, carriers are able to
keep premiums affordable for high risk enrollees.
However, the prevalence and intensity of experience rating
has accelerated in the small group market in recent years,
thereby placing the price of coverage out of reach for some
high- risk groups. This change has been propelled by the same
interest as in the large group market-- namely, the demands of
employers for lower premiums. And as overall health care costs
have risen, so too have these demands, resulting in a wide
range of premiums that can be charged to small groups. While
these wide spreads make coverage more affordable for low- risk
groups, they also result in premiums for some groups that are
unaffordable.
Carriers' renewal practices in the small group market also
have evolved over time. While it once was very uncommon for a
small group to be dropped from coverage be, cause of poor
experience, many carriers now routinely refuse to renew small
groups for this reason. These groups may be unable to obtain
other insurance coverage if they are considered too high risk
to insure.
Similarly, some carriers have entered the small group
market in Arizona only to leave it as soon as profit reaches
potential. In the more than 50 years Blue Cross and Blue
Shield of Arizona has provided insurance coverage to Arizonans,
the company has witnessed competitors cancel whole blocks of
business.
While some current enrollment rating and renewal practices
create coverage problems for small employers, many more small
employers have difficulty purchasing insurance coverage because
of its cost. In addressing the problem of the underlying cost
of coverage, it is important to understand there are many
components of health care cost increases. These include:
practice patterns of providers, consumer demand for health care
services, new technology, demographic changes, cost associated
with medical malpractice and excess capacity.
In addition, there are other factors that make the cost of
small group coverage in Arizona higher than similar coverage
for large groups, including:
The cost of state mandates. Small employers must
purchase insurance that includes coverage of state
mandated benefit and provider laws which add to the
cost of coverage. In addition, insurance coverage for
small employers also includes the cost of state
premium taxes. Large employers can avoid these costs
by self- funding their health benefits.
A smaller base of employees and premiums over which to
spread expenses. Health insurance contracts entail
certain fixed expenses, such as enrollment and
marketing costs, resulting in higher expenses as a
percent of premium for small groups.
High turnover of small group contracts. Carriers tend
to lose 3% to 5% of small group enrollment per month.
This is due in part to the marginal profitability of
small business, which results in high failure rates.
High turnover also leads to higher administrative
costs because groups that drop coverage frequently
leave before a carrier can fully recoup the cost of
enrollment.
In summary, the key problems in the small group market are
as follows:
0 The overall cost of insurance coverage.
Lack of availability of insurance, which arises
because some carriers reject whole groups ( or
individuals within groups) because of health status,
occupation or geographic location;
Lack of coverage that limits the use of a group's
experience on health status or claims experience in
setting its rates; and
Lack of assurance of continuity of coverage because of
a cancellation of high- risk groups by some carriers.
BLUE CROSS AND BLUE SHIELD OF ARIZONA SUPPORTS A VARIETY OF
PROGRAMS TO ADDRESS EACH OF THE PROBLEMS OUTLINED ABOVE.
1. Guaranteed Availability. Blue Cross and Blue Shield of
Arizona supports guaranteeing the availability of private
coverage for all employers by establishing a program that
will require each carrier to accept its fair share of
employers that have been turned down for coverage in the
marketplace. We believe that the model law being
considered for adoption by the National Association of
Insurance Commissioners ( NAIC) that ensures small group
access to coverage by allocatinq risks among insurance
carriers meets three critical criteria: ( 1) Risk
management; ( 2) Minimize financial impact; and ( 3)
Marketplace equity.
2. Ratina reforms. Blue Cross and Blue Shield of Arizona
supports imposing restrictions on carriers' rating
practices in the small group market, such as those recently
adopted by the NAIC in the Model Act on Premium Rates and
Renewability of Coverage for Health Insurance Sold to Small
Employers.
The NAIC model addresses the problem of risk- based rating
which, as noted earlier, can result in rates that are
unaffordable for some small groups. The rating reforms do
not limit the use of demographic adjustments but they do
limit the extent to which a group's own experience can be
used in setting its rates. In this way, carriers abilities
to set rates that more closely reflect a group's experience
will be balanced with a need to subsidize the rates for
higher risk groups.
3. Guaranteed renewability. We also support the NAIC Model
Act's prohibition against cancelling coverage of groups
because of poor claim experience.
4. Enforcement. We believe adequate enforcement is essential
to the success of any of these approaches. Of particular
importance is the inclusion of Multiple Employer Welfare
Associations ( MEWAs) in any reform measures, If these
entities were not subject to market reforms along with
other carriers, more and more of the insured small group
market would be encouraged to move to these entities and
thereby render any " reform" largely meaningless.
5. Availabilitv of lower cost coveraae. In response to the
high costs of small group coverage, we strongly support
state legislation to exempt insurance sold to small
employers from state- mandated coverage, benefit and
provider requirements. And we believe that the insurance
industry has a responsibility for developing lower- cost
products for small employers.
Appendix C
Summary of Risk Pool Features from 25 S t a t e s t h a t have
Implemented a S t a t e High Risk Pool Program.
RISK POOL FEATURES
C- aJ iforn i a :
Active: 1991
X oaid bv insured: tba
Fundins: cigarette and tobacco oroducts surtax = und
Limits: 530 aillion cap
Cost oer member: tDa
Colorado:
Active: 1991
g paid by insured: tba
Funding: income tax surcharae of 8 2 if income over SlS. 000
Limits: 3 years for fundinq aechanisrn
Cost per member: tSa
Note: Em~ lovers are rqauired to contribute the same
amount for an em~ lovee in the ~ o o l as their other
workers .
Connecticut
Active: 1976
X paid by insured: 39%
Fundins: assessments to insurance industrv
Limits: $ 250 benefits for normal labor/ delivery
Cost per member: $ 5267
Note: Includes non- risk policyholders.
Florida:
Active: 1983
X paid by insured: 5 3 X
Fundins: oeneral fund/ assessments to industrv
Limits: capped enrollment
Cost per member: $ 3929
Georqia
* not yet active
Funding not decided upon
Limits: annual cap of $ 100,000 in individual benefits
Cost per member: tba
Illinois-
Active: 1989
X paid by insured: 37%
Funding: general fund
Limits: cap on membership @ 4500
Cost per member: $ 3 1 3 1
Note: Includes non- risk policyholders.
Xnaipn- a
Active: 1982
X paid by insured: 51X
Fundina: assessments to insurance industry w/ tax credits
Limits: transplant benefits limited
Cost Der member: $ 5328
I-!-?? 2
Active: 1987
X paid by insured: 65X
Fundina: assessments to insurance industrv w/ tax credits
Limits: maternitv is outional.
Cost per member: $ 3571
Louisiana
% not yet active
Funding: daily hospital surcharge of Sl outpatient $ 2 inpatient
for insured patients + lottery if enacted
Limits: tba
Cost per member: tba
M A n- e
Active: 1988
X paid by insured: 37%
Funding: assessment of. al1 Maine hospitals
Limits: membership cap @ 600
Cost per member: 63476
Minnesota
Active: 1976
X paid by insured: 50%
Funding: assessments to insurance industrv
Limits: PPO
Cost per member: 62016
Miss i ss- ipp._ i_
* not yet active
Funding: health insurer $ 1 per member per month assessment,
except governments
Limits: tba
Cost per member: tba
Missouri
tnot yet active
Funding: assessments to insurance industry w/ tax credits
Limits: PPO
Cost per member: tba
Monta& a_
Active: 1987
X paid by i n s u r e d : 96Z
Fundins: assessments t o i n s u r a n c e i n d u s t r v for l o s s e s
L i m i t s : no alcohol or ? ruff t r e a t m e n t b e n e f i t s
Cost p e r member: 52166
N&; as_ k_ a_
Active: 1986
% paid by i n s u r e d : 51%
Fundins: assessments t o insurance i a d u s t r v w/ tax c r e d i t s
L i m i t s : P? O
Cost per member: 53004
New Mexico
Active: 1988
X paid by i n s u r e d : S l y
Funding: assessments to i n s u r a n c e i n d u s t r y w/ tax c r e d i t s
L i m i t s : m a t e r n i t v b e n e f i t s o p t i o n a l
Cost per member: $ 4289
Note: Employers must pay t h e same amount as t h e i r non-r
i s k workers to t h e pool and provide same b e n e f i t s t o
h i s h r i s k worker's dependents as o t h e r dependents.
North Dakota
Active: 1982
X paid by i n s u r e d : 57%
Funding: assessments to i n s u r a n c e i n d u s t r v w/ tax c r e d i t s
L i m i t s : c h i r o p r a c t i c o p t i o n a l
Cost per member: $ 2702
O r eqon
Active: 1990
X paid by i n s u r e d : 4 7 X
Funding: g e n e r a l fund s t a r t up, t h e n assessments t o i n d u s t r y
L i m i t s : $ 2 m i l l i o n e x p e n d i t u r e l i m i t
Cost per member: $ 2359
S. Carolina.
Active: 1990
X paid by i n s u r e d :
Funding: assessments t o i n s u r a n c e i n d u s t r y w/ tax c r e d i t s
L i m i t s : $ 5 m i l l i o n c a p , A I D S excluded
Cost per member: $ 1 610
Tennessee
Active: 1987
X paid by i n s u r e d : 76%
Funding: g e n e r a l fund and a s s e s s m e n t s t o i n s u r a n c e i n d u s t r v
L i m i t s : $ 3 m i l l i o n cap/ 2 y e a r s
Cost per member: $ 3459
- T - e- x- a- s
* not yet active
Fundinq: assessments to insurance industrv
Limits: 12.5% cost limit for administration and fees
Cost per member: tba
Utah
Active: 1991
X paid by insured: tba
Funding: seneral fund start up costs then self fundinq
Limits: $ 2 million start un
Cost per member: tba
Note: Em~ loyers must contribute same amount for a hiqh
risk worker as for their other workers.
Washincrton
Active: 1981
X paid by insured: 57%
Fundins: assessments to insurance industry w/ tax credit
Limits: n/ a
Cost per member: $ 2965
W i scong. 12
Active: 1981
X paid by insured: 461
Funding: assessments to insurance industry wlqeneral fund subsidy
Limits: n/ a
Cost per member: $ 2481
Note: Low income policvholders receive a subsidy.
Wyomins
Active: 1991
X paid by insured: 192
Funding: assessments to insurers witax credit under $ 1 million
Limits: sunset provision June 1995
Cost per member: $ 1153
Data source: Aaron Trigpler, Communicating for Agriculture
Compilation: Raena Honan, ARC
lSTATB GROUP ADM P9E ADD TOTAL DEDUT POCKET PLANS OPT LIMIT MAXIMLIM
PER PER PER HIGH
FIORI CIA 5834 4 7 4 I n 0 7 1 ? ? a 2 2314686 .? n(? fj ! 511~ 1 !. N v 5 ( 11 ( 1 I:] I' (: I
GEORGIA% n 0 i? !. I 11 - 15ni- 1 : ! O O ~ I I N Ti 5 1.1 11 o ( I 1- 1 u ILLINOIS 4 370 396 27 35 4279 32 381700 100(: 1 2511f: 1 ? N Y 5 0 0 0 0 0
INDIANA 3080 2 3 2 2720 2376 164102411 1500 25130 1 N V d [:!
LOUISIANA* O 0 !. I (: I I) 2 11I:) ( I cr : 1 N Y 5 I:) I:] (: I 1.1 I I
APNE 400 324 I 2 9 1 ! Y71 1 3 8 0 4 0 f I 500 1500 1 N Y 5 0 ( 1 0 C'I ( 1
EW MEXICO 130 3 169 21 91 1929 5585567 1 2f! 00 1 Y N A(!
NO DAKOTA 1 6 5 6 1 2 3 1 5 5 3 1026 4 4 7 4 5 1 2 1000 3000 ! V Y 2 5 I:) !: I I:) i:)
121 1 309 11 00 950 2556749 SO0 5000 2 N Y 5 0 0 0 0 n
ISCONSIN 9287 160 1137 1 1 8 4 2 3 0 4 1 0 4 7 1000 2000 % N N 5000Qrl
i YOMING 94 7 3 220 860 ' 1 0 8 3 8 2 2000 3000 1 N Y 2 5 1:) ( 1 ( I [ I
Appendix D
Summary of the Purpose, Restrictions and Requirements of the Title
I1 HIV Care Grant Program o f the Ryan White Comprehensive AIDS Resources
Emergency Act o f 1990.
THE TITLE II HIV CARE GRANT PROGUM OF THE C. A. R. E. ACT
The Ryan White Comprehensive AIDS Resources Emergency ( C. A. R. E.) Act of 1990 ( Public
Law 101- 383) adds a new Title XXVI to the Public Health Services Act ( 42 U. S. Code 300ee
et seq.). The C. A. R. E. Act has four Parts. Part B provides assistance to States under what is
commonly referred to as the Title 11 HIV Care Grant Program. Title I1 is administered by the
Bureau of Health Resource Development ( BHRD), Health Resources and Services Administration
( HRSA), Public Health Service ( PHs), Department of Health and Human Services ( DHHS).
At the State level, the statute specifies that Title I1 programs are to be administered by the State
public health agency.
TITLE I1 FUNDING PURPOSES -
Title I1 provides financial assistance to States to enable them to improve the quality, availability
and organization of health care and support services for individuals and families with HIV
disease. States may use funds to:
1) Establish and operate HIV care consortia within areas most affected by HIV
disease that shall be designed to provide a comprehensive continuum of care to
individuals and families with HIV disease, in accordance with the provisions
specified in the Section 2613, Grants To Establish HIV Care Consortia;
2) Provide home- and community- based care services for individuals with HIV
disease in accordance with the provision specified in Section 2614, Grants For
Home- and Community- Based Care;
3) Provide assistance to assure the continuity of health insurance coverage for
individuals with HLV disease, in accordance with the provisions in Section 2615,
Continuum of Health Insurance Coverage; and
4) Provide treatments, that have been determined to prolong life or prevent serious
deterioration of health, to individuals with HIV disease, in accordance with the
provisions specified in Section 2616, Provision of Treatments.
States may use funds awarded under Title 11 only for the specific program components described
above as defined in the C. A. R. E. Act. States are not required to implement all four of these
program components.
CONTWUUM OF HEALTH INSLXANCE COVERAGE
Pun> ose: A State is permitted to use funds to establish a program of financial
assistance to assist eligible low- income individuals with HIV disease to:
1) Maintain a continuity of health insurance; or
2) Receive medical benefits under a health insurance program, including risk
pools.
Restriction: A State is permitted to use funds to pay:
1) Any costs associated with the creation, capitalization, or administration of
a liability risk pool ( other than those costs paid on behalf of individuals
as a part of premium contributiuns to existing liability risk pools); and
2) Any amount expended by a State under Title XIX of the Social Security
Act.
ReauirementS; A State which intends to use Ryan White Title H funds to continue
health insumee coverage must demonstrate to HRSA that it has established a program
which assures that:
1) Funds will be targeted to individuals who would not otherwise be able to
afford health insurance coverage; and
2) Income, asset and medical expense criteria will be established and applied
by the State to identify those individuals who qualify for assistance.
Information concerning these criteria will be made public.
INFORMATION - ABOUT
- THE - AIDS DEMONSTRATION PROJECT
Private insurance provides a first line of defense for most individuals Fn
meeting most health care costs. Tho State of Florida rppropriaeed general
revenue funds for the demonstration of Stata funding of privacm heaith Lnsur-ance
premiums for people who are HIV nymptomatic or have AIDS, As pmople who
are HIV symptomatic or have AIDS bacome too incapacitated to work, loss of
employment could jeopardize their ability to pay for thdr ovn haalth insurance
premium through thair employer ( Croup/ COBRA) or a privately purchased ( individ-ual)
policy.
The AIDS fnnurance Demonaeration Projmct ( AIDP) i s svaflablo for rssldants of
Broward and Monroe Counties. The AIDP is being implemented through r Cormunity
Based Organization ( CBO) in onch of tho two counties. Center On* in Broward
County and AIDS Help in Monroe County will be raaponaible for the collection of
information roquired for participation and for the paymane of premiums to
insurance carriers. ( The maximum assintance available is $ 500/ month/ partici-pant.)
Center One and AIDS Help are both not- for- profit CEO. that play an
active role in ~ roviding their community'r AIDS/ HIV symptomatic population with
an assortment of services ranging from case management to intaka, social and
financial counseling. Ufth thasa renourco* at hand, each rgancy is equipped to
assess eligibiliry for the AIDS Innuranca Damonstration Project.
In addition to having a diagnosis o f AIDS or being HIV symptomrtic, partici-pants
in the AIDP must also meet the following criteria:
* suffer a loss of their principal employment;
* currently have health insuranca caveragcfunder a group,
individual or COBRA policy;
* have a household income equal to or lass than $ l, Ob9/ month ($ 1,605
for a family of two) ;
* have cash assets equal co ot less than $ 4,500 ($ 5,500 if
married) ;
* ba villing to sign r Release of Infomrtfon Statement, a
Physician's Statement of Diagnorio and Employability and
tho Applicant's Data Collaction form.
Health Council of South Florida, Inc. ( HCSF) is responsible for tho administra-tion
and evaluation of tha AIDS Insurance Demonstration Project. HCSF if a
voluntary, not- far- profit corporation seiving Dade, Broward and Monroe Coun-ties.
The purpo~ 4 af the Council is to providr affactive health planning for
the area by promoting development of health sarvicea, manpower and facilities
which meet identified health nee& in cost effective manner, reduca i n e f f i -
ciencies and implement the area health plan.
( continued)
Form UAIbP- 01
REV 8/ 90, 2/ 91
Research and lnvestlgatlon carried out by the HCSF staff found that similar
programs, operatad by the Department of Social Services, are currently Fn
I-various
stages of development in other states across the country, such as
Michigan, New York and Washington. Although not a now concept, Florida is tha
first otata to lmplornent this type of program through Community Based Organiza-
I
tions which are usually the first source of assiocance to persons who are HIV
symptomatic or have AIDS.
If you are a rasident of Broward or Monroe County and Lnterested in p a r t i c i p a t -
ing in the AIDS Insurance Damanstration Project, you may contact:
CENTER ONE AIDS HELP. ZNC.
2518 Wart Oakland Pk. Blvd. P. 0. Box b37h
Ft. ku& r& fe, FL 33311 vest, n 33041
AIDS INSURANCE ASSISTANCE PROGRU
PROCRAM DESCRIPTION
INTROOUCTION
The AIDS Insurance Assistance Program is a pilot program operated
by the Michigan Department of Social Services ( MDsS). The
program is designed to a s s i s t people who, because of AIDS related
disease, are unable to continue wqrking, and thus may lose their
health insurance.
The program will assist any qualified person to pay for any
health insurance they have. The progrm does not purchase or
provide insurance for people who do not have insurance to start
with.
. C
~ h~ program began October 1. 1989 in Wayne, Oakland, and Macomb
counties '
LEGISLATIVE BACXGROUND
Section 1626 of the DSS Appropriation Act for FY 88/ 89 ( Act 322
of the Public Acts of 1988) required the following:
" The department of @ ocial service3 s h a l l develop a* proposal ta
identify potential medicaid recipients who test HIV positive and
pay their insurance premiums so that they can maintain their
health insurance policies. The proposal s h a l l be approved by the
house and senate appropriations committses before being
implemented."
A proposal was developed by the Department of Social Services,
and received legislative approval on May 30, 1989.
SIZE OF TARGEZ POPULATION
The target population is those persons who, because of HIV
related disease, may soon be unable t o continue working, and thuq
may lose health insurance provided either through an employer, or
privately ' purchased. With no insurance, and high medical bills
most of these would soon become Medicaid e l i g i b l e . These are
persons for whom it would be cost effective for the State to
maintain insurance.
The size of t h e population can be estimated using Michigan
Department of Public Health ( MDPH) data regarding the number of
full blown AIDS cases expected to appear in the future. It can
be assumed that virtually all those with full blown AIDS are too
ill to work, however in the fairly recent paat they would have
been, although suffering from HIV related disease, still able to
work. We thus estimate the target population for a point in time
by looking at how many full blown cases are expecteC twel. ve
months later. 1 .
#
The target population is those persons with AIDS, with insurance,
who would have become Medicaid eligible. To estimate its size we
take the expected number of Medicaid eligible AIDS cases, and
reduce it to account for cases that pcobably had no insurance.
Data to do this are as follows:
1. MBSS data indicates that about 50 percent of all AIDS
cases become Medicaid eligible.
2. MDPH data indicate that IV'dtug use accounts for about 28
percent of total cases. We aSsume that these cases never
had insurance, and all went on to become Medicaid
eligible. I
3 . MDPH data indicate that pediatric cases account for two
percent of a11 eases. We assume that half of there become
~ edfcafde ligible but would have had no insurance to s t a r t
with. Pediatric cases who have insurance would have it
through a parent, and would not be in a position to lose
employment based insurance.
4. MBPH data indicate that about 4 percent of total ca3es had
an undetermined transmission mode. We assume half of
these case3 went on to become Medicaid eligible, and of
the Medicaid eligibles, half had no insurance.
Tnuhme betra rgoeft cpaospeusl aatnido nr emcoavni ntgh uts hboes ee wsthio mwaetreed eb I thteark innogn - tMheed itcoatiadl
( SO%), I v drug users ( 2 8 1 ) , pediatric without insurance ( 1%), or
undetermined transmission mode without insurance ( 1%). The
result is to remove 80 percent of total cases. Or conversely,
.
the estimated target population equals about 20 percent of new
AIDS cases.
The total program population will equal new cases, plus cases
that were eligible from previous time periods. For 1990 we
assume that a l l the 1989 eligibles will continue. We assume that
half of 1990 e l i g i b l e s will survive into 1991. Total estimated
program population is as follows:
ESTIVATED
SIZE OF TARGET POPULATION
( 2 )
Size of
Target cases
New .. Population
Total
Carried
AZDS ( Cola 1 from)
Program
Over From
YEAR cases* Next year . Previous ( CPoolp.. 2 +
X . 2 ) Year Col. 3 )
*~ ased on MDPH projections. New Cases equals the average of the
MDPH pessimistic and optimistic projections multiplied by 70%.
bout 70% o t statewide cases occur in Wayne, Oakland, and Macomb
counties.
** The program begun October 1, 1989 80 we have assumed only one
quarter of the annual target population would appear in 1989.
The number 31 equals 628 X .2 X .25
COST ANALYSIs
Average total Medicaid cost of treating a patient with AIDS is
approximately $ 1,600 per month. The monthly premium cost for
private insurance will vary greatly depending on the coverages.
However, the price for an individual to participate in the State
Health Plan available tor state employees is approximately
$ 135.00 per month.
FOK the buy- in concept to be cost effective for the State, the
state must avoid buying in for too many individuals who either
would have maintained coverage at their own expense, or
individuals who would have been forced to spend- down their own
assets before qualifying for Medicaid.
m he table below indicates tho approximate maximum cost of the
program, and also what eavings would occur if the program
suc~ essfullyjavoided Medicaid expenditures for the target
population.
COST ANALYSIS
INSURANCE ASSISTANCE PROGRAM
COST PROJECl'IONS FOR EXPANDING PROCRAM STATEWIDE
Current Number pf. Potentia1 E l i g i b l e s Statewide
As of 6/ 6/ 90 there were 41 people enrolled i n tho program,. Data
from the Department of Public Health indicates t h a t about 70
percent of a l l cases of 410s are in Wayne, Oakland, and Macornb
counties. Absuming that t h e 4 1 people represent 70 percent of the
statewide number, statewide enrollment would be about 59 people.
~ h onu mber would probably be somewhat higher than this becauee
persons who contract AIDS v i a Iv drug use are probably more
concentrated in Goutheaat Michigan than outstate. We have asaumgd
t h a t these persons tend not to qualify for the program because they
are less likely to have insurance to start with* The t o t a l nunbsp
sf potential eligibles in the rtate may therefore be about 65,
guture Number og, ELfgiblee S t 8 tawide
TO date cnroflrnent levels have grown b r about fivo peraons per month. If we assume this repredents on y 70 percent of possible
growth, then possible growth would be about reven people per month.
During the next twelva months enrollment could therefore r i b s to
about 100 people statewide*
Sav ing- e *
- 4
Assuming there are 100 eople in the program per month, total
monthly savings would be ! 135,796, or ennual'total savings of $ 1,6
million, ' Ithe State savings would be $ 5d, 784 pot month, and
$ 621,408 per year.
Total enrollment as of 6/ 6/ 90 is 4 1 peoph. Since t h e program
began 10/ 1/ 89, four enrollees have died, and two have returned to
work. One enrollee moved out of utate and thuo wag diacnrolled.
Total. amount paia for premiums ir $ 38,415.84
COSY EXPERIENCE, NOVEMRER 89- APRIL 90
We have used o conservatFve and simple method of assigning caete
based partly on self reporting and partly On the services uniformly
needed by a person with AIDS. While this method does not reflect
the true experience of the progtarn, it clearly demonstrates the
positive benefit to coat r a t i o . The d e t a i l s of the methodology are
described in t h e attachmenkt
Each person in the program is required to submit a monthly report
form identifying medical servicaa they obtained and describing
their financial status* During the months from Novembor through
April we received 104 m~ nthly report forms from 29 people. This
repreeented a return rate of about 75 percent.
The ra art forms indicate t h a t 23 of theae people would have been
Mcdica ! d e ligible, and six would not., The cost analyaia assumes
that without the Insurance Assistencs Progtam, Medicaid wouLd have
paid for the care received by Medicaid oligible persane,
The tesulta for the 104 person months are as followrt
AZT/ Dr , tab. I PH Other Total
Pentarn, V i r i t s
Total $ 28,678* 78 $ 2,093* 50 SBt700 $ 115,101 $ 4,302,50 $ 158,875.70
Costs
Avoided '
Costs $ 275.75 , $ 20.13 $ 83.65 $ 1106.75 $ 41.37 $ 1,527.65
Avoided
pet Per-son
month
Total Premium Payments.- $ 17,647.90
Premium Payments per Person Month - $ 169.69
Total aenefir/ cost Ratio - 9rl ( i S r h 1 , 5 2 7 . ( 6 s / 6169.69)
Benefit/ Cost Ratio on State - 481 ( i. e .45 * $ 1,527,65 / $ 169.69)
Dollars
Total Savings per Person Month - $ 1,357.96 ( i. e. $ 1,527.65 - $ 169,691
Total State Savings - $ 517.84 ( i . e .45 * $ 1,527,65 -$ 169.69)
per Person Month
The method of asrigning costs outlined below is strongly bidsed in ehR
direction oE understating costs. Reasons for this include:
- persons who ate the sickest are the most likely not to submit
completed repcrt form. Parti~ ul8riy when they are in th
hoirpi tal- f
- Many incurred costs are not included in tha analysis because t
do so would be very complicnted. For example enrollees report
receiving a wide variet of home, health 8arvices, but it i
difficult to know which o 1 these would be covered. A wfda v a r i r e l
of prescriptions, radiology services and emergency room eervice3
are reported, Again; it is a complex matter t o aeaign a cost t
these. P -
Costs ere assigned as follows1
AZT; For v i r t u a l l y each eligible we know from diract contact they a t I taking AZT. Average monthly Medicaid per petson Cart for AZT bs
$ 225.52. This amount is included for every person for each month.
I Pentamidine: Many of the eligiblor report use of pentamidine. Average
manthly Medicaid payment for pentamidine is $ 117.56. Thf8 amount i
included for each petson that reports use of pentamidin@,
Eabt Cost of lab work is estimated at $ 100 per month, This is the
cost ~ f basic lab work that should be done each month for a person wit
AIDS I
Physician services: Each re orted physician service is priced base
on th4 Medicaid scroen of $ 1 g .60,
Inpatient Hospital: klospital services are pilcod barcd on the typica
Medicaid payment per discharge for treatmefit of AIDS related dircaac
For peraons who died and did not submit s report form during the mont
the average admission.
of death we have included a hospital admission of one half the cost of n li
other: In ~ t t s a s where rubstantial incurred coats are reported i n a
category not listed above ( e. g. outpa- tiant surgery) we have include
half the reported cost of the service. e
ARIZONA HIV INFECTION SURVEILLANCE REPORT
Arizona Department of Health Services
Division of Disease Prevention
Oct 1, 1991
Acquired Immunodeficiency Syndrome ( AIDS*) Summary
AduLt/ Adolescent
Cases ( X) Deaths ( X)
Pediatric
Cases ( X) Deaths ( X)
Total
Disease Categoryg* Cases ( X) Deaths ( --.-------------
PCP
Other Disease u/ o PCP
KS Alone
- - - - - - - - - * - * - - -
Total
[ X of a l l casesl
Adult/ AdoLescent
C-- a- s- e- s --( --%--)
1253 ( 84)
62 ( 4)
150 ( 10)
7 ( 01
11 ( 1)
---- 9- (. - 1-) --
1492 ( 100)
Pediatric
C-- a- se- s- --( -- X-)-
6 ( 60)
2 ( 20)
1 ( 10)
O ( 0)
1 ( 10)
.-- O -(-- -- 0- )-
10 ( 100)
Total
Cases ( %) --.--------
1259 ( 84)
b C ( 4)
151 ( 10)
7 ( 0)
12 ( 1)
---- 9- (- - 1-) -.
1502 ( 100)
A- g- e- ----
Under 5
5- 12
13- 19
20- 29
30- 39
40 - 49
Over 49
Unknown
- - * - - - -
Total
C- a- se- s -( - X. I -----
6 ( 0)
4 ( 01
7 ( 0)
363 ( 24)
657 ( 44)
318 ( 21)
147 ( 10)
0 ( 0)
-*--- *---*
1502 ( 100)
3. Race/ Ethnicity .----.-.--.---
Uhite, Not Hispanic
Black, Not Hispanic
Hispanic
Asian/ Pacific 1s.
Native American
Unknown -
---*-.--------
Total
4. Adult/ Adolescmt
Exposure Category Males ( X)
m e - - - - - - - - -
1030 ( 73)
97 ( 7)
157 ( 11)
21 ( 1)
1 4 ( 1)
35 ( 2)
--- 5- 5- ( 4) -.-- a
1409 ( 100)
t 941
Total ( XI
1030 ( 69)
129 ( 9)
157 ( 11)
21 ( 1)
38 ( 3)
54 ( 4)
-. 6- 3 -(- -- 4 .) -.
1492 ( 100)
I Homosexual or bisexual Hen
Intravenous ( IV) drug User
Gay/ li I V drug User
Hemphi L iac
Heterosexual contact
Transfusion with blood/ products
None of the above/ Other .-----.*-------------------
Pediatric
Exposure Category
. - - - - - - - - - - - - - - - . - - - - - * - - * -
Hemophiliac
Parent at risk/ has AIDS/ HIV I Transfusion with bloodlproducts
None of the above/ Other
- - - - - - - - - - - - - - - - * - - - - - - - - - -
Total ( XI
---------- a
3 ( 3 0 )
5 ( 50)
2 ( 20)
O ( 0)
Total I CX of a l l casesl
ncqurred rdmunodeficiency Syndrome ( AIDS)
surveillance Report - 0ct 1, 1991
County of Residence -.----...------------
Apache
Cochise
Coconino
Gila
Graham
Greenlee
La Paz
Maricopa
Mohave
Nava j o
Pima
Pinal
Santa Cruz
Yavapai
Yuma
U- nk- now- n ----------.---
Total
Cases ( % ) --------___
5 ( 41)
12 ( 1)
10 ( 1)
4 ( < I)
4 ( < I)
1 ( < I)
3 (
1118 ( 74)
15 ( 1)
4 ( < I)
272 ( 18)
13 ( 1)
4 ( < I)
15 ( 1)
21 ( 1)
-- 1 -( <- 1) -----.-
- 1502 ( 100)
D- e-- a- t- h- s
2
5'
5
3
1
0
2
641
7
2
143
10
0
10
12
0
------.
843
1990 Census
P- o- p- u- l- a- t- i_ o_ n -
61,591
97,624
96,591
40,216
26,554
8,008
13,844
2,122,101
93,497
77,658
666,880
116,379
29,676
107,714
106,895
------ N-/- A-
3,665,228
Case
Rate***
-- we-
8.12
12.29
10.35
9.95
15.06
12.49
21.67
52.68
16.04
5.15
40.79
11.17
13.48
13.93
19.28
N/ A
-'----
40.98
6. Reported Cases of RIDS and Case- Fatality Rates by Half- Year of diagnosis.
Half - Year Number of Number of Case- Fatality
of Diagnosis Cases Deaths Rate ------------ --------- --------- ------------- Before 1980 ,.
1980 Jan - June
July- Dec
1981 Jan - June
July- Dec
1982 Jan - June
July- Dec
1983 Jan - June
July- Dec
1984 Jan - June
July- Dec
1985 Jan - June
July- Dec
1986 Jan - June
July- Dec
1987 Jan - June
July- Dec
1988 Jan - June
July- Dec
1989 Jan - June
July- Dec
1990 Jan - June
July- Dec
1991 Jan - June
July- Oct 1 ------------
Totals
. -
* Only cases meeting CDC 1987 criteria are included. ** KS- Kaposi Sarcoma, PCP= Pneumocvstis carinii pneumonia
*** Per 100,000 population based on 1990 Census.
Under 5
5- 12
13- 19
20- 29
30- 39
40 - 49
Over 49
Unknom
* - - - - - -
Total
C-- a- s- es- --( -- X-)-
1 ( 0)
3 ( 1)
2 ( 1)
133 ( 33)
151 ( 38)
83 ( 21)
26 ( 7)
---- 0- -( - 0-) .-
399 ( 100)
ARIZONA HIV INFECTION SURVEILLANCE REPORT
Arizona Department of Health Services
Division of Disease Prevention
OCt 1, 1991
AIDS RELATED COMPLEX ( ARC) Summary
Adult/ AdoLescmt
Exposure Category
-------------*---*---.*----
Hwsexual or bisexual Men
Intravenous ( I V ) drug User
Gay/ Bi IV drug User
Hemophiliac
Heterosexual contact
Transfusion with blood/ products
None of the above/ Other
- - - - * * - - - - - - - - - - - - - - - - - - - - -
Total
2. Race/ Ethnicity -------.-.-.--
Uhite, Not Hispanic
Btack, Not Hispanic
Hispanic
Asian/ Pacific Is.
Native American
Unknoun ----.--.------
Total
AduLt/ Adotescent
Cases ( X) -.--.-.----
337 ( 85)
16 ( 4)
36 ( 9)
0 ( 0)
4 ( 1)
----- 2 -( --- 1-)
395 ( 100)
Males ( X)
- - - - - - * - * * -
262 ( 73)
27 ( 8)
30 ( 8)
6 ( 1)
1 ( 0)
6 ( 2)
--- 2- 7- (- -- 8-- 1
357 ciao)
I 901
Exposure Category ---.*---.----------.---.---
Hemophi Liac
Parmt at risk/ has AIDS/ HIV
Transfusion with blood/ products
None of the above/ Other .-----------------------*.-
Total
[ X of a l l cases1
M. a- le. s. (. - X-)- .--
3 ( 100)
0 ( 01
0 ( 0)
---- O- ( 0) .--*-
3 ( 100)
Z 751
Pediatric
C-- a- se- s- --( -- X--)
4 ( 100)
0 ( 0)
0 ( 0)
0 ( 0)
0 ( 0)
.-- 0 -( - 0 )
4 ( 100)
Total
Cases ( X )
T-- o- t- a- l- -( -- X--)
262 ( 66)
4 ( 11)
30 ( 8)
4 ( 1)
9 ( 2)
16 ( 4)
--- 3- 0- -( - - 8-)-
395 ( 100)
Total ( X)
-*----.-.--
3 ( 75)
O ( 0)
1 ( 25)
---- O- (. - 0-) --
L ( 100)
AIDS RELATED COMPLEX ( ARC)
Surveillance Report - Oct 1, 1991
4. County of Residence
------------- e-----
Apache
Cochise
Coconino
Gila
Graham
Greenlee
La Paz
Mar icopa
Mohave
Nava j o
Pima
Pinal
Santa Cruz
Yavapai
Yuma
C- a- s- e- s- --( -%- --)
1 ( < I)
8 ( 2)
0 ( 0)
0 ( 0)
2 ( 1)
0 ( 0)
0 ( 0)
320 ( 80)
0 ( 0)
0 ( 0)
61 ( 15)
3 ( 11
D- e-- a- t- h- s
0
0
0
0
0
0
0
3 1
0
0
7
0
1990 Census Case
- P- o- p- u- l- a- t- i- o- n R- a- t-- e-* **
61,591 1.62
97,624 8.19
96,591 0.00
40,216 0.00
26,554 7.53
8,008 0.80
I
U- n-- k- n- o- w- n- --------- ---- 0- -( --- 0-)- -- 0. ------- --- N-/ A- - N--/ A- -
Total a 399 ( 180) 38 3,665,228 10.89 I
5. Reported Cases of ARC
Half - Year
o- f- - D- i- a- g- n-- o- s- i- s
Before 1980
1980 Jan - June
July- Dec
1981 Jan - June
July- Dec
1982 Jan - June
July- Dec
1983 Jan - June
July- Dec
1984 Jan - June
July- Dec
1985 Jan - June
July- Dec
1986 Jan - June
July- Dec
1987 Jan - June
July- Dec
1988 Jan - June
July- Dec
1989 Jan - June
July- Dec
1990 Jan - June
July- Dec
1991 Jan - June
July- Oct 1
Totals
and Case- Fatality
Number of
-- C- a-- s- e- s- -
0
0
0
0
0
0
1
0
0
2
0
0
23
2 3
2 1
38
28
42
67
52
42
23
17
17
--------- 3
399
Rates by Half- Year of Diagnosis.
Number of Case- Fatality
-- D- e- a- t- h- s- - ---- R- a-- t- e- ----
* Case rate per 100,000 based on 1990 Census I
ARIZONA HIV INFECTION SURVEILLANCE REPORT
Arizona Department of Health Services
Division of Disease Prevention
O C ~ 1, 1991
HIV INFECTION - ASYMPTOMATIC
1. Age Cases ( X)
.-----* -----------
Under5 1 2 ( 0)
5- 12 6 ( 0)
13- 19 45 ( 2)
1 20- 29 1042 ( 35) 30- 39 1008 ( 34)
40- 69 399 ( 13)
Over 69 133 ( 4) I U. n- kn- ow. n- ---- 3- 3- 4- (. - 11- --
Total 2979 ( 100)
2. R- a- ce-/ E- th- ni- ci- ty --.---.
Uhite, Not Hispanic
Black, Not Hispanic
Hispanic
Asian/ Pacific Is.
Native American
U- n- kn- on. n ---.------
Total
AduLt/ AdoIescmt
Cases ( X) ---------.-
1918 ( 65)
246 ( 8)
368 ( 12)
11 ( 0)
35 ( 1)
383 ( 13)
--*-- .----
2961 ( 100)
Pediatric
Cases ( X)
a*--.------
11 ( 61)
4 ( 22)
0 ( 0)
0 ( 0)
2 ( 11)
---- 1- -( -- 6-)-
18 ( 100)
Total
Cases ( X) ---------.-
1929 ( 65)
250 ( 8)
368 ( 12)
11 ( 0)
3 7 ( 1)
-- 3- 8- 6- -( - 13.) --
2979 ( 100)
I 3. Adult/ Adolescent
Exposure Category
. - - * - - - - - * - - - - - - - - - . - - - . - - -
Homosexual or bisexual Hen
I Intravenous ( IV) drug User
Gay/ Bi IV drug User
Hemophi 1 iac
Heterosexual contact
Transfusion with blood/ products I None of the above/ Othere
Total
[ X of a l l casesl I Pediatric
Exposure Category
I - - - - - - - - - - - - - - - - - - * - - - - - - - -
Hemophiliac
Parent at risk/ has AIDS / HIV
Transfusion with blood/ products
None of the above/ Other
----..-.*--------------*---
Total
[ X of a l l casesl
Males ( X)
Males ( X)
--.-* a*----
3 ( 30)
7 ( 70)
0 ( 0)
0 (. - 0-) --
10 ( 100)
[ 561
Total ( X)
Total ( X)
I This category largely consists of persons who could not bo located/ intervicwed.
HIV INFECTION - ASYXPTOHATIC
surveillance Report - Oct 1, 1991
C- o- u- n- t- y- -- of- - R-- e- s- i- d- e- n- c- e
Apache
Cochise
Coconino
Gila
Graham
Greenlee
La Paz
Maricopa
Mohave
Navajo
Pima
Pinal
Santa Cruz
Yavapai
Yuma
Unknown
Total
C- a- s- e-- s- -( --% --)
5 ( < I)
44 ( 1)
19 ( 1)
4 ( < I)
2 ( < 1)
0 ( 0)
8 ( < I)
1989 ( 67)
26 ( 1)
1 ( < 1)
537 ( 18)
24 ( 1)
4 ( < I)
28 ( 1)
59 ( 2)
229 ( 8)
D-- e- a- t- h- s
0
0
0
0
0
0
0
35
0
0
10
0
0
1
0
----- 2-
48
1990 Census
Population
Case
Reported HIV Infection by Half- Year of Date Tested. m
Half - Year
-- T- e-- s- t- - d- a- t- e- ---
Testdate not reported
1985 Jan - June
July- Dec
1986 Jan - June
July- Dec
1987 Jan - June
July- Dec
1988 Jan - June
July- Dec
1989 Jan - June
July- Dec
1990 Jan - June
July- Dec
1991 Jan - June
----- J- u-- l- y--- O- c- t- - I
Number of Additional***
-- C- a-- s- e- s- - A- n- o- n- y- m- o- u- s- -- C- a- s- e- s
113
10
2 1
49
54
254
426
379
266
267
277
3 12
299
223
-------- 29-
Totals 2979
** Case rate per 100,000 based on 1990 Census *** On March 15, 1989, the option to receive HIV testing anonymously
became available.
January 21, 1992
Senator Cindy Resnick, Co- Chair
Representative Karen Mills, Co- Chair
Joint Health Planning Committee on the Medically Uninsurable
Arizona State Senate
1700 W. Washington
Phoenix, AZ 85007
Dear Senator Resnick, Representative Mills and Committee Members:
The subcommittee on Affordability of Health Care Reform met twice to discuss cost and
its relationship to the availability of health care insurance which is affordable to individuals
as well as to society as a whole.
The subcommittee was unanimous in its concern that major changes must occur in the way
health care services are provided, used, and financed. Insurance reform, although an
appropriate first step, is not sufficient in and of itself to assure the availability of affordable
health care coverage. Therefore, we have compiled the attached list for the committee's
consideration.
We regret not being able to present our findings in person, as we both are out of town.
However, we appreciate the opportunity to present them to the committee and to enter
them in the record.
Thank you very much for the opportunity to participate in this subcommittee.
Sincerely,
~ l i z a b e t h c ~ a r n eCeo,- Chair
Kathy Haake, Co- Chair
Subcommittee on Affordability of Health Care Reform
Attachment
HEALTH CARE REFORM PROPOSALS I
ESSENTIAL ELEMENTS FOR EFFECTIVE, EFFICIENT CARE I
1. A DEFINITION OF BASIC HEALTH CARE BENEFITS
Proposals should define core benefits which emphasize prevention, early intervention, and the
efficacy of diagnostic and therapeutic services.
2. MANAGED, COORDINATED OR ORGANIZED SYSTEMS FOR DELIVERING CARE
Health care delivery arrangements should manage the volume and cost of services used by: a)
reducing the need for care through the promotion of healthy lifestyles among their members and
b) providing only those services necessary and appropriate to achieving a positive outcome from
the care delivered.
3. ADMINISTRATIVE STREAMLINING
Simplify administrative processes. Uniformity of enrollment applications, provider numbers,
credentialing, accreditation, claims forms, and data systems linkages are all keys to achieving a
more streamlined health care administration.
4. INDIVIDUALS EDUCATED ABOUT AND INVOLVED IN MAKING HEALTH CHOICES
Individuals have personal responsibility for choosing behaviors which contribute to their health
and well being and for using only those health care services which are necessary and appropriate.
5. USE OF GUIDELINES FOR CLINICAL PRACTICE m
Practice guidelines should be used to reduce the wide variations in the care provided for the same II
condition when treated by different physicians. Guidelines should define the necessary and
appropriate services required to reach an effective outcome for the patient. Practice of defensive
medicine due to fear of liability should decline with the onset of practice guidelines. Physicians
should foster an ethic of restraint in which they provide the most appropriate and cost efficient
I
care. I
6. COST CONTAINING FINANCIAL INCENTIVES
The financial incentives for payors, providers and consumers must be aligned to assure effective
working partnerships which foster positive patient outcomes through the efficient use of resources. I
7. REALIGNMENT OF SYSTEM WIDE RESOURCES I
The entire health care system must be made more efficient and less redundant. Public policy
should support the appropriate mix and distribution of health care personnel, facilities and
technology. I
JOINT LEGISLATIVE COMMITTEE ON MEDICALLY UNINSURABLE
SUBCOMMITTEE ON ALLOCATION
~ ecommendation: Consideration of the NAIC Small Group Health
Insurance ~ vailability Act by the Arizona Legislature
(" Allocation Program")
at ion ale. Implementation of the Allocation program in ~ rizona
will address the following concerns associated with small
employer group health insurance:
1. Stabilize and moderate rate increases for high cost
small groups who otherwise may be forced to terminate
coverage.
2. Limit and make uniform pre- existing condition
limitations periods within the small group market.
3. Portability. Employees who change employers may go
without coverage for 30 days and not have to satisfy
new pre- existing conditions.
4 . Demands equity in the marketplace. Requires the
private health insurance market to integrate high risk
groups into their larger risk pool according to each
carrier's pro rata market share.
Avoids burdensome and costly administrative
requirements associated with a prospective
reinsurance mechanism.
r Avoids difficult, if not impossible, enforcement
issues associated with prospective reinsurance.
Appendix G
Summary of NAIC Small Group Health Insurance Allocation
Availability Act - Allocation Model.
SMALL EMPLOYER HEALTH INSURANCE AVAILABILITY MODEL ACT
I. Bating and Renewal Standards
The primary effect of the " premium Rates and Renewability
of Coverage for Health Insurance Sold to Small Groupsn
model law would be to limit the range of premiums that can
be charged for small group health insurance based on claims
experience, health status or duration since issue. Limits
would be placed on: 1) group- specific annual increases; 2)
the maximum allowable difference between an insurer's
highest and lowest rates within a class ( block) of
business; and 3) the variation in rates among all classes
of an insurer's small group business.
Definition of Terms
Small group coverage: All group health insurance policies
and contracts issued to small groups with no more than 25
eligible employees.
Insurer/ Carrier: These terms are intended to include
commercial insurers, Blue Cross and Blue Shield plans,
multiple employer trusts, HMOs, discretionary groups,
association groups, Taft- Hartley plans and similar
insurance arrangements.
Class of business: All small group contracts in force with
an insurer will be considered a single class of business
unless one or more of the following requirements are met:
Classes are marketed by clearly different sales forces;
A class was acquired from another carrier;
A class of coverage is provided through an association
with membership of small employers that was
established for a purpose other than obtaining health
insurance; or
A class meets the requirements for exception to the
rating restriction that limits variations in rates
between classes of business ( described below).
Carriers could establish no more than two additional
classes under each of these provisions on the basis of
underwriting criteria that are expected to product
substantial variation in health care costs. Carriers also
could apply to the insurance commissioner to establish a
separate class of business.
Carriers could not involuntarily transfer a group into or
out of a class of business unless all groups in the class
were offered the opportunity to transfer, without regard to
claims experience, health status or duration since issue.
Base premium rate: For each class of business, the lowest
premium rate charged for the same or similar coverage to
any small employer with similar case characteristics,
other than claims experience, health status or duration
since icsue, as determined by the carrier.
New business premium rate: For each class of business,
the premium rate charged or offered for newly issued
coverage that is the same or similar for any small
employer with similar case characteristics, other than
claims experience, health status or duration since issue,
as determined by the carrier.
Index rate: The arithmetic average of the base premium
rate and the highest premium rate charged for the same or
similar coverage to small employers with similar case
characteristics other than claims experience, health
status or duration since issue, for each class of business.
Small Group Ratinq Restrictions
Annual Rate Change Limitation: Within a class, no group
can ~ eceive an annual rate increase in excess of the
percenta9. e increase in the new business premium rate plus
15 percent for claims experience, health status or
duration since issue, plus adjustments for any changes in
the coverage of the group and/ or changes in case
characteristics. If a group is in a closed class, then
the percentage change in the base premium rate is used in
place of the change in the new business premium rate.
Limitation on Rate Differences Within a Class: Within a
class, rates charged to groups with similar case
characteristics can be no more than 25 percent above or
below the index rate for that class.
Limitation on Differences in Rates Between ClafiSeS of
Business: If an insurer has two or more classes of
business, the index rate for any class of business cannot
be more than 20 percent above or below the index rate for
any other class of business.
Exception for Non- Underwritten Classes: his rating
restriction does not apply to classes of business for
which the carrier does not and never has rejected small
employers based on claims experience or health status.
Such business must be currently available for purchase
and these carriers can not more groups from
underwritten classes to these non- underwritten classes
without the group's consent.
~ pplication to xis sting ~ usiness: For coverage issued
prior to the effective date of the model act, rates may
exceed the limits on rate differences within and between
classes of business for a five- year period. In such
cases, annual premium increases would be limited to the
percentage change in the new business premium rate plus
any adjustments due to changes in the coverage of the
group and/ or changes in case characteristics. ( If that
class of business is closed, the percentage change in the
base premium rate would be used in place of the change in
the new business premium rate.)
The model law allows insurers to ask regulators for
permission to deviate from these restrictions, where
warranted.
Disclosure Requirements
Carriers must disclose the following information in their
sales materials:
FactOKs used in determining initial and renewal rates,
including claims experience, health status, duration
since issue and other factors;
Provisions concerning carriers' rights to change
premium rates;
~ escription of the class in which a small employer
would be included: and
~ enewability provisions.
Actuarial Certification
Carriers must maintain detailed descriptions of their
rating and renewal underwriting practices, which must be
made available to the Insurance Commissioner, upon request.
Carriers must file an annual actuarial certification that
they are in compliance with the requirements of the model
act, and that their rating and underwriting practices are
sound.
Restrictions on Renewal Practices
Carriers could not refuse to renew small group coverage
except for nonpayment of premiums, fraud or
misrepresentation, noncompliance with plan provisions,
failure to meet participation requirements or if the
small employer is no longer actively engaged in the
business it was engaged in when the coverage was issued.
Carriers would retain the right to cancel whole classes
of business. But if they exercise this right, tRey
must give 90 days notice to all of the groups within
that class and they may not establish a new class of
business for five years, unless approved by the
Insurance Commissioner. ~ dditionally, if any group is
allowed to transfer into another class, all of the
groups in the class must be given the same opportunity
to transfer without regard to their claims experience,
health status, or duration since issue.
Establishment of an Allocation Program to Spread High Risk
Groups
Description: Under the Allocation approach, insurers
would be required to accept otherwise uninsurable groups
through placement by a state program. Small employers
found to be uninsurable by an insurer would register with
a state program and be allowed to select coverage under
rules set up to assure fair distribution of such groups
among all small group insurers in the state. All insurers
would have to comply with the rating and consumer
protection requirements.
Eligibility is limited to groups with uninsurable
individuals
Carriers receive allocated groups according to market
share.
Example of How the Allocation Mechanism Would Work
STEP 1. Estimate the first year's allocations.
In 200 groups consisting of 1,000 individuals, 20% ( 200)
are expected to be uninsurable and 809 ( 800) are expected
to be insurable.
STEP 2. Assign small group carriers target number of
individuals based on market share.
In the example above, a carrier with a 50% market share
could expect an allocation of approximately 500
individuals, of which 100 would be uninsurable and 400
would be insurable. This proportion exists whether the
carrier has groups averaging under 5 lives or groups
averaging over 20 lives.
STEP 3. Allocation process.
After rejection by two carriers due to medical conditions,
an employer would select a carrier from its choice of
carriers. As carriers received allocated groups, their
totals would be updated. When a carrier reached its
target, it would no longer have to take on new groups.
At the end of the allocation period, targets would be revised
for the next allocation period. If experience showed that the
total number of allocated individual8 or the overall proportion
of uninsurables to insurable6 was significantly higher ( or
lower) than originally estimated, future targets will be
revised accordingly. Targets can also be revised based on
estimated claims volume attributed to the uninsurable risks.
Rationale:
This approach provides states with an alternative to
guaranteed issue with a reinsurance mechanism. The
reinsurance approach is untested, costly to administer
and difficult to regulate, and may require additional
financing arrangements if the pool gets too large.
High risk groups would be spread through the insurance
market equitable among all small group insurers. The
risks ate spread directly on the front end, instead of
indirectly under a reinsurance approach.
Carriers would be encouraged to manage the care of
high- risk groups and individuals because the entire
risk of these cases would be retained by each carrier.
This would not be the case with reinsurance.
~ llocation is simple and less expensive to administer
because it does not require the establishment of a
complex and costly reinsurance mechanism. The
administrative costs associated with a reinsurance
mechanism are avoided.
Enforcement is easier because it is simpler and does
not require monitoring of the marketing, acceptance and
reinsurance processes of carriers that would be
required under a guaranteed issue approach.
The number of current uninsurables are relatively
small. In a recent University of ~ innesota study, only
2.5 percent of all uninsured individuals were uninsured
because they were rejected by insurers. 97.5 percent
were uninsured for other reasons -- primarily
affordability. The allocation approach addresses this
small but important problem without creating a large
complex reinsurance mechanism.
W e recogni ZP the m e d i r a l 1 v r i n i r r F r ~ - ~ hpl = r. a~ 1 re .= il-! v2 hcirr+ gt-. t r!
the s t a tP . A + t e r hpi n ~ : i ~ / i t ~ plt- +!~ = ttl h 4 3-=!- L - qriCp. tk.= ,-,+
the: r C ? r - + i r c t i mnni/ i. ri qh t'= ilni nc; lir.-.+ - 7- d - ~ ? . : ' - J P ~ + - I I.=? 1
13t1.31 j $ v th- m 43- ti w- 1 far- nrncr.=; nc th.=' f CIP,--~ n.. T~ r Tf r, r . irk.
qnr- t ink.
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r t p l n c ; t i r q t ~ pl w h q qr- ah1 P and : JT 1 ! 1 no + rt nqv 4nr + h e 1 r ht=- l + b - ar=
t- overag~ and mnnt t,> r t h p r~ haal th rpnl43 ti nn ? n i l l 81 p a r t n p r ~ h i
w~ th arnvz d- rs.
a s q t r r n n l - i nn + bat = m= l 1 P m n I n v ~ rqr cltnc; ' CJpcl = l i; T+ rr)*, ur IF hqc; pA
on m r r d i r a l l i n i n - r i r a h i l I t v n+ thpi r empl nv- F-- nr d r p P n r ( ~ ~ t~ 1q \ 1
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aroups nf t h r ~ e( 7 ) nr m n r e w o r k e r - .
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thpv . nnerat~ a h i i r l n p ~ = -
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r h a r ~ i n ah i qher r? te% nr re+!!'; i. nn rnxieraqe t r ? nc.? r\ nle w i t h nrp-e?.!
i-= tni a r n ~ t lci a f cnndi tinns nr pencl e who a r p 2 t ric; C:. nf
d ~ v - 1n o: na them.
QV-( CCfS. i t s hn5t anpqrv. 3nd H p = l th f= trG~ r i i * m ? re t- ni i i r t a r t + n
a1 lnw r n e r f ~ c all v r t ~ ~ n c ; r t r . = t hI tn~ r t i v~ rliial G a h t i . ~ 7 r, fr, + bl= th
ins~ ir3nce octtl an be rat^=^ nf thp ;-. ccr; i h! m., r) pncm znrl f CIm / qrt
that Health r a r e G r n t t c , WAF r r a a t p d Inr + h~-, n i: rnpq~ a nd
l i kel v w n t r l d riot hm ah! p t~ 1=. I I=+~ I 7 tha ~ ~ ~ rr 2rt -~ c - n t
Suh- c- mm~ ftpe r ~ r n m ~ ~ ~ n d ~ t ~ r t n ~ :
4. I-! p= tlt~ S~ 3i - s G r i l c t n '; t-' 7-::!-! p?+ r.- imn=+ p w i t h + C I P p r i ' / ? + ~
h ~ 3 ' I - hI nqiir;\ nc~ m a r i p t . r f I = v11h11 71J = i i h - = ~ d ~ o~ nptdln c
qrrri c; hnitl rt nql v 41 1 1 a n l r h ~+ h a + rqnnnt qthpr~ 1 h~ m ~ htd
thp i nri~ igtrv: n ~ \ , - r t h m l ec7, Hm- 1 th T = r r i= rnttn = h- t~ rll h=
estahl tsl-+ pri 35 a c t a t p w i ri= onti nvs
u n i n ~ u r a bel emnl ovee pr t= i~ t- t~ nr! ent 5 1 nqi + I rant 7 n r r p a c ~ ~
t h e i r heal th inc;~. tranre~ ncf- 5n r + qrrp-- - t h ~ m+ s : n r ~ r r h a ~ e
siarsi+ j can+ l v l psgp( c r n v ~ r a r l p+ ban H ~ a l t hr ; rr~ Er nrln. ~ hr,
recommendatinn i= ha =~ rl + h- tp 4C; r; llm~ f th= f prnflnc, ::
or more wnrker~ 3 rp tn h~ ~ d d r p q ~ h"~ * dth e- c. lh-cnmml
ttees. sn t- 915 I i l ~ m7 c; apqrnr) r: = tp - 1= an tlvm~ tr lpp+ -
Srn311 7rnnlnvpr nari: pt.
3* EI- IV ._ i n t n AH13[= fS
Pri rnna ' 3 statewide Medj. cai d nt- acram: + he A r l zmna Heal t h r . a r ~
CQG? Cnntai nrn~ rrt C; vstem has nvpr 77t7, T! T> Q men- therq- Thew . qre hie
aeoaraphical lv as a or~ i- tpf or I e d ~ r a lG'l t~ apdetterl and n+ her
caveraoe rnntai nsd i n the State PI an.
AYCC- CS j s wi. 11i nn tn acrerif rnediral? y ~ ining? trahP! i ndi v ' r j i ! ~ ! j~ 4
t h e i r T T ) s ~ ~ a. r e rer~ nqnizarrlq s r ? a r a t ~ l ya nd h n r n ~ hs drrndinn n + h ~ r
than agenrv a! loc. 3ted qen~ ra1. rr\ t. intv ar? d iectpra] 4t1nds.
58 rb- cornmi f t - P recammendat i qns:
a. allow indiL.~ idi. talasn d 4. ami ? jp= ~ hl3h . av~ n n n t h ~ rn nti nn=
tn nurch. qc; n rqveraom + r n m Q W r r r S :
b. prevent di.. trn~ ni a a+ medical 1 \/ vni ri~ r. irahel empl mv-~ sb v
emplovers who cover t h e i r other workers i n comparable
r a t e ~ n reis :
c. ~ 5 t a b l5ih h~ ne- Fj. tsa nd C C I V P ~ ~ O Pc clm~ arablet i7 hi ah ri = I-onals
i n other - tat- s;
d. estahl i s h premium rates rnmparahle tn h ~ n hr ls C. rnc15. 1 v
other stateq:
e. provide medical case man? aement fnr verv h~ n h r l ~ rkas -=,
T. Hiah R ~ s kFn ot
Q r i ~ n n a1 s f - ~ ~ i g iilne relatimn t n ~ l t h e~~ t a t a~ ss M- AITPAhq~ LV/ u
? rrtansaed c3re mechanism that i s b i d ac; a 0r) nl +" r nlir ~ pA?.- q, d
PODI- rlation; other states use n r i r r r a r ~ l vf rne- Jcv--= pr\~~~ cp; v c; t- tpm=-
Therp+ ore t o create an insitrance " ohettn" n+ the m~ dica11v
rminsurable means t h i q~ rn uy, w ~ l lp vpnttiallv hp p., npnc; i= lp 37 a
stand alone onnulatinn, AG 511ch. a h ~ n hry sb t 3 ~ ~ ) w1i l l n ~ ~ d
extraordinarv cnst cnntai nrnmnt r o n t r n l - qnd I I r n 7 ted rhni CPG f nr
n a r t ~ c i o a n t s .
Other states have already l i m i t e d rnverane nr rnr? ed i . v r n l l n ~ n t .
Despite the d e + i n i t i n n nf p r ~ - e x i s t i n n mpdir. qZ r n n d i t i n n . Grime
diseases are heincr excl uded Q r the; r b ~ n e1 ft c- r t t r fa i I ed.
Sub- rr) mmit+~ e recommsnrf. atior!-
a. w e feel t h e r r e a t inn of annther i 5 dq% m1 i == ti
prefer t o incl! rde t h i s pnnttlatinn i n eithpr QHCCCS or the
State Emplnvee nnol.
Q. Firv i n t n - the State cmnt ~ V P P
C) ri. znna rlnntrarlt..; *? r h ~ a ? th. i nr. tfrznc= + n r Ever - t- l. f> 17( 7 emn! nvqpc:
and dependents. Th- r n ~ t+ n r si n ~ P jr m v = r a n m i r. annrn:.! j : ~ l a + v~ l
8! 9c? npr perqnn npr m o n t h . T ~ PDp ~ artrnw- ito f qdmi ni 5 t r . a t i E n i.=
1- tnabl F t. m - rn i@ r+ t h p~ f 4 prt. s n+ ~ 1 f n w i nn ? h a mm!- j~ r ; l l I
l.! ni !-!.; I- trahl P tn c. qr+ i. r? nata i n t h i c; oror In. HCWPVFT. the + DS+ i. ; TO~.. L:
aiven t n the r~> mrni++~ 1e n d i r a f q r ! th. qt + % j 5 rate i 5. j n p s f r Q - , . 3 0- F
wha+ m a n v 4 i - ms rjav.
S u b - r c m m l t t e - r~ rnrnrnmn~ iia ntn :
2. the =+ at- = hl7irl rf PSsi\ ml n~ I t = o w n n r 9 r f i r- c; i n rri 1 = rt r 7 r l
hl- rlc frtr c ; t a t = a m n l n v = - h- a1 t h I n+= lir=+ nre qr, rrct c;;\ vl nqr ma,,
b~ r ~ ail~ - d self- 7 n ~ . t f r a - rn~ r n t h ~ rr m r n O n l ~ p r f
P ~ 1P ov - r / smnl ov- e hsne+ i t n- nnti ? t inn=,:
b. .; hr? cr! d cost qavi nas he real i 7ed. W- n ~ a * - r t h e = imrtrtnt ha
r f e s i q n p t ~ dt nwiiarrf c~ rh-~ rztii nn heal fh I nc; rrrqnce nrnqramc. for
the medical l v tini n ~ i i r a hel -
Rep. Piith F c . k ~ q p n
sen. . Ti. m F!: I.;+- r
R e p . P e t e r G n % i r t i n n f +
Ws, Barbara Hnnkins
Ms. P h y l l i s Ethridne
Ms. Raena Honan
Appendix I
Prospective Reinsurance Model Subcommittee findings.
JOINT HEALTH INSIJRANCII PIIINNTNG COMMITTEE ON THE MEDICALLY UNINSURABLE
IZEPORT OF THE
DATE: January 21, 1992
TO: THE JOINT HEALTH INSURANCE PLANNING COMMIl'TEE ON THE MEDICALLY
UNINSURABLE
Senator Cindy Resnick, Co- chair
Representative Karen Mills, Co- chair
At the request of the Co- chairs of The Joint Health Insurance Planning Committee on the
Medically Uninsurable, the Sub- committee on the Prospective Reinsurance Model, aker
conducting a public hearing, recommends the following:
In light of the complexities of both the Prospective Reinsurance and Allocation Models tbr
increasing the availability of health insurance coverage to small employer groups and in light
of the comprehensive changes which will result to the current system of providing health
insurance to small employer groups, both models should be studied and analyzed further.
SUB- COMMITTEE ON ' THE I'ROSI'ECTIVE REINSURANCE MODEL
Senator Jim Buster, Co- chair N
REPORT OF THE
SIJB- COMMITTEE ON THE PROSPECTIVE REINSURANCE MODEL
I. BACKGROUND
The Joint Health Insurance Planning Committee on the Medically Uninsurable was
established to study the issue of the medically uninsurable population in the state and
to propose recommendations which would increase the availability of health insurance
to this population. The Joint Committee convened a public hearing to address the
medically uninsurable population from the perspective of individual as well as small
employer uninsurables. The Joint Committee created several sub- committees to
address various issues. One of those sub- committees is the Sub- committee on the
Prospective Reinsunnce Model for small employer group reform.
11. SUB- COMMITTEE HITAIIlN(;
The Sub- committee on the Prospective Reinsurance Model held one public hearing on
January 20, 1992, to receive public testimony regarding the Prospective Reinsurance
Model for small employer group reform. The Sub- committee received testimony from
Barry Wong, Regional Vice President, Government Affairs, CIGNA Companies; Andrea
Lazar, Blue Cross and Dlue Shield of Arizona; Jan Doughty, insurance broker; Rena
Honan, Association for Retarded Citizens. Mr. Wong provided a presentation on the
Prospective Reinsurance Model for Small Employer Group Reform. He provided
details of the provision within that model and reasons that the prospective reinsurance
model is the best approach for making health insurance coverage more available to
employers with benveen 3 ancl 25 employees. Further, he provided reasons why the
alternative approach, the allocation model, would not be to the best interest of the
small employer groups.
Ms. Lazar respondeci to Mr. Wong's remarks regarding the prospective reinsurance
model and addressed the allocation model.
It was agreed among the Sub- committee members that both the prospective
reinsurance model and the allocation model are similar in many ways, in that it would
increase the availability of health insurance coverage to small employer groups.
Further, both models would place limits on pre- existing condition limitations,
guarantee renewability of coverage and place restrictions on premium rates. The main
difference between the models, as was addressed by the Sub- committee, is the method
in which risk is shared among insurance carriers.
111. SUB- COMMITTEE RECOMMENDATION
The Sub- committee on the I'rospective Reinsurance Model recommends that both the
Prospective Reinsurance and Allocation Models be studied and analyzed further before
a final determination is made on which model to adopt for this state.
Attachment A: Summary of provisions on the Prospective Reinsurance Model
Attachment B: NAIC Prospective Reinsunnce Model
Appendix J
Summary o f the NAIC Prospective Reinsurance Model.
Major Provisions
of the
NAIC Prospective Reinsurance Model
1. Guannteed Isstrance. Guarantees issuance of at least a basic health plan to
employers of 3 to 25 employees who apply to any carrier selling small employer insurance.
2. Restricts Pre- exist in^ Conditions Limitation ( PCL), PCL can only be imposed once,
i. e., portable PCL: an individual, once eligible for a plan, must only satisfy a PCL once in
continuous employment lifetime.
3. Guarantees Renembilirv. Guarantees renewability of health plans unless the
employer does not meet the contnctual requirements, i. e., Failing to pay premiums or meet plan
requirements or is guilty of fraud.
4. Pate Restrictions. Imposes rate restrictions at initial'issuance and at renewal.
jtisk Sharing Mechanism: Reinsumnce
Carriers may elect to opt- out of this risk sharing mechanism, known as reinsurance, by
agreeing to assume the risk.
Carriers electing to not opt- out of reinsunnce would be subject to the following
provisions:
A. Carriers a n reinsure individuals or groups.
B. Carriers pay a premium to the reinsurance pool for groups or individuals ceded:
( 9 500' X, of the avenge nte, for individuals ceded.
( ii) 15036 of the avenge rate, for groups ceded.
( iii) Other variations.
C. Carriers retain first $ 5,000 of claims per individual per year.
D. Excess losses to the reinsurance pool is offset by a two- tier assessment system:
( i) Losses up to 5% of total small group premium are spread to carriers in the
small case marketing participating in the reinsurance pool, according to market
share.
( ii) Additional losses covered by a broad- based funding source.
Appendix K
Small employer Health Insurance Avai 1 abi 1 i ty Model Act -
Prospective Reinsurance With or Without an Opt- Out.
SMAU EMPCOYER HEALTH INSURANCE AVAllABlUTV MOOEL ACT
( PROSPECTIVE REINSURANCE WITH OR WITHOUT AN oerqun
Section 1 .
Sectron 2.
Socnon 3.
Semon 4.
Socrton 5.
Smon 6.
Smon 7.
Smiorr 8.
Section 9.
Socdon 10.
Secnon 1 1.
Soctlon 1 2.
Secuon 13.
Section 14.
Sectlon 1 5.
Soction 16.
Soction 17.
Seqion 18.
Shon Tdo
Puruoso
Oefintaons
Aookaediw and Scow
Establtrhmont of C l a w of Buwrou
R~ smcoonsR olatmg to Ptomum Ratrr
Ronowikiity of Covorrge
Avshkiity of Coverage
N0ttc8 of Intorit to Operate as a Risk- Assumlng
Camw or a Remsunng Camu
Apglkam to h o m o a Risk- Auum~ ngC arrier
Small Ernolover Carnu Rwruranca Program
Health Brnrfit Plan CofnmlnOO
Penodic Mwlut Ev8l~ i~ On
Waivw of Cuntn Stato b w 8
Admtn~ suaavo Procrduror
Standards to Auwa Fau Mulrourrg
SooarrbdW
EffdvO oat@
Section 1. Short Tido
This Act shdl be known and miv be cited a8 tho SmaU Ern@ ovw Health lnsurancr AvatkWity Act.
Section 2. Purposo
The ~ urgosom d intm of thi8 Act rro to promo- tho a v a t h b l i of health ~ nsurancoc ovorago to Small
emotovors rlgardloss of motr horlth status or ciarms oxg. ccona, to ~ n v r mab uuvo raung o m o r ,
to roautro d~ rctosuro of ramg prmcor to purcna8~ 8, to ostablhll n r l u rogard~ ng renowrdrty of
covorago. to onablirh limcuwcu on ttw use of praa* uMg conQltion exdusotts, to orovrde tor
devrloornont of ' b a ~ ~ an'd ' ~ t m d u d ' health bonefit plans to k OMto aU smaU emDloWl8. to
provldo for ornbU& wMmo f 8 ramumna ~ ogr& na, n d to tmprovo tho ovwaU fatmoss and etfitroncy
of tho small group h..( th inwmnw mulut
This Act L not imrrdrd to provide 8 cam~ mMmvoM an to globlom of a* ordabJitV of horlth
care or health inrwurca.
Section 3. Oofinitlorrr
As us& in this Act:
A. ' Acn~; uul crroficttiorrm moms a wrinrr, stammom by a rnwnbu of the Amman
A c r d wo f Acnrvio or o wur divdrcrl a c t r to~ th . Commurrocwr thm a smau
emoIovrr camu ir in com@ iance wie the provirioru of S m0 of this AH. bauQ
tho acrwnaL assurnouans and mOIodS usad bv mall omolovw mu In
establishing gramturn rat08 for aoo1icabb hoalth bonefit plans.
8. prom~ urn ratem moans, for a u h ciao of bu- a8 to a nung pmod, tne
lowort promturn rate charged or that cMlld hrva kwr - 9. d undu m0 raung a y a m
for that c t ao~ f b uunou. bv tho small rmoIoyu CamU to small rmolovus wlrk stmtlar
case cnanctorrsacs for health bonetit glans with same or stmllrr cov. nge.
C. ' 8as1c horith bonofit plan' moms a iowu cost h o r n benofit D i m dovrioo. 9 pursuant
ro Smon 12.
0. ' Ebard* moans tho board of d i r m s of tho pmOnm utlb( i8h. d oursuant to Socum
11.
E. ' Carriu' moms anv rnmy that provide8 MJth inruruw=. in * is suu. For tho
puroosu of this Act. curiw inctudu an inrwum comoanv, [ in- a ~ w ~ a t o
rofurno for a prowid hosaml 01 mod- cam oknl, [ inam aoorooriate rdumca for
a fratwnai bonotit aocrowl. a hortth maintanarm organurnon, or anv omw onoty
provldirq a plan of hoatui nwma or M bwwfitt sub- to ram inwrmce
roquiauon.
Dratthg Note: Tho torm ' mulaolo omolovu w d f m rrnngumW should be addod to tho list of
carnors in thoso states that have sooarate camficates of wthorio/ for such amngamcmu.
In states that do not have soowate km8u for s. l1. hd. d Mgl. mgkyu wolfuo unngunmts,
such ortangommu should bo uoated as unauthoritrd inarm. StstU 8kuld enforce rhou lam agahr%
transaction of unruthonred insunma agaurn such unrwhorkad d- funded mubolo omdoyw wolfare
arrangements.
F. ' Cam charactansricrmm oms dwrmgraohic or othuo b j ~ v~ oi u ~ ~ ~ t O f i 8otfi C8 mS ail
amolovu that aro eonsiduad by W rmrY omoioyw cu~ ila t ho dotwminraorr of
prorntum rates for tho small ompkyu, providod that claim oxoorionca, heJth status
and dunuon of covorage rhd not k cam charactutstica for tho purt~ ouorf this Act.
Oratthg Nou: Whur t) H word ' C m & o t w 8 aweus irt rhis Acz. rho rowowte d w d o r \ for
tho chbt inswwtca uromuory offitul of tho auto rhauld k rubnmrud.
J. ' 0-' SU b. dafinod in the rune mannu as [ i n W rofmrm to stat,
insurmca law d. finng d- l
Oraitirq Note: Statas without a statuto~ d efinition of dogondu~ m av wish to us0 the following
dofinition:
unmarnod cntld wno IS a full- am0 sNdM u3n1aLw. ? no ago of [ in- maumum agoi and w n,~ s
finurc~ avd owndent u wtn o pumc and m unmarrld cnlid of anv ago * no is rnwrcariy
c8mti. d as a~ ubkdan d dopmdent uoon tho parent.
Oratthg Not@: Statms should inson a mamrnum age for studant dooondonts that IS cons~ stent
WIK~ o tmf stat) laws. Stat08 Ulo. may wish to inctudm o* Or individuals dotinaa as do- onts
Sv stat@ law.
K. ' Eligibk arndovooa moms an arndovn who W O W on a full- tlmo b a a nd has a
normal work wook of t h t q ( 30) o r morm hours. n ot om ~ neludasa roro propr~ otw,
a orrmw of a ~ ~ ~ I C I aInOd a, n ~ ndoOYdUlCt OnUaCIOr. ~ fr ho sale proonot~ lp, amar
or ~ nd. gwrd. nt conolcrot 18~ nckddas an @ fnOlovOeu ndw a haam banofit plan ot a
smacl amomvu, but doos not ~ ncludra n amolovoo who WOoNn a pm- ama.
t ~ O O f i yW SUbStlNU m.
L. ' Eltabli8hod goograohic smuo aroam moan8 a gooqrrghicai arm. a8 aowovod by the
Commr- and baud on tho cam. c's c8mficatr of aumor~ tvto VanllCt ~ nsuranca
in this stat@, within which tho carrier is authorizd to provide coverago.
M. ' Hoalth benofit plan' moans any hosoid or modkai policv or camfkm, [ inson
rrfrmm8 to urbrarbu contrrct or convacx of insururcr, orovidod bv a pr- hosocul
or modtcd sorv~ co planl, or h e m mumMuK@ OrQllruaam Sub8mbw contract.
Hoaidl burofit plan doos not include actrd~ t= Qnly, crMit. dontai, vis~ orr, Modicara
suoplornont, long- tom care, or diubdity incoma asunncm, coverage ~ uud as a
suo~ lmontt o IiabtLity inswanco, worltu'r commnuaon or scm~ lar inswmcr, or
automob~ lo medical pavrnont msuruK8.
N. ' Index n t m m moans, for oach d a u of businou u to 8 rating pdod for smaU wnolove~ s
with similar cau character~ sucs, tho arithmoac avorrga of the apolicablo base ~ romium
rat@ and tho cortesmnding htgh08Z prmmturn nto.
0. ' Lato onrolloos morns m algibla omobvoo or d@# rrdmt who rwuorta mrdknont in
a horlth benotit plan of a mail empkvw following tho initial anrollmont ponod for
which such individurl is ontidad to n r d undu tho trms of tho health b w t i t ~ l a n ,
providd that weir in~ tidm rollrnont pond is a p. riod of at loast thiw ( 30\ d avs.
Howovw, an oliglbk emplovor or dopwtdont shaU not bo constdorod a Iat@ onrolloo 11:
( 1 1 fhr wrdividwl meou each of tho following:
a Tho individual was coverad undw qualitying provious CoVU890 at tnr
time of thm initid onrollmom
I b) Tho individwl lost covomga undu qurlifvinq prmviow cavuwo as a
r U t of tumm+ tiorr of mptovrrmt or oligibJity, the irrvdwrurv
t n n n r a m of th. qtdiWng pnvicM sov. rrg@, death of 8 soouu or
d i v m n
( c) Tho individual r w u w mro# nmt wiIhin thirry 1301 d. Ys attar
tofmmaWCI of dl@ q wlifytng ~ w o ucsov rrag@:
( 21 The individwi ir omgky. d by mpkyrr eat offm multiok hod* banatrt
- - 3i
ptans and the individwl Juts a ditfumt @ md ~ an g00- onrtW~ om%
prrrod; er
I
( 3) A coun has ordered covrngr ba pcowdad for a soouw or muw or d m m t
chid undu a covmrrd rmokwa'r haalb) baft@ fir pkn urd rwuart for mrollmrno
IS madm wtdrln tntw ( 301 davr attar luwncr of ma coun ordw.
P. ' Naw bustnru Premtum rat@' moms, fw 0- dru of buwrrrr as to a raong p. rrod,
tna lowmrt prmmlum fato chmrd or Meor w heh coubd havm bnn ckugw or
1
offwad. bv tha snail amdOyw ~ urmto mall ernokvmn wtttr stmrlar cau
chrrrcrwuucs tor naw - lIy h. JrC, krwfir DI8n8 mtk th. uma or stm~ luco vuaga.
A. Pnmiuca' r n w aU monies W bv 8 UnJI omObyw W aiiqigibk omdovau as a
condition of ruoiving covarrga from 8 SmaO ampbow curiu, induding any faor or
othw c ~ n m b uauu~ oc~: a trd with tra harm bnafit plan. I
S. ' Ploducr* moans [ incorgoram ntmrrcr, to ddhidon in suto'r law for liconung
~ roducml. u
Orrttlng Noto: Sat= that have not adootod the NAIC Sinqb Licmru Rocodurm ModJ Act should
submtuta tho torma ' agrnt' andlor ' broku* for th. tom ' producw' a8 aooro~ nato.
T. ' Program* maas the [ Statal SmU EmOkvw hinrwanea Program crrrtod gumuma
to Sactim 11.
U. ' Rating pariod' rnarru the cakrrdw pwiod for which wwnium rater eruWad bv a I
small omolovw carnu rra ammod to k in m* m.
V. ' RdnuKing carriu' rnrrns a smaY emokvu c a W prrriciorting in thm reinruranca
woorun Oursurn to Section 1 1.
W. ' R r n r i c t d nrrworlt provision' mowu any provirion of a health bend plrn that
condidom ma pay^ of banofits, in whoh or in p u t on tnr use of hmrtth cum
u m vth~ n h 8va nund into 8 convactua4 amngwnwn wtth tha camw ~ nwt
I
to [ i m a001oOrirt, roflmrm to rtlt. lam raguhtmg harm rnuc~ mr
orguriutioru and pnf- prowdot orguwutioru or mangomonul to pmvida haakh
cam suvku to connd individwlr.
Ordthg W. Stn# r) ldd this subuam to m. k, rafwonea to the NU- of rrrtncrad
natworlt munonu amhodad irr th. mor.
~ rriw m. utt^ 8 vndl wn~ kwr who- aoaicrdm is a0mv. d
I
X. * RW-h
t h a c ~ p w t u u n t o10s. ~ I
OmfthgNotr: O ~ . ~ V m d X i f p v o c i r r m o r r i n r h a r ~ m c r ~ o ~ ~ ~ i r m u Y. ' SmrU rmokvw' ma- anv pwtocr, firm, corpontion, pumus h- ioa or * at
isrcowCVongagdirr bwvuuthac on n krttmty percam 150%) of its worktnO day8
B
during ubandw qwn#, no mom dun twmw- fiva 123) di~ ibk
ernokyau, Ma majorw of whom wan omokvrd Win this suta. In d- 9 ma I
number of orqrbk wnolovoos, c o m w s tnat u m affilhtod comoan~ os. or tnn are
ehg~ bkto f i b a cornolw tax raturn for purpow of rut@ ta xawn, shaU be cm-@ roQ
one orngioyrr.
-
Orahing Hate: Stater may wish to consider a different threshold numbor of tmolovoar tor me
suroosas of dofintng ' smaY amotovrr.' deoandlng on tho undommng md markrung p r w u m tno
state and othar rdownt factors.
2. ' SmaY amokvu carnorm means a camw Mat affm healtk banafit plans covwng
rriglbk omocovoos of on0 or more mad omglovers in this stat@.
AA. ' Standard health banofit plan' moms a health bandit plan dO~ rlO0Od pursuant to
S . c t ~ n12 .
88. ' Affiliato* or maffiiutod' means my on* or ponm who d i r e or ~ ndir- mrougn
ona or more intarmodianos, conudr or is conuolkd by, or IS undu common conuoi
. with, a sourfiad onaw or person.
CC. ' Conad' shaU ba dofined in tho urn0 mannu as tinson reforencr to rut@ la w
conerWing to NAlC Modd Holding Company A d .
00. ' Qualifving provcour covuagoa and QurliCying existing coverage' moan banofits or
coverage prov~ dedu ndu -
( 2) An ornolover- bard health insuranm or h e m benrfit wrangmant that
provides bonefiu stmllar to or oxceoding benefits prov~ ded undw tho bas~ c
he&& bonefit dm; or
( 31 An lndivtduil health rnswana poticy lincfuding CQV. ng. U bv J herhh
malntanmce orgmaauon, [ insort rogrowato reference for 8 pram4 hosoctal
or medcal care plan1 and [ insort aooroorirtm referma for a fratwnrl bonofn
souowl) that grovtdu benofits s~ rnllart o or oxced~ nqth e bonefits provtdod
undu mo bass health bonafit plm, providod thn such policv has bow ~ n affoct
for a panod of at lout on. yew.
This ~ cshtal l aooiy to my health b w f i t plan that provides covmgo to me omo~ ovooso f a small
employu in this stam if any of thr foUomrrg condttioru we met:
A. Any of thr pruwun or b. rrofitt is paid by or on boblf of the uruY undovrr;
8. An diglbl. omdoycn or dr@ ondant is nimbumd, wh. dwr through wag@ Wu+ onents
or ottlorw180, by or on bJun of the unrY ungkWI tor any por~ ocro f tho m u m : o r
C. Tho h. Jth b w f i t g k n u treated by tho mglovu or any of tho olig~ blao mdoveas or
d e o o ~ aos p ui of a olrn or program tor rhe pwpow, of Sacnm 1 62. S~~ 1 25
or S m o n 106 of tho Unitad Statu I n m J Rovenm Code.
both to tho p r o w m o f * IS A68 and to ttro p r o w ~ orf r) ro rutr's liwr tor mdrvrduai ho&
Insuranca. A suta should con- whothu ~ nco~ rcrt~ ncIn~ ~ ocslg uktorys w a r d 8 would result
escoctally In tho provlsmns rdaong to premlum ntrr. A stat* may wtsh to constdor exomp~ g
~ ndlvtduahi oala - fit plans from tho raong prov~ wnsof mi8 Act. t
0. ( 1 ) Excrot u orovrded in Paraqrrdr ( 21, fW the WrWI. r of tiria a c t urriwr that
are attiliaud corngmtos or that are diglbh to fila a consaridatd u x return & U
bo trcutod a8 on0 camor and my n s u i a i o I I S or hfmims JrnWs. 6 by rhir rcr
8
shaU r o w as if aU hoam b. cwftt OMS doUvuM or iwod tor dalivw to smaU
ornOkywr co thu stat0 by such atflliatod camen wom isrue0 by one cunw.
( 21 An affiliated carnor that IS a h& m- orgrnnaoorr h a w a
camfiau of authomy undw ( inson retotme8 to mu hearttr mwmruncr
orgmruwn licrnung act1 rnav k considorad to k r uO8latO carnu for tho
purpowr of this act.
( 3) Unlou othorwiu ruthonzed by tho Cornrniuionw, a mall rmdoyw camor
shall not ontar into on0 or mora c mwm gnwmr wrch re- to hoJth
laonofit gknr d. livuwd or ismod for ddhmv t0 rmdl mgkvus n this ruu rf
I
such u n n g m u would r8US in Iors than fi* pomnt ( 50%) of tho
insurano obligation or ntk for such horlth krwfit pl. N bang retwwd bv tho
cading carnu. [ Tho provtsmns of ( in- amUcrbk reformer to s o u law on
I
.' assumpuon rrtnsuranc8) shall a~ gly ~ f a small rmoloyrr camw codes or
; rssumos Iof tho inuuanca or risk with roscwct to one or more
hrrlth - fit plans doiivwmd or irru. 6 for d W wt o maU omokywr h this
5tata. l
OratWq Noto: Tho Ianguago in brackou should ba indudod kr tnm that hrvo onacrod laws rwuhtmg
A. A m a l ompkyu carriw may ostabl& h r dass of bushus only to r e f l a substantial
d i f f o r o t u in oxo. ctrd claims omodonea or adminimove costs rolatod to the
following rrams:
( 1) Tho rmrY omokvw camu usas mor, ern OM ~ VO. o f SVSWfor rho
mukrtmg and uk of ho& h bonofit pprrcu to maU ornoloyrrs: I
( 2) T h o ~ o m d o v w c u r i u h u ~ i r r d 8 c l 8 s 8boufs hass from anahof maU
rrndovw curnr; or
( 3) Tho muM wndoyw cadw pcovid. r cmmmgo to o w or more as8dation
gmuOI tht mm tha nquuan~~ oUf ( i n- awrooruu statutory nfUuia to
- S 2E of t) H NAIC Groug H - oI h DofWtbl and G l w H~ o alth
lnsurncr SUndud Pmvisiuu ModJ A d .
I
8. A unJl anpkyw urriw m+ y ortrblhh uo to nino ( 9) ugurt, cfas- of bum^^
undu S u b u a m A.
C. Tho Cornrnisuonw mly rmW reguhtions to provide for a ponod of W'uWUOn In I
put : mutrnq 40 rtrp ow ro) w uu s # gJ= mAqdun mm
ow woy WIJW~ OP sr n~ o) bun(( nut ow) o SWWWKMP JO
OW ) O ) O UOOIJnP JO 8flUXS W O l 0 4-'
ow or mp **@ A mu0 - 41 no1 40 8WuOd buprr mu M pmisnlpa
pur w u u t ( 5 s 1) iura- a LML/~ pmelro or mu awuasn@ e AUV ( q)
: uoAo( duro I( rw mou ~ ~ ( ( o JMwA W?
$ 1 JOU~ JoAOI~ UO )) rus 041 wym ow! urld qpwq rp( nq rnus
i r o u orp J O ~ mirr wntuo~ d mwsnq mou mrp u! oburrp mrp ' cmrq
oDnuraJmd r u0 '- 83x0 10U SWp 0- w W S m o r d ' m1tJ
wntruo~ do srg oq UI mDutu3 oDcw8aW 041 u n~ wqsr u n 3 ~ @ Wruo
~~ rru04s1 ~ s~ o~ o~ naeruuso M OU ~ UIIJOJUI wbwl ou t! nun:, n A o ) O W
lrtrus om 4num OIUI urla iyouoq rp( roq r ) o we3 om ul * pouad bunu
mou orp # a Atp SJ!~ ow or pocnb buaer m d orp 40 Atp itr! j oqr worj
prrntrou mu^ utntwr~ ds truttnq mou orp u! oburq3 mbnumame ( t)
: bu~ wo~ 0( 4o1~ 4 0 uns oqa peeaxr aou A t u t POUMO unt~ m w r
JO) JOADldUJO PEWS r 01 mb~ rL43@ & tJW QWJd Oyl U! U8OJ3U! Obtlum3Jod ( C)
* rrer xopu! 041 40 (% st) am- m~! j-& uomr uew orout
Aq mrtJ xopui our utoy k rio~ u n + qs ' mupnq 40 ttrp irqa J O ~ W lSA8 bunu
@@ J@ SJVOAO JOUJO U3nS 01 W8J8~ 3O q pln03 St@ SOltJ Om JO *@ C) CJOAO~
rrl! ruts JO ours ou1 J O ~ r3aswmurq3 . re3 rrllurts Y)! M SHAqdUO ( ICUS
01 P O W b uot~ t buunp prbrrq3 smur utn! Wrd 014 * nou! snq $ 0 wet3 r roj ( 2)
'(% OZ) rurs~ od& U OW ucw OJOLLI Aq + townq 40 nrp amo Am ro) ortr xowt
rua Wax0 iou ncys ssounnq 40 rrrp Aur JO) buoe~ r J O ~ m rrr xmpu! o y l [ 11
.@* mmrorru HAordruo lrrw om + o t t o w t r ~ p ut AWOI~ WI OUI S~ UIUUO plnom uor: 3t
U3nS 1rUl JOuotssrwruo~ o ui ~ q Du! pu! j r put ~ ouorrtturuo= m) u1 01 uonr3l! oot uoBn
+ s@ mtnq4 0 S@ tsrr> f euop! ppt 40 wowyr! yqnrr orp o~ orboAt rru muorss~ w~ oo3 u ' 0
' N. ldLu. wqWnrlm"- J@ QZrw
or p . u w r e renor8 ~ L 4P0 unrru . rp ar onp uauwwp muu aw
o p w r ~ o p u e l ~ o l w n n q ~ - ~ ~ - m ~ -
t t x w p ~ ro j trun~ urrrda mporb ~( ryrm om .. mmnq $ 0 8wp
r u! wAo( 0wo neurs nc oa M ur~ um 9 ' . .
rtn Wgmgu! ' SJOYL~ OUDIJ W e w z ( I) ( 8)
* sroAo@ wo )( run mw 6qlpnn A! m~ rur
s! r o w a Aotauro OWJS . rl) q q q ~ m u! ur) d apmq w e 4 nl! w! s
itoru mp Mj ole1 umywo 8mJ! mq mw oqt q memp mrp *- q
aDnwwd c uo * poo3xo mu aoop ~ OWWqm s amp WWOM * ~ L J
wn~ ruudm tq am u! ebuwqa mbewmed erp 88n mryr H ~ JnACqd~ rrr 0
I( ILUI '~ JOAO( OUIO flWLL) S MOU bOmQIW J@ 8UOJ QU t! & Ow3 O. hOflLLI9
flew . rP WUM OlU! w dJ IJWOq w q8 ) o mt@ Ul ~ U ~ E J
mou HP 40 Alp asry ow or pomd Oupu aoyd OQ ) o Aep LUY mw ~ 011
prJMuJ Oitr urnguorcl mwpnq meu . rp u! . kml=, 06nwa~ od m y l { I)
m a 40 urns ryl pmraxo iou
ntyt pornd buuer mmu e nAo( dur8 flew 8 ar pmbny3 rru urn~ wordm ur u!
WnWarM Ow ' US3 t@ fW Ul ' 23V 8! m ) o mS8p . Am#@ BLIl krtm0l) Oj
* lnAt t ) 10 * 12) ( L) V - qnS u! - 1 in S O ~ U ~ J
~ 0 . r s x o ~ n u p a n d ~ e r o ) . u r r ~ e ~ v n w ) o n r p ~ w ~ ~
. r p ~ - ~ ~ w P ~ J p . m + ! r o P u Y ( . P ~ L b C . c n q w l ~ - w u l ( L)
* ~ ~ ~ ~ 1 - u w y y u n g o o r u ~ q ~ A J u n p v i - r p r m 9 1 a - t
Muti altr lsomo~ ma ~ H J X O iou VVt WWqpW8e; a LLonpul Auc yltm
9n- e muc~ r iu asmql) lq . rll mqi pmpuoM * nrrr runword b m ~ c i s o
ul ~~ SUIUUCU~ . st3 r st APMPUI azyan AIU JWJ~ JJO AQC) UJO n t u s ~ S J
. L 1 wmos 01 aumt~ narr mw3 ~ ~ q b w o
news Au mtqrAr0 JO pnd mwrnmsr Aur 8 u ~ ~ s q w ououuam s 8cw
Co SUWOJ~ D@ OJUI wtm AIOUIO~ l t 8 ~ ssu et0 agmumq ~ W D JUO) 8 0 % ru~ n~ lw ard ( s)
( 1 1 ) Tha Commrssmu mav onrblirh ragulrwru to lmobment ma orov~ rronso f mls
soct~ on and to a u w m mat raang P~ CIXU used by small amo~ ovar camen arm
consrstont wtth tfie purwus of thu aa, rncfuding:
a AssurlntJ that ditfarmeas in ratma chargod for health bonatii olanr bv
srnarl ernolaver carners are raaronabk and r@ fjUot bruuve d i f f ~ n c r s
In olan desqn, not lnduding diffumcrs dua to tno natura of ma grouos
auumod to sakcr parpculu h. Jtn banatit plans; and,
( b) Ptouribmg mannu in which cam chuactrnsacs mav ba u u 6 bv
smaU am0kvw cJmu8. .
A small rrnolovw carnu shall not vandw 8 unJl un010vw ~ nvolununlvIn to or out of
a ctau of buunau. A small emotovw camr shaU not offar to uanrtw a mall
emolovar Into or out of a class of bus- u n k u such offer Ir made to uanstu all
small omployerr In the ctau of buslna88 w! thout regard to case charactanaacs. ciarm
oxg. rlenc8, health status or durram of covu8go.
me Commissionu may susaond for a rrmitkd mnod tha awlicrtion of Subsactton
A( 1 1 as to tha prmium ntu aoobkabb tO OIU or ~ OIsmI all omplovws i wmthrn
a class of business of a small omglovw camu for om or more nang uwn a
filing by the smaU omoloyer carrier and a finding by the Comrnisrionw ardwr that tha
susoansion is roasonabla in light of the financial condition of tha small rmobowr carriu
or that the susoonsior~ would mhrncr tho efficiww urd fairness of tha mulratgkcr
for small omOlovw healdl insurmca.
In connution with the offaring fw ~ k of any hulrh hnafit plan to a m8. U molovw,
a small omolovar camu shall makr r roamrbh dircksuro, as pan of its roliciuuofl
and sales rnatmlk, ot all of the tdkwmg:
( 1) Tho enont to which prornium rater for a sourfiod small rmoWw arm
rstablishrd or adjustrd b u r d upon the actual or oxoutad v m r m m ctalms
costs or actual or oxgutad vanation in hoatt? l $ tams of tho o m o l o v ~ of tho
small rmokvu md hair deeadano;
( 2) The pnwirioru of tha had* buWt plrr concarnrng tha smd arnOIovrr
carnu's rlgnt to cnanga pramnrm ratma and factors, ornor than ciarm
exoenenca. that attm cfrmges m pramlum ntms;
13) fha provision8 relating to. rmaw8bJity of poiicirs and contracts: and
( 4) The provkhw nlronq to rn praaxirdng condition proviJon.
( 1 1 Each ma4 omohvu tabu shail maintain at its princiod placa of bushus a
Com0l0t@ and datukb d- of iu nung pracclcu and rMawd
undewrhhg pmcacu. indudinq inform* and documwrtrtiorr that
dr- that its ram metho& a d arm based UOOCI cmmOCVy
acc8- rctwnJ afld u, in m r b r n c 8 with Sound
principlu
CCI~ QdW Cmu~ A na dd M ma nOnO me? wt i ot me rmrY ornpboyw
carnuarorcnruul) yrourrd. S u d , ~ r h r Y b o i r r a f o r m r d m r r r w o ,
md 3rd comt8m ruc) r n i.- 8 W d db y C O ~ ~ A Ucoov.
of me crroftcaoon shrU be rournrd bv rho 0moroVu carnor at iu pno~ 101(
pkes of buWe88.
( 3) A tnull om- clniw shaY mrlo dre ~ nformraon and dotumammm - --.
dorulkd in Sub- Efll avJIbk to me Cammuuonu u r n rwwst.
Exclot in caw of viohao~ of thia Act, tne informaoon shaU be c- wd
p r o m wd mda nuwt mfom8mn wrd r h U not be rubim to di. dowrr
bv me Cornmuuonw to mmau ovud. of tk. O. ovanmt oxcw u a g m d
to by ma rmaY ompkvw camu or u orderad bv a coun of compmont
jurisdictiocr.
Sodon 7. AenowabiIity ot Cavorsge
011ttLIg NOW: Stater a k w have adootad th. NAlC ModJ Rofniwn Rator and RonewrWtv of
C o v m for. H mln surancr Sold to SmaU Emokvus ModJ Act wiU have woviduu that
subrturtirlly d wtha om dona of this mdon. Some, of r) n provisions in thir mo6). homvw,
ara mor, frw- to polityhddus md ntur m8v wish tO f? wdifv thw laws to cmfmn to tna
provimonr in this d o n .
A. A h e mb anrffl ~ lusru bject to this Act 8haO k mwwtbk wth resom to aU digible
ompbyeos md dogllldmu. at tM oodolr of tho unrY rmplovar, oxcrot in my of the
following taros:
I
( 1 ) NonorVrrwm of t) ra rewired pnmiwnr;
( 2) Fnud w misrr# owmtdocr of the unJl mDkyw or, with ns0lcr to covrrrga
of indivdulJ inswadr, rho insurod8 Or dl* rOglOSOft~ d~ 0~;
( 3) NoncomoliuK1, with tho - 8 minimum particigawn nquirornenu;
( 4) NoncomOYYK. with th. m amDk vu c8nmbuaon rwuirem. ntt: I
( 5) R a p . m d ~ o t r o r o w d u ~ p r o v i r i o n ; o r
( 6) Tha rmJL mlokyw trniw doem to nowwow ail of iu hralth bmfit plans
drlivuod or iuurd for drYwry to u n r U omgkyus in this suto. In Such r car.
thecuriw8M&
( a) Provide ndm of ita dmcbim undw this pamw8@ to the
C ~ h o u h s m t o i n ~ i t i s l i c ~ ; ~ 8
( b) P r o v i d ~ ~ ~ f d t ~ ~ n ~ t t ~ f @ ~ ~ . ~ ~ ~ ~ i n ~ ~ t t o i a ~ . ~ h d i v i d w l ) i r k n o w n t ~ n r i d . r t 1 o m 1 8 0 d m o r u x
to tho nonnmdof ~ lhye mb YWfit plan bv thr urriw. NOUC* t o
the Commirriorm undw thia suMam0mdr rhaU be pmnd. d at
I
am ( 3) workurg drys prior to tha n o w to the a ms m d
put : n8unnq # a rrtp eyl u ebWrroa 10) W d c
SJ8AO) bW@ VCUS Ilr 01 - 0s mlaae .) wr) u {!!! I
: JOAWWu nrn erp ) o r w w M x @
W I C ~ JO n u n s q~ rrr( @ Y, 01 w M
3- mplrrord * munnq 40 wep e mu!
H A W C Xd833C 01 JDWWM ~ u! u! Iw()~ U~! P @ RIUO# 8J
AgOe 48~ 1 M A O W @ puts v * poqsy~ nt@ ar rnwcnq ) o
rrw rpr8 u! urld w8urq w u wru ew utel u pn y d wwq
werq m qou o act81x r rJoclo( dw( (. un qq! W8 or pue wcwm~
ntw n u n 3J OAOldUJO nrw eyl * Qu owos oa ) UMUe~ s~ eq mq / O ssm
8uo ueyl 8Jow c8wgqru@ r rw JOW ¶ JOAQOW ((.~ YeI 40 8sca egl UI ( 91
Ir.
{ IV) Tho smaU emolovw carnu Drovtdrs for tno accroturce of ul
eligtble m9 emulovrrr Into one or moro ctarur of bwurau. u
Tho provtsrons of tho suboaragraoh'shall not aoolv to a class of businmu
wh~ chtn a small emolovw camu 1s no longor anrolling now smaU omgl0v. n. I-
( 3) A small ernokvar is eiigtble undw Paragraoh ( 2) if it emoloved n lean *- ( 3)
or more eligrble emolov- mthin this stat# on at lrut fim pwcmt ( 50%) gt
its womng davs during the proellding caiendar quartor.
Oratting Notr: The rn~ nimumg rouo size of tbroo ( 31 is indudd to Wotm m r Ue molovar carnors from
exceruve advarso wkcoon.
14) TRe oroririw of thu subuclM sh8M ba emclm 180 davs attu the 1..
Commisuocr. r's ao~ rovJo f tho baric h- bowfit dm and me standard
health banetit plan dovelopod Duruum to Socwn 12. wovulod dm d the SmrU
Emgloyar Health Roinsurano Program ereatad pursuant to Sam 11 is not
yet in omradon on such dam, the mviriorrs of this parignd\ shall be
effoctivo on the data that such OtoOnm kOwu 0- Wft.
8. I 1) A smaU omoiovu carriu shall Mo wtth tho Cornrnirtiau, in a form md mrnnr
prescribed bv tho Commimionw, ttro buic h e m bornfit phm and tha
standud hoalth benefit plans to be us& by the carrier. A hrrlth bumfit plan .
filed purswnt to this paragnOh mrv be us8d by a smaU emokyw c m w
boginning thirry ( 301 days aftu it is filod u n hth e Commrruonw diuwrovea
iu use.
I
( 21 The Commissionor at any time mry, rfW mviding notice and m oopocnrniw
for a houulg to a sm8M erndoyu carner, diuwove tlro continued u u by tha
smaU emokyw carrier of a buic of standud hoakh benefit plan on tha grounds
that such plan does not m mtt re roquummu of tftis Act. B
C. Haalth banetit plan8 C O V O ~ Q small ornoloyen shall cornoh/ w~ th tfte followng
provtsiona:
( 1) A heath bonefit pian shall not dmy, exclude or limit bonefits for a covarod
indindurl for lasso8 incurnd mom than twdva ( 1 21 montns folkmnq tne
e*- e 01 i n d w d s cova- due to a p m m n g condition. A
health bwwfit plan not dofino a proamrong condition morr resmetrvalv
than:
( a) A conditkn that would hwo causd an ordinrntv ON- PU8m to I
W medid ad-, diagnosu, cue or watmont dunng the rrx ( 6)
momh im- gmcdimg the rtfuave data ot c o v ~ ;
( b) A c o n d i for vh& h modid advica, diqnosis, cue or uumlm was
roamend. d or r l c w v . d dunng tho six ( 6) mondu immoUiatWv
oruIljina the ofrctive data of covmgc or I
( 21 A heattk bettoe plan shd wliw anv time ponod a~ p- bk a prrnnrong 8
cond~ nona xctuuon or Itmtttaon panod wtth r r r o m to uarocurar sacvtcrr for
the panod of omo an ~ ndtvlduawi ar pravtouJv covorad by auarttyroq prrvtoua
covwage that prowdod brrrafiu wttn r a s m to sucn samaos. 0lOv1d. d tnat
the qual~ htngp ravtous covoaga was conunuoua to a data not loss man rnirry
( 301 days prror to tno offocnvo date of the now covarage. Thts oaragraon doer
not prwtud~ a oolieawn of any watong panod a00LiCablo 10 all now onro~ loor
undrr tho hoaltfi bandit plan.
13) A health bonofit olan mav rxc! ud@ covoragr for Iata onrorloor for tno qraatar
of etghtaon 118) montnr or for an rrgntcnrr- montn prooxlrung condraon
exctuaon. provldod that rt botk a pwmd of axdurron from covorago and a
prooxuung cooatuon exciurcor, arr aooiicabk to a lato mroUeo, tno combmod
ponod s h r Y not axmod wghtrw, 11 81 months from tno datr tno tndlvtdwl
enrolls for covorag. undw tho ho8ith b. rwfit pkn.
( 4) a Excam as orovtdod in S u b ~ u i ~ ~( ldOl. rhw uiromants uS8d bv a small
emoloyu carriu a datumining whamar to provrdo covorago to 8 small
rm~ lovrr, in cluding rrouirrmants for minimum oamctoatKwr of rlig~ ble
ornpLoyoos and minimum @ mPlo~ wco nmbuuonr, $ hail bo aoplird
unif0nn) y among ail # MU @ m~ loy@ winth the samo numb* of rligibla
amployoor ao@ ytng for coveraga or rustving covrnga from tna smarl
emolovu camor.
( b) A small rmolovar carriu may vary aoolicatlon of minimum parricioation
raquirmwm and rnirumum amgkyor conutbutron rooutram. rru only by
tha of Fha WMY W W ~ ~ QTOWUO.
( ct ( i) Excaot a8 providod in Claum iiil, in aoolvin9 minimum
prmcaoawrr raauiramontr with rarom to a smaU amoiovor, a
mrY omdoyw c m w shall not considu omoiovnr or
daoandonu who have qualifying ox~ rong covwrgo In
datumtntng whathu tno applkabla gorcrntago of pamcroat~ on
is mot.
lii) Wtth r mto a mall ampioyw [ witn tan ( 10) of fower
eligiblo rmoloyaorl, a m U amglovu carnar mav consldrr
emoloyau or daoandonu who have coverage undr mothor
h. Jm buufit glln swamrod by such smJ emdovar In
aoolying minimum guociprdorr rwuitomonu.
DraWtg Noto: In dammining w h d w to mduda the bnsktod Imgurgo, statas should considu tno
impact of d w i ch. o k8. on afruM amobvu camus in rokuemho to both the nurnkr of h8alt. n m a i n t ~ n r or ganammu in tho rtlm ud th. effrct on r m r U empkvws md @ mOkyw-
( dl A un. U amolovu camw shall not incraam any r w u u m t for
minimum amgloyoo pamcigatjon or any rrquiramam fw mtnimum
nnpLoWl comnkmoc\ a p W M to a mail rmolovu at my tima ahor
dl. SnwM WndOYY hU boon aca@ md for COv~ go.
( 5) ( a) If a smdt ompkyw tunw offom ~ o v m g oto a mall omo) ovn. me
mall amoloyw carnu rhaU offw mvurge to all of m0 eltglblr
ot a unJL a m ~ b yaun d thew da9. rrdmu. A srnatl amorover
.- .
carnu shd not o wc avuago to only ~ n d i v ~ dtnW a m u
rsng( owl gmuo or to pan of the QrOue, excoot ~ n mo c w of late
enroYw as WOhW P q r a o h ( 3).
( b) A smrY ~ fnOkWI eurm 8lW not modifv a baut or standard health
brnrfit plan mth ror# ct to r d * rWOvw or anv elrglbk mdovw
or deoondmt r) rrough ndm. r n d o r m t a or othew~ sa, to r o m a or
covered bv tne h e m M a t i t plan.
0. ( 1 1 A smaH emokvu c a w stuN not b. rwuurb to offer coverage or accoot
aooiicawnr pursuant to SSIHW A in t ~ coam of tho foilowmg: I
fa) To a m r Y -, whoto tho rmJI rmOkvu IS not phvscab kcatod
in tho camw's cutr# irCI. d googmoh SamCa uaa; I
( b) To an motwoo. when th mpkvw doa8 not worlr or ramdm within
tho tamer's enrblWI. d goographic somica arar: or
( ct Within u, rma whw, tho unJL mdovw & or rarsanrbty - tor,
and dwvwumms to dw udrtrcriocr of th. C o m m r ~ wt, hl n it will
not haw ck. c. olcrt~ withhiueo8b lirh. d goograohic s m hu or to
deliver smcce adwwtab to the mornbus of such grouos baauo of
its obligatiorrs to emrang grouo pdicy) lddu, and mnrollnr.
B
( 2) A smaU rrnoloyw curiw thn c ~ ~ o# f ftu c ovuago pursuant to Paragraph
. ( 1 )( c) mw not offir covemgo in ttla ro@ icWo uw to new c a m of wng( ovw
I.
grouos with more than mry- fiva ( 2s) eligibk emo) ovms or to rry mail
rmolovor grouos undl tho Irm of 180 days tdlomng each such r a w or the
date on which tho curiw noofi. r the Commissionor that it h u regainad
capaUry to doUvu srrvic# to rmrU ernolovu grouos.
I
E. A small omolovw carrier shd not be nquuod to provide covoragr to smrU omdoven
pursuant to Subsrcoon A for any pmod of umo for which the com- ef
I
datarrn~ nrr * at requiring the rctogunu ot smrU emolovws in accordam* wnh tho
provisions of Subwaion A woJd p k a me smJl emp( oyw carnar ~ n a tinurmlly
imorirrd conditiocr.
( 1) ~ ~ r r n o k w r c w r i w ~ n o o t y t h o ~
. .
A. within thirN ( 301
dayroffhofhc$ va d r t . d t h b A c t o f dmtunw'r intontiontoogwro, 88a
risk- rrruningcwriwortmdwwmgcwriw. ~ u n J L w n O k y w t v r i r r m
to as r rirlr- urwnng curiu rh. Y mJu m agolicroior, Oonwnt to
Slcoocr 10. I
( 21 The docidon & NU k # rdhO for r fiveyou p d* xc rOt tfia th. lndjJ
docision W ba rn- rrirm bm ( 30) da- of tho effmva data of this ACt (
and shad bo made for two I21 yaw. Tho CommuriocHI mav P m8 C anor
to mod* its drr; tim at # y w for good caw WW~.
( 3) Tho Commitr# rm r n 8 0 0 L i c ~ pm o- for mJLm @ Ww
1L
camon sooung to cnurge mur status unan ntr suosmon.
8. A ralnsur~ ngc arnor tbat aoollas and IS aogrovod to OPOrate as a nsk- auum~ ngc m w
shail not be pumtrud to cononuo to rorrrruro any hodth bonofit Bran wrm tno progum.
Sucn a carrier snarl oav a ororatad assorsmont b i ~ 0 duo on bus~ nouiu wd as a
rstnsunng carrtor for any mmon ot me you rmt ln@ bu rtnou war rernsurad.
Orahinq ~ ota: O olota thts w o nr f ~ amaoafiorrrr r me rornsuranco Program ra mandatory.
A. A small emolovu eamu may aooly to become a risk- assuming carnor bv filing an
aogl1cauon w~ tn tno Commtruonw in a fonn and mannw prose