26-19-304. Restrictions relating to premium rates.

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

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

(ii) For a class of business, the premium rates charged during a rating period to small employers with similar case characteristics for the same or similar coverage, or the rates which could be charged to employers under the rating system for that class of business shall not vary from the index rate by more than thirty-five percent (35%) of the index rate;

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

(A) The percentage change in the new business premium rate measured from the first day of the prior rating period to the first day of the new rating period. In the case of a health benefit plan into which a small employer carrier is no longer enrolling new small employers, the carrier shall use the percentage change in the base premium rate, provided that the change does not exceed, on a percentage basis, the change in the new business premium rate for the most similar health benefit plan into which the carrier is actively enrolling new small employers;

(B) Any adjustment, not to exceed fifteen percent (15%) annually and adjusted pro rata for rating periods of less than one (1) year, due to the claim experience, health status or duration of coverage of the employees or dependents of the small employer as determined from the small employer carrier's rate manual for the class of business; and

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

(iv) Adjustments in rates for claims experience, health status and duration from issue shall not be charged to individual employees or dependents. Any such adjustment shall be applied uniformly to the rates charged for all employees and dependents of the small employer;

(v) Any adjustment in rates charged by a small employer carrier caused by reinsurance is subject to the rating limitations set forth in this section;

(vi) Premium rates for health benefit plans shall comply with the requirements of this section notwithstanding any assessments paid or payable by small employer carriers under this act;

(vii) In any case where a small employer carrier utilizes industry as a case characteristic in establishing premium rates, the rate factor associated with any industry classification shall not vary from the arithmetic average of the rate factors associated with all industry classifications by greater than fifteen percent (15%) of such coverage;

(viii) In the case of health benefit plans issued prior to the effective date of this act, a premium rate for a rating period may exceed the ranges set forth in paragraphs (i) and (ii) of subsection (a) of this section for a period of three (3) years following the effective date of this act. In such case, the percentage increase in the premium rate charged to a small employer in such a class of business for a new rating period may not exceed the sum of the following:

(A) The percentage change in the new business premium rate measured from the first day of the prior rating period to the first day of the new rating period. In the case of a health benefit plan into which a small employer carrier is no longer enrolling new small employers, the carrier shall use the percentage change in the base premium rate, provided that the change does not exceed, on a percentage basis, the change in the new business premium rate for the most similar health benefit plan into which the carrier is actively enrolling new small employers; and

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

(ix) Small employer carriers shall apply rating factors, including case characteristics, consistently with respect to all small employers in a class of business;

(x) For the purposes of this subsection, a health benefit plan that utilizes a provider network shall not be considered similar coverage to a health benefit plan that does not utilize such a network, provided that utilization of the network results in substantial differences in claims costs;

(xi) The small employer carrier shall not use case characteristics, other than age, gender, industry, geographic area, family composition and group size without prior approval of the commissioner;

(xii) The commissioner shall adopt regulations to implement the provisions of this section and to assure that rating practices used by small employer carriers are consistent with the purposes of this act, including regulations that:

(A) Assure that differences in rates charged for health benefit plans by small employer carriers are reasonable and reflect objective differences in plan design;

(B) Prescribe the manner in which case characteristics may be used by small employer carriers.

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

(c) The commissioner may suspend for a specified period the application of paragraph (a)(i) of this section as to the premium rates applicable to one (1) or more small employers included within a class of business of a small employer carrier for one (1) or more rating periods upon a filing by the small employer carrier and a finding by the commissioner either that the suspension is reasonable in light of financial condition of the small employer carrier or that the suspension would enhance the efficiency and fairness of the marketplace for small employer health insurance.

(d) In connection with the offering for sale of any health benefit plan to a small employer, the small employer carrier shall make a reasonable disclosure, as part of its solicitation and sales materials, of the following:

(i) The extent to which premium rates for a specified small employer are established or adjusted in part based upon the actual or expected variation in claims costs or actual or expected variation in health condition of the employees and dependents of the small employer;

(ii) The provisions concerning the small employer carrier's right to change premium rates and the factors other than claim experience which affect changes in premium rates;

(iii) The provisions relating to renewability of policies and contracts; and

(iv) The provisions relating to any preexisting condition provision.

(e) Each small employer carrier shall:

(i) Maintain at its principal place of business a complete and detailed description of its rating practices and renewal underwriting practices, including information and documentation that demonstrate that its rating methods and practices are based upon commonly accepted actuarial assumptions and are in accordance with sound actuarial principles;

(ii) File with the commissioner annually on or before March 15 an actuarial certification certifying that the carrier is in compliance with this act and that the rating methods of the small employer carrier are actuarially sound. A copy of the certification shall be retained by the small employer carrier at its principal place of business;

(iii) Make the information and documentation described in paragraph (i) of this subsection available to the commissioner upon request. Except in cases of violations of this act, the information shall be considered proprietary and trade secret information and shall not be subject to disclosure by the commissioner to persons outside of the department except as agreed to by the small employer carrier or as ordered by a court of competent jurisdiction.